N-CSR 1 a_vtintervalue.htm PUTNAM VARIABLE TRUST a_vtintervalue.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811-05346)
Exact name of registrant as specified in charter: Putnam Variable Trust
Address of principal executive offices: 100 Federal Street, Boston, Massachusetts 02110
Name and address of agent for service: Stephen Tate, Vice President
100 Federal Street
Boston, Massachusetts 02110
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: December 31, 2022
Date of reporting period: January 1, 2022 – December 31, 2022



Item 1. Report to Stockholders:

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:



Message from the Trustees

February 8, 2023

Dear Shareholder:

As an investor, you might be happy to see 2022 in the rearview mirror. High inflation and aggressive interest-rate increases from the U.S. Federal Reserve contributed to market volatility and negative returns for stocks and bonds. Fortunately, toward the end of the year, we  saw both inflation levels and Fed actions begin to moderate somewhat.

Although we still face high inflation and uncertainty on how much the economy will slow because of higher interest rates, we believe financial market performance might be better in 2023 as compared with 2022. Historically, stocks and bonds have recovered from bear markets like the one we are experiencing. Be assured that our investment teams are actively researching securities with attractive potential and working to keep portfolio risks in check.

Thank you for investing with Putnam.



Performance summary (as of 12/31/22)

Investment objective

Capital growth with current income as its secondary objective

Net asset value December 31, 2022

Class IA: $10.19  Class IB: $10.06 

 

Annualized total return at net asset value (as of 12/31/22)

  Class IA shares  Class IB shares  MSCI EAFE Value 
    (1/2/97)    (4/6/98)    Index (ND) 
1 year  –6.70%  –6.81%  –5.58% 
5 years  2.23  1.97  0.17 
10 years  4.45  4.19  3.51 
Life of fund  5.07  4.83  4.65 

 

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

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.

Putnam VT International Value Fund   1 

 


Report from your fund’s managers

How was the investing environment during the 12-month reporting period ended December 31, 2022?

Financial markets had a difficult 2022. International value stocks, the focus of this fund, posted losses for the period. Throughout the year, stocks across all asset classes were challenged by multiple, converging risks in the macroeconomy. High inflation, rising interest rates, and the Russia-Ukraine War contributed to a risk-averse investing environment. Combating inflation with interest-rate hikes remained a top priority for central banks worldwide. International stocks recovered somewhat in the final months of the year, but investors remained concerned about the risk of recession.

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 –6.70%, underperforming the fund’s benchmark, the MSCI EAFE Value Index [ND], which returned –5.58%.

Could you discuss some stocks that helped the fund’s performance during the reporting period?

AIB Group, an Ireland-based bank, was the top contributor for the period. The macroeconomic environment in Ireland shifted positively during the period, as did the competitive landscape for Irish banks. AIB Group is among the best-positioned banks given its healthy balance sheet and strong market position, in our view.

Another portfolio highlight was Sumitomo Mitsui Financial Group [SMFG], one of the leading banks in Japan. Changes in Japanese monetary policy are providing a healthy backdrop for the country’s banking industry. SMFG has reported strength in a number of business lines, particularly corporate lending. In addition, the company hiked its dividend forecast and announced a continuation of its share buyback program.

What were some stocks that detracted from fund performance during the reporting period?

Sony Group was the top detractor from fund performance. The company’s core businesses include sensors, gaming, movies, and music. The stock struggled due to a slowdown in the gaming industry that caused significant declines in Sony’s gaming software sales. Despite the recent underperformance, we believe Sony is well positioned in its core businesses and remains attractively valued relative to its peers.

Another detractor was MinebeaMitsumi, a Japan-based producer of machinery components and electronic devices. China’s Covid-19 lockdowns weighed heavily on results for the company’s electronic devices segment. However, we believe ongoing strength from the company’s semiconductor business, accretive acquisitions in the automotive area, and the lifting of China’s lockdowns offer a more positive long-term outlook.

As the fund begins a new fiscal year, what is your outlook?

The outlook for international markets has improved somewhat in recent months, in our view. In Europe, a warm winter has led to lower-than-expected demand for gas and a steep decline in gas prices. Also, China’s reopening, while likely to be bumpy, in our view, has positive implications for industrial demand and increased tourism in Europe. Thus, we believe the risk of a recession seems to be somewhat lower than it was a few months ago.

The Bank of Japan surprised markets in December by widening the band of its yield curve control policy, driving a recovery in the yen and a boost to stock prices. Japan’s economy continues to benefit from its domestic reopening and border easing, which began in the fall. We believe its economy should receive another shot in the arm with the return of tourists from China.

In both markets, valuations remain quite attractive, despite outperforming the U.S. in recent months, and stocks continue to trade at a wider discount to the U.S. than the historical norm.

Our goal, as always, is to prepare the portfolio for a range of scenarios with a balanced structure. We plan to maintain a mix of cyclical and defensive holdings, investing in our best ideas with a focus on the fundamentals of the businesses.

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. Current and future portfolio holdings are subject to risk.

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. European financial markets have experienced increased volatility in recent years due to concerns with some countries’ high levels of sovereign debt, budget deficits, and unemployment. 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

2   Putnam VT International Value Fund 

 


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 thefund more vulnerableto 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.

Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in 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.

Putnam VT International Value Fund   3 

 


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 7/1/22 to 12/31/22. 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

  Class IA  Class IB 
Total annual operating expenses for the fiscal     
year ended 12/31/21  0.87%  1.12% 
Annualized expense ratio for the six-month     
period ended 12/31/22*  0.89%  1.14% 

 

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.

*Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios 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 12/31/22    ended 12/31/22     
    Class IA    Class IB    Class IA    Class IB 
Expenses paid         
per $1,000*†    $4.69    $6.01    $4.53    $5.80 
Ending value         
(after         
expenses)    $1,092.20    $1,091.10    $1,020.72    $1,019.46 

 

*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 12/31/22. 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 (184); and then dividing that result by the number of days in the year (365). 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 (184); and then dividing that result by the number of days in the year (365).

4   Putnam VT International Value Fund 

 


Report of Independent Registered Public Accounting Firm

To the Board of 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, 2022, the related statement of operations for the year ended December 31, 2022, the statement of changes in net assets for each of the two years in the period ended December 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2022 (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, 2022, 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, 2022 and the financial highlights for each of the five years in the period ended December 31, 2022 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, 2022 by correspondence with the custodian, transfer agent 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 8, 2023

We have served as the auditor of one or more investment companies in the Putnam Investments family of funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.

Putnam VT International Value Fund   5 

 


The fund’s portfolio 12/31/22

COMMON STOCKS (97.9%)*  Shares  Value 
 
Aerospace and defense (1.0%)     
BAE Systems PLC (United Kingdom)  81,149  $839,780 
    839,780 
Air freight and logistics (1.2%)     
Deutsche Post AG (Germany)  26,367  992,939 
    992,939 
Airlines (1.4%)     
Qantas Airways, Ltd. (voting rights) (Australia)  †   286,697  1,173,138 
    1,173,138 
Auto components (1.0%)     
Magna International, Inc. (Canada)  15,249  856,602 
    856,602 
Automobiles (1.2%)     
Yamaha Motor Co., Ltd. (Japan)  45,200  1,036,666 
    1,036,666 
Banks (19.8%)     
AIB Group PLC (Ireland)  454,973  1,761,085 
ANZ Group Holdings, Ltd. (Australia)  116,758  1,880,845 
BNP Paribas SA (France)  27,911  1,590,967 
CaixaBank SA (Spain)  168,945  664,071 
DBS Group Holdings, Ltd. (Singapore)  39,304  995,365 
DNB Bank ASA (Norway)  44,592  885,076 
Hana Financial Group, Inc. (South Korea)  38,047  1,265,224 
HSBC Holdings PLC (United Kingdom)  335,359  2,090,813 
ING Groep NV (Netherlands)  231,422  2,821,099 
Mizuho Financial Group, Inc. (Japan)  41,480  586,611 
Sumitomo Mitsui Financial Group, Inc. (Japan)  56,400  2,275,940 
    16,817,096 
Beverages (2.2%)     
Asahi Group Holdings, Ltd. (Japan)  19,700  618,289 
Coca-Cola Europacific Partners PLC (Spain)  22,595  1,249,955 
    1,868,244 
Building products (1.0%)     
Compagnie de Saint-Gobain (France)  17,603  860,189 
    860,189 
Capital markets (2.4%)     
Quilter PLC (United Kingdom)  420,725  472,624 
UBS Group AG (Switzerland)  87,020  1,619,185 
    2,091,809 
Chemicals (0.6%)     
LANXESS AG (Germany)  13,157  530,963 
    530,963 
Construction and engineering (2.8%)     
Vinci SA (France)  23,897  2,386,408 
    2,386,408 
Construction materials (1.1%)     
CRH PLC (Ireland)  24,597  974,468 
    974,468 
Diversified financial services (2.0%)     
Eurazeo SE (France)  13,195  820,638 
ORIX Corp. (Japan)  57,400  926,561 
    1,747,199 
Diversified telecommunication services (4.4%)     
Deutsche Telekom AG (Germany)  62,642  1,249,773 
Nippon Telegraph & Telephone Corp. (Japan)  68,500  1,963,555 
Telstra Group, Ltd. (Australia)  186,755  507,337 
    3,720,665 
Electric utilities (2.0%)     
Fortum OYJ (Finland)  32,682  543,658 
SSE PLC (United Kingdom)  57,836  1,197,045 
    1,740,703 

 

COMMON STOCKS (97.9%)* cont.  Shares  Value 
 
Electrical equipment (0.1%)     
Siemens Energy AG (Germany)  6,065  $114,102 
    114,102 
Food and staples retailing (2.2%)     
Koninklijke Ahold Delhaize NV (Netherlands)  40,817  1,172,708 
Seven & i Holdings Co., Ltd. (Japan)  16,500  711,597 
    1,884,305 
Food products (1.6%)     
Ajinomoto Co., Inc. (Japan)  26,300  807,797 
Kerry Group PLC Class A (Ireland)  5,825  525,267 
    1,333,064 
Health-care equipment and supplies (1.2%)     
Hoya Corp. (Japan)  10,400  1,006,797 
    1,006,797 
Hotels, restaurants, and leisure (0.8%)     
Compass Group PLC (United Kingdom)  29,518  684,275 
    684,275 
Household durables (2.3%)     
Cairn Homes PLC (Ireland)  465,226  432,265 
Panasonic Corp. (Japan)  75,000  634,620 
Sony Group Corp. (Japan)  11,800  902,263 
    1,969,148 
Industrial conglomerates (2.4%)     
Siemens AG (Germany)  14,496  2,011,654 
    2,011,654 
Insurance (9.0%)     
AIA Group, Ltd. (Hong Kong)  201,600  2,241,880 
AXA SA (France)  61,630  1,718,895 
Prudential PLC (United Kingdom)  88,638  1,208,217 
QBE Insurance Group, Ltd. (Australia)  186,203  1,702,606 
SOMPO Holdings, Inc. (Japan)  17,600  785,858 
    7,657,456 
Machinery (1.4%)     
Minebea Mitsumi, Inc. (Japan)  59,500  893,588 
NSK, Ltd. (Japan)  56,300  300,719 
    1,194,307 
Metals and mining (3.5%)     
Anglo American PLC (London Exchange)     
(United Kingdom)  44,285  1,732,769 
Rio Tinto PLC (United Kingdom)  18,387  1,288,835 
    3,021,604 
Multi-utilities (1.8%)     
Veolia Environnement SA (France)  59,793  1,536,129 
    1,536,129 
Multiline retail (0.9%)     
Pan Pacific International Holdings Corp. (Japan)  41,800  781,282 
    781,282 
Oil, gas, and consumable fuels (8.6%)     
BP PLC (United Kingdom)  315,908  1,813,724 
Shell PLC (London Exchange) (United Kingdom)  85,547  2,405,597 
Suncor Energy, Inc. (Canada)  57,216  1,814,939 
TotalEnergies SE (France)  21,349  1,340,330 
    7,374,590 
Personal products (1.1%)     
Unilever PLC (United Kingdom)  18,829  944,688 
    944,688 
Pharmaceuticals (5.5%)     
AstraZeneca PLC (United Kingdom)  14,367  1,948,453 
Sanofi (France)  28,927  2,781,886 
    4,730,339 
Real estate management and development (0.8%)     
Mitsui Fudosan Co., Ltd. (Japan)  36,400  670,366 
    670,366 
Semiconductors and semiconductor equipment (0.9%)   
Renesas Electronics Corp. (Japan)  †   87,600  789,962 
    789,962 

 

6   Putnam VT International Value Fund 

 


COMMON STOCKS (97.9%)* cont.    Shares  Value 
 
Specialty retail (1.0%)       
JD Sports Fashion PLC (United Kingdom)  562,658  $858,104 
      858,104 
Technology hardware, storage, and peripherals (1.0%)   
Lite-On Technology Corp. (Taiwan)    419,000  869,750 
      869,750 
Tobacco (1.1%)       
Imperial Brands PLC (United Kingdom)  37,435  937,273 
      937,273 
Trading companies and distributors (4.8%)     
Ferguson PLC (United Kingdom)    6,152  776,471 
ITOCHU Corp. (Japan)    32,300  1,020,389 
Mitsubishi Corp. (Japan)    71,600  2,336,657 
      4,133,517 
Wireless telecommunication services (1.8%)     
KDDI Corp. (Japan)    20,100  609,861 
Vodafone Group PLC (United Kingdom)  943,719  961,102 
      1,570,963 
Total common stocks (cost $76,874,119)    $83,710,544 
 
    Principal   
    amount/   
SHORT-TERM INVESTMENTS (1.8%)*    shares  Value 
 
Putnam Short Term Investment Fund     
Class P 4.53% L   Shares  1,381,053  $1,381,053 
U.S. Treasury Bills 4.002%, 1/10/23 ∆     $200,000  199,859 
Total short-term investments (cost $1,580,857)    $1,580,912 
 
Total investments (cost $78,454,976)    $85,291,456 

 

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, 2022 through December 31, 2022 (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 820 Fair Value Measurements and Disclosures.

* Percentages indicated are based on net assets of $85,493,181.

† This security is non-income-producing.

∆   This security, in part or in entirety, was pledged and segregated with the custodian for collateral on certain derivative contracts at the close of the reporting period. Collateral at period end totaled $120,867 and is included in Investments in securities on the Statement of assets and liabilities (Notes 1 and 8).

L Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.

Unless otherwise noted, the rates quoted in Short-term investments security descriptions represent the weighted average yield to maturity.

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):

 

United Kingdom  23.6%  Spain  2.2% 
Japan  23.0  Switzerland  1.9 
France  15.3  United States  1.9 
Australia  6.2  South Korea  1.5 
Germany  5.7  Singapore  1.2 
Netherlands  4.7  Norway  1.1 
Ireland  4.3  Taiwan  1.0 
Canada  3.1  Finland  0.7 
Hong Kong  2.6  Total  100.0% 

 

FORWARD CURRENCY CONTRACTS at 12/31/22 (aggregate face value $22,342,030)  Unrealized 
    Contract  Delivery    Aggregate   appreciation/ 
Counterparty  Currency  type*  date  Value   face value   (depreciation) 
Bank of America N.A.             
  Australian Dollar  Buy  1/18/23  $221,675  $219,341  $2,334 
  Canadian Dollar  Sell  1/18/23  309,624  305,633  (3,991) 
  Danish Krone  Buy  3/15/23  155,117  150,648  4,469 
  Japanese Yen  Buy  2/15/23  248,275  242,975  5,300 
  New Taiwan Dollar  Sell  2/15/23  435,769  418,185  (17,584) 
  Swedish Krona  Buy  3/15/23  435,432  435,820  (388) 
  Swiss Franc  Buy  3/15/23  272,656  267,292  5,364 
Barclays Bank PLC             
  Hong Kong Dollar  Buy  2/15/23  357,535  355,592  1,943 
  Israeli Shekel  Buy  1/18/23  119,119  119,450  (331) 
  New Taiwan Dollar  Sell  2/15/23  435,769  418,329  (17,440) 
  Singapore Dollar  Buy  2/15/23  123,050  116,784  6,266 
Citibank, N.A.             
  British Pound  Sell  3/15/23  699,989  706,461  6,472 
  Canadian Dollar  Sell  1/18/23  1,056,354  1,047,481  (8,873) 
  Danish Krone  Buy  3/15/23  526,078  510,592  15,486 
  Swiss Franc  Buy  3/15/23  773,289  757,405  15,884 

 

Putnam VT International Value Fund   7 

 


FORWARD CURRENCY CONTRACTS at 12/31/22 (aggregate face value $22,342,030) cont.  Unrealized 
    Contract  Delivery    Aggregate   appreciation/ 
Counterparty  Currency  type*  date  Value   face value   (depreciation) 
Goldman Sachs International             
  Australian Dollar  Buy  1/18/23  $203,689  $193,951  $9,738 
  Japanese Yen  Sell  2/15/23  15,011  13,500  (1,511) 
  South Korean Won  Buy  2/15/23  332,600  281,378  51,222 
HSBC Bank USA, National Association             
  British Pound  Sell  3/15/23  420,478  424,378  3,900 
  Euro  Buy  3/15/23  358,169  351,994  6,175 
  Norwegian Krone  Buy  3/15/23  189,355  186,421  2,934 
  Swiss Franc  Buy  3/15/23  62,334  61,101  1,233 
JPMorgan Chase Bank N.A.             
  British Pound  Sell  3/15/23  616,426  622,190  5,764 
  Japanese Yen  Sell  2/15/23  219,020  196,989  (22,031) 
  New Zealand Dollar  Buy  1/18/23  162,500  145,268  17,232 
  Singapore Dollar  Buy  2/15/23  180,429  171,252  9,177 
  South Korean Won  Sell  2/15/23  1,702,455  1,527,022  (175,433) 
  Swiss Franc  Buy  3/15/23  138,181  135,444  2,737 
Morgan Stanley & Co. International PLC             
  Australian Dollar  Buy  1/18/23  276,990  264,056  12,934 
  Canadian Dollar  Sell  1/18/23  394,563  398,974  4,411 
  Euro  Buy  3/15/23  259,108  251,006  8,102 
  Hong Kong Dollar  Sell  2/15/23  320,824  321,694  870 
  Japanese Yen  Sell  2/15/23  159,554  152,252  (7,302) 
  Swedish Krona  Buy  3/15/23  1,041,253  1,046,995  (5,742) 
  Swiss Franc  Buy  3/15/23  556,319  545,255  11,064 
NatWest Markets PLC             
  Swedish Krona  Buy  3/15/23  486,676  486,894  (218) 
  Swiss Franc  Buy  3/15/23  1,933,005  1,894,782  38,223 
State Street Bank and Trust Co.             
  Australian Dollar  Buy  1/18/23  666,657  642,940  23,717 
  British Pound  Sell  3/15/23  1,781,096  1,810,806  29,710 
  Canadian Dollar  Buy  1/18/23  184,726  179,911  4,815 
  Israeli Shekel  Buy  1/18/23  466,286  468,244  (1,958) 
  Japanese Yen  Sell  2/15/23  324,627  291,945  (32,682) 
  Norwegian Krone  Buy  3/15/23  10,412  10,249  163 
  Swedish Krona  Buy  3/15/23  316,346  316,368  (22) 
Toronto-Dominion Bank             
  Australian Dollar  Buy  1/18/23  533,885  507,892  25,993 
  Canadian Dollar  Sell  1/18/23  265,750  266,177  427 
  Swedish Krona  Buy  3/15/23  333,261  333,476  (215) 
  Swiss Franc  Buy  3/15/23  343,272  336,518  6,754 
UBS AG             
  Canadian Dollar  Sell  1/18/23  608,390  603,342  (5,048) 
  Euro  Buy  3/15/23  330,204  324,628  5,576 
WestPac Banking Corp.             
  Canadian Dollar  Sell  1/18/23  294,630  292,254  (2,376) 
  Japanese Yen  Buy  2/15/23  220,269  212,496  7,773 
Unrealized appreciation            354,162 
Unrealized (depreciation)            (303,145) 
Total            $51,017 

 

* The exchange currency for all contracts listed is the United States Dollar.

8   Putnam VT International Value Fund 

 


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  $5,291,628  $—­  $—­ 
Consumer discretionary  6,186,077  —­  —­ 
Consumer staples  6,967,574  —­  —­ 
Energy  7,374,590  —­  —­ 
Financials  28,313,560  —­  —­ 
Health care  5,737,136  —­  —­ 
Industrials  13,706,034  —­  —­ 
Information technology  1,659,712  —­  —­ 
Materials  4,527,035  —­  —­ 
Real estate  670,366  —­  —­ 
Utilities  3,276,832  —­  —­ 
Total common stocks  83,710,544  —­  —­ 
Short-term investments  —­  1,580,912  —­ 
Totals by level  $83,710,544  $1,580,912  $—­ 
 
    Valuation inputs   
Other financial instruments:  Level 1  Level 2  Level 3 
Forward currency contracts  $—­  $51,017  $—­ 
Totals by level  $—­  $51,017  $—­ 

 

* 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 Fund   9 

 


Statement of assets and liabilities
12/31/22

Assets   
Investment in securities, at value (Notes 1 and 8):   
Unaffiliated issuers (identified cost $77,073,923)  $83,910,403 
Affiliated issuers (identified cost $1,381,053) (Note 5)  1,381,053 
Foreign currency (cost $24,632) (Note 1)  24,691 
Dividends, interest and other receivables  176,725 
Foreign tax reclaim  146,183 
Receivable for shares of the fund sold  85,391 
Unrealized appreciation on forward currency contracts (Note 1)  354,162 
Total assets  86,078,608 
 
Liabilities   
Payable for shares of the fund repurchased  82,297 
Payable for compensation of Manager (Note 2)  50,501 
Payable for custodian fees (Note 2)  13,064 
Payable for investor servicing fees (Note 2)  9,795 
Payable for Trustee compensation and expenses (Note 2)  54,934 
Payable for administrative services (Note 2)  1,045 
Payable for distribution fees (Note 2)  11,266 
Payable for auditing and tax fees  43,552 
Unrealized depreciation on forward currency contracts (Note 1)  303,145 
Other accrued expenses  15,828 
Total liabilities  585,427 
 
Net assets  $85,493,181 
 
Represented by   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $78,951,673 
Total distributable earnings (Note 1)  6,541,508 
Total — Representing net assets applicable to capital shares outstanding  $85,493,181 
Computation of net asset value Class IA   
Net assets  $33,090,476 
Number of shares outstanding  3,245,855 
Net asset value, offering price and redemption price per share (net assets divided by number of shares outstanding)  $10.19 
 
Computation of net asset value Class IB   
Net assets  $52,402,705 
Number of shares outstanding  5,210,588 
Net asset value, offering price and redemption price per share (net assets divided by number of shares outstanding)  $10.06 

 

The accompanying notes are an integral part of these financial statements.

10   Putnam VT International Value Fund 

 


Statement of operations
Year ended 12/31/22

Investment income   
Dividends (net of foreign tax of $275,869)  $3,100,909 
Interest (including interest income of $42,424 from investments in affiliated issuers) (Note 5)  47,404 
Securities lending (net of expenses) (Notes 1 and 5)  12,831 
Total investment income  3,161,144 
 
Expenses   
Compensation of Manager (Note 2)  566,876 
Investor servicing fees (Note 2)  57,693 
Custodian fees (Note 2)  28,318 
Trustee compensation and expenses (Note 2)  3,355 
Distribution fees (Note 2)  124,442 
Administrative services (Note 2)  2,680 
Auditing and tax fees  52,105 
Other  47,344 
Total expenses  882,813 
 
Expense reduction (Note 2)  (425) 
Net expenses  882,388 
 
Net investment income  2,278,756 
 
Realized and unrealized gain (loss)   
Net realized gain (loss) on:   
Securities from unaffiliated issuers (Notes 1 and 3)  (1,719,947) 
Foreign currency transactions (Note 1)  (60,074) 
Forward currency contracts (Note 1)  (302,040) 
Total net realized loss  (2,082,061) 
 
Change in net unrealized appreciation (depreciation) on:   
Securities from unaffiliated issuers  (6,038,499) 
Assets and liabilities in foreign currencies  (8,109) 
Forward currency contracts  37,239 
Total change in net unrealized depreciation  (6,009,369) 
 
Net loss on investments  (8,091,430) 
 
Net decrease in net assets resulting from operations  $(5,812,674) 

 

The accompanying notes are an integral part of these financial statements.

Putnam VT International Value Fund   11 

 


Statement of changes in net assets

  Year ended  Year ended 
  12/31/22  12/31/21 
Increase (decrease) in net assets     
Operations:     
Net investment income  $2,278,756  $1,821,166 
Net realized gain (loss) on investments and foreign currency transactions  (2,082,061)  2,440,504 
Change in net unrealized appreciation (depreciation) of investments and assets and liabilities in foreign currencies  (6,009,369)  6,269,261 
Net increase (decrease) in net assets resulting from operations  (5,812,674)  10,530,931 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class IA  (725,594)  (788,407) 
Class IB  (988,630)  (845,278) 
Net realized short-term gain on investments     
Class IA  (432,202)  (31,791) 
Class IB  (654,311)  (37,237) 
From net realized long-term gain on investments     
Class IA  (706,665)  (422,815) 
Class IB  (1,069,822)  (495,251) 
Increase from capital share transactions (Note 4)  10,198,351  8,316,869 
Total increase (decrease) in net assets  (191,547)  16,227,021 
Net assets:     
Beginning of year  85,684,728  69,457,707 
End of year  $85,493,181  $85,684,728 

 

The accompanying notes are an integral part of these financial statements.

12   Putnam 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                           
12/31/22­  $11.52­  .29­  (1.03)  (.74)  (.23)  (.36)  (.59)  $10.19­  (6.70)  $33,090­  .92e  2.91­  11­ 
12/31/21  10.35­  .27­  1.29­  1.56­  (.25)  (.14)  (.39)  11.52­  15.28­  36,527­  .87­  2.41­  15­ 
12/31/20  10.44­  .20­  .09­  .29­  (.25)  (.13)  (.38)  10.35­  4.23­  33,437­  .94­  2.28­  17­ 
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 
Class IB                           
12/31/22­  $11.37­  .26­  (1.00)  (.74)  (.21)  (.36)  (.57)  $10.06­  (6.81)  $52,403­  1.17­e­  2.67­  11­ 
12/31/21  10.23­  .24­  1.27­  1.51­  (.23)  (.14)  (.37)  11.37­  14.94­  49,158­  1.12­  2.14­  15­ 
12/31/20  10.32­  .18­  .08­  .26­  (.22)  (.13)  (.35)  10.23­  3.94­  36,020­  1.19­  2.06­  17­ 
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 

 

a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

b Total return assumes dividend reinvestment.

c The charges and expenses at the insurance company separate account level are not reflected.

d Includes amounts paid through expense offset and/or brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

e Includes one-time proxy cost of 0.02%.

The accompanying notes are an integral part of these financial statements.

Putnam VT International Value Fund   13 

 


Notes to financial statements 12/31/22

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, 2022 through December 31, 2022.

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. At times, the fund also uses derivatives, which are expected to include certain foreign currency transactions. For example, the fund typically uses foreign currency forward contracts in connection with the fund’s investments in foreign securities in order to hedge the fund’s currency exposure relative to the fund’s benchmark index.

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 valuation Portfolio 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 procedures and 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 820 Fair 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.

Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2.

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. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.

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.

Joint trading account Pursuant to an exemptive order from the SEC, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in issues of short-term investments having maturities of up to 90 days.

14   Putnam VT International Value Fund 

 


Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the fair value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. In the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings.

Security transactions and related investment income Security 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, if any, is recorded on the accrual basis. Amortization and accretion of premiums and discounts on debt securities, if any, 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.

Foreign currency translation The 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 contracts The 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 agreements The 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 pledged 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 $176,612 on open derivative contracts subject to the Master Agreements. Collateral pledged by the fund at period end for these agreements totaled $120,867 and may include amounts related to unsettled agreements.

Securities lending The 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 risk of 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 lending The 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 credit The fund participates, along with other Putnam funds, in a $100 million ($317.5 million prior to October 14, 2022) 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 Bank Funding Rate for the committed line of credit and 1.30% plus the higher of (1) the Federal Funds rate and (2) the Overnight Bank Funding Rate 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 taxes It 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.

The fund is subject to the provisions of Accounting Standards Codification 740 Income 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,

Putnam VT International Value Fund   15 

 


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.

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At December 31, 2022, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:

  Loss carryover   
Short-term  Long-term  Total 
$518,142  $721,255  $1,239,397 

 

Distributions to shareholders Distributions 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 losses on wash sale transactions, from foreign currency gains and losses and 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 $616,074 to decrease undistributed net investment income and $616,074 to decrease accumulated net realized loss.

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:

Unrealized appreciation  $13,923,809 
Unrealized depreciation  (7,598,009) 
Net unrealized appreciation  6,325,800 
Undistributed ordinary income  $1,462,856 
Capital loss carryforward  $1,239,397 
Cost for federal income tax purposes  $79,016,673 

 

Expenses of the Trust Expenses 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 interest At 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 30.0% 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 0.689% of the fund’s average net assets.

Putnam Management has contractually agreed, through April 30, 2024, 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 0.25% (prior to July 1, 2022, the annual rate was 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 0.25% (prior to July 1, 2022, the annual rate was 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  $22,831 
Class IB  34,862 
Total  $57,693 

 

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. For the reporting period, the fund’s expenses were reduced by $425 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $62, 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

16   Putnam VT International Value Fund 

 


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)  $18,467,839  $8,912,799 
U.S. government securities     
(Long-term)  —  — 
Total  $18,467,839  $8,912,799 

 

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.

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 12/31/22  Year ended 12/31/21  Year ended 12/31/22  Year ended 12/31/21 
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount 
Shares sold  396,864  $3,930,270  382,595  $4,391,496  3,227,059  $32,294,702  1,776,323  $19,957,413 
Shares issued in connection with                 
reinvestment of distributions  172,955  1,864,461  113,517  1,243,013  254,481  2,712,763  127,100  1,377,766 
  569,819  5,794,731  496,112  5,634,509  3,481,540  35,007,465  1,903,423  21,335,179 
Shares repurchased  (495,292)  (4,996,606)  (556,048)  (6,302,671)  (2,592,943)  (25,607,239)  (1,102,968)  (12,350,148) 
Net increase (decrease)  74,527  $798,125  (59,936)  $(668,162)  888,597  $9,400,226  800,455  $8,985,031 

 

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  12/31/21  Purchase cost  Sale proceeds  Investment income  12/31/22 
Short-term investments           
Putnam Cash Collateral Pool, LLC*  $—  $14,958,312  $14,958,312  $7,023  $— 
Putnam Short Term Investment           
Fund**  2,765,609  13,008,438  14,392,994  42,424  1,381,053 
Total Short-term investments  $2,765,609  $27,966,750  $29,351,306  $49,447  $1,381,053 

 

*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.

The Covid-19 pandemic and efforts to contain its spread have resulted in, among other effects, significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, significant changes in fiscal and monetary policies, and economic downturns and recessions. The effects of the Covid-19 pandemic have negatively affected, and may continue to negatively affect, the global economy, the economies of the United States and other individual countries, the financial performance of individual issuers, sectors, industries, asset classes, and markets, and the value, volatility, and liquidity of particular securities and other assets. The effects of the Covid-19 pandemic also are likely to exacerbate other risks that apply to the fund, which could negatively impact the fund’s performance and lead to losses on your investment in the fund. The duration of the Covid-19 pandemic and its effects cannot be determined with certainty.

Putnam VT International Value Fund   17 

 


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)  $31,500,000 

 

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 
  Investments,       
Foreign exchange contracts  Receivables  $354,162  Payables  $303,145 
Total    $354,162    $303,145 

 

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  $(302,040)  $(302,040) 
Total  $(302,040)  $(302,040) 

 

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  $37,239  $37,239 
Total  $37,239  $37,239 

 

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Putnam VT International Value Fund   19 

 


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.

  Bank of America N.A. Barclays Bank PLC Citibank, N.A. Goldman Sachs International HSBC Bank USA, National Association JPMorgan Chase Bank N.A. Morgan Stanley & Co. International PLC NatWest Markets PLC State Street Bank and Trust Co. Toronto-Dominion Bank UBS AG WestPac Banking Corp. Total
Assets:                           
Forward currency contracts#  $17,467  $8,209  $37,842  $60,960  $14,242  $34,910  $37,381  $38,223  $58,405  $33,174  $5,576  $7,773  $354,162 
Total Assets  $17,467  $8,209  $37,842  $60,960  $14,242  $34,910  $37,381  $38,223  $58,405  $33,174  $5,576  $7,773  $354,162 
Liabilities:                           
Forward currency contracts#  21,963  17,771  8,873  1,511  —  197,464  13,044  218  34,662  215  5,048  2,376  303,145 
Total Liabilities  $21,963  $17,771  $8,873  $1,511  $—  $197,464  $13,044  $218  $34,662  $215  $5,048  $2,376  $303,145 
Total Financial and Derivative                           
Net Assets  $(4,496)  $(9,562)  $28,969  $59,449  $14,242  $(162,554)  $24,337  $38,005  $23,743  $32,959  $528  $5,397  $51,017 
Total collateral                           
received (pledged)†##  $—  $—  $—  $—  $—  $(120,867)  $—  $—  $—  $—  $—  $—   
Net amount  $(4,496)  $(9,562)  $28,969  $59,449  $14,242  $(41,687)  $24,337  $38,005  $23,743  $32,959  $528  $5,397   
Controlled collateral received                           
(including TBA commitments)**  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Uncontrolled collateral received  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $—  $— 
Collateral (pledged) (including                           
TBA commitments)**  $—  $—  $—  $—  $—  $(120,867)  $—  $—  $—  $—  $—  $—  $(120,867) 

 

** 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.

20  Putnam VT International Value Fund  Putnam VT International Value Fund   21 

 


Federal tax information (Unaudited)

For the reporting period, total interest and dividend income from foreign countries were $3,376,759, or $0.40 per share (for all classes of shares). Taxes paid to foreign countries were $275,869, or $0.03 per share (for all classes of shares).

22   Putnam VT International Value Fund 

 



Putnam VT International Value Fund   23 

 



*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, 2022, there were 92 mutual funds, 4 closed-end funds, and 7 exchange-traded funds in the Putnam funds complex. Each Trustee serves as Trustee of all funds in the Putnam funds complex.

Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 75, removal, or death.

24   Putnam VT International Value Fund 

 


Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:

James F. Clark (Born 1974)  Richard T. Kircher (Born 1962)  Denere P. Poulack (Born 1968) 
Vice President and Chief Compliance Officer  Vice President and BSA Compliance Officer  Assistant Vice President, Assistant Clerk, 
Since 2016  Since 2019  and Assistant Treasurer 
Chief Compliance Officer and Chief Risk Officer,  Assistant Director, Operational Compliance,  Since 2004 
Putnam Investments, and Chief Compliance  Putnam Investments and Putnam   
Officer, Putnam Management  Retail Management  Janet C. Smith (Born 1965) 
    Vice President, Principal Financial 
Nancy E. Florek (Born 1957)  Martin Lemaire (Born 1984)  Officer, Principal Accounting Officer, 
Vice President, Director of Proxy Voting  Vice President and Derivatives Risk Manager  and Assistant Treasurer 
and Corporate Governance, Assistant Clerk,  Since 2022  Since 2007 
and Assistant Treasurer  Risk Manager and Risk Analyst,  Head of Fund Administration Services, Putnam 
Since 2000  Putnam Investments  Investments and Putnam Management 
 
Michael J. Higgins (Born 1976)  Susan G. Malloy (Born 1957)  Stephen J. Tate (Born 1974) 
Vice President, Treasurer, and Clerk  Vice President and Assistant Treasurer  Vice President and Chief Legal Officer 
Since 2010  Since 2007  Since 2021 
  Head of Accounting and Middle Office Services,  General Counsel, Putnam Investments, Putnam 
Jonathan S. Horwitz (Born 1955)  Putnam Investments and Putnam Management  Management, and Putnam Retail Management 
Executive Vice President, Principal Executive     
Officer, and Compliance Liaison  Alan G. McCormack (Born 1964)  Mark C. Trenchard (Born 1962) 
Since 2004  Vice President and Derivatives Risk Manager  Vice President 
  Since 2022  Since 2002 
  Head of Quantitative Equities and Risk,  Director of Operational Compliance, Putnam 
  Putnam Investments  Investments and Putnam Retail 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.

Putnam VT International Value Fund   25 

 


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, 2022, 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:  Barbara M. Baumann, Vice Chair 
Boston, MA 02110  P.O. Box 219697  Liaquat Ahamed 
Kansas City, MO 64121-9697  Katinka Domotorffy 
Investment Sub-Advisors  1-800-225-1581  Catharine Bond Hill 
Putnam Investments Limited  Jennifer Williams Murphy 
16 St James’s Street  Custodian  Marie Pillai 
London, England SW1A 1ER  State Street Bank and Trust Company  George Putnam III 
    Robert L. Reynolds 
The Putnam Advisory Company, LLC  Legal Counsel  Manoj P. Singh 
100 Federal Street  Ropes & Gray LLP  Mona K. Sutphen 
Boston, MA 02110 
Independent Registered 
Marketing Services  Public Accounting Firm   
Putnam Retail Management  PricewaterhouseCoopers LLP   
Limited Partnership     
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.

This report has been prepared for the shareholders   
of Putnam VT International Value Fund.  VTAN024 332108 2/23 

 

Item 2. Code of Ethics:
(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 January 2023, the Code of Ethics of Putnam Investments and Code of Ethics of Putnam Funds were amended. The key changes to the Putnam Investments Code of Ethics are as follows: (i) Prohibition on investments in a single stock ETFs and (ii) Revision to the 7-day blackout rule for Analysts. The key change to the Putnam Funds Code of Ethics was that the provisions of the Code of Ethics for employees of PanAgora Asset Management, inc. and any of its subsidiaries are excluded from the Putnam Funds’ Code of Ethics.

Item 3. Audit Committee Financial Expert:
The Funds’ Audit, Compliance and Risk 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 member of the Audit, Compliance and Risk Committee also possesses a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualifies him or her for service on the Committee. In addition, the Trustees have determined that each of Dr. Hill, Ms. Murphy 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 Risk 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, 2022 $40,075 $ — $9,242 $ —
December 31, 2021 $36,498 $ — $7,577 $ —

For the fiscal years ended December 31, 2022 and December 31, 2021, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $251,253 and $300,997 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 Risk Committee. The Audit, Compliance and Risk 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 Risk 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, 2022 $ — $242,011 $ — $ —
December 31, 2021 $ — $293,420 $ — $ —

Item 5. Audit Committee of Listed Registrants
Not applicable

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:
Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable

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 90 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:
Not Applicable

Item 13. Exhibits:
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.

(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

SIGNATURES
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.

Putnam Variable Trust
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: February 28, 2023
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

Date: February 28, 2023
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: February 28, 2023