The Trustees of the Trust recommend that shareholders of PCM U.S.
Government and High Quality Bond Fund approve a new management
contract with Putnam Investment Management, Inc., which provides
for an increase in the management fees payable by the fund to
Putnam Management.

WHY DID PUTNAM MANAGEMENT RECOMMEND A NEW MANAGEMENT FEE
SCHEDULE?

Putnam Management believes that the new management fee schedule
will help insure that Putnam management receives fees for its
services that are competitive with fees paid by other mutual
funds to high-quality investment managers. In recent years,
Putnam Management has noted a general increase in the complexity
of the investment process and in the competition for talented
investment personnel. Putnam Management believes than maintaining
competitive management fees will, over the longer term, enable it
to continue to provide high-quality management services to the
fund.

WHAT IS THE EFFECT OF THE NEW MANAGEMENT FEE SCHEDULE?
Under the new management contract, the annual management fee paid
by the fund to Putnam Management would be increased as follows:

Existing fee   Proposed fee
0.60%     First $500 million  0.65%
          Next $500 million   0.55%
          Next $500 million   0.50%
          Next $5 billion     0.45%
          Next $5 billion     0.425%
          Next $5 billion     0.405%
          Next $5 billion     0.39%
          Thereafter          0.38%

Based on the net assets of the fund as of December 31, 1994, the
new management fee would have resulted in an increase of $0.03 in
annual expenses for each $100 invested. In addition, the new fee
schedule, unlike the old schedule, provides for lower fee rates
as the fund's assets increase and would, in fact, result in a fee
decrease if its net assets exceed $1 billion.

HAS THE FUND'S MANAGEMENT FEES EVER BEEN INCREASED?

The fund's current management fee schedule has not been changed
since the fund's inception in 1988.

WHEN WILL THE VOTE ON THE MANAGEMENT FEE INCREASE TAKE PLACE?
A notice of meeting, proxy and voting instruction cards, and
proxy statement have been mailed to PCM U.S. Government and High
Quality Bond Fund shareholders of record and contract and policy
owners on or about May 1, 1995. A meeting of shareholders will be
held on July 13, 1995.

Proxy statements include further details. You should encourage
your clients to read the instructions before voting.

WHO IS ELIGIBLE TO VOTE?

Shareholders of record at the close of business on April 21,
1995, are entitled to vote on the management fee proposal. The
Hartford Life Insurance Companies and Investors Life Insurance
Company of North America will vote shares of the fund held by
then in accordance with voting instructions received from
variable annuity contract and variable life insurance policy
owners for whose accounts the shares of the fund are held.

HOW HAS PCM U.S. GOVERNMENT AND HIGH QUALITY BOND FUND PERFORMED?

As part of any decision regarding management fees, shareholders
may wish to consider how the fund has performed. 

     TOTAL RETURN             ANNUALIZED
     AS OF 12/31/94           RETURN
     Life (since 2/1/88)       8.08%
     5 years                   7.85
     3 years                   5.00
     1 year                   -3.23

Performance assumes reinvestment of distributions at net asset
value, represents past results, and does not account for taxes or
for charges and fees payable at the separate account level.
Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than
their original cost.

Another was of evaluating the performance of the PCM U.S.
Government and High Quality Bond Fund is to compare it to other
funds with similar investment objectives and strategies and that
underlie variable insurance subaccounts. When evaluated in such a
group ranked by Lipper Analytical Services, the total return of
shares of PCM U.S. Government and High Quality Bond Fund ranked
in the top 24% of 24 such funds for the twelve months ended
December 31, 1994, in the top 19% of 21 such funds for the three
years ended December 31, 1994, and in the top 28% of 17 such
funds for the five years ended December 31, 1994. These rankings
be Lipper, of corporate debt A-rated funds underlying variable
insurance subaccounts, do not take into account charges and fees
payable at the subaccount level. Past performance is not
indicative of future results.


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