PUTNAM VARIABLE TRUST PROSPECTUS
Class IB Shares APRIL 30, 1999
Putnam Variable Trust (the "Trust") offers shares of beneficial interest in
separate investment portfolios (collectively, the "funds") for purchase by
separate accounts of various insurance companies. The funds, which have
different investment objectives and policies, offered by this prospectus
are:
Growth Funds Growth and Income Funds
Putnam VT International Growth Fund Putnam VT Growth and Income Fund
Putnam VT Voyager Fund
This prospectus explains what you should know about the funds of Putnam
Variable Trust listed above, which are available for purchase by separate
accounts of insurance companies. Certain other funds of the Trust are
offered through other prospectuses.
Putnam Investment Management, Inc. (Putnam Management), which has managed
mutual funds since 1937, manages the funds. These securities have not been
approved or disapproved by the Securities and Exchange Commission nor has
the Commission passsed upon the accuracy or adequacy of this prospectus.
Any statement to the contrary is a crime.
CONTENTS
2 Fund summaries (including Goal, Main investment strategies, Main risks and
Performance information)
4 What are the funds' main investment strategies and related risks?
6 Who manages the funds?
7 How to buy and sell fund shares
8 Distribution Plan
8 How do the funds price their shares?
8 Fund distributions and taxes
10 Financial highlights
Fund summaries
The following summaries identify each fund's goal, principal investment
strategies and the main risks that could adversely affect the value of a
fund's shares and the total return on your investment. Each summary also
contains performance information that provides some indication of each
fund's risks. The chart contained in each summary shows year-to-year
changes in the performance of the fund's class IB shares. A table
following each chart compares the fund's performance to that of broad
measures of market performance. Of course, a fund's past performance is
not necessarily an indication of future performance. None of the
performance information reflects the impact of insurance-related charges or
expenses. Please refer to the prospectus for your insurance contract for
information about those charges and performance data reflecting those
charges and expenses.
Class IB performance for the period prior to April 6, 1998 for Putnam VT
Growth and Income Fund and prior to April 30, 1998 for Putnam VT
International Growth Fund and Putnam VT Voyager Fund are based upon
performance of class IA shares of the fund (not offered by this prospectus)
restated to reflect the fees for clas IB shares including a 12b-1 fee of
0.15%.
More detailed descriptions of the funds, including the risks associated
with investing in the funds, can be found further back in this prospectus.
Please be sure to read this additional information before you invest.
You can lose money by investing in any of the funds. A fund may not
achieve its goals, and none of the funds are intended as a complete
investment program. An investment in any fund is not a deposit of a bank
and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
PUTNAM VT GROWTH AND INCOME FUND
GOAL
The fund seeks capital growth and current income.
MAIN INVESTMENT STRATEGIES - VALUE STOCKS
The fund invests primarily in value stocks, that offer the potential for
capital growth, current income, or both. Value stocks are those that
Putnam Management believes are currently undervalued compared to their true
worth. If Putnam Management is correct and other investors recognize this
discount, the price of the stock may rise. The fund invests mainly in
large companies, although it can invest in companies of any size.
MAIN RISKS
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to appreciate as anticipated by
Putnam Management, regardless of movements in the securities markets. Many
factors can adversely affect a stock's performance. This risk is greater
for smaller companies, which tend to be more vulnerable to adverse
developments.
* The risk that movements in the securities markets will reduce the value
of the fund's investments, regardless of how well the companies in the
fund's portfolio perform.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB
SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES
(Bar chart)
Plot points
1989 21.12%
1990 1.81%
1991 18.87%
1992 9.59%
1993 14.09%
1994 0.20%
1995 36.51%
1996 21.73%
1997 23.96%
1998 15.29%
Year-to-date performance through 3/31/99 was 2.53%. During the periods
shown in the bar chart, the highest return for a quarter was 16.59%
(quarter ending 12/31/98) and the lowest return for a quarter was -10.00%
(quarter ending 9/30/98).
Average annual total returns (for periods ending 12/31/98)
- -------------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
- -------------------------------------------------------------------------------
Class IB 15.29% 18.94% 15.87%
S&P 500 Index 28.58% 24.07% 19.21%
- -------------------------------------------------------------------------------
The fund's performance is compared to the Standard & Poor's 500 Index, an
unmanaged index of common stocks frequently used as a general measure of U.S.
stock market performance.
PUTNAM VT INTERNATIONAL GROWTH FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES - GROWTH
Under normal conditions, the fund generally diversifies its investments
among a number of different countries by investing at least 65% of its
total assets in at least three countries other than the United States. The
fund may invest in both growth and value stocks. Growth stocks are issued
by companies whose earnings Putnam Management believes are likely to grow
faster than the economy as a whole. Value stocks are those that Putnam
Management believes are currently undervalued compared to their true worth.
If Putnam Management is correct and other investors recognize this
discount, the price of the stock may rise. The fund invests mainly in
medium and large-sized companies, although it can invest in companies of
any size. Although the fund emphasizes investments in developed countries,
it may also invest in companies located in emerging markets.
MAIN RISKS
* The risks of investing outside the United States, such as currency
fluctuations, economic or financial instability, lack of timely or reliable
financial information or unfavorable political or legal developments in
international markets. The risks are increased when investing in emerging
markets.
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to appreciate as anticipated by
Putnam Management, regardless of movements in foreign or U.S. securities
markets. Many factors can adversely affect a stock's performance. This
risk is greater for smaller companies, which tend to be more vulnerable to
adverse developments.
* The risk that movements in foreign or U.S. securities markets will reduce
the value of the fund's investments, regardless of how well the companies
in the fund's portfolio perform.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB
SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES
(Bar chart)
1998 18.69%
Year-to-date performance through 3/31/99 was 5.18%. During the periods
shown in the bar chart, the highest return for a quarter was 22.06%
(quarter ending 12/31/98) and the lowest return for a quarter was -18.92%
(quarter ending 9/30/98).
Average annual total returns (for periods ending 12/31/98)
- ------------------------------------------------------------------------------
Since
Past inception
1 year (1/2/97)
- ------------------------------------------------------------------------------
Class IB 18.43% 17.30%
MSCI EAFE Index 20.00% 10.52%
- ------------------------------------------------------------------------------
The fund's performance has benefitted from Putnam Management's agreement to
limit the fund's expenses through December 31, 1998. The fund's
performance is compared to the Morgan Stanley Capital International (MSCI)
EAFE Index, an unmanaged index of equity securities from Europe, Australia
and the Far East, with all values expressed in U.S. dollars.
PUTNAM VT VOYAGER FUND
GOAL
The fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES - GROWTH STOCKS
The fund invests mainly in growth stocks. Growth stocks are common stocks
that are issued by companies whose earnings Putnam Management believes are
likely to grow faster than the economy as a whole. The fund may invest in
companies of any size.
MAIN RISKS
* The risk that the prices of the stocks in the fund's portfolio will fall,
or will fail to appreciate as anticipated by Putnam Management. Many
factors can adversely affect a stock's performance. This risk is greater
for small or medium-size companies, which tend to be more vulnerable to
adverse developments.
* The risk that movements in the securities markets will reduce the value
of the fund's investments, regardless of how well the companies in the
fund's portfolio perform.
PERFORMANCE INFORMATION
[GRAPHIC OMITTED: vertical bar chart CALENDAR YEAR TOTAL RETURNS FOR CLASS IB
SHARES]
CALENDAR YEAR TOTAL RETURNS FOR CLASS IB SHARES
(Bar chart)
Plot points
1989 32.18%
1990 -2.18%
1991 45.87%
1992 10.19%
1993 18.92%
1994 0.89%
1995 40.46%
1996 12.80%
1997 26.33%
1998 24.19%
Year-to-date performance through 3/31/99 was 6.12%. During the periods
shown in the bar chart, the highest return for a quarter was 27.07%
(quarter ending 12/31/98) and the lowest return for a quarter was -17.39%
(quarter ending 9/30/90).
Average annual total returns (for periods ending 12/31/98)
- -------------------------------------------------------------------------------
Past Past Past
1 year 5 years 10 years
- -------------------------------------------------------------------------------
Class IB 24.19% 20.19% 19.98%
S&P 500 Index 28.58% 24.07% 19.21%
- -------------------------------------------------------------------------------
The fund's performance is compared to the Standard & Poor's 500 Index, an
unmanaged index of common stocks frequently used as a general measure of
U.S. stock market performance.
What are the funds' main investment strategies and related risks?
The funds are generally managed in styles similar to other open-end
investment companies which are managed by Putnam Management and whose
shares are generally offered to the public. These other Putnam funds may,
however, employ different investment practices and may invest in securities
different from those in which their counterpart funds invest, and
consequently will not have identical portfolios or experience identical
investment results. Any investment carries with it some level of risk that
generally reflects its potential for reward.
The first part of this section describes the investment strategies and
related risks that are particular to each of the funds. The second part of
this section (Common Investment Strategies and Risks) provides additional
information on the investment strategies described in part one of the
section. It discusses investment strategies and related risks that are
common to a number of the funds. In addition, the "Fund Summaries" contain
important information about the funds. Investors are urged to read the
fund summary and both parts of the section that follows for complete
information about the funds.
Putnam VT Growth and Income Fund
The fund pursues its goal by investing mainly in value stocks. Putnam
Management will consider, among other things, a company's financial
strength, competitive position in its industry and projected future
earnings and dividends when deciding whether to buy or sell investments.
The fund may invest in companies of any size. The fund may invest without
limit in securities of foreign issuers traded in the U.S. public markets.
The fund may also invest in securities of issuers not actively traded in
U.S. markets. The fund expects that its investments in such foreign
securities not actively traded in U.S. markets will generally not exceed
20% of the fund's total assets, although the fund's investments in such
foreign securities may exceed this amount from time to time.
Putnam VT International Growth Fund
The fund pursues its goal by investing mainly in growth and value stocks
issued by companies outside the United States. Putnam Management will
consider, among other things, a company's financial strength, competitive
position in its industry and projected future earnings and dividends when
deciding whether to buy or sell investments. The fund may invest in
companies of any size.
Putnam VT Voyager Fund
The fund pursues its goal by investing mainly in growth stocks. Putnam
Management will consider, among other things, a company's financial
strength, competitive position in its industry and projected future
earnings and dividends when deciding whether to buy or sell investments.
The fund may invest in companies of any size. The fund may invest without
limit in securities of foreign issuers traded in U.S. public markets. The
fund may also invest in securities of issuers not actively traded in U.S.
markets. The fund expects that its investments in such foreign securities
not actively traded in U.S. markets will generally not exceed 20% of the
fund's total assets, although the fund's investments in such foreign
securities may exceed this amount from time to time.
Common Investment Strategies And Related Risks
Common stocks. Common stocks represent an ownership interest in a company.
The value of a company's stock may fall as a result of factors directly
relating to that company, such as decisions made by its management or lower
demand for the company's products or services. A stock's value may also
fall because of factors affecting multiple companies 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 market
conditions 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 makes
required payments to holders of its bonds and other debt. For this reason,
the value of the stock will usually react more strongly than the bonds and
other debt to actual or perceived changes in the company's financial
condition or prospects.
Growth stocks. Certain funds may invest in growth stocks. Growths stocks
are stocks of companies Putnam Management believes have earnings that are
likely to grow faster than the economy as a whole. These growth stocks
typically trade at higher multiples of current earnings than other stocks.
Therefore, the values of growth stocks may be more sensitive to changes in
current or expected earnings than the values of other stocks. If Putnam
Management's assessment of the prospects for the company's earnings growth
is wrong, or if its judgment about 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 Putnam Management has placed on it.
Value stocks. Certain funds may also invest in companies that are not
expected to experience significant earnings growth, but whose stock Putnam
Management believes is undervalued compared to its true worth. These
companies may have experienced adverse business developments or may be
subject to special risks that have caused their stocks to be out of favor.
If Putnam Management's assessment of a company's prospects is wrong, or if
other investors do not eventually recognize the value of the company, then
price of the company's stock may fall or may not approach the value that
Putnam Management has placed on it.
Smaller companies. Certain funds can invest in small and medium-sized
companies, including companies with market capitalizations of less than
$500 million. These companies 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 may
trade less frequently and in limited volume, and their prices may fluctuate
more than stocks of other companies. Stocks of these companies may
therefore be more vulnerable to adverse developments than those of larger
companies.
Foreign investments. Each of the funds may invest in securities of foreign
issuers. Foreign investments involve certain special risks, including
* Unfavorable changes in currency exchange rates: Foreign investments are
normally issued and traded in foreign currencies. As a result, their
values may be affected by changes in the exchange rates between particular
foreign currencies and the U.S. dollar.
* Political and economic developments: Foreign investments may be subject
to the risks of seizure by a foreign government, imposition of restrictions
on the exchange or transport of foreign currency, and tax increases.
* Unreliable or untimely information: There may be less information
publicly available about a foreign company than about most U.S. companies,
and foreign companies are usually not subject to accounting, auditing and
financial reporting standards and practices comparable to those in the
United States.
* Limited legal recourse: Legal remedies for investors such as the fund may
be more limited than those available in the United States.
* Limited markets: Certain foreign investments may be less liquid (harder
to buy and sell) and more volatile than domestic investments, which means
the fund may at times be unable to sell these foreign investments at
desirable prices. For the same reason, the fund may at times find it
difficult to value its foreign investments.
* Trading practices: Brokerage commissions and other fees are generally
higher for foreign investments than for domestic investments. The
procedures and rules for settling foreign transactions may also involve
delays in payment, delivery or recovery of money or investments.
* Lower yield: Common stocks of foreign companies have historically offered
lower dividends than comparable U.S. companies. Foreign withholding taxes
may further reduce the amount of income available to distribute to
shareholders of the fund. The fund's yield is therefore expected to be
lower than yields of most funds that invest mainly in common stocks of U.S.
companies.
* Emerging markets. The risks of foreign investments are typically
increased in less developed and developing countries, which are sometimes
referred to as emerging markets. For example, political and economic
structures in these countries may be young and developing rapidly, which
can cause instability. These countries are also more likely to experience
high levels of inflation, deflation or currency devaluation, which could
hurt their economies and securities markets. For these and other reasons,
investments in emerging markets are often considered speculative.
Certain of these risks may also apply to some extent to U.S.-traded
investments that are denominated in foreign currencies, investments in U.S.
companies that are traded in foreign markets, or to investments in U.S.
companies that have significant foreign operations. Special U.S. tax
considerations may apply to the fund's foreign investments.
Derivatives. The funds may engage in a variety of transactions involving
derivatives, such as futures, options, warrants and swap contracts.
Derivatives are financial instruments whose value depends upon, or is
derived from, the value of something else, such as one or more underlying
investments, pools of investments, indexes or currencies. The fund's
return on a derivative typically depends on the change in the value of the
investment, pool of investments index or currency specified in the
derivative instrument.
The funds may use derivatives both for hedging and non-hedging purposes.
The decision as to whether and to the extent the fund will use derivative
hedging purposes will depend upon a number of factors, including market
conditions, the funds' investments and the availablility of suitable
derivatives. Derivatives involve special risks and may result in losses.
The funds will be dependent on Putnam Management's ability to analyze and
manage these sophisticated instruments. The prices of derivatives may move
in unexpected ways, especially in abnormal market conditions. Some
derivatives are "leveraged" and therefore may magnify or otherwise increase
investment losses to the fund.
Other risks arise from the potential inability to terminate or sell
derivatives positions. A liquid secondary market may not always exist for
the fund's derivative positions at any time. In fact, many
over-the-counter instruments will not be liquid. Over-the-counter
instruments also involve the risk that the other party will not meet its
obligations to the fund. For further information about the risks of
derivatives, see the statement of additional information (SAI).
Other investments. In addition to the main investment strategies described
above, the funds may also make other types of investments, such as
investments in preferred stocks, convertible securities or fixed-income
securities, and therefore may be subject to other risks, as described in
the funds' SAI.
Alternative strategies. At times Putnam Management may judge that market
conditions make pursuing a funds' investment strategies inconsistent with
the best interests of its shareholders. Putnam Management then may
temporarily use alternative strategies that are mainly designed to limit a
fund's losses. Although Putnam Management has the flexibility to use these
strategies, it may choose not to for a variety of reasons, even in very
volatile market conditions. These strategies may cause the affected fund
to miss out on investment opportunities, and may prevent the fund from
achieving its goal.
Changes in policies. The Trust's Trustees may change any of the funds'
goals, investment strategies and other policies without shareholder
approval, except as otherwise indicated.
Who manages the funds?
The Trust's Trustees oversee the general conduct of each fund's business.
The Trustees have retained Putnam Management to be the funds' investment
manager, responsible for making investment decisions for the funds and
managing the funds' other affairs and business. Each fund pays Putnam
Management a quarterly management fee for these services based on the
fund's average net assets. Putnam Management's address is One Post Office
Square, Boston, MA 02109. The funds paid Putnam Management management fees
in the following amounts (reflected as a percentage of average net assets)
for each fund's last fiscal year:
Putnam VT Growth and Income Fund .46%
Putnam VT International Growth Fund .80%
Putnam VT Voyager Fund .54%
The following officers of Putnam Management have had primary responsibility
for the day-to-day management of the relevant fund's portfolio since the
years shown below. Their experience as either portfolio managers or
investment analysts over the last five years is also shown.
<TABLE>
<CAPTION>
Business experience
Fund name Year (at least 5 years)
- --------------------- ------- -------------------------
<S> <C> <C>
Putnam VT Growth and
Income Fund
David L. King 1993 Employed by Putnam Management since 1983.
Managing Director
Hugh H. Mullin 1998 Employed by Putnam Management since 1986.
Senior Vice President
Sheldon N. Simon 1997 Employed by Putnam Management since 1984.
Senior Vice President
Putnam VT International
Growth Fund
Justin M. Scott 1996 Employed by Putnam Management since 1988.
Managing Director
Omid Kamshad 1996 Employed by Putnam Management since
Managing Director 1996. Prior to January 1996, Mr. Kamshad
was employed by Lombard Odier International
and prior to April 1995, he was employed by
Baring Asset Management Company.
Mark Pollard 1999 Employed by Putnam Management since 1990.
Managing Director
Paul Warren 1999 Employed by Putnam Management since 1997.
Senior Vice President Prior to May 1997, Mr. Warren was employed
by IDS Fund Management. Prior to August 1994,
he was employed by Pilgrim Baxter Associates.
Putnam VT Voyager Fund
Robert R. Beck 1995 Employed by Putnam Management since 1989.
Managing Director
Roland W. Gillis 1995 Employed by Putnam Management since 1995.
Managing Director Prior to March 1995, Mr. Gillis was employed
by Keystone Custodian Funds, Inc.
Michael P. Stack 1997 Employed by Putnam Management since 1997.
Senior Vice President Prior to November 1997, Mr. Stack was employed
by Independence Investment Associates, Inc.
Charles H. Swanberg 1994 Employed by Putnam Management since 1984.
Senior Vice President
Michael E. Nance 1999 Employed by Putnam Management since 1994.
Senior Vice President Prior to June 1994, Mr. Nance attended the
University of Chicago Graduate School of
Business.
</TABLE>
Year 2000 Issues. The funds could be adversely affected if the computer
systems used by Putnam Management and the funds' other service providers do
not properly process and calculate the date-related information relating to
year 2000. While year 2000-related computer problems could have a negative
effect on a fund, both in its operations and in its investments, Putnam
Management is working to avoid such problems and to obtain assurances from
service providers that they are taking similar steps. No assurances,
though, can be provided that the funds will not be adversely impacted by
these matters.
How to buy and sell fund shares
The Trust has an underwriting agreement relating to the funds with Putnam
Mutual Funds, One Post Office Square, Boston, Massachusetts 02109. Putnam
Mutual Funds presently offers shares of each fund of the Trust continuously
to separate accounts of various insurers. The underwriting agreement
presently provides that Putnam Mutual Funds accepts orders for shares at
net asset value and no sales commission or load is charged. Putnam Mutual
Funds may, at its expense, provide promotional incentives to dealers that
sell variable insurance products.
Shares are sold or redeemed at the net asset value per share next
determined after receipt of an order. Orders for purchases or sales of
shares of a fund must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to receive that
day's net asset value. No fee is charged to a separate account when it
redeems fund shares.
Please check with your insurance company to determine which funds are
available under your variable annuity contract or variable life insurance
policy. Certain funds may not be available in your state due to various
insurance regulations. Inclusion in this prospectus of a fund that is not
available in your state is not to be considered a solicitation. This
prospectus should be read in conjunction with the prospectus of the
separate account of the specific insurance product which accompanies this
prospectus.
The funds currently do not foresee any disadvantages to policyowners
arising out of the fact that the funds offer their shares to separate
accounts of various insurance companies to serve as the investment medium
for their variable products. Nevertheless, the Trustees intend to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise, and to determine what action, if any, should be taken in
response to such conflicts. If such a conflict were to occur, one or more
insurance companies' separate accounts might be required to withdraw their
investments in one or more funds and shares of another fund may be
substituted. This might force a fund to sell portfolio securities at
disadvantageous prices. In addition, the Trustees may refuse to sell
shares of any fund to any separate account or may suspend or terminate the
offering of shares of any fund if such action is required by law or
regulatory authority or is in the best interests of the shareholders of the
fund.
Under unusual circumstances, the Trust may suspend repurchases or postpone
payment for up to seven days or longer, as permitted by federal securities
law.
DISTRIBUTION PLAN
The Trust has adopted a Distribution Plan with respect to class IB shares
to compensate Putnam Mutual Funds for services provided and expenses
incurred by it as principal underwriter of the class IB shares, including
the payments to insurance companies and their affiliated dealers mentioned
below. The plans provide for payments by each fund to Putnam Mutual Funds
at the annual rate (expressed as a percentage of average net assets) of up
to 0.35% on class IB shares. The Trustees currently limit payments on
class IB shares to 0.15% of average net assets.
Putnam Mutual Funds compensates insurance companies (or affiliated
broker-dealers) whose separate accounts invest in the Trust through class
IB shares for providing services to their contract holders investing in the
Trust.
Putnam Mutual Funds makes quarterly payments to insurers or 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 insurers and
dealers. The payments are also subject to the continuation of the
Distribution Plan, the terms of service agreements between dealers and
Putnam Mutual Funds, and any applicable limits imposed by the National
Association of Securities Dealers, Inc.
How do the funds price their shares?
The price of a fund's shares is based on its net asset value (NAV). The
NAV per share of each class equals the total value of its assets, less its
liabilities, divided by the number of its outstanding shares. Shares are
only valued as of the close of regular trading on the New York Stock
Exchange each day the exchange is open.
Each fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market value.
It values all other investments and assets at their fair value.
Each fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a result,
changes in the value of those currencies in relation to the U.S. dollar may
affect each fund's NAV. Because foreign markets may be open at different
times than the New York Stock Exchange, the value of each fund's shares may
change on days when shareholders are not able to buy or sell them. If
events materially affecting the values of each fund's foreign investments
occur between the close of foreign markets and the close of regular trading
on the New York Stock Exchange, these investments will be valued at their
fair value.
Fund distributions and taxes
Each month's distributions will be paid on the first business day of the
next month. Each of the funds will distribute any net investment income
and net realized capital gains at least annually.
Distributions are reinvested without a sales charge, using the net asset
value determined on the ex-dividend date. Distributions on each share are
determined in the same manner and are paid in the same amount, regardless
of class, except for such differences as are attributable to differential
class expenses.
Generally, owners of variable annuity and variable life contracts are not
taxed currently on income or gains realized with respect to such contracts.
However, some distributions from such contracts may be taxable at ordinary
income tax rates. In addition, distributions made to an owner who is
younger than 59 1/2 may be subject to a 10% penalty tax. Investors should
ask their own tax advisors for more information on their own tax situation,
including possible foreign, state or local taxes.
In order for investors to receive the favorable tax treatment available to
holders of variable annuity and variable life contracts, the separate
accounts underlying such contracts, as well as the funds in which such
accounts invest, must meet certain diversification requirements. Each fund
intends to comply with these requirements. If a fund does not meet such
requirements, income allocable to the contracts would be taxable currently
to the holders of such contracts.
Each fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements necessary
for it to be relieved of federal income taxes on income and gains it
distributes to the separate accounts. For information concerning federal
income tax consequences for the holders of variable annuity contracts and
variable life insurance policies, contract holders should consult the
prospectus of the applicable separate account.
Fund investments in foreign securities may be subject to withholding taxes
at the source on dividend or interest payments. In that case, a fund's
return on those investments would be decreased.
A fund's investments in certain debt obligations may cause the fund to
recognize taxable income in excess of the cash generated by such
obligations. Thus, the fund could be required at times to liquidate other
investments in order to satisfy its distribution requirements.
Financial highlights
The financial highlights table is intended to help you understand the
funds' recent financial performance. Certain information reflects
financial results for a single fund share. The total returns represent the
rate that an investor would have earned or lost on an investment in the
fund, assuming reinvestment of all dividends and distributions. This
information has been derived from each fund's financial statements, which
have been audited and reported on by PricewaterhouseCoopers LLP. Its
report and the fund's financial statements are included in the funds'
annual report to shareholders, which is available upon request.
<TABLE>
<CAPTION>
Financial Highlights
Investment Operations Less Distributions:
Net Asset Net Realized
Value, Net and Unrealized Total from From Net
Beginning Investment Gain (Loss) on Investment Investment
of Period Income (Loss) Investments Operations Income
Period ended
<S> <C> <C> <C> <C> <C>
Putnam VT Growth
and Income Fund
1998* $28.02 $.26(a) $.47 $.73 $ --
Putnam VT
International
Growth Fund
1998** $13.44 $(.04)(a) $.15 $.11 $(.03)
Putnam VT Voyager
Fund
1998** $41.55 $(.01)(a) $4.27 $4.26 $ --
Total
Investment Ratio of
Net Asset Return at Net Assets Expenses to
Total Value, End Net Asset End of Period Average Net
Distributions of Period Value(%)(c) (in thousands) Assets(%)(d)
Putnam VT Growth
and Income Fund
1998** $ -- $28.75 2.61* $7,583 .49*
Putnam VT
International
Growth Fund
1998*** $(.04) $13.51 .81* $1,234 .83*
Putnam VT Voyager
Fund
1998*** $ -- $45.81 10.25* $4,332 .49*
* Not annualized.
** For the period April 6, 1998 (commencement of operations) to December 31, 1998.
*** For the period April 30, 1998 (commencement of operations) to December 31, 1998.
(a) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
(c) Total investment return assumes dividend reinvestment.
(d) The ratio of expenses to average net assets includes amounts paid through expense
offset and brokerage service arrangements.
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For more information
about the funds of Putnam Variable Trust
The Trust's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about
the funds. The SAI, and the auditor's report and financial statements
included in the Trust's most recent annual report to the funds'
shareholders, are incorporated by reference into this prospectus, which
means they are part of this prospectus for legal purposes. The Trust's
annual report discusses the market conditions and investment strategies
that significantly affected the funds' performance during the funds' last
fiscal year. You may get free copies of these materials, request other
information about the funds and other Putnam funds, or make shareholder
inquiries, by contacting your financial advisor or by calling Putnam
toll-free at 1-800-225-1581.
You may review and copy information about the funds, including the Trust's
SAI, at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-800-SEC-0330 for
information about the operation of the public reference room. You may also
access reports and other information about the fund on the Commission's
Internet site at http://www.sec.gov. You may get copies of this
information, with payment of a duplication fee, by writing the Public
Reference Section of the Commission, Washington, D.C. 20549-6009. You may
need to refer to the Trust's file number.
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581
Address correspondence to
Putnam Investor Services
P. O. Box 989
Boston, Massachusetts 02103
www.putnaminv.com
File No. 811-5346
Putnam Mutual Funds Corp.
Member, NASD, Inc.
