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| UNITED STATES
SECURITIES AND EXCHANGE COMMISSION |
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| CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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| Investment Company Act file number: | (811–05346) |
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| Exact name of registrant as specified in charter: | Putnam Variable Trust |
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| Address of principal executive offices: | 100 Federal Street, Boston, Massachusetts 02110 |
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| Name and address of agent for service: | Robert T. Burns, Vice President
100 Federal Street
Boston, Massachusetts 02110 |
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| Copy to: | Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036 |
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| Registrant's telephone number, including area code: | (617) 292–1000 |
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| Date of fiscal year end: | December 31, 2019 |
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| Date of reporting period: | January 1, 2019 — December 31, 2019 |
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Item 1. Report to Stockholders: | |
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| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |
IMPORTANT NOTICE: Delivery of paper fund reports
In accordance with regulations adopted by the Securities and Exchange Commission, beginning on or after January 1, 2021, at the election of your insurance provider, you may not receive paper reports like this one in the mail from the insurance provider that offers your variable annuity contract or variable life insurance policy unless you specifically request it. Instead, they will be available on a website, and your insurance provider will notify you by mail whenever a new one is available, and provide you with a website link to access the report.
If you wish to continue to receive paper reports free of charge after January 1, 2021, please contact your insurance provider.
If you already receive these reports electronically, no action is required.
Message from the Trustees
February 7, 2020
Dear Shareholder:
Global financial markets overcame a number of uncertainties in 2019. Both stock and bond markets experienced bouts of volatility, but performance recovered despite macroeconomic headwinds and risks. Stock markets worldwide delivered solid returns for the calendar year, with all three major U.S. equity indexes reaching record highs in December. The year was also beneficial for bond investors, as global fixed-income markets posted strong returns, thanks in part to policy easing from central banks.
Although no one can predict the direction of the markets in the months ahead, Putnam’s experienced investment professionals actively seek to position their fund portfolios for all types of conditions. They take a research-intensive approach to investing that includes risk management strategies designed to serve investors through changing markets. In all environments, we believe investors should remain focused on time-tested approaches, such as maintaining a well-diversified portfolio, thinking about long-term goals, and speaking regularly with a financial advisor.
Thank you for investing with Putnam.
Performance summary(as of 12/31/19)
Investment objective
Capital growth with current income as its secondary objective
Net asset valueDecember 31, 2019
| |
| Class IA: $10.44 | Class IB: $10.32 |
Total return at net asset value
| | | |
| | | | | MSCI EAFE Value |
| (as of 12/31/19) | Class IA shares* | Class IB shares† | | Index (ND) |
| 1 year | 20.44% | 20.22% | 16.09% |
| 5 years | 23.89 | 22.37 | 19.01 |
| Annualized | 4.38 | 4.12 | 3.54 |
| 10 years | 55.94 | 52.16 | 47.73 |
| Annualized | 4.54 | 4.29 | 3.98 |
| Life | 222.38 | 206.37 | 218.61 |
| Annualized | 5.22 | 4.99 | 5.19 |
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
* Class inception date: January 2, 1997.
† Class inception date: April 6, 1998.
The MSCI EAFE Value Index (ND) is an unmanaged index that measures the performance of equity securities representing the value style in countries within Europe, Australasia, and the Far East. Calculated with net dividends (ND), this total return index reflects the reinvestment of dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.
Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. All total return figures are at net asset value and exclude contract charges and expenses, which are added to the variable annuity contracts to determine total return at unit value. Had these charges and expenses been reflected, performance would have been lower. Performance of class IB shares before their inception is derived from the historical performance of class IA shares, adjusted to reflect the higher operating expenses applicable to such shares. For more recent performance, contact your variable annuity provider who can provide you with performance that reflects the charges and expenses at your contract level.
Allocations are shown as a percentage of the fund’s net assets. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, and rounding.Holdings and allocations may vary over time.
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| Putnam VT International Value Fund1 |
Report from your fund’s managers
How was the environment for investing in international value stocks during the 12-month reporting period ended December 31, 2019?
Throughout the 12-month period, international stocks generally performed well despite many developments that could have sent investors fleeing. Markets experienced bouts of volatility, but performance recovered despite macroeconomic headwinds and risks, such as fears of a global economic slowdown and concerns over the U.S.–China trade conflict.
How did Putnam VT International Value Fund perform in this environment?
For the 12-month period, the fund’s IA shares delivered a return of 20.44%, outperforming the fund’s benchmark, the MSCI EAFE Value Index [ND], which returned 16.09%.
Could you discuss some stocks that helped the fund’s performance during the period?
The top two contributors to performance were Japan-based Screen Holdings, which produces semiconductor manufacturing equipment, and Samsung Electronics, a South Korean semiconductor manufacturer. Both companies benefited from a recovery in the semiconductor industry, based on expectations for improving demand.
Another highlight was our investment in AstraZeneca, a U.K.-based biopharmaceutical company. The company has made great progress with its oncology drugs, and it reported better-than-expected earnings and sales in the third quarter of 2019. At the same time, AstraZeneca upgraded its outlook for product sales growth.
What were some stocks or strategies that detracted fund performance during the period?
The top detractor was Japan-based Seven & i Holdings Co., the parent company of 7 Eleven, which operates stores in 17 countries. The stock’s underperformance was due in part to weaker sales in its supermarket and department store businesses.
Also detracting from fund performance was our decision to avoid the stock of British American Tobacco, which performed well for the period. We have been staying away from tobacco stocks for many reasons. Demand and volume are down significantly for the industry, and tobacco companies no longer have the pricing power they once had. In addition, regulatory scrutiny and issues have created further headwinds for these companies.
As the fund begins a new fiscal year, what is your outlook?
Despite the markets’ strength in 2019, we are still seeing persistently slower growth in economies worldwide. Along with recession concerns, we believe a number of uncertainties and risks remain for investors, including U.S. politics and the potential divisiveness of the 2020 presidential election. One bright spot could be optimism around easing monetary policy. We believe interest-rate cuts by major central banks worldwide in 2019 could continue to boost investor sentiment in the coming year.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice. Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future.
Consider these risks before investing:International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. Because the fund currently invests, and may in the future invest, significantly in European companies, the fund is particularly susceptible to economic, political, regulatory, or other events or conditions affecting issuers in Europe. Investments in small and/or midsize companies increase the risk of greater price fluctuations. Value stocks may fail to rebound, and the market may not favor value-style investing. The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions, and the potential failure of the other party to the instrument to meet its obligations. You can lose money by investing in the fund.
Your fund’s managers
Portfolio ManagerDarren A. Jaroch, CFA,joined Putnam in 1999 and has been in the investment industry since 1996.
Lauren B. DeMore, CFA, is Assistant Portfolio Manager of the fund.
Your fund’s managers also manage other accounts advised by Putnam Management or an affiliate, including retail mutual fund counterparts to the funds in Putnam Variable Trust.
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| 2Putnam VT International Value Fund |
Understanding your fund’s expenses
As an investor in a variable annuity product that invests in a registered investment company, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, which are not shown in this section and would result in higher total expenses. Charges and expenses at the insurance company separate account level are not reflected. For more information, see your fund’s prospectus or talk to your financial representative.
Review your fund’s expenses
The two left-hand columns of the Expenses per $1,000 table show the expenses you would have paid on a $1,000 investment in your fund from 7/1/19 to 12/31/19. They also show how much a $1,000 investment would be worth at the close of the period,assuming actual returns and expenses. To estimate the ongoing expenses you paid over the period, divide your account value by $1,000, then multiply the result by the number in the first line for the class of shares you own.
Compare your fund’s expenses with those of other funds
The two right-hand columns of the Expenses per $1,000 table show your fund’s expenses based on a $1,000 investment,assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All shareholder reports of mutual funds and funds serving as variable annuity vehicles will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expense ratios
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| | Class IA | Class IB |
| Total annual operating expenses for the fiscal | | |
| year ended 12/31/18 | 0.92% | 1.17% |
| Annualized expense ratio for the six-month | | |
| period ended 12/31/19* | 0.91% | 1.16% |
Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Expenses are shown as a percentage of average net assets.
*For the fund’s most recent fiscal half year; may differ from expense ratios based on one-year data in the financial highlights.
Expenses per $1,000
| | | | |
| | | | Expenses and value for a |
| | Expenses and value for a | $1,000 investment, assuming |
| | $1,000 investment, assuming | a hypothetical 5% annualized |
| | actual returns for the | return for the 6 months |
| | 6 months ended 12/31/19 | ended 12/31/19 | |
| | Class IA | Class IB | Class IA | Class IB |
| Expenses paid | | | | |
| per $1,000*† | $4.79 | $6.10 | $4.63 | $5.90 |
| Ending value | | | | |
| (after | | | | |
| expenses) | $1,086.40 | $1,085.20 | $1,020.62 | $1,019.36 |
*Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 12/31/19. The expense ratio may differ for each share class.
†Expenses based on actual returns are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year. Expenses based on a hypothetical 5% return are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.
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| Putnam VT International Value Fund3 |
Report of Independent Registered Public Accounting Firm
To the Trustees of Putnam Variable Trust
and Shareholders of Putnam VT International Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of Putnam VT International Value Fund (one of the funds constituting Putnam Variable Trust, referred to hereafter as the “Fund”) as of December 31, 2019, the related statement of operations for the year ended December 31, 2019, the statement of changes in net assets for each of the two years in the period ended December 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2019 and the financial highlights for each of the five years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 7, 2020
We have served as the auditor of one or more investment companies in the Putnam Investments family of mutual funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.
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| 4Putnam VT International Value Fund |
The fund’s portfolio12/31/19
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| COMMON STOCKS (100.1%)* | Shares | Value |
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| Aerospace and defense (0.8%) | | |
| BAE Systems PLC (United Kingdom) | 74,135 | $554,629 |
| | | 554,629 |
| Airlines (1.3%) | | |
| Japan Airlines Co., Ltd. (Japan) | 1,200 | 37,447 |
| Qantas Airways, Ltd. (Australia) | 168,516 | 841,925 |
| | | 879,372 |
| Auto components (1.0%) | | |
| Magna International, Inc. (Canada) | 12,413 | 680,610 |
| | | 680,610 |
| Automobiles (0.9%) | | |
| Nissan Motor Co., Ltd. (Japan) | 22,900 | 133,090 |
| Yamaha Motor Co., Ltd. (Japan) | 22,700 | 453,755 |
| | | 586,845 |
| Banks (12.6%) | | |
| Australia & New Zealand Banking Group, Ltd. | | |
| (Australia) | 76,363 | 1,322,956 |
| Bank of Ireland Group PLC (Ireland) | 76,537 | 419,127 |
| CaixaBank SA (Spain) | 87,524 | 274,696 |
| DBS Group Holdings, Ltd. (Singapore) | 31,200 | 601,388 |
| DNB ASA (Norway) | 36,416 | 680,262 |
| ING Groep NV (Netherlands) | 190,679 | 2,285,999 |
| Lloyds Banking Group PLC (United Kingdom) | 542,420 | 449,056 |
| Mizuho Financial Group, Inc. (Japan) | 378,900 | 582,734 |
| Skandinaviska Enskilda Banken AB (Sweden) | 16,236 | 152,681 |
| Sumitomo Mitsui Financial Group, Inc. (Japan) | 35,500 | 1,306,833 |
| UniCredit SpA (Italy) | 36,143 | 527,852 |
| | | 8,603,584 |
| Beverages (1.2%) | | |
| Asahi Group Holdings, Ltd. (Japan) | 18,000 | 822,234 |
| | | 822,234 |
| Building products (0.8%) | | |
| Compagnie De Saint-Gobain (France) | 14,053 | 575,359 |
| | | 575,359 |
| Capital markets (4.2%) | | |
| Credit Suisse Group AG (Switzerland) | 32,385 | 438,526 |
| EQT AB (Sweden) † | 49,374 | 574,058 |
| Natixis SA (France) | 107,698 | 478,146 |
| Quilter PLC (United Kingdom) | 428,375 | 913,839 |
| UBS Group AG (Switzerland) | 36,817 | 465,063 |
| | | 2,869,632 |
| Construction and engineering (3.0%) | | |
| Vinci SA (France) | 18,620 | 2,067,719 |
| | | 2,067,719 |
| Construction materials (0.8%) | | |
| LafargeHolcim, Ltd. (Switzerland) | 9,720 | 539,330 |
| | | 539,330 |
| Containers and packaging (1.6%) | | |
| SIG Combibloc Group AG (Switzerland) | 66,290 | 1,058,941 |
| | | 1,058,941 |
| Diversified financial services (2.3%) | | |
| Eurazeo SA (France) | 11,019 | 753,961 |
| ORIX Corp. (Japan) | 48,000 | 798,978 |
| | | 1,552,939 |
| Diversified telecommunication services (3.6%) | | |
| BCE, Inc. (Canada) | 14,500 | 671,765 |
| Nippon Telegraph & Telephone Corp. (Japan) | 55,000 | 1,393,140 |
| Telstra Corp., Ltd. (Australia) | 168,783 | 420,489 |
| | | 2,485,394 |
| Electric utilities (2.4%) | | |
| Fortum OYJ (Finland) | 28,101 | 693,460 |
| SSE PLC (United Kingdom) | 48,294 | 920,212 |
| | | 1,613,672 |
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| COMMON STOCKS (100.1%)*cont. | Shares | Value |
| | |
| Electronic equipment, instruments, and components (0.6%) | |
| Kyocera Corp. (Japan) | 6,300 | $429,323 |
| | | 429,323 |
| Entertainment (0.7%) | | |
| Nintendo Co., Ltd. (Japan) | 1,200 | 484,376 |
| | | 484,376 |
| Equity real estate investment trusts (REITs) (1.1%) | | |
| British Land Co., PLC (The) (United Kingdom) | 81,866 | 692,713 |
| Vicinity Centres (Australia) | 37,133 | 65,005 |
| | | 757,718 |
| Food and staples retail (2.1%) | | |
| Koninklijke Ahold Delhaize NV (Netherlands) | 34,083 | 852,358 |
| Seven & i Holdings Co., Ltd. (Japan) | 15,000 | 548,831 |
| | | 1,401,189 |
| Food products (1.5%) | | |
| Kerry Group PLC Class A (Ireland) | 7,919 | 986,873 |
| | | 986,873 |
| Health-care equipment and supplies (1.5%) | | |
| Alcon, Inc. (Switzerland) † | 4,010 | 227,059 |
| Hoya Corp. (Japan) | 8,400 | 802,033 |
| | | 1,029,092 |
| Hotels, restaurants, and leisure (1.1%) | | |
| Dalata Hotel Group PLC (Ireland) | 99,379 | 574,088 |
| La Francaise des Jeux SAEM (France) † | 5,237 | 139,956 |
| | | 714,044 |
| Household durables (2.0%) | | |
| Panasonic Corp. (Japan) | 50,500 | 473,656 |
| Sony Corp. (Japan) | 12,800 | 871,255 |
| | | 1,344,911 |
| Industrial conglomerates (2.2%) | | |
| Siemens AG (Germany) | 11,527 | 1,506,843 |
| | | 1,506,843 |
| Insurance (9.2%) | | |
| AIA Group, Ltd. (Hong Kong) | 163,400 | 1,719,234 |
| Allianz SE (Germany) | 3,961 | 970,363 |
| AXA SA (France) | 49,514 | 1,394,606 |
| Prudential PLC (United Kingdom) | 70,960 | 1,361,967 |
| QBE Insurance Group, Ltd. (Australia) | 83,652 | 758,161 |
| SCOR SE (France) | 1,718 | 72,111 |
| | | 6,276,442 |
| Machinery (2.9%) | | |
| KION Group AG (Germany) | 7,167 | 494,895 |
| MinebeaMitsumi, Inc. (Japan) | 48,700 | 1,005,000 |
| NSK, Ltd. (Japan) | 53,100 | 500,804 |
| | | 2,000,699 |
| Metals and mining (2.8%) | | |
| Anglo American PLC (United Kingdom) | 35,317 | 1,016,549 |
| Rio Tinto PLC (United Kingdom) | 14,776 | 881,340 |
| | | 1,897,889 |
| Multi-utilities (1.9%) | | |
| Veolia Environnement SA (France) | 48,038 | 1,277,595 |
| | | 1,277,595 |
| Oil, gas, and consumable fuels (7.8%) | | |
| BP PLC (United Kingdom) | 253,787 | 1,585,360 |
| Encana Corp. (Canada) | 69,000 | 323,068 |
| Royal Dutch Shell PLC Class B (United Kingdom) | 31,874 | 945,523 |
| Suncor Energy, Inc. (Canada) | 45,831 | 1,502,112 |
| TOTAL SA (France) | 17,895 | 987,583 |
| | | 5,343,646 |
| Personal products (2.0%) | | |
| Shiseido Co., Ltd. (Japan) | 6,700 | 479,079 |
| Unilever NV (Netherlands) | 15,725 | 903,632 |
| | | 1,382,711 |
| |
| Putnam VT International Value Fund5 |
| | |
| COMMON STOCKS (100.1%)*cont. | Shares | Value |
| | | |
| Pharmaceuticals (8.4%) | | |
| AstraZeneca PLC (United Kingdom) | 16,948 | $1,707,720 |
| Novartis AG (Switzerland) | 26,726 | 2,537,838 |
| Sanofi (France) | 14,996 | 1,507,499 |
| | | 5,753,057 |
| Semiconductors and semiconductor equipment (2.0%) | |
| SCREEN Holdings Co., Ltd. (Japan) | 12,500 | 855,492 |
| Sino-American Silicon Products, Inc. (Taiwan) | 159,000 | 528,412 |
| | | 1,383,904 |
| Technology hardware, storage, and peripherals (2.0%) | |
| Samsung Electronics Co., Ltd. (South Korea) | 28,393 | 1,368,098 |
| | | 1,368,098 |
| Tobacco (1.2%) | | |
| Imperial Brands PLC (United Kingdom) | 33,558 | 830,788 |
| | | 830,788 |
| Trading companies and distributors (6.3%) | | |
| Ashtead Group PLC (United Kingdom) | 23,093 | 738,418 |
| Ferguson PLC (United Kingdom) | 10,746 | 975,039 |
| ITOCHU Corp. (Japan) | 46,900 | 1,086,128 |
| Mitsubishi Corp. (Japan) | 56,400 | 1,496,282 |
| | | 4,295,867 |
| Transportation infrastructure (0.9%) | | |
| Aena SME SA (Spain) | 3,232 | 618,119 |
| | | 618,119 |
| Wireless telecommunication services (3.4%) | | |
| KDDI Corp. (Japan) | 16,900 | 502,772 |
| Tele2 AB (Sweden) | 26,013 | 377,294 |
| Vodafone Group PLC (United Kingdom) | 758,132 | 1,473,795 |
| | | 2,353,861 |
| | | |
| Total investments (cost $61,945,530) | | $68,327,305 |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from January 1, 2019 through December 31, 2019 (the reporting period). Within the following notes to the portfolio, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “ASC 820” represent Accounting Standards Codification 820Fair Value Measurements and Disclosures.
* Percentages indicated are based on net assets of $68,264,322.
† This security is non-income-producing.
At the close of the reporting period, the fund maintained liquid assets totaling $114,176 to cover certain derivative contracts.
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| DIVERSIFICATION BY COUNTRY |
Distribution of investments by country of risk at the close of the reporting period, excluding collateral received, if any (as a percentage of Portfolio Value):
| | | | |
| Japan | 22.0% | | South Korea | 2.0% |
| United Kingdom | 22.0 | | Sweden | 1.6 |
| France | 13.5 | | Spain | 1.3 |
| Switzerland | 7.7 | | Finland | 1.0 |
| Netherlands | 5.9 | | Norway | 1.0 |
| Australia | 5.0 | | Singapore | 0.9 |
| Canada | 4.7 | | Taiwan | 0.8 |
| Germany | 4.3 | | Italy | 0.8 |
| Ireland | 2.9 | | Other | 0.1 |
| Hong Kong | 2.5 | | Total | 100.0% |
| | | | | | |
| FORWARD CURRENCY CONTRACTS at 12/31/19 (aggregate face value $22,305,388) | | | | Unrealized |
| | | Contract | Delivery | | Aggregate | appreciation/ |
| Counterparty | Currency | type* | date | Value | face value | (depreciation) |
| Bank of America N.A. | | | | | | |
| | British Pound | Sell | 3/18/20 | $180,252 | $176,319 | $(3,933) |
| | Canadian Dollar | Sell | 1/15/20 | 585,161 | 573,152 | (12,009) |
| Barclays Bank PLC | | | | | | |
| | Australian Dollar | Buy | 1/15/20 | 71,039 | 67,837 | 3,202 |
| | Australian Dollar | Sell | 1/15/20 | 71,039 | 70,825 | (214) |
| | British Pound | Sell | 3/18/20 | 29,467 | 28,824 | (643) |
| | Canadian Dollar | Sell | 1/15/20 | 177,520 | 173,869 | (3,651) |
| | Euro | Buy | 3/18/20 | 218,519 | 216,310 | 2,209 |
| | Hong Kong Dollar | Buy | 2/19/20 | 585,717 | 582,126 | 3,591 |
| | Japanese Yen | Sell | 2/19/20 | 263,447 | 264,751 | 1,304 |
| | Swedish Krona | Buy | 3/18/20 | 167,187 | 164,618 | 2,569 |
| Citibank, N.A. | | | | | | |
| | British Pound | Sell | 3/18/20 | 398,996 | 390,325 | (8,671) |
| | Canadian Dollar | Sell | 1/15/20 | 764,837 | 749,228 | (15,609) |
| | Danish Krone | Buy | 3/18/20 | 158,569 | 156,980 | 1,589 |
| | Euro | Sell | 3/18/20 | 2,411,036 | 2,386,641 | (24,395) |
| Goldman Sachs International | | | | | | |
| | British Pound | Sell | 3/18/20 | 181,314 | 176,867 | (4,447) |
| | Canadian Dollar | Sell | 1/15/20 | 508,223 | 497,887 | (10,336) |
| | Euro | Buy | 3/18/20 | 253,793 | 251,222 | 2,571 |
| | Japanese Yen | Buy | 2/19/20 | 1,666,015 | 1,668,461 | (2,446) |
| HSBC Bank USA, National Association | | | | | | |
| | Australian Dollar | Buy | 1/15/20 | 125,091 | 120,933 | 4,158 |
| | Chinese Yuan (Offshore) | Buy | 2/19/20 | 30,997 | 30,594 | 403 |
| | Euro | Buy | 3/18/20 | 3,167,232 | 3,135,423 | 31,809 |
| |
| 6Putnam VT International Value Fund |
| | | | | | |
| FORWARD CURRENCY CONTRACTS at 12/31/19 (aggregate face value $22,305,388)cont. | | | | Unrealized |
| | | Contract | Delivery | | Aggregate | appreciation/ |
| Counterparty | Currency | type* | date | Value | face value | (depreciation) |
| JPMorgan Chase Bank N.A. | | | | | | |
| | Australian Dollar | Buy | 1/15/20 | $203,500 | $202,893 | $607 |
| | Australian Dollar | Sell | 1/15/20 | 203,500 | 197,976 | (5,524) |
| | British Pound | Buy | 3/18/20 | 1,550,589 | 1,516,922 | 33,667 |
| | Canadian Dollar | Sell | 1/15/20 | 129,385 | 126,733 | (2,652) |
| | Euro | Buy | 3/18/20 | 880,726 | 871,930 | 8,796 |
| | Japanese Yen | Buy | 2/19/20 | 338,926 | 340,207 | (1,281) |
| | New Zealand Dollar | Buy | 1/15/20 | 172,292 | 159,872 | 12,420 |
| | Norwegian Krone | Sell | 3/18/20 | 140,920 | 134,800 | (6,120) |
| | Singapore Dollar | Buy | 2/19/20 | 313,144 | 310,609 | 2,535 |
| | South Korean Won | Sell | 2/19/20 | 1,343,051 | 1,338,550 | (4,501) |
| | Swiss Franc | Sell | 3/18/20 | 1,407,549 | 1,385,638 | (21,911) |
| NatWest Markets PLC | | | | | | |
| | British Pound | Sell | 3/18/20 | 891,834 | 872,536 | (19,298) |
| | Euro | Buy | 3/18/20 | 172,201 | 170,467 | 1,734 |
| State Street Bank and Trust Co. | | | | | | |
| | Australian Dollar | Buy | 1/15/20 | 1,140,416 | 1,088,693 | 51,723 |
| | Canadian Dollar | Sell | 1/15/20 | 402,943 | 394,741 | (8,202) |
| | Israeli Shekel | Buy | 1/15/20 | 372,834 | 371,660 | 1,174 |
| UBS AG | | | | | | |
| | Canadian Dollar | Sell | 1/15/20 | 659,634 | 646,088 | (13,546) |
| | Japanese Yen | Buy | 2/19/20 | 291,832 | 291,881 | (49) |
| Unrealized appreciation | | | | | | 166,061 |
| Unrealized (depreciation) | | | | | | (169,438) |
| Total | | | | | | $(3,377) |
* The exchange currency for all contracts listed is the United States Dollar.
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| | | |
| | | | Valuation inputs | |
| Investments in securities: | Level 1 | Level 2 | Level 3 |
| Common stocks*: | | | |
| Communication services | $2,522,854 | $2,800,777 | $— |
| Consumer discretionary | 1,394,654 | 1,931,756 | — |
| Consumer staples | 3,573,651 | 1,850,144 | — |
| Energy | 5,343,646 | — | — |
| Financials | 12,212,313 | 7,090,284 | — |
| Health care | 5,980,116 | 802,033 | — |
| Industrials | 7,531,021 | 4,967,586 | — |
| Information technology | — | 3,181,325 | — |
| Materials | 3,496,160 | — | — |
| Real Estate | 692,713 | 65,005 | — |
| Utilities | 2,891,267 | — | — |
| Total common stocks | 45,638,395 | 22,688,910 | — |
| Totals by level | $45,638,395 | $22,688,910 | $— |
| |
| | | | Valuation inputs | |
| Other financial instruments: | Level 1 | Level 2 | Level 3 |
| Forward currency contracts | $— | $(3,377) | $— |
| Totals by level | $— | $(3,377) | $— |
* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.
The accompanying notes are an integral part of these financial statements.
| |
| Putnam VT International Value Fund7 |
Statement of assets and liabilities
12/31/19
| |
| Assets | |
| Investment in securities, at value (Notes 1 and 8): | |
| Unaffiliated issuers (identified cost $61,945,530) | $68,327,305 |
| Foreign currency (cost $34,586) (Note 1) | 34,949 |
| Dividends, interest and other receivables | 126,184 |
| Foreign tax reclaim | 108,190 |
| Receivable for shares of the fund sold | 1,829 |
| Receivable for investments sold | 46,096 |
| Unrealized appreciation on forward currency contracts (Note 1) | 166,061 |
| Total assets | 68,810,614 |
| |
| Liabilities | |
| Payable to custodian | 85,628 |
| Payable for shares of the fund repurchased | 84,112 |
| Payable for compensation of Manager (Note 2) | 39,660 |
| Payable for custodian fees (Note 2) | 23,189 |
| Payable for investor servicing fees (Note 2) | 7,929 |
| Payable for Trustee compensation and expenses (Note 2) | 67,809 |
| Payable for administrative services (Note 2) | 649 |
| Payable for distribution fees (Note 2) | 6,954 |
| Payable for auditing and tax fees | 44,898 |
| Unrealized depreciation on forward currency contracts (Note 1) | 169,438 |
| Other accrued expenses | 16,026 |
| Total liabilities | 546,292 |
| | |
| Net assets | $68,264,322 |
| |
| Represented by | |
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $59,628,539 |
| Total distributable earnings (Note 1) | 8,635,783 |
| Total — Representing net assets applicable to capital shares outstanding | $68,264,322 |
| | |
| Computation of net asset value Class IA | |
| Net assets | $35,692,772 |
| Number of shares outstanding | 3,419,609 |
| Net asset value, offering price and redemption price per share (net assets divided by number of shares outstanding) | $10.44 |
| | |
| Computation of net asset value Class IB | |
| Net assets | $32,571,550 |
| Number of shares outstanding | 3,157,644 |
| Net asset value, offering price and redemption price per share (net assets divided by number of shares outstanding) | $10.32 |
The accompanying notes are an integral part of these financial statements.
| |
| 8Putnam VT International Value Fund |
Statement of operations
Year ended 12/31/19
| |
| Investment income | |
| Dividends (net of foreign tax of $249,080) | $2,558,389 |
| Interest (including interest income of $22,419 from investments in affiliated issuers) (Note 5) | 22,419 |
| Securities lending (net of expenses) (Notes 1 and 5) | 21,891 |
| Total investment income | 2,602,699 |
| |
| Expenses | |
| Compensation of Manager (Note 2) | 464,453 |
| Investor servicing fees (Note 2) | 47,153 |
| Custodian fees (Note 2) | 20,096 |
| Trustee compensation and expenses (Note 2) | 888 |
| Distribution fees (Note 2) | 80,998 |
| Administrative services (Note 2) | 1,926 |
| Auditing and tax fees | 50,218 |
| Other | 32,420 |
| Total expenses | 698,152 |
| | |
| Expense reduction (Note 2) | (2,034) |
| Net expenses | 696,118 |
| | |
| Net investment income | 1,906,581 |
| | |
| Realized and unrealized gain (loss) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (Notes 1 and 3) | 929,152 |
| Foreign currency transactions (Note 1) | (15,233) |
| Forward currency contracts (Note 1) | 16,881 |
| Total net realized gain | 930,800 |
| Change in net unrealized appreciation (depreciation) on: | |
| Securities from unaffiliated issuers | 9,839,459 |
| Assets and liabilities in foreign currencies | (4,202) |
| Forward currency contracts | (216,504) |
| Total change in net unrealized appreciation | 9,618,753 |
| | |
| Net gain on investments | 10,549,553 |
| | |
| Net increase in net assets resulting from operations | $12,456,134 |
The accompanying notes are an integral part of these financial statements.
| |
| Putnam VT International Value Fund9 |
Statement of changes in net assets
| | |
| | Year ended | Year ended |
| | 12/31/19 | 12/31/18 |
| Increase (decrease) in net assets | | |
| Operations: | | |
| Net investment income | $1,906,581 | $1,928,597 |
| Net realized gain on investments and foreign currency transactions | 930,800 | 3,620,444 |
| Change in net unrealized appreciation (depreciation) of investments and assets and liabilities in foreign currencies | 9,618,753 | (19,764,989) |
| Net increase (decrease) in net assets resulting from operations | 12,456,134 | (14,215,948) |
| Distributions to shareholders (Note 1): | | |
| From ordinary income | | |
| Net investment income | | |
| Class IA | (1,051,511) | (999,882) |
| Class IB | (881,012) | (751,802) |
| Net realized short-term gain on investments | | |
| Class IA | (56,457) | — |
| Class IB | (52,208) | — |
| From net realized long-term gain on investments | | |
| Class IA | (1,940,708) | — |
| Class IB | (1,794,653) | — |
| Decrease from capital share transactions (Note 4) | (4,035,097) | (6,305,854) |
| Total increase (decrease) in net assets | 2,644,488 | (22,273,486) |
| Net assets: | | |
| Beginning of year | 65,619,834 | 87,893,320 |
| End of year | $68,264,322 | $65,619,834 |
The accompanying notes are an integral part of these financial statements.
| |
| 10Putnam VT International Value Fund |
Financial highlights(For a common share outstanding throughout the period)
| | | | | | | | | | | | | |
| INVESTMENT OPERATIONS: | | | | LESS DISTRIBUTIONS: | | | RATIOS AND SUPPLEMENTAL DATA: | |
| Period ended | Net asset value, beginning of period | Net investment income (loss)a | Net realized and unrealized gain (loss) on investments | Total from investment operations | From net investment income | From net realized gain on investments | Total distributions | Net asset value, end of period | Total return at net asset value (%)b,c | Net assets, end of period (in thousands) | Ratio of expenses to average net assets (%)c,d | Ratio of net investment income (loss) to average net assets (%) | Portfolio turnover (%) |
| Class IA | | | | | | | | | | | | | |
| 12/31/19 | $9.47 | .29 | 1.55 | 1.84 | (.30) | (.57) | (.87) | $10.44 | 20.44 | $35,693 | .92 | 2.96 | 15 |
| 12/31/18 | 11.71 | .28 | (2.27) | (1.99) | (.25) | — | (.25) | 9.47 | (17.31) | 34,394 | .92 | 2.53 | 17 |
| 12/31/17 | 9.54 | .24 | 2.11 | 2.35 | (.18) | — | (.18) | 11.71 | 24.95 | 47,732 | .90 | 2.26 | 11 |
| 12/31/16 | 9.67 | .21 | (.09) | .12 | (.25) | — | (.25) | 9.54 | 1.28 | 43,650 | .92e | 2.29e | 23 |
| 12/31/15 | 9.99 | .20 | (.36) | (.16) | (.16) | — | (.16) | 9.67 | (1.71) | 49,516 | .88 | 1.97 | 29 |
| Class IB | | | | | | | | | | | | | |
| 12/31/19 | $9.36 | .26 | 1.54 | 1.80 | (.27) | (.57) | (.84) | $10.32 | 20.22 | $32,572 | 1.17 | 2.70 | 15 |
| 12/31/18 | 11.59 | .25 | (2.26) | (2.01) | (.22) | — | (.22) | 9.36 | (17.61) | 31,226 | 1.17 | 2.25 | 17 |
| 12/31/17 | 9.44 | .21 | 2.10 | 2.31 | (.16) | — | (.16) | 11.59 | 24.69 | 40,161 | 1.15 | 2.02 | 11 |
| 12/31/16 | 9.56 | .19 | (.09) | .10 | (.22) | — | (.22) | 9.44 | 1.11 | 37,566 | 1.17e | 2.02e | 23 |
| 12/31/15 | 9.88 | .17 | (.36) | (.19) | (.13) | — | (.13) | 9.56 | (2.00) | 39,629 | 1.13 | 1.71 | 29 |
aPer share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
bTotal return assumes dividend reinvestment.
cThe charges and expenses at the insurance company separate account level are not reflected.
dIncludes amounts paid through expense offset and/or brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
eReflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than .01% as a percentage of average net assets per share for each class (Note 2).
The accompanying notes are an integral part of these financial statements.
| |
| Putnam VT International Value Fund11 |
Notes to financial statements12/31/19
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from January 1, 2019 through December 31, 2019.
Putnam VT International Value Fund (the fund) is a diversified series of Putnam Variable Trust (the Trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The goal of the fund is to seek capital growth. Current income is a secondary objective. The fund invests mainly in common stocks of large and midsize companies outside the United States, with a focus on value stocks. Value stocks are those that Putnam Management believes are currently undervalued by the market. If Putnam Management is correct and other investors ultimately recognize the value of the company, the price of its stock may rise. The fund invests mainly in developed countries, but may invest in emerging markets. Putnam Management may consider, among other factors, a company’s valuation, financial strength, growth potential, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The fund may also use derivatives, such as futures, options, certain foreign currency transactions, warrants and swap contracts, for both hedging and non-hedging purposes.
The fund offers class IA and class IB shares of beneficial interest. Class IA shares are offered at net asset value and are not subject to a distribution fee. Class IB shares are offered at net asset value and pay an ongoing distribution fee, which is identified in Note 2.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Amended and Restated Agreement and Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
Note 1 — Significant accounting policies
The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuationPortfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these proceduresand have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820Fair Value Measurements and Disclosures(ASC 820). If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Many securities markets and exchanges outside the U.S. close prior to the scheduled close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the scheduled close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value certain foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. The foreign equity securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. At the close of the reporting period, fair value pricing was used for certain foreign securities in the portfolio. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Short-term securities with remaining maturities of 60 days or less are valued using an independent pricing service approved by the Trustees, and are classified as Level 2 securities.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment incomeSecurity transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes and including amortization and accretion of premiums and discounts on debt securities, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.
| |
| 12Putnam VT International Value Fund |
Foreign currency translationThe accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.
Forward currency contractsThe fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk.
The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. The fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Master agreementsThe fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund had a net liability position of $108,845 on open derivative contracts subject to the Master Agreements.There was no collateral posted by the fund at period end for these agreements.
Securities lendingThe fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The remaining maturities of the securities lending transactions are considered overnight and continuous. The riskof borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending, net of expenses, is included in investment income on the Statement of operations. Cash collateral is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. At the close of the reporting period, the fund had no securities out on loan.
Interfund lendingThe fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Lines of creditThe fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxesIt is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 740Income Taxes(ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
Distributions to shareholdersDistributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and/or permanent differences from unrealized gains and losses on passive foreign investment companies. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $61,223 to increase undistributed net investment income, and $61,223 to decrease accumulated net realized gain.
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:
| |
| Putnam VT International Value Fund13 |
| |
| Unrealized appreciation | $12,992,057 |
| Unrealized depreciation | (6,671,509) |
| Net unrealized appreciation | 6,320,548 |
| Undistributed ordinary income | 1,429,900 |
| Undistributed long-term gain | 885,717 |
| Cost for federal income tax purposes | $62,003,380 |
Expenses of the TrustExpenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.
Beneficial interestAt the close of the reporting period, insurance companies or their separate accounts were record owners of all but a de minimis number of the shares of the fund. Approximately 47.4% of the fund is owned by accounts of one insurance company.
Note 2 — Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of all open-end mutual funds sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:
| |
| 0.850% | of the first $5 billion, |
| 0.800% | of the next $5 billion, |
| 0.750% | of the next $10 billion, |
| 0.700% | of the next $10 billion, |
| 0.650% | of the next $50 billion, |
| 0.630% | of the next $50 billion, |
| 0.620% | of the next $100 billion and |
| 0.615% | of any excess thereafter. |
For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.690% of the fund’s average net assets.
Putnam Management has contractually agreed, through April 30, 2021, to waive fees and/or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plan, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.35% of the average net assets of the portion of the fund managed by PIL.
The Putnam Advisory Company, LLC (PAC), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund, as designated from time to time by Putnam Management or PIL. PAC did not manage any portion of the assets of the fund during the reporting period. If Putnam Management or PIL were to engage the services of PAC, Putnam Management or PIL, as applicable, would pay a quarterly sub-advisory fee to PAC for its services at the annual rate of 0.35% of the average net assets of the portion of the fund’s assets for which PAC is engaged as sub-adviser.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. was paid a monthly fee for investor servicing at an annual rate of 0.07% of the fund’s average daily net assets. During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:
| |
| Class IA | $24,468 |
| Class IB | 22,685 |
| Total | $47,153 |
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $54 under the expense offset arrangements and by $1,980 under the brokerage/service arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $45, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted a distribution plan (the Plan) with respect to its class IB shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plan is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plan provides for payment by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35% of the average net assets attributable to the fund’s class IB shares. The Trustees have approved payment by the fund at an annual rate of 0.25% of the average net assets attributable to the fund’s class IB shares. The expenses related to distribution fees during the reporting period are included in Distribution fees in the Statement of operations.
Note 3 — Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| | |
| | Cost of | Proceeds |
| | purchases | from sales |
| Investments in securities | | |
| (Long-term) | $9,648,834 | $16,239,549 |
| U.S. government securities | | |
| (Long-term) | — | — |
| Total | $9,648,834 | $16,239,549 |
The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.
| |
| 14Putnam VT International Value Fund |
Note 4 — Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Subscriptions and redemptions are presented at the omnibus level. Transactions in capital shares were as follows:
| | | | | | | | |
| | | Class IA shares | | | Class IB shares | |
| | Year ended 12/31/19 | Year ended 12/31/18 | Year ended 12/31/19 | Year ended 12/31/18 |
| | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |
| Shares sold | 80,531 | $784,442 | 133,598 | $1,502,813 | 170,382 | $1,649,654 | 366,292 | $3,927,318 |
| Shares issued in connection with | | | | | | | | |
| reinvestment of distributions | 326,411 | 3,048,676 | 89,116 | 999,882 | 294,905 | 2,727,873 | 67,608 | 751,802 |
| | 406,942 | 3,833,118 | 222,714 | 2,502,695 | 465,287 | 4,377,527 | 433,900 | 4,679,120 |
| Shares repurchased | (620,495) | (6,006,318) | (664,064) | (7,305,278) | (643,538) | (6,239,424) | (564,485) | (6,182,391) |
| Net decrease | (213,553) | $(2,173,200) | (441,350) | $(4,802,583) | (178,251) | $(1,861,897) | (130,585) | $(1,503,271) |
Note 5 — Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| | | | | |
| | | | | | Shares outstanding |
| | Fair value as of | | | | and fair value as of |
| Name of affiliate | 12/31/18 | Purchase cost | Sale proceeds | Investment income | 12/31/19 |
| Short-term investments | | | | | |
| Putnam Cash Collateral Pool, LLC* | $— | $10,856,655 | $10,856,655 | $10,545 | $— |
| Putnam Short Term Investment | | | | | |
| Fund** | 939,702 | 10,871,838 | 11,811,540 | 22,419 | — |
| Total Short-term investments | $939,702 | $21,728,493 | $22,668,195 | $32,964 | $— |
*No management fees are charged to Putnam Cash Collateral Pool, LLC (Note 1). Investment income shown is included in securities lending income on the Statement of operations. There were no realized or unrealized gains or losses during the period.
**Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
Note 6 — Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations.
Note 7 — Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| |
| Forward currency contracts (contract amount) | $27,200,000 |
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:
Fair value of derivative instruments as of the close of the reporting period
| | | | |
| | Asset derivatives | Liability derivatives |
| Derivatives not accounted for as hedging | Statement of assets and | | Statement of assets and | |
| instruments under ASC 815 | liabilities location | Fair value | liabilities location | Fair value |
| Foreign exchange contracts | Receivables | $166,061 | Payables | $169,438 |
| Total | | $166,061 | | $169,438 |
The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
| | |
| Derivatives not accounted for as hedging instruments under ASC 815 | Forward currency contracts | Total |
| Foreign exchange contracts | $16,881 | $16,881 |
| Total | $16,881 | $16,881 |
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| | |
| Derivatives not accounted for as hedging instruments under ASC 815 | Forward currency contracts | Total |
| Foreign exchange contracts | $(216,504) | $(216,504) |
| Total | $(216,504) | $(216,504) |
| |
| Putnam VT International Value Fund15 |
Note 8 — Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
| | | | | | | | | | |
| | | | | Goldman | HSBC | | | | | |
| | Bank of | | | Sachs | Bank USA, | JPMorgan | | State Street | | |
| | America | Barclays | Citibank, | Inter- | National | Chase Bank | NatWest | Bank and | | |
| | N.A. | Bank PLC | N.A. | national | Association | N.A. | Markets PLC | Trust Co. | UBS AG | Total |
| Assets: | | | | | | | | | | |
| Forward currency contracts# | $— | $12,875 | $1,589 | $2,571 | $36,370 | $58,025 | $1,734 | $52,897 | $— | $166,061 |
| Total Assets | $— | $12,875 | $1,589 | $2,571 | $36,370 | $58,025 | $1,734 | $52,897 | $— | $166,061 |
| Liabilities: | | | | | | | | | | |
| Forward currency contracts# | 15,942 | 4,508 | 48,675 | 17,229 | — | 41,989 | 19,298 | 8,202 | 13,595 | 169,438 |
| Total Liabilities | $15,942 | $4,508 | $48,675 | $17,229 | $— | $41,989 | $19,298 | $8,202 | $13,595 | $169,438 |
| Total Financial and | | | | | | | | | | |
| Derivative Net Assets | $(15,942) | $8,367 | $(47,086) | $(14,658) | $36,370 | $16,036 | $(17,564) | $44,695 | $(13,595) | $(3,377) |
| Total collateral received | | | | | | | | | | |
| (pledged)†## | $— | $— | $— | $— | $— | $— | $— | $— | $— | |
| Net amount | $(15,942) | $8,367 | $(47,086) | $(14,658) | $36,370 | $16,036 | $(17,564) | $44,695 | $(13,595) | |
| Controlled collateral | | | | | | | | | | |
| received (including | | | | | | | | | | |
| TBA commitments)** | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Uncontrolled | | | | | | | | | | |
| collateral received | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| Collateral (pledged) | | | | | | | | | | |
| (including | | | | | | | | | | |
| TBA commitments)** | $— | $— | $— | $— | $— | $— | $— | $— | $— | $— |
** Included with Investments in securities on the Statement of assets and liabilities.
† Additional collateral may be required from certain brokers based on individual agreements.
#Covered by master netting agreement (Note 1).
##Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
Federal tax information(Unaudited)
Pursuant to §852 of the Internal Revenue Code, as amended, the fund hereby designates $1,013,016 as a capital gain dividend with respect to the taxable year ended December 31, 2019, or, if subsequently determined to be different, the net capital gain of such year.
For the reporting period, total interest and dividend income from foreign countries were $2,806,472 or $0.43 per share (for all classes of shares). Taxes paid to foreign countries were $249,080, or $0.04 per share (for all classes of shares).
| |
| 16Putnam VT International Value Fund |
About the Trustees
| | |
| Putnam VT International Value Fund17 |
*Mr. Reynolds is an “interested person” (as defined in the Investment Company Act of 1940) of the fund and Putnam Investments. He is President and Chief Executive Officer of Putnam Investments, as well as the President of your fund and each of the other Putnam funds.
The address of each Trustee is 100 Federal Street, Boston, MA 02110.
As of December 31, 2019, there were 91 Putnam funds. All Trustees serve as Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.
Officers
In addition to Robert L. Reynolds, the other officers of the fund are shown below:
| | |
| Robert T. Burns(Born 1961) | Michael J. Higgins(Born 1976) | Denere P. Poulack(Born 1968) |
| Vice President and Chief Legal Officer | Vice President, Treasurer, and Clerk | Assistant Vice President, Assistant Clerk, and |
| Since 2011 | Since 2010 | Assistant Treasurer |
| General Counsel, Putnam Investments, Putnam | | Since 2004 |
| Management, and Putnam Retail Management | Jonathan S. Horwitz(Born 1955) | |
| | Executive Vice President, Principal Executive | Janet C. Smith(Born 1965) |
| James F. Clark(Born 1974) | Officer, and Compliance Liaison | Vice President, Principal Financial Officer, |
| Vice President and Chief Compliance Officer | Since 2004 | Principal Accounting Officer, and Assistant |
| Since 2016 | | Treasurer |
| Chief Compliance Officer and Chief Risk Officer, | Richard T. Kircher(Born 1962) | Since 2007 |
| Putnam Investments and Chief Compliance | Vice President and BSA Compliance Officer | Head of Fund Administration Services, Putnam |
| Officer, Putnam Management | Since 2019 | Investments and Putnam Management |
| Assistant Director, Operational Compliance, | |
| Nancy E. Florek(Born 1957) | Putnam Investments and Putnam | Mark C. Trenchard(Born 1962) |
| Vice President, Director of Proxy Voting and | Retail Management | Vice President |
| Corporate Governance, Assistant Clerk, and | | Since 2002 |
| Assistant Treasurer | Susan G. Malloy(Born 1957) | Director of Operational Compliance,Putnam |
| Since 2000 | Vice President and Assistant Treasurer | Investments and Putnam Retail Management |
| | Since 2007 | |
| Head of Accounting and Middle Office Services, | |
| Putnam Investments and Putnam Management | |
The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is 100 Federal Street, Boston, MA 02110.
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| 18Putnam VT International Value Fund |
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| Putnam VT International Value Fund19 |
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| 20Putnam VT International Value Fund |
Other important information
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2019, are available in the Individual Investors section of putnam.com and on the Securities and Exchange Commission’s (SEC) website at www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT from the SEC’s website at www.sec.gov.
Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.
Fund information
| | |
| Investment Manager | Investor Servicing Agent | Trustees |
| Putnam Investment Management, LLC | Putnam Investments | Kenneth R. Leibler,Chair |
| 100 Federal Street | Mailing address: | Liaquat Ahamed |
| Boston, MA 02110 | P.O. Box 219697 | Ravi Akhoury |
| | Kansas City, MO 64121-9697 | Barbara M. Baumann |
| Investment Sub-Advisors | 1-800-225-1581 | Katinka Domotorffy |
| Putnam Investments Limited | | Catharine Bond Hill |
| 16 St James’s Street | Custodian | Paul L. Joskow |
| London, England SW1A 1ER | State Street Bank and Trust Company | Robert E. Patterson |
| | | George Putnam, III |
| The Putnam Advisory Company, LLC | Legal Counsel | Robert L. Reynolds |
| 100 Federal Street | Ropes & Gray LLP | Manoj P. Singh |
| Boston, MA 02110 | | |
| Independent Registered | |
| Marketing Services | Public Accounting Firm | |
| Putnam Retail Management | PricewaterhouseCoopers LLP | |
| 100 Federal Street | | |
| Boston, MA 02110 | | |
The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
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| Putnam VT International Value Fund21 |
| |
| | |
| This report has been prepared for the shareholders | TR515 |
| of Putnam VT International Value Fund. | VTAN024 319804 2/20 |
| |
|
(a) The fund's principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers. |
| |
| (c) In October 2019, the Code of Ethics of Putnam Investments was amended. The key changes to the Code of Ethics are as follows: (i) Employee notification to the Code of Ethics Officer before acting as a public official for any government entity (ii) Clarifying changes to the Insider Trading provisions and to the rules for trading in securities issued by Great-West Lifeco. |
| |
| Item 3. Audit Committee Financial Expert: |
| |
| The Funds' Audit, Compliance and Distributions Committee is comprised solely of Trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Trustees believe that each of the members of the Audit, Compliance and Distributions Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Patterson, Ms. Baumann and Mr. Singh qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on their review of his or her pertinent experience and education. The SEC has stated, and the funds' amended and restated agreement and Declaration of Trust provides, that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit, Compliance and Distribution Committee and the Board of Trustees in the absence of such designation or identification. |
| |
| Item 4. Principal Accountant Fees and Services: |
| |
| The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor: |
| | | | | |
| Fiscal year ended | Audit Fees | Audit-Related Fees | Tax Fees | All Other Fees |
|
|
| | | | | |
| December 31, 2019 | $40,271 | $ — | $7,221 | $ — |
| December 31, 2018 | $40,192 | $ — | $7,846 | $ — |
| |
| For the fiscal years ended December 31, 2019 and December 31, 2018, the fund's independent auditor billed aggregate non-audit fees in the amounts of $164,896 and $624,328 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund. |
| |
| Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements. |
| |
| Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation. |
| |
| Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities. |
| |
| Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures. |
| |
| The Audit, Compliance and Distributions Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds' independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm. |
| |
| The following table presents fees billed by the fund's independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2–01 of Regulation S-X. |
| | | | | |
| Fiscal year ended | Audit-Related Fees | Tax Fees | All Other Fees | Total Non-Audit Fees |
|
|
| December 31, 2019 | $ — | $157,675 | $ — | $ — |
| December 31, 2018 | $ — | $616,482 | $ — | $ — |
| |
| Item 5. Audit Committee of Listed Registrants |
| |
|
Item 6. Schedule of Investments: |
| |
| The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
| |
| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
| |
|
Item 8. Portfolio Managers of Closed-End Investment Companies |
| |
|
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| |
|
Item 10. Submission of Matters to a Vote of Security Holders: |
| |
|
Item 11. Controls and Procedures: |
| |
|
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 180 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. |
| |
| (b) Changes in internal control over financial reporting: Not applicable |
| |
|
Item 12. Disclosures of Securities Lending Activities for Closed-End Management Investment Companies: |
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|
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith. |
| |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
| |
| By (Signature and Title): |
| |
| /s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
|
| |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
| |
| By (Signature and Title): |
| |
| /s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer
|
| |
| By (Signature and Title): |
| |
| /s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer
|
