PUTNAM VARIABLE TRUST, 485APOS, 2000-03-31

PUTNAM VARIABLE TRUST
485APOS, 2000-03-31

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As filed with the Securities and Exchange Commission on
March 31, 2000

Registration No. 33-17486
811-5346
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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. 23 /X/
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940 ----
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Amendment No. 24 /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
Technology 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
, 2000

Putnam Variable Trust

Growth Fund
Putnam VT Technology Fund

Class IA Shares

This prospectus explains what you should know about the fund of Putnam
Variable Trust listed above, which is 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 fund. These securities have not been
approved or disapproved by the Securities and Exchange Commission nor has
the Commission passed upon the accuracy or adequacy of this prospectus.
Any statement to the contrary is a crime.

CONTENTS

2 Fund summary (including Goal, Main investment strategies and Main risks)

3 What is the fund's main investment strategies and related risks?

5 Who manages the fund?

6 How to buy and sell fund shares

6 How does the fund price its shares?

7 Fund distributions and taxes

Fund summary

The following summary identifies the fund's goal, main investment
strategies and the main risks that could adversely affect the value of the
fund's shares and the total return on your investment. More detailed
descriptions of the fund, including the risks associated with investing in
the fund, can be found further back in this prospectus. Please be sure to
read this additional information before you invest.

You can lose money by investing in the fund. The fund may not achieve its
goal and is not intended as a complete investment program. An investment
in the 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.

GOAL

The fund seeks capital appreciation.

MAIN INVESTMENT STRATEGIES -- STOCKS

We invest mainly in common stocks of U.S. companies in the technology
industries that we believe offer the opportunity for gain. We look for
companies with stock prices lower than the value we place on the company.
We also look for the presence of factors we think will cause the stock
price to increase toward that value. We invest in companies of all sizes.

MAIN RISKS

The main risks that could adversely affect the value of the fund's shares
and the total return on your investment include:

* The risk that the stock price of one or more of the companies in the fund's
portfolio will fall, or will fail to rise. Many factors can adversely affect
a stock's performance, including both general financial market conditions and
factors related to a specific company or industry. This risk is generally
greater for small and mid-sized companies, which tend to be more vulnerable
to adverse developments.

* The risk that movements in financial markets will adversely affect the price
of the fund's investments, regardless of how well the companies in which we
invest perform.

* The risk of investing in a single group of industries. Investments in the
technology industries, even though representing interests in different
companies within these industries, may be affected by common economic forces
and other factors. This vulnerability to factors affecting the technology
industries is significantly greater than for a fund that invests in a broader
range of industries, and may result in greater fund losses and volatility.
In addition, stock prices of companies in technology industries have
historically been more volatile than those of companies in other industries.

* The risk of loss from investing in fewer issuers than a fund that invests
more broadly. The fund is "non-diversified," which means that it may invest
more of its assets in the securities of fewer companies than a "diversified"
fund. This vulnerability to factors affecting a single investment can result
in greater fund losses and volatility.

What are the fund's main investment strategies and related risks?

We generally manage the fund in a style similar to a fund in the retail
Putnam family of funds. However, the counterpart funds will not have an
identical portfolio or investment results, since we may employ different
investment practices and invest in different securities for them.

Any investment carries with it some level of risk that generally reflects
its potential for reward. This section provides additional information on
the investment strategies and related risks that are identified for the
fund in "Fund summary" at the beginning of this prospectus and discusses
investment strategies and related risks.

* 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.

We may purchase stock that trades at a higher multiple of current earnings
than other stocks. The value of such stocks may be more sensitive to
changes in current or expected earnings than the values of other stocks.
If our assessment of the prospects for a company's earnings growth is
wrong, or if our judgment of how other investors will value the company's
earnings growth is wrong, then the price of the company's stock may fall or
not approach the value that we have placed on it.

Companies whose stock we believe is undervalued by the market may have
experienced adverse business developments or may be subject to special
risks that have caused their stocks to be out of favor. If our assessment
of a company's prospects is wrong, or if other investors do not similarly
recognize the value of the company, then the price of the company's stock
may fall or may not approach the value that we have placed on it.

* Industry focus. We invest primarily in companies that have or will develop
products, processes or services that will provide or benefit significantly
from technological advances or improvements. These include companies that
develop, produce or distribute products or services in the computer,
semi-conductor, electronics, communications, telecommunications, health
care, and biotechnology industries. Factors that affect the technology
industries will have a greater effect on the fund than they would on a fund
that is more widely diversified among a number of unrelated industries.
Examples include obsolescence of existing technology, short product cycles,
falling prices and profits, and competition from new market entrants.

* 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.

* Smaller companies. We may invest in smaller and mid-sized companies.
Smaller companies, which may have a market capitalization of less than
$1 billion, are more likely than larger companies to have limited product
lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies often trade less
frequently and in limited volume, and their prices may fluctuate more than
stocks of larger companies. Stocks of smaller and mid-sized companies may
therefore be more vulnerable to adverse developments than those of larger
companies.

* Frequent trading. We may buy and sell investments relatively often, which
involves higher brokerage commissions and other expenses.

* Other investments. In addition to the main investment strategies described
above, we may make other types of investments, such as investments in
preferred stocks, convertible securities, debt instruments and derivatives,
which may be subject to other risks, as described in the fund'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 fund's Trustees may change the fund's goals,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.

Who manages the fund?

The fund's Trustees oversee the general conduct of the fund's business.
The Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and managing
the fund's other affairs and business. The fund pays Putnam Management a
quarterly management fee for these services based on the fund's average net
assets. Putnam Management's address is One Post Office Square, Boston,
MA 02109. The fund pays Putnam Management a quarterly management fee for these
services at the annual rate of [ ]

In order to limit expenses for the fund, Putnam Management has agreed to
limit its compensation (and, to the extent necessary, bear other expenses)
through [ ], 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 [ %] 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 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.

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Manager Since Experience
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2000 1992-Present Putnam Management
Peter J. Hadden
Senior Vice President
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David J. Santos 2000 1986-Present Putnam Management
Senior Vice President
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Saba S. Malak 2000 1997-Present Putnam Management
Vice President Prior to Oct. 1997 The Boston
Consulting Group
- ----------------------------------------------------------------------------

How to buy and sell fund shares

The Trust has an underwriting agreement relating to the fund with Putnam
Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam
Mutual Funds presently offers shares of the fund 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 fund 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 fund currently does not foresee any disadvantages to policyowners
arising out of the fact that the fund offers its shares to separate
accounts of various insurance companies to serve as the investment medium
for their variable products. Nevertheless, the Trustees intend to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise, and to determine what action, if any, should be taken in
response to such conflicts. If such a conflict were to occur, one or more
insurance companies' separate accounts might be required to withdraw their
investments in 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 does the fund prices its shares?

The price of the 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.

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

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

Fund distributions and taxes

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

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

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

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

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

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

For more information
about Putnam VT Technology Fund

The fund's statement of additional information (SAI) includes additional
information about the fund. 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
fund and other Putnam funds, or make shareholder inquiries, by contacting
your financial advisor by visiting Putnam's Web Site or by calling Putnam
toll-free at 1-800-225-1581.

You may review and copy information about the fund, including the SAI, at
the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-202-942-8090 for
information about the operation of the public reference room. You may also
access reports and other information about the funds on the EDGAR Database
on the Commission's Internet site at http://www.sec.gov. You may get
copies of this information, with payment of a duplication fee, by
electronic request at the following E-mail address: [email protected], or
by writing the Commission's Public Reference Section, Washington, D.C.
20549-0102. You may need to refer to the Trust's file number.

PUTNAM INVESTMENTS

One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581

Address correspondence to
Putnam Investor Services
P.O. Box 989
Boston, Massachusetts 02103

www.putnaminv.com

File No. 811-5346

Prospectus
, 2000

Putnam Variable Trust

Growth Fund
Putnam VT Technology Fund

Class IB Shares

CONTENTS

2 Fund summary (including Goal, Main investment strategies and Main risks)

3 What is the fund's main investment strategies and related risks?

5 Who manages the fund?

6 How to buy and sell fund shares

6 Distribution Plan

6 How does the fund price its shares?

7 Fund distributions and taxes

Fund summary

GOAL

The fund seeks capital appreciation.

MAIN INVESTMENT STRATEGIES -- STOCKS

MAIN RISKS

The main risks that could adversely affect the value of the fund's shares
and the total return on your investment include:

* The risk that the stock price of one or more of the companies in the fund's
portfolio will fall, or will fail to rise. Many factors can adversely
affect a stock's performance, including both general financial market
conditions and factors related to a specific company or industry. This
risk is generally greater for small and mid-sized companies, which tend
to be more vulnerable to adverse developments.

* The risk that movements in financial markets will adversely affect the price
of the fund's investments, regardless of how well the companies in which we
invest perform.

What are the fund's main investment strategies and related risks?

* 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.

* Industry focus. We invest primarily in companies that have or will develop
products, processes or services that will provide or benefit significantly
from technological advances or improvements. These include companies that
develop, produce or distribute products or services in the computer,
semi-conductor, electronics, communications, telecommunications, health
care, and biotechnology industries. Factors that affect the technology
industries will have a greater effect on the fund than they would on a
fund that is more widely diversified among a number of unrelated industries.
Examples include obsolescence of existing technology, short product cycles,
falling prices and profits, and competition from new market entrants.

* Smaller companies. We may invest in smaller and mid-sized companies.
Smaller companies, which may have a market capitalization of less than $1
billion, are more likely than larger companies to have limited product lines,
markets or financial resources, or to depend on a small, inexperienced,
management group. Stocks of these companies often trade less frequently and
in limited volume, and their prices may fluctuate more than stocks of larger
companies. Stocks of smaller and mid-sized companies may therefore be more
vulnerable to adverse developments than those of larger companies.

* Frequent trading. We may buy and sell investments relatively often, which
involves higher brokerage commissions and other expenses.

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

Who manages the fund?

The fund's Trustees oversee the general conduct of the fund's business. The
Trustees have retained Putnam Management to be the fund's investment manager,
responsible for making investment decisions for the fund and managing the
fund's other affairs and business. The fund pays Putnam Management a montly
management fee for these services based on the fund's average net assets.
Putnam Management's address is One Post Office Square, Boston, MA 02109. The
fund pays Putnam Management a quarterly management fee for these services at
the annual rate of [ ]

In order to limit expenses for the fund, Putnam Management has agreed to limit
its compensation (and, to the extent necessary, bear other expenses) through
[ ], 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 [ %] 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.

- ----------------------------------------------------------------------------
Manager Since Experience
- ----------------------------------------------------------------------------
Peter J. Hadden 2000 1992-Present Putnam Management
Senior Vice President
- ----------------------------------------------------------------------------
David J. Santos 2000 1986-Present Putnam Management
Senior Vice President
- ----------------------------------------------------------------------------
Saba S. Malak 2000 1997-Present Putnam Management
Vice President Prior to Oct. 1997 The Boston
Consulting Group
- ----------------------------------------------------------------------------

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.

How does the fund prices its shares?

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 plan provides for payments by the 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.

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
return on those investments would be decreased.

For more information
about Putnam VT Technology Fund

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 TECHNOLOGY FUND
A SERIES OF PUTNAM VARIABLE TRUST

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
, 2000

This SAI is not a prospectus and is only authorized for distribution when
accompanied or preceded by the prospectus of the fund dated ,
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
fund has more than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's prospectuses, unless
otherwise noted. The SAI should be read together with the applicable
prospectus. For a free copy of the fund's prospectus, call Putnam Investor
Services at 1-800-225-1581 or write Putnam Investor Services, Mailing
address: P.O. Box 41203, Providence, RI 02940-1203.

Part I of this SAI contains specific information about the fund. Part II
includes information about the fund and the other funds in the Trust.

Table of Contents

Part I

TRUST ORGANIZATION AND CLASSIFICATION I-3
INVESTMENT RESTRICTIONS I-4
CHARGES AND EXPENSES I-5
ADDITIONAL OFFICERS I-8
INDEPENDENT ACCOUNTANTS I-11

Part II

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1
TAXES II-23
MANAGEMENT II-24
DETERMINATION OF NET ASSET VALUE II-32
DISTRIBUTION PLANS II-33
SUSPENSION OF REDEMPTIONS II-33
SHAREHOLDER LIABILITY II-33
STANDARD PERFORMANCE MEASURES II-34
COMPARISON OF PORTFOLIO PERFORMANCE II-35
SECURITIES RATINGS II-38
DEFINITIONS II-43

SAI
Part I

TRUST ORGANIZATION AND CLASSIFICATION

Putnam Variable Trust is a Massachusetts business trust organized on
September 24, 1987. A copy of the Agreement and Declaration of Trust,
which is governed by Massachusetts law, is on file with the Secretary of
State of The Commonwealth of Massachusetts. Prior to January 1, 1997, the
Trust was known as Putnam Capital Manager Trust and each of its series then
in existence was designated PCM, rather than Putnam VT.

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-five series of shares, each representing a separate
investment portfolio which is being offered to separate accounts of various
insurance companies.

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

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

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

Shares of the fund 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.

Putnam VT Technology Fund is a diversified investment company.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed as to the
fund without a vote of a majority of the outstanding voting securities of
the fund, the Trust may not and will not take any of the following actions
with respect to the 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.

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

The following non-fundamental policies may be changed without shareholder
approval:

(1) The fund will not invest in (a) securities which are not readily
marketable, (b) securities restricted as to resale (excluding securities
determined by the Trustees of the fund (or the person designated by the
Trustees of the Trust to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days, if, as a result, more than 15% of the fund's net assets (taken at
current value) would be invested in securities described in (a), (b) and
(c) above.

(2) Under normal market conditions, invest less than 65% of its total
assets in securities of companies that derive at least 50% of their assets,
revenues, or profits from the technology industries. For this purpose,
technology industries is defined broadly to include any industry involved
in the production or development of technological advancements or
improvements, including the computer, semi-conductor, electronics,
communications and telecommunications, health care, and biotechnology
industries.

All percentage limitations on investments (other than pursuant to
non-fundamental restriction (1)) will apply at the time of the making of an
investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.

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

CHARGES AND EXPENSES

Management fees

Under a Management Contract dated [ ] the fund pays a quarterly
fee to Putnam Management based on the average net assets of the fund, as
determined at the close of each business day during the quarter, at the
annual rate of: [ ]

Expense limitation. In order to limit Putnam VT Technology Fund's expenses,
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses of the fund) through [ ]
to the extent that expenses of the fund (exclusive of brokerage, interest,
taxes, and deferred extraordinary expenses, and payments under the fund's
distribution plans) would exceed an annual rate of [ ]%
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.

Trustee responsibilities and fees

The Trustees are responsible for generally overseeing the conduct of fund
business. Subject to such policies as the Trustees may determine, Putnam
Management furnishes a continuing investment program for the fund and makes
investment decisions on its behalf. Subject to the control of the
Trustees, Putnam Management also manages the fund's other affairs and
business.

The Trust pays each Trustee a fee for his or her services. Each Trustee
also receives fees for serving as Trustee of other Putnam funds. The
Trustees periodically review their fees to assure that such fees continue
to be appropriate in light of their responsibilities as well as in relation
to fees paid to trustees of other mutual fund complexes. The Trustees meet
monthly over a two-day period, except in August. The Board Policy
Committee, which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee compensation,
estimates that Committee and Trustee meeting time together with the
appropriate preparation requires the equivalent of at least three business
days per Trustee meeting. The following table shows the year each Trustee
was first elected a Trustee of the Putnam funds and the fees expected to be
paid for the first full fiscal year are shown), and the fees paid to each
Trustee by all of the Putnam funds for the year ended December 31, 1999:

COMPENSATION TABLE

Estimated
Pension or
retirement Estimated
benefits annual
accrued benefits Total
Estimated as part from compensation
Aggregate of fund all Putnam from
compensation expenses funds upon all Putnam
Trustees/Year the fund(1) + ++ retirement (2) funds (3)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter/1994 $95,000 $191,000 (4)
Hans H. Estin/1972 95,000 190,000
John A. Hill/1985 (5) 115,000 239,750 (4)
Ronald J. Jackson/1996 95,000 193,500 (4)
Paul L. Joskow/1997 95,000 191,000 (4)
Elizabeth T. Kennan/1992 95,000 190,000
Lawrence J. Lasser/1992 95,000 189,000
John H. Mullin, III/1997 95,000 196,000 (4)
Robert E. Patterson/1984 95,000 190,250
William F. Pounds/1971 (5) 115,000 231,000
George Putnam/1957 95,000 190,000
George Putnam, III/1984 95,000 190,000
A.J.C. Smith/1986 95,000 188,000
W. Thomas Stephens 95,000 188,000 (4)
W. Nicholas Thorndike/1992 95,000 190,000

</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 1999.

(3) As of December 31, 1999, there were 114 funds in the Putnam family.

(4) Includes compensation deferred pursuant to a Trustee Compensation
Deferral Plan.

(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
Part II of this SAI.

Share ownership

As of the date of this SAI, Putnam Investments, Inc. owned of record and
beneficially [ ] of the shares of the fund. Putnam Investments,
Inc. is incorporated in Massachusetts, and its parent corporation, Marsh &
McLennan Companies, Inc., is incorporated in Delaware. The address of Putnam
Investments, Inc. is One Post Office Square, Boston, MA 02109.

ADDITIONAL OFFICERS

In addition to the persons listed as officers of the Trust in Part II of
this SAI, each of the following persons is also a Vice President of the
Trust and certain of the other Putnam funds, the total of which is noted
parenthetically. Officers of Putnam Management hold the same offices in
Putnam Management's parent company, Putnam Investments, Inc.

Robert R. Beck (59) (4 funds), Managing Director of Putnam Management.

Edward P. Bousa (41) (5 funds), Senior Vice President of Putnam Management.

Joshua L. Byrne (35) (3 funds), Senior Vice President of Putnam Management.

David G. Carlson (38) (2 funds), Senior Vice President of Putnam
Management.

Dana Clark (44) (2 funds), Vice President of Putnam Management.

C. Beth Cotner (47) (6 funds), Managing Director of Putnam Management.
Prior to September 1995, Ms. Cotner was employed at Kemper Financial
Services.

Kevin M. Cronin (38) (4 funds), Managing Director of Putnam Management.
Prior to February 1997, Mr. Cronin was employed at MFS Investment
Management.

Steven Dexter (41) (4 funds), Senior Vice President of Putnam Management.
Prior to June 1999, Mr. Dexter was employed at Scudder Kemper Inc.

Joanne M. Driscoll (29) (2 funds), Vice President of Putnam Management.

Richard B. England (41) (4 funds), Senior Vice President of Putnam
Management.

Roland W. Gillis (50) (6 funds), Managing Director of Putnam Management.

Peter J. Hadden (38) (2 funds), Senior Vice President of Putnam Management.

Omid Kamshad (37) (7 funds), Managing Director of Putnam Management. Prior
to January 1996, Mr. Kamshad was employed at Lomdard Odier International.

David L. King (43) (4 funds), Managing Director of Putnam Management.

Steven L. Kirson (39) (2 funds), Senior Vice President of Putnam
Management.

Deborah Kuenstner (41) (14 funds), Managing Director of Putnam Management.
Prior to March 1997, Ms. Kuenstner was employed at Dupont Pension Fund
Investment.

Willam J. Landes (47) (23 funds), Managing Director of Putnam Management.

Jeffrey R. Lindsey (37) (6 funds), Senior Vice President of Putnam
Management.

Saba S. Malak (34) (2 funds), Vice President of Putnam Management. Prior
to October 1997, Consultant/Manager, The Boston Consulting Group.

Paul Marrkand (41) (4 funds), Senior Vice President of Putnam Management.

Michael Martino (47) (5 funds), Managing Director of Putnam Management.

Krishna K. Memani (39) (3 funds), Managing Director of Putnam Management.
Prior to September 1998, Mr. Memani was employed at Morgan Stanley & Co.

Daniel L. Miller (42) (2 funds), Managing Director of Putnam Management.

Jeanne L. Mockard (36) (4 funds), Senior Vice President of Putnam
Management.

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

Michael J. Mufson (36) (2 funds), Senior Vice President of Putnam
Management.

Hugh H. Mullin (37) (3 funds), Senior Vice President of Putnam Management.

Jeffrey Netols (46) (2 funds), Senior Vice President of Putnam Management.

Steven Oristaglio (44) (73 funds), Senior Managing Director of Putnam
Management. Prior to July 1998, Mr. Oristaglio was a Managing Director at
Swiss Bank Corp.

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

Carmel Peters (48) (6 funds), Senior Vice President of Putnam Management.
Prior to May 1997, Ms. Peters was employed at Wheelock Natwest Investment
Management, Hong Kong, and prior to February 1996 was employed at
Rothschild Asset Management Asia Pacific, Hong Kong.

Mark D. Pollard (40) (3 funds), Senior Vice President of Putnam Management.

James Prusko (33) (6 funds), Senior Vice President of Putnam Management.

David J. Santos (42) (4 funds), Senior Vice President of Putnam Management.

Anthony C. Santosus (41) (2 funds), Senior Vice President of Putnam
Management.

Justin M. Scott (42) (14 funds), Managing Director of Putnam Management.

Edward T. Shadek, Jr. (39) (4 funds), Managing Director of Putnam
Management. Prior to March 1997, Mr. Shadek was employed at Newbold's
Asset Management Co.

Sheldon N. Simon (42) (2 funds), Senior Vice President of Putnam
Management.

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

George W. Stairs (50) (3 funds), Senior Vice President of Putnam
Management.

Lisa Svensson (37) (2 funds), Senior Vice President of Putnam Management.

Charles H. Swanberg (51) (4 funds), Senior Vice President of Putnam
Management.

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

Rosemary H. Thomsen (39) (4 funds), Senior Vice President of Putnam
Management.

David L. Waldman (33) (5 funds), Managing Director of Putnam Management.
Prior to June 1997, Mr. Waldman was employed at Lazard Freres and prior to
April 1995 was employed at Goldman Sachs.

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

Manuel Weiss (51) (5 funds), Senior Vice President of Putnam Management.

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

INDEPENDENT ACCOUNTANTS

[ ], 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.

TABLE OF CONTENTS

PUTNAM VARIABLE TRUST
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II

As noted in the prospectus, in addition to the principal investment
strategies and the principal risks described in the prospectus, a fund may
employ other investment practices and may be subject to other risks, which
are described below. Because the following is a combined description of
investment strategies of all of the Putnam funds, certain matters described
herein may not apply to your fund. Unless a strategy or policy described
below is specifically prohibited by the investment restrictions explained
in a fund's prospectus or part I of this SAI, or by applicable law, the
fund may engage in each of the practices described below.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

Foreign Investments

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

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

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

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

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

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

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

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

Foreign Currency Transactions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Options on Securities

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

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

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

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

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

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

Risk Factors in Options Transactions

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

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

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

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

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

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

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

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

Investments in Miscellaneous Fixed-Income Securities

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

Lower-rated Securities

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

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

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

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

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

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

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

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

Loan Participations

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

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

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

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

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

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

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

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

Floating Rate and Variable Rate Demand Notes

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

Mortgage Related and Asset-backed Securities

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

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

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

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

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

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

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

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

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

Structured notes

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

Convertible Securities

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

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

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

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

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

Private Placements

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

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

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

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

Futures Contracts and Related Options

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Options on Indices

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

Index Warrants

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

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

Short-term Trading

In seeking the fund's objective(s), Putnam Management will buy or sell
portfolio securities whenever Putnam Management believes it appropriate to
do so. In deciding whether to sell a portfolio security, Putnam Management
does not consider how long the fund has owned the security. From time to
time the fund will buy securities intending to seek short-term trading
profits. A change in the securities held by the fund is known as
"portfolio turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and other
transaction costs on both the sale of securities and the reinvestment of
the proceeds in other securities. As a result of the fund's investment
policies, under certain market conditions the fund's portfolio turnover
rate may be higher than that of other mutual funds. Portfolio turnover
rate for a fiscal year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of portfolio
securities -- excluding securities whose maturities at acquisition were one
year or less. The fund's portfolio turnover rate is not a limiting factor
when Putnam Management considers a change in the fund's portfolio.

Securities Loans

The fund may make secured loans of its portfolio securities, on either a
short-term or long-term basis, amounting to not more than 25% of its total
assets, thereby realizing additional income. The risks in lending
portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. As a matter of
policy, securities loans are made to broker-dealers pursuant to agreements
requiring that the loans be continuously secured by collateral consisting
of cash or short-term debt obligations at least equal at all times to the
value of the securities on loan, "marked-to-market" daily. The borrower
pays to the fund an amount equal to any dividends or interest received on
securities lent. The fund retains all or a portion of the interest
received on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with respect to
the loaned securities may pass to the borrower, the fund retains the right
to call the loans at any time on reasonable notice, and it will do so to
enable the fund to exercise voting rights on any matters materially
affecting the investment. The fund may also call such loans in order to
sell the securities.

Repurchase Agreements

The fund may enter into repurchase agreements, amounting to not more than
25% of its total assets, except that this limit does not apply to money
market funds. A repurchase agreement is a contract under which the fund
acquires a security for a relatively short period (usually not more than
one week) subject to the obligation of the seller to repurchase and the
fund to resell such security at a fixed time and price (representing the
fund's cost plus interest). It is the fund's present intention to enter
into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government
or its agencies or instrumentalities. Repurchase agreements may also be
viewed as loans made by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such transactions to
ensure that the value of the underlying securities will be at least equal
at all times to the total amount of the repurchase obligation, including
the interest factor. If the seller defaults, the fund could realize a loss
on the sale of the underlying security to the extent that the proceeds of
the sale including accrued interest are less than the resale price provided
in the agreement including interest. In addition, if the seller should be
involved in bankruptcy or insolvency proceedings, the fund may incur delay
and costs in selling the underlying security or may suffer a loss of
principal and interest if the fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's estate.

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

Restricted Securities

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

Forward Commitments

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

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

Swap Agreements

The fund may enter into swap agreements and other types of over-the-counter
transactions with broker-dealers or other financial institutions.
Depending on their structures, swap agreements may increase or decrease a
fund's exposure to long-or short-term interest rates (in the United States
or abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation
rates. The value of a fund's swap positions would increase or decrease
depending on the changes in value of the underlying rates, currency values,
or other indices or measures. A fund's ability to engage in certain swap
transactions may be limited by tax considerations.

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

Derivatives

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

TAXES

Tax requirements for variable annuity and variable life insurance separate
accounts. Internal Revenue Service regulations applicable to variable
annuity and variable life insurance separate accounts generally require
that portfolios that serve as the funding vehicles for such separate
accounts meet a diversification requirement. A portfolio will meet this
requirement if it invests no more than 55% of the value of its assets in
one investment, 70% in two investments, 80% in three investments, and 90%
in four investments. Alternatively, a portfolio will be treated as meeting
this diversification requirement for any quarter of its taxable year if, as
of the close of such quarter, the portfolio meets the diversification
requirements applicable to regulated investment companies described 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.

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 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 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.

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.

Passive foreign investment companies. 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.

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 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 publicly-owned holding company whose principal
businesses are international insurance and reinsurance brokerage, employee
benefit consulting and investment management.

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

The Management Contract

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

For details of Putnam Management's compensation under the Management
Contract, see "Charges and expenses" in Part I of this SAI. Putnam
Management's compensation under the Management Contract may be reduced in
any year if the fund's expenses exceed the limits on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction
in which shares of the fund are qualified for offer or sale. The term
"expenses" is defined in the statutes or regulations of such jurisdictions,
and generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan, payments
made under such plan.

Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such lower
expense limitation as Putnam Management may, by notice to the fund, declare
to be effective. The expenses subject to this limitation are exclusive of
brokerage commissions, interest, taxes, deferred organizational and
extraordinary expenses and, if the fund has a distribution plan, payments
required under such plan. For the purpose of determining any such
limitation on Putnam Management's compensation, expenses of the fund shall
not reflect the application of commissions or cash management credits that
may reduce designated fund expenses. The terms of any expense limitation
from time to time in effect are described in the prospectus and/or Part I
of this SAI.

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

The amount of this reimbursement for the fund's most recent fiscal year is
included in "Charges and Expenses" in Part I of this SAI. Putnam
Management pays all other salaries of officers of the fund. The fund pays
all expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and shareholder
reporting expenses. The fund pays the cost of typesetting for its
prospectuses and the cost of printing and mailing any prospectuses sent to
its shareholders. Putnam Mutual Funds pays the cost of printing and
distributing all other prospectuses.

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

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

INSERT NEW CODE OF ETHICS DISCLOSURE WHICH WILL BE AVAILABLE SHORTLY

Portfolio Transactions

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

Brokerage and research services. Transactions on U.S. stock exchanges,
commodities markets and futures markets and other agency transactions
involve the payment by the fund of negotiated brokerage commissions. Such
commissions vary among different brokers. A particular broker may charge
different commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often involve the
payment of fixed brokerage commissions, which may be higher than those in
the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by
the fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the fund includes a disclosed,
fixed commission or discount retained by the underwriter or dealer. It is
anticipated that most purchases and sales of securities by funds investing
primarily in tax-exempt securities and certain other fixed-income
securities will be with the issuer or with underwriters of or dealers in
those securities, acting as principal. Accordingly, those funds would not
ordinarily pay significant brokerage commissions with respect to securities
transactions. See "Charges and expenses" in Part I of this SAI for
information concerning commissions paid by the fund.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional
investors to receive brokerage and research services (as defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) from
broker-dealers that execute portfolio transactions for the clients of such
advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from many
broker-dealers with which Putnam Management places the fund's portfolio
transactions and from third parties with which these broker-dealers have
arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts. Where the
services referred to above are not used exclusively by Putnam Management
for research purposes, Putnam Management, based upon its own allocations of
expected use, bears that portion of the cost of these services which
directly relates to their non-research use. Some of these services are of
value to Putnam Management and its affiliates in advising various of their
clients (including the fund), although not all of these services are
necessarily useful and of value in managing the fund. The management fee
paid by the fund is not reduced because Putnam Management and its
affiliates receive these services even though Putnam Management might
otherwise be required to purchase some of these services for cash.

Putnam Management places all orders for the purchase and sale of portfolio
investments for the fund and buys and sells investments for the fund
through a substantial number of brokers and dealers. In so doing, Putnam
Management uses its best efforts to obtain for the fund the most favorable
price and execution available, except to the extent it may be permitted to
pay higher brokerage commissions as described below. In seeking the most
favorable price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant, including, by way
of illustration, price, the size of the transaction, the nature of the
market for the security or other investment, the amount of the commission,
the timing of the transaction taking into account market prices and trends,
the reputation, experience and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.

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

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

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

Principal Underwriter

Putnam Mutual Funds is the principal underwriter of shares of the fund and
the other continuously offered Putnam funds. Putnam Mutual Funds is not
obligated to sell any specific amount of shares of the fund and will
purchase shares for resale only against orders for shares. See "Charges
and expenses" in Part I of this SAI for information on sales charges and
other payments received by Putnam Mutual Funds.

Investor Servicing Agent and Custodian

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

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

See "Charges and expenses" in Part I of this SAI for information on fees
and reimbursements for investor servicing and custody received by PFTC.
The fees may be reduced by credits allowed by PFTC.

DETERMINATION OF NET ASSET VALUE

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

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

Reliable market quotations are not considered to be readily available for
long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, and certain foreign securities. These investments are valued
at fair value on the basis of valuations furnished by pricing services,
which determine valuations for normal, institutional-size trading units of
such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders.

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

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

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

DISTRIBUTION PLAN

The Trust has adopted a distribution plan with respect to class IB shares,
the principal features of which are described in the prospectus. This SAI
contains additional information which may be of interest to investors.

Continuance of the plan is subject to annual approval by a vote of the
Trustees, including a majority of the Trustees who are not interested
persons of a fund and who have no direct or indirect interest in the plan
or related arrangements (the "Qualified Trustees"), cast in person at a
meeting called for that purpose. All material amendments to the plan must
be likewise approved by the Trustees and the Qualified Trustees. The 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 or
relevant class of the fund, as the case may be. The plan terminates
automatically in the event of its assignment and may be terminated without
penalty, at any time, by a vote of a majority of the Qualified Trustees or
by a vote of a majority of the outstanding voting securities of the fund or
the relevant class of the fund, as the case may be.

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

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

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

SUSPENSION OF REDEMPTIONS

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

SHAREHOLDER LIABILITY

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

STANDARD PERFORMANCE MEASURES

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

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

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

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

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

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

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

COMPARISON OF PORTFOLIO PERFORMANCE

Independent statistical agencies measure the fund's investment performance
and publish comparative information showing how the fund, and other
investment companies, performed in specified time periods. Three agencies
whose reports are commonly used for such comparisons are set forth below.
From time to time, the fund may distribute these comparisons to its
shareholders or to potential investors. The agencies listed below measure
performance based on their own criteria rather than on the standardized
performance measures described in the preceding section.

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

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

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

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

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

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

The Dow Jones Industrial Average is an index of 30 common stocks frequently
used as a general measure of stock market performance.

The Dow Jones Utilities Average is an index of 15 utility stocks frequently
used as a general measure of stock market performance.

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 investment-grade 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 fixed-income 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 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 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
price-to-book ratios that represent approximately half of the market
capitalization of the Standard & Poor's 500 Composite Stock Price Index.

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

SECURITIES RATINGS

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

Moody's Investors Service, Inc.

Bonds

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

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

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

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

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

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

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

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

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

Notes (for Money Market funds only)

MIG 1/VMIG 1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

Commercial paper (for Money Market funds only)

Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by the following characteristics:

- -- Leading market positions in well established industries.

- -- High rates of return on funds employed.

- -- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.

- -- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- -- Well established access to a range of financial markets and assured
sources of alternate liquidity.

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

Standard & Poor's

Bonds

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

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

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

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

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

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

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

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

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

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

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

Notes (for Money Market funds only)

SP-1 -- Strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus
(+) designation.

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

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

Commercial paper (for Money Market funds only)

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

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

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

Duff & Phelps Corporation

Long-Term Debt

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

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

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

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

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

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

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

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

Fitch Investors Service, Inc.

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

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

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

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

BB -- Bonds considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.

B -- Bonds are considered highly speculative. Bonds in this class are
lightly protected as to the obligor's ability to pay interest over the life
of the issue and repay principal when due.

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

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

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

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

DEFINITIONS

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

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

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

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

PUTNAM VARIABLE TRUST

FORM N-1A
PART C

OTHER INFORMATION

Item 23. Exhibits

1. Agreement and Declaration of Trust dated September 24, 1987, as revised
January 1, 1997 -- Incorporated by reference to Post-Effective Amendment
No. 14 to the Registrant's Registration Statement.
2. By-Laws, as amended through January 30, 1997 -- Incorporated by
reference to Post-Effective Amendment No. 14 to the Registrant's
Registration Statement.
3a. Portions of Agreement and Declaration of Trust Relating to
Shareholders' Rights -- Incorporated by reference to Post-Effective
Amendment No. 14 to the Registrant's Registration Statement.
3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by
reference to Post-Effective Amendment No. 14 to the Registrant's
Registration Statement.
4. Management Contract dated October 2, 1987, as most recently supplemented
May , 2000 - To be filed by Amendment.
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.
9. Opinion of Ropes & Gray, including consent -- To be filed by Amendment.
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.
14. Rule 18f-3(d) Plan -- Incorporated by reference to Post-Effective
Amendment No. 15 to the Registrant's Registration Statement.
15a. The Putnam Funds Code of Ethics - To be filed by Amendment.
15b. Putnam Investments Code of Ethics - To be filed by Amendment.

Item 24. Persons Controlled by or under Common Control with the Fund

As of February 29, 2000, Putnam Investments, Inc. owned:

Putnam Mid-Cap Value Fund 97.00%
Putnam International Fund 93.90%
Putnam Growth Fund 93.20%
Putnam Value Fund 90.20%
Putnam Asia Pacific Fund II 86.30%
Putnam Balanced Fund 83.60%
Putnam Latin America Fund 79.10%
Putnam U.S. Core Fund 77.10%
Putnam Worldwide Equity Fund 55.10%
Putnam Equity Fund 98 53.80%

Item 25. Indemnification

The information required by this item is incorporated by reference to the
Registrant's Initial Registration Statement on Form N-1A under the
Investment Company Act of 1940 (File No. 811-5346).

Item 26. Business and Other Connections of Investment Adviser

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

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

Lauren Allansmith Prior to August 1999, Analyst, Loomis Sayles,
Senior Vice President One Financial Center, Boston, MA 02111

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

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

Jane N. Barlow Prior to January 2000, Office Management,
Assistant Vice President Distinction Resourcing Limited, 2/4 Great Eastern
Street, London, EC2A 3NT; Prior to January 1999,
Office Manager, D.E. Shaw Securities International,
Finsbury Dials, 20 Finsbury Street, London, EC3M

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ralph C. Derbyshire Board Member, MSPCC, 399 Boylston St.,
Senior Vice President Boston, MA; Board Member, Winchester After School
Program, Skillings Rd., Winchester, MA

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

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

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

Douglas Dunn Prior to November 1999, Director of Research,
Vice President Brandywine Asset Management, 381 Brinton Lake Road,
Thornton, PA 19317; Prior to May 1998, Quantitative
Analyst, Westpeak Investment Advisors, 1011 Walnut
St., Suite 400, Boulder, CO 80303

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

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

Christine Durkee Prior to June 1998, Project Manager, Foundation
Assistant Vice President Technologies, Inc., 78 4th Ave., Waltham, MA 02451

Nathan Eigerman Trustee, Flower Hill Trust, 298 Marlborough St.,
Senior Vice President #4, Boston, MA 02116

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

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

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

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

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

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

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

Matthew R. Gage Prior to December, 1999, Audit Manager, Ernst
Assistant Vice President & Young LLP, 200 Clarendon St., Boston, MA 02116

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

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

Andrew Graham Prior to October 1999, Fund Manager, Scottish
Senior Vice President Widows Investment Management, Port Hamilton, 67
Morrison St., Edinburgh Scotland

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

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

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

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

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

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

Kim Heller Prior to April 1998, Senior Human Resources
Assistant Vice President Specialist, Fidelity Investments, 82 Devonshire St.,
Boston, MA 02109

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

Ronald Hua Prior to August 1999, Quantitative Analyst,
Vice President Fidelity Investments, 82 Devonshire St., Boston,
MA 02109

Amrit Kanwal Prior to August 1999, Vice President, Corporate
Managing Director Development and Strategy, Sequa Corporation, 200 Park
Avenue, New York, NY 10166

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

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

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

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

Richard T. Kircher Prior to April 1998, Assistant Vice President and
Assistant Vice President Compliance Manager, T. Rowe Price Associates, Inc.,
100 E. Pratt Street, Baltimore, MD 21202

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

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

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

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

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

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

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

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

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

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

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

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

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

Stacy M. Mills Prior to April 1999, Vice President, Manager-Financial
Vice President Accounting and Internal Reporting, State Street
Corporation, 225 Franklin Street, Boston, MA 02110

Reena Mithal Prior to July 1999, Vice President, Deutsche Bank
Vice President Securities, 31 W. 52nd Street., New York, NY 10019

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

Dirk Morris Prior to October 1999, Vice President-Global Strategist,
Managing Director Bankers Trust, Chifley Tower, Sydney NSW 2000 Australia

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

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

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

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

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

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

Nancy O'Brien Prior to September 1999, Manager Corporate Disbursements,
Assistant Vice President Fidelity Investments, 82 Devonshire St., Boston, MA 02129

Teresa O'Day Prior to April 1999, Operations Manager, Compaq Computer
Vice President Corp., 334 South Street, Shrewsbury, MA 01545

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

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

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

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

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

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

Lisa M. Platia Prior toDecember 1999, Vice President, Windham
Assistant Vice President Capital Management, 5 Revere St., Cambridge MA 02138

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

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

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

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

Nadine McQueen-Reed Prior to March, 1999, Key Account Executive, Fidelity
Assistant Vice President Investments, 130 Tonbridge Road, Hildenborough, Kent,
England, TN11 9DZ

Thomas V. Reilly Trustee, Knox College, 2 East South St., Galesburg,
Managing Director IL 61401

Kevin J. Rogers Prior to September 1998, Managing Director-Portfolio
Senior Vice President Manager, Invesco, NY Organization, 1066 Avenue of the
Americas, New York, NY 10036

Jeff B. Sacknowitz Investment Associate, Independence Investment Associates,
Vice President 53 State St., Boston, MA 02109

Paul D. Scanlon Prior to October 1999, Senior Vice President, Olympus
Vice President Healthcare Group, 775 Trapelo Road, Waltham, MA 02452

Saied Simozar Prior to March 1998, Manager, Portfolio Analytics,
Senior Vice President DuPont Pension fund Investment, One Righter Parkway,
Suite 3200, Wilmington, DE 198903

Justin M. Scott Director, DSI Proprieties (Neja) Ltd., Epping Rd.,
Managing Director Reydon, Essex CM19 5RD

Denise D. Selden Prior to June 1998, Managing Director, Lehman Brothers,
Senior Vice President 260 Franklin St., Boston, MA 02110

Jean I. Sievert Prior to October 1998, Vice President, Salomon Smith
Senior Vice President Barney, Seven World Trade Center, New York, NY 10048

Gordon H. Silver Trustee, Wang Center for the Performing Arts, 270
Managing Director Tremont St., Boston, MA 02116

David M. Silk Member of Board of Directors, Jobs for Bay State
Senior Vice President Graduates, 451 Andover St., Suite 305, North Andover,
MA 01845

Steven Spiegel Director, Ultra Diamond and Gold Outlet, 29 East
Senior Managing Director Madison St., Suite 1800, Chicago, IL 60602; Director,
FACES New York University Medical Center, 550 First
Avenue, New York, NY 10016; Trustee, Babson College, One
College Drive, Wellesley, MA 02157

Raman Srivastava Prior to July 1999, Market Risk Analyst, Bank of
Assistant Vice President Nova Scotia, 20 King St., W., Toronto, ON

James St. John Prior to July 1998, Investment Analyst, University of
Assistant Vice President Rochester, Rochester, NY 14627

Toshifumi Sugimoto Prior to October 1998, Portfolio Manager, Deputy
Senior Vice President General Manager, Nikko Securities Investment Trust &
Management, Fixed Income Department, 4-3 Nihonbashi,
Hakozakicho, Chuou-ku, Tokyo, Japan, 103-0015

William J. Sullivan Prior to June 1999, Executive Director, SBC Warburg
Senior Vice President Dillion Read, 677 Washington Blvd, Stamford, CT, 06901

John C. Talanian Member of Board of Directors, the Japan Society of
Managing Director Boston, One Milk Street, Boston, MA 02109

Nicole J. Thorpe Prior to February 1999, President/Owner, Thorpe
Assistant Vice President Resources, P.O. Box 1895, Brockton, MA 02301

Robert J. Ullman Prior to September, 1998, Assistant Vice President,
Assistant Vice President State Street Bank, Two International Place, Boston, MA
02109

Vincent Vliebergh Prior to May 1998, Senior Consultant, Garnett Consulting,
Vice President 30 Monument Square, Concord, MA 01742

Christopher C. Watt Prior to July 1999, Finance Manager, Procter &
Vice President Gamble, 1 Procter & Gamble Plaza, Cincinnati, OH 45202

Eric Wetlaufer President and Member of Board of Directors, The Boston
Managing Director Security Analysts Society, Inc., 100 Boylston St., Suite
1050, Boston, MA 02110

Edward F. Whalen Member of the Board of Directors, Hockomock Area YMCA,
Senior Vice President 300 Elmwood St., North Attleboro, MA 02760

Kelly A. Woolbert Prior to November 1999, Investment Analyst, MetLife
Assistant Vice President Investment Services, 99 High Street, Boston, MA 02110

Edmund F. Wright Jr. Prior to July 1998, Controller, CBE Technologies,
Assistant Vice President Inc., 50 Redfield St., Boston, MA 02122

Richard P. Wyke Director, Salem YMCA, One Sewall St., Salem, MA 01970
Senior Vice President

</TABLE>

Item 27. Principal Underwriter

(a) Putnam Mutual Funds Corp. is the principal underwriter for each of the
following investment companies, including the Registrant:

Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced
Retirement Fund, Putnam California Tax Exempt Income Fund, Putnam California
Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam
Convertible Income-Growth Trust, Putnam Diversified Income Trust, Putnam Equity
Income Fund, Putnam Europe Growth Fund, Putnam Florida Tax Exempt Income Fund,
Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Equity
Fund, Putnam Global Governmental Income Trust, Putnam Global Growth Fund,
Putnam Global Natural Resources Fund, The Putnam Fund for Growth and Income,
Putnam Growth and Income Fund II, Putnam Health Sciences Trust, Putnam High
Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam
Intermediate U.S. Government Income Fund, Putnam International Growth Fund,
Putnam Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax Exempt
Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax
Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund,
Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund,
Putnam New York Tax Exempt Income Fund, Putnam New York Tax Exempt Money Market
Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt
Income Fund, Putnam OTC & Emerging Growth Fund, Putnam Pennsylvania Tax Exempt
Income Fund, Putnam Preferred Income Fund, Putnam Strategic Income Fund, Putnam
Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free
Income Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government Income
Trust, Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam
Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II.

(b) The directors and officers of the Registrant's principal underwriter are
listed below. None of the officers are officers of the Registrant except:

Name Position and Offices with Registrant

Richard Monaghan Vice President
George Putnam Chairman and President
Gordon Silver Vice President

The principal business address of each person is One Post Office Square,
Boston, MA 02109:

Name Position and
Offices with Underwriter
- -----------------------------------------------------------------------------
Adduci,John V. Vice President
Alberts,Richard W. Asst. Vice President
Alden,Donald F. Vice President
Alexander,Michael R. Vice President
Alpaugh,Christopher S. Vice President
Altomare,Mario P. Vice President
Amisano,Paulette C. Vice President
Arends,Michael K. Senior Vice President
Armon,Lori E. Asst. Vice President
Asher,Steven E. Senior Vice President
Avery,Scott A. Senior Vice President
Aymond,Christian E. Senior Vice President
Aymond,Colin C. Vice President
Babcock III,Warren W. Senior Vice President
Baltimore,Mark H.W. Asst. Vice President
Barlow,Jane Asst. Vice President
Barnett,William E. Asst. Vice President
Barrett,Thomas Vice President
Battit,Suzanne J Vice President
Beatty,Steven M. Senior Vice President
Bent,John J. Senior Vice President
Beringer,Thomas C. Vice President
Boester,Eric C. Asst. Vice President
Boneparth,John F. Managing Director
Bouchard,Keith R. Senior Vice President
Boudreau,Stephen T. Asst. Vice President
Bradford Jr.,Linwood E. Senior Vice President
Bresnahan,Leslee R. Managing Director
Brockelman,James D. Senior Vice President
Brookman,Joel S. Vice President
Brown,Timothy K. Senior Vice President
Buckner,Gail D. Senior Vice President
Burnham,David N. Vice President
Burrill,Gregory J. Vice President
Buzzell,Paul F. Asst. Vice President
Cabana,Susan D. Vice President
Cartwright,Patricia A. Asst. Vice President
Casey,David M. Vice President
Castle Jr.,James R. Senior Vice President
Chamieh,Mark Vice President
Chapman,Frederick Vice President
Chapman,Thomas E. Vice President
Chase,Mary Claire Senior Vice President
Chrostowski,Louis F. Senior Vice President
Church,Daniel J. Vice President
Clark,Richard B. Senior Vice President
Clermont,Mary Vice President
Clinton,John C. Asst. Vice President
Cohen,Jeff M. Asst. Vice President
Collman,Kathleen M. Sr Managing Director
Commane,Karen L. Asst. Vice President
Coneeny,Mark L. Senior Vice President
Connelly,Donald A. Senior Vice President
Connolly,William T. Managing Director
Cooper,John S. Vice President
Corbett,Dennis Vice President
Corvinus,F. Nicholas Senior Vice President
Cote,Marie C. Asst. Vice President
Cotto,Stephen P Asst. Vice President
Cotton,Rick Vice President
Crane III,George H. Senior Vice President
Cristo,Chad H. Vice President
Critchell Jr.,D.Alan Asst. Vice President
Curran,Peter J. Senior Vice President
Dahill,Jessica E. Vice President
Daly,Kenneth L. Managing Director
Daylor,Donna M. Vice President
Days,Nancy M. Asst. Vice President
Deluse,Laura R. Asst. Vice President
deMont,Lisa M. Vice President
Diaz,Roger Vice President
Dirstine,Michael T. Vice President
DiStasio,Karen E. Vice President
Divney,Kevin M. Senior Vice President
Dolan,Michael G. Vice President
Donaldson,Scott M. Vice President
Dougherty,Thomas Vice President
Durbin,Emily J. Vice President
Durkee,Christine Asst. Vice President
Edlin,David B. Managing Director
Eidelberg,Kathleen E. Asst. Vice President
Elder,Michael D. Vice President
Emhof,Joseph R. Vice President
English,James M. Senior Vice President
Esposito,Vincent Managing Director
Favaloro,Beth A. Vice President
Feldman,Susan H. Senior Vice President
Fisher,C. Nancy Managing Director
Fishman,Mitchell B. Senior Vice President
Fiumara,Joseph C. Vice President
Flaherty,Patricia C. Senior Vice President
Fleisher,Kate Vice President
Fleming,Ellen E. Asst. Vice President
Foley,Timothy P. Vice President
Foran,Carey L. Vice President
Frost,Karen T. Senior Vice President
Gage,Matthew R. Asst. Vice President
Gaudette,Marjorie B. Vice President
Gibbs,Stephen C. Vice President
Gindel,Caroline E. Asst. Vice President
Goodfellow,Mark D. Vice President
Goodman,Robert Managing Director
Gould,Carol J. Asst. Vice President
Grace,Linda K. Vice President
Grant,Mitchell T. Managing Director
Graviere,Patrice Senior Vice President
Grey,Eric M. Vice President
Grossberg,Jill Asst. Vice President
Grove,Denise Vice President
Guerin,Donnalee Vice President
Hachey,Andrew J Asst. Vice President
Hadley,Christopher Asst. Vice President
Halloran,James E. Vice President
Halloran,Thomas W. Senior Vice President
Hansen,Christine M. Asst. Vice President
Harring,Linda Senior Vice President
Harrington,Shannon W. Vice President
Hartig,Robert Vice President
Hartigan,Craig W. Vice President
Hartley,Deborah M. Asst. Vice President
Hayes-Castro,Deanna R. Vice President
Hedstrom,Gayle A. Asst. Vice President
Heller,Kim G. Asst. Vice President
Holmes,Maureen A. Vice President
Hooley Jr.,Daniel F. Vice President
Horwitz,Jonathan S. Senior Vice President
Hotchkiss,Michael F. Senior Vice President
Howes,Douglas E. Asst. Vice President
Hoyt,Paula J. Asst. Vice President
Hurley,William J. Managing Director & CFO
Hutcherson,Eric A. Asst. Vice President
Hutchins,Robert B. Vice President
Iino,Yoshiro Vice President
Jacobsen,Dwight D. Managing Director
Kaminsky,Gregory C. Vice President
Kanwal,Amrit Managing Director
Kapinos,Peter J. Vice President
Keleher,Kevin J. Asst. Vice President
Kelley,Brian J. Vice President
Kelly,David Vice President
Kennedy,Alicia C. Asst. Vice President
Kinsman,Anne Senior Vice President
Kircher,Richard T. Asst. Vice President
Kirk,Deborah H. Senior Vice President
Koontz,Jill A. Senior Vice President
Kringdon,Joseph D. Senior Vice President
Landers,Bruce M. Vice President
Lane,Linda L. Asst. Vice President
LaPierre,Christopher W Asst. Vice President
Lathrop,James D. Senior Vice President
Lawlor,Stephanie T. Asst. Vice President
Leary,Joan M. Vice President
Ledbetter,Charles C. Vice President
Leddy,Maura W. Vice President
Leipsitz,Margaret Asst. Vice President
Lemire,Kevin Vice President
Levy,Eric S. Senior Vice President
Levy,Norman S. Vice President
Lewandowski Jr.,Edward V. Vice President
Lewandowski,Edward V. Senior Vice President
Lewis,Paul Asst. Vice President
Li,Mei Asst. Vice President
Lieberman,Samuel L. Senior Vice President
Lifsitz,David M. Vice President
Lilien,David R. Vice President
Link,Christopher H. Asst. Vice President
Linquata,Louis K. Asst. Vice President
Litant,Lisa M. Vice President
Lockwood,Maura A. Senior Vice President
Loew,Christopher R. Asst. Vice President
Lohmeier,Andrew Asst. Vice President
Lohr,Mark G. Managing Director
Lomba,Rufino R. Senior Vice President
Lord,Caroline F. Asst. Vice President
Lucey,Robert F. Director
Lucey,Thomas J. Director
Luskin,James M. Asst. Vice President
Lyons,Robert F. Asst. Vice President
MacDonald,Richard A. Senior Vice President
Maloof,Renee L. Asst. Vice President
Mancini,Dana Asst. Vice President
Mancini,Jane M. Managing Director
Manthorne,Heather M. Asst. Vice President
Maravel,Alexi A. Asst. Vice President
Martens,Erwin W. Managing Director
Maxwell,Scott M. Managing Director
McAvoy,Bridget Vice President
McCafferty,Karen A. Vice President
McCarthy,Anne B. Asst. Vice President
McConville,Paul D. Senior Vice President
McCracken,Brian Asst. Vice President
McCutcheon,Bruce A Senior Vice President
McDermott,Robert J. Vice President
McKenna,Mark J. Senior Vice President
McNamara,Laura Vice President
McNamee,Mary G. Vice President
Meagher,Dorothy B. Vice President
Mehta,Ashok Vice President
Metelmann,Claye A. Vice President
Michejda,Marek A. Vice President
Miller,Bart D. Senior Vice President
Miller,Gregory T. Vice President
Miller,Jeffrey M. Managing Director
Mills,Ronald K. Vice President
Mills,Stacy M. Vice President
Minsk,Judith Asst. Vice President
Monaghan,Richard A. Director
Monahan,Kimberly A. Vice President
Moody,Paul R. Vice President
Moret,Mitchell L. Senior Vice President
Morey,John P. Senior Vice President
Mosher,Barry L. Vice President
Mullen,Donald E. Senior Vice President
Munson,Brian D. Vice President
Murphy Jr.,Kenneth W. Asst. Vice President
Murray,Brendan R. Senior Vice President
Nadherny,Robert Senior Vice President
Nagashima,Toshio Managing Director
Natale,Lisa A. Asst. Vice President
Nauen,Kimberly Page Vice President
Neary,Ellen R. Vice President
Neher,Stacey P. Asst. Vice President
Nelson,Andrew E. Vice President
Newell,Amy Jane Vice President
Nickodemus,John P. Senior Vice President
Nickse,Gail A. Asst. Vice President
Nicolazzo,Jon C. Vice President
Nisbet,M. Julia Asst. Vice President
O'Brien,Lois C. Vice President
O'Brien,Nancy M. Asst. Vice President
O'Connell,Gayle M. Vice President
O'Connor,Brian P. Vice President
O'Connor,Matthew P. Asst. Vice President
O'Day,Teresa S. Vice President
Orr,Kevin Vice President
Palmer,Patrick J. Vice President
Pampliega,Carlos Vice President
Panek,Raymond S. Asst. Vice President
Parker,Michael T. Asst. Vice President
Parr,Cynthia O. Senior Vice President
Patton,Robert J. Vice President
Perkins,Erin M. Asst. Vice President
Peters,Jeffrey F. Managing Director
Petitti,Joseph P. Vice President
Petralia,Randolph S. Senior Vice President
Phoenix,John G. Senior Vice President
Phoenix,Joseph Senior Vice President
Pilibosian,George J. Vice President
Plapinger,Keith Senior Vice President
Powers,Brian S. Asst. Vice President
Present,Howard B. Senior Vice President
Puddle,David G. Senior Vice President
Pulkrabek,Scott M. Vice President
Putnam,George Director
Quinn,Lisa F. Asst. Vice President
Reed,Nadine McQueen Asst. Vice President
Rider,Wendy A. Vice President
Riley,Megan G. Asst. Vice President
Rodammer,Kris Senior Vice President
Rodts,Jennifer M. Asst. Vice President
Rogers,Deborah A. Vice President
Rowe,Robert B. Vice President
Ryan,Carolyn M. Asst. Vice President
Ryan,Deborah A. Vice President
Ryan,William M. Vice President
Saccocia,Cynthia M Asst. Vice President
Saunders,Catherine A. Senior Vice President
Saur,Karl W. Vice President
Scanlon,Michael M. Vice President
Schlosberg,Alan R. Asst. Vice President
Schofield,Shannon D. Senior Vice President
Schultz,Mitchell D. Managing Director
Scordato,Christine A. Senior Vice President
Segers,Elizabeth R. Senior Vice President
Selden,Denise D. Senior Vice President
Shamburg,John B. Vice President
Shanahan,Christopher W. Vice President
Sharpless,Kathy G. Managing Director
Shelby,Robert Vice President
Short,Jonathan D. Senior Vice President
Siebold,Mark J. Asst. Vice President
Siemon Jr.,Frank E. Asst. Vice President
Silva,J. Paul Vice President
Silver,Gordon H. Sr Managing Director
Skistimas Jr,John J. Vice President
Smeglin,Maryann C. Asst. Vice President
Solan,Meenakshi S. Asst. Vice President
Soule,Scott W. Asst. Vice President
Spiegel,Steven Sr Managing Director
Sprague,David L. Vice President
Starishevsky,Daniel Vice President
Starr,Loren M. Managing Director
Statuta,Jason M. Vice President
Steinberg,Lauren B. Asst. Vice President
Stern,Derek A. Asst. Vice President
Stickney,Paul R. Senior Vice President
Strumpf,Casey Senior Vice President
Sugimoto,Toshifumi Senior Vice President
Sullivan,Brian L. Senior Vice President
Sullivan,Donna G Vice President
Sullivan,Elaine M. Senior Vice President
Sullivan,Maryann Asst. Vice President
Suzuki,Toshimi Senior Vice President
Sweeney,Janet C. Senior Vice President
Talanian,John C. Managing Director
Tanner,B Iris Vice President
Tavares,April M. Asst. Vice President
Telling,John R. Senior Vice President
Tibbetts,Richard B. Managing Director
Tirado,Patrice M. Vice President
Troped Blacker,Bonnie Senior Vice President
Upham,Scott E. Vice President
Veale,David B. Asst. Vice President
Wallack,William F. Asst. Vice President
Walsh,Stephen M. Vice President
Warde,Elizabeth A. Asst. Vice President
Washburn,Andrew O. Vice President
Waters,Mitchell J. Vice President
Watt,Christopher C. Vice President
Welch III,William A. Asst. Vice President
Whalen,Brian Vice President
Whalen,Edward F. Senior Vice President
Whitaker,J. Greg Vice President
White,Patrick J. Asst. Vice President
Wolfson,Jane Senior Vice President
Woodlock,Ronald J. Asst. Vice President
Woolbert,Kelly A. Asst. Vice President
Woolverton,William H. Managing Director
Wright Jr.,Edmund F. Asst. Vice President
Yan,Yanfang Vice President
Young,Jason P. Vice President
Zografos,Laura J. Senior Vice President
Zukowski,Virginia A. Senior Vice President

Item 28. Location of Accounts and Records

Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are Registrant's
Associate Clerk, Judith Cohen; Registrant's investment adviser, Putnam
Investment Management, Inc.; Registrant's principal underwriter, Putnam
Mutual Funds Corp.; Registrant's custodian, Putnam Fiduciary Trust Company
("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam
Investor Services, a division of PFTC. The address of the Associate Clerk,
investment adviser, principal underwriter, custodian and transfer and
dividend disbursing agent is One Post Office Square, Boston, Massachusetts
02109.

Item 29. Management Services

None.

Item 30. Undertakings

None.

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 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston, and The Commonwealth
of Massachusetts, on the 31st day of March, 2000.

Putnam Variable Trust

By: Gordon H. Silver, Vice President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement of Putnam Variable Trust has been signed
below by the following persons in the capacities and on the dates
indicated:

Signature Title

George Putnam President and Chairman of the Board;
Principal Executive Officer; Trustee

John D. Hughes Senior Vice President; Treasurer and
Principal Financial Officer

Paul G. Bucuvalas Assistant Treasurer and
Principal Accounting Officer

Jameson A. Baxter Trustee

Hans H. Estin Trustee

John A. Hill Trustee

Ronald J. Jackson Trustee

Paul L. Joskow Trustee

Elizabeth T. Kennan Trustee

Lawrence J. Lasser Trustee

John H. Mullin, III Trustee

Robert E. Patterson Trustee

William F. Pounds Trustee

George Putnam, III Trustee

A.J.C. Smith Trustee

W. Thomas Stephens Trustee

W. Nicholas Thorndike Trustee

By: Gordon H. Silver,
as Attorney-in-Fact
March 31, 2000