Putnam VT Global Health Care Fund
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12 | 31 | 19
February 11, 2020
Global financial markets overcame a number of uncertainties in 2019. Both stock and
bond markets experienced bouts of volatility, but performance recovered despite
macroeconomic headwinds and risks. Stock markets worldwide delivered solid returns
for the calendar year, with all three major U.S. equity indexes reaching record highs in
December. The year was also beneficial for bond investors, as global fixed-income markets
posted strong returns, thanks in part to policy easing from central banks.
Although no one can predict the direction of the markets in the months ahead, Putnam’s
experienced investment professionals actively seek to position their fund portfolios for
all types of conditions. They take a research-intensive approach to investing that includes
risk management strategies designed to serve investors through changing markets. In all
environments, we believe investors should remain focused on time-tested approaches,
such as maintaining a well-diversified portfolio, thinking about long-term goals, and
speaking regularly with a financial advisor.
Thank you for investing with Putnam.
Robert L. Reynolds
President and Chief Executive Officer
Kenneth R. Leibler
Chair, Board of Trustees
Message from the Trustees
Putnam VT Global Health Care Fund 1
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 portfolio schedule included in the financial
statements due to the inclusion of derivative securities, any interest accruals,
the exclusion of as-of trades, if any, the use of different classifications of securi-
ties for presentation purposes, and rounding. Holdings and allocations may
vary over time.
19.0% Health-care equipment
12.3% Health-care providers
2.9% Life sciences tools and services
3.1% Cash and net other assets
Performance summary (as of 12/31/19)
Net asset value December 31, 2019
Class IA: $17.32 Class IB: $16.70
Total return at net asset value
(as of 12/31/19) Class IA shares* Class IB shares*
1 year 30.58% 30.29% 23.24%
5 years 44.52 42.69 50.35
Annualized 7.64 7.37 8.50
10 years 227.47 219.44 218.76
Annualized 12.59 12.32 12.29
Life 380.55 356.89 —
Annualized 7.51 7.26 —
For a portion of the periods, the fund had expense limitations, without which
returns would have been lower.
* Class inception date: April 30, 1998.
† The fund’s benchmark, the MSCI World Health Care Index (ND), was introduced on
1/1/01, which post-dates the inception of the fund’s class IA shares.
Cumulative total returns of a $10,000
investment in class IA and class IB shares
at net asset value — since 12/31/09
12/31/09 2010 2011 2012 2013 2014 2015 2016 2017 2018 12/31/19
$40,000 Putnam VT Global Health Care Fund class IA shares
Putnam VT Global Health Care Fund class IB shares
MSCI World Health Care Index (ND)
The MSCI World Health Care Index (ND) is a free float-adjusted market capitaliza-
tion weighted index that is designed to measure the equity market performance
of developed markets in the health-care sector. Calculated with net dividends
(ND), this total return index reflects the reinvestment of dividends after the deduc-
tion 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. 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.
2 Putnam VT Global Health Care Fund
Report from your fund’s manager
How was the investing environment for the 12-month
reporting period ended December 31, 2019?
For the 12-month period, stocks in markets worldwide generally
performed well despite many developments that could have sent
investors fleeing. Markets experienced bouts of volatility, but perfor-
mance recovered despite macroeconomic headwinds and risks,
such as fears of a global economic slowdown and concerns over the
U.S.–China trade conflict.
Health-care stocks continued to face a number of headwinds in
2019. The upcoming U.S. presidential election focused the media’s
attention on health-care reform. Both Republicans and Democrats
support platforms to reduce out-of-pocket medical expenses, espe-
cially for seniors covered by Medicare. In response, stocks of private
insurers, including managed care companies, declined. Pharmaceu-
tical and biotech stocks also faced increased volatility as investors
feared the impact of lower drug prices on corporate profits. Life
science and medical device companies, which are less exposed to
payer and pricing changes, were a relative safe haven for investors.
How did Putnam VT Global Health Care Fund perform in
The fund’s performance was strong for the 12-month reporting period,
both in absolute terms and relative to the benchmark. The fund’s class
IA shares posted a return of 30.58%, outperforming the MSCI World
Health Care Index [ND] benchmark, which returned 23.24%.
What were some holdings that helped fund performance
during the period?
The top contributor was The Medicines Company, a biotechnology
firm that specializes in treatments used in acute care settings.
Another highlight was Danaher, a life-science technology company
that sells diagnostic tools to pharmaceuticals and biomedical
research firms. Investors were pleased with its plans to acquire the
biopharma business of GE Life Sciences. Another top contributor
was Mirati Therapeutics, a biotechnology company specializing
in targeted gene therapies for cancer. Mirati’s stock rallied as the
company reported continued progress in its clinical trials with lung
What stocks detracted during the period?
The top detractor was Biogen, a U.S.-based multinational biotech-
nology firm. The stock was pressured following management’s
decision to discontinue several late-stage trials of a promising
Alzheimer’s drug. Also detracting from performance was Orchard
Therapeutics, a gene therapy company focused on treating rare,
What is your outlook for the fund and health-care stocks?
Leading up to the U.S. election, we believe regulatory uncertainty is
likely to remain an overhang for health-care stocks. Pharmaceuti-
cals are under pressure to reduce drug prices, which could impact
their earnings. The fund has generally avoided companies that have
concentrated drug portfolios with significant exposure to reim-
bursement issues. Instead, we are focused on investing in larger
pharmaceuticals with diversified product lines, solid management,
and durable cash flows.
We believe the pharmaceutical and biotech sectors’ appetite for
innovation — and for acquiring companies with groundbreaking
products — has never been greater. In addition, the FDA has been
quite accommodative, in our view, of companies developing break-
through therapies that address unmet medical needs. We continue
to see impressive examples of innovation in oncology, neurology,
and orphan diseases — which are rare conditions that affect a
relatively small number of people. In this respect, we remain quite
optimistic about the prospects for health-care sector investing.
The views expressed in this report are exclusively those of Putnam Manage-
ment and are subject to change. They are not meant as investment advice.
Please note that t