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  • Putnam Variable Trust Putnam VT Global Health Care Fund

    IMPORTANT NOTICE: Delivery of paper fund reports In accordance with regulations adopted by the Securities and Exchange Commission, beginning on or after January 1, 2021, at the election of your insurance provider, you may not receive paper reports like this one in the mail from the insurance provider that offers your variable annuity contract or variable life insurance policy unless you specifically request it. Instead, they will be available on a website, and your insurance provider will notify you by mail whenever a new one is available, and provide you with a website link to access the report.

    If you wish to continue to receive paper reports free of charge after January 1, 2021, please contact your insurance provider.

    If you already receive these reports electronically, no action is required.

    Annual report 12 | 31 | 19

  • February 11, 2020

    Dear Shareholder:

    Global financial markets overcame a number of uncertainties in 2019. Both stock and bond markets experienced bouts of volatility, but performance recovered despite macroeconomic headwinds and risks. Stock markets worldwide delivered solid returns for the calendar year, with all three major U.S. equity indexes reaching record highs in December. The year was also beneficial for bond investors, as global fixed-income markets posted strong returns, thanks in part to policy easing from central banks.

    Although no one can predict the direction of the markets in the months ahead, Putnam’s experienced investment professionals actively seek to position their fund portfolios for all types of conditions. They take a research-intensive approach to investing that includes risk management strategies designed to serve investors through changing markets. In all environments, we believe investors should remain focused on time-tested approaches, such as maintaining a well-diversified portfolio, thinking about long-term goals, and speaking regularly with a financial advisor.

    Thank you for investing with Putnam.

    Respectfully yours,

    Robert L. Reynolds President and Chief Executive Officer Putnam Investments

    Kenneth R. Leibler Chair, Board of Trustees

    Message from the Trustees

  • Putnam VT Global Health Care Fund 1

    Portfolio composition

    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.

    42.3% Pharmaceuticals 20.4% Biotechnology 19.0% Health-care equipment

    and supplies 12.3% Health-care providers

    and services 2.9% Life sciences tools and services 3.1% Cash and net other assets

    Performance summary (as of 12/31/19)

    Investment objective Capital appreciation

    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*

    MSCI World Health Care Index (ND)†

    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 $10,000

    $15,000

    $20,000

    $25,000

    $30,000

    $35,000

    $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)

    $32,747 $31,944 $31,876

    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 this environment? 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 cancer patients.

    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, inherited disorders.

    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