File No. 33-84546
File No. 811-8786
As Filed with the Securities and Exchange Commission on August 7, 1995.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
Pre-Effective Amendment No. ___ /_ __/
Post-Effective Amendment No. _1_ /_X__/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT _____
OF 1940 /_X__/
Amendment No. 2 /_X__/
(Check appropriate box or boxes)
PIONEER VARIABLE CONTRACTS TRUST
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
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(Address of principal executive office) Zip Code
(617) 742-7825
(Registrant's Telephone Number, including Area Code)
Joseph P. Barri, Hale and Dorr, 60 State Street, Boston, MA 02109
(Name and address of agent for service)
It is proposed that this filing will become effective (check appropriate
box):
___ immediately upon filing pursuant to paragraph (b)
___ on [date]pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on [date] pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
X on October 23, 1995 pursuant to paragraph (a)(2) of Rule 485
---
The Registrant has registered an indefinite number of shares pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Registrant has
not filed a Rule 24f-2 Notice because it has not completed a fiscal year.
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
Cross-Reference Sheet Showing Location in Prospectus and Statement
of Additional Information of Information Required by Items of
the Registration Form
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
1. Cover Page..............................................Prospectus - Cover
Page
2. Synopsis................................................Prospectus -
Highlights--Pioneer
Variable Contracts
Trust
3. Condensed Financial Information.........................Financial Highlights
4. General Description of Registrant.......................Prospectus -
Highlights--Pioneer
Variable Contracts
Trust; Investment
Objectives and
Policies; The Fund
and the Pioneer
Organization;
Shareholder
Information.
5. Management of the Fund..................................Prospectus - The
Fund and the
Pioneer
Organization; Fund
Management Fees and
Other Expenses.
6. Capital Stock and Other Securities......................Prospectus -
Investment Objective
and Policies;
Shareholder
Information.
7. Purchase of Securities Being
Offered..............................................Prospectus -
Shareholder
Information.
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
8. Redemption or Repurchase..............................Prospectus -
Shareholder
Information.
9. Pending Legal Proceedings.............................Not Applicable
10. Cover Page............................................Statement of
Additional
Information -
Cover Page
11. Table of Contents.....................................Statement of
Additional
Information -
Cover Page
12. General Information and History.......................Statement of
Additional
Information -
Cover Page;
Description of
Shares
13. Investment Objectives and Policy......................Statement of
Additional
Information -
Investment Policies,
Restrictions and
Risk Factors
14. Management of the Fund................................Statement of
Additional
Information -
Management of the
Trust; Investment
Adviser
15. Control Persons and Principal Holders
of Securities.......................................Statement of
Additional
Information -
Management of the
Trust
16. Investment Advisory and Other
Services............................................Statement of
Additional
Information -
Management of the
Trust; Investment
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
Adviser; Principal
Underwriter;
Shareholder
Servicing/Transfer
Agent; Custodian;
Independent Public
Accountant
17. Brokerage Allocation and Other
Practices...........................................Statement of
Additional
Information -
Portfolio
Transactions
18. Capital Stock and Other Securities....................Statement of
Additional
Information -
Description of
Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered........................... Statement of
Additional
Information -
Determination of Net
Asset Value
20. Tax Status............................................Statement of
Additional
Information - Tax
Status
21. Underwriters..........................................Statement of
Additional
Information -
Principal
Underwriter
22. Calculation of Performance Data.......................Statement of
Additional
Information -
Investment Results
23. Financial Statements..................................Statement of
Additional
Information -
Financial Statements
<PAGE>
Pioneer Variable Contracts Trust
Prospectus
February 15, 1995
(revised October 23, 1995)
TABLE OF CONTENTS
Page
I. HIGHLIGHTS 3
II. HOW THE FUND WORKS 6
III. RISK CONSIDERATIONS 12
IV. THE FUND AND THE PIONEER ORGANIZATION 15
V. FUND MANAGEMENT FEES AND OTHER EXPENSES 17
VI. PERFORMANCE 18
VII. DISTRIBUTIONS AND TAXES 19
VIII. SHAREHOLDER INFORMATION 20
IX. APPENDIX 21
Pioneer Variable Contracts Trust (the Fund) is an open-end, management
investment company primarily designed to provide investment vehicles for
variable annuity and variable life insurance contracts (Variable Contracts) of
various insurance companies.
The Fund currently offers these Portfolios:
International Growth Portfolio seeks long-term growth of capital primarily
through investments in non-U.S. equity securities and related depositary
receipts.
Capital Growth Portfolio seeks capital appreciation through a diversified
portfolio of securities consisting primarily of common stocks.
Real Estate Growth Portfolio seeks long-term growth of capital primarily through
investments in the securities of real estate investment trusts (REITs) and other
real estate industry companies. Current income is the Portfolio's secondary
investment objective.
Equity-Income Portfolio seeks current income and long-term capital growth by
investing in a portfolio of income-producing equity securities of U.S.
corporations. The Portfolio's goal is to achieve a current dividend yield which
exceeds the published composite yield of the securities comprising the Standard
& Poor's 500 Composite Stock Price Index.
Balanced Portfolio seeks capital growth and current income by actively managing
investments in a diversified portfolio of equity securities and bonds.
Swiss Franc Bond Portfolio seeks to approximate the performance of the Swiss
franc relative to the U.S. dollar while earning a reasonable level of income.
America Income Portfolio seeks as high a level of current income as is
consistent with the preservation of capital. The Portfolio invests in United
States ("U.S.") Government Securities and in "when issued" commitments and
repurchase agreements with respect to such securities.
Money Market Portfolio seeks current income consistent with preserving capital
and providing liquidity. The Portfolio seeks to maintain a stable $1.00 share
price; however, there can be no assurance that a $1.00 share price will be
maintained.
Portfolio returns and share prices fluctuate and the value of your account upon
redemption may be more or less than your purchase price. Shares in the
Portfolios are not deposits or obligations of, or guaranteed or endorsed by, any
bank or other depository institution, are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency and are not guaranteed by the United States Government. There is no
assurance that a Portfolio will achieve its objective.
Investors considering the purchase of shares of any Portfolio should read this
Prospectus before investing. It is designed to provide you with information and
help you decide if the goal of one or more of the Portfolios matches your own.
Retain this document for future reference.
Shares of each Portfolio may be purchased primarily by the separate accounts of
insurance companies, for the purpose of funding Variable Contracts. Particular
Portfolios may not be available in your state due to various insurance or other
regulations. Please check with your insurance company for available Portfolios.
Inclusion of a Portfolio in this Prospectus which is not available in your state
is not to be considered a solicitation. This Prospectus should be read in
conjunction with the separate account prospectus of the specific insurance
product which accompanies this Prospectus. Shares of each Portfolio also may be
purchased by certain qualified pension and retirement plans (Qualified Plans).
See "Shareholder Information--Investments in Shares of The Portfolios" for more
complete information.
A Statement of Additional Information dated February 15, 1995, (revised October
23, 1995) for the Fund has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This free Statement is
available upon request from your insurance company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[End of Prospectus Cover Page]
<PAGE>
I. HIGHLIGHTS
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust (the Fund) is an open-end management investment
company that currently consists of eight distinct Portfolios. Shares of the
Portfolios are offered primarily to holders of insurance company variable
annuity and variable life insurance contracts (Variable Contracts). You may
obtain certain tax benefits by purchasing a Variable Contract (refer to the
prospectus of your insurance company's separate account for a discussion of the
tax benefits).
Each Portfolio has its own distinct investment objective and policies. In
striving to meet its objective, each Portfolio will face the challenges of
changing business, economic and market conditions. Each Portfolio offers
different levels of potential return and will experience different levels of
risk.
No single Portfolio constitutes a complete investment plan. Each Portfolio's
share price (except as described below for Money Market Portfolio), yield and
total return will fluctuate and an investment in a Portfolio may be worth more
or less than your original cost when shares are redeemed. Money Market Portfolio
seeks to maintain a constant $1.00 share price although there can be no
assurance it will do so.
Pioneering Management Corporation (Pioneer) is the investment adviser to each
Portfolio. Each Portfolio pays a fee to its investment adviser for managing the
Portfolio's investments and business affairs. For a discussion of these fees,
please see "Fund Management Fees and Other Expenses."
Each Portfolio complies with various insurance regulations. Please read your
insurance company's separate account prospectus for more specific information
relating to insurance regulations and instructions on how to invest in and
redeem from each Portfolio. For a general discussion of how to buy and sell
Portfolio shares, see "Shareholder Information" in this Prospectus.
Choosing a Portfolio
The illustration below shows the expected relationship between the return
potential and the level of risk normally associated with each Portfolio's
investment objective. Refer to "How the Fund Works" for additional information
on each Portfolio's investment objective and policies.
Portfolio Strategic Focus
More Aggressive
International Invests for long-term growth of
Growth capital primarily through
investments in non-U.S. equity
securities and related
depositary receipts.
Capital Invests for capital appreciation
Growth through a diversified portfolio of
securities consisting primarily of
common stocks.
Real Estate Invests for long-term growth of
Growth capital primarily through
investments in the securities of
real estate investment trusts
(REITs) and other real estate
industry companies. Current income
is the Portfolio's secondary
investment objective.
3
<PAGE>
More Conservative
Equity-Income Invests for current income and long-
term capital growth by investing in
a portfolio of income-producing
equity securities of U.S.
corporations.
Balanced Invests for capital growth and
current income by actively managing
investments in a diversified
portfolio of common stocks and
bonds.
Swiss Franc Invests to approximate the
Bond performance of the Swiss franc
relative to the U.S. dollar while
earning a reasonable level of
income.
America Invests for as high a level of cur-
Income rent income as is consistent with
the preservation of capital. The
Portfolio invests in U.S. Government
Securities and in "when-issued"
commitments and repurchase
agreements with respect to such
securities.
Money Market Invests for current income
consistent with preserving capital
and providing liquidity.
4
<PAGE>
Financial Highlights (Unaudited)
Selected Data for a Share Outstanding from
March 31, 1995 (Commencement of Operations) to June 30, 1995
<TABLE>
<CAPTION>
Real
International Capital Estate Equity- America Money
Growth Growth Growth Income Balanced Income Market
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $1.00
------- ------- ------- ------- ------- ------- -----
Increase from investment operations:
Net investment income $0.01 $0.02 $0.15 $0.06 $0.09 $0.14 $0.18
Net realized and
unrealized gain (loss) on
investments 0.34* 0.63 0.57 0.93 0.72 (0.01) ---
---- - ----- ---- ---- ---- ------ ------
Total increase (decrease)
from investment operations $0.35 $0.65 $0.72 $0.99 $0.81 $0.13 $ ---
Distribution to shareholders from:
Net investment income --- --- (0.15) (0.06) (0.07) (.014) (0.18)
In excess of net investment
income --- --- (0.01) --- ---
----------- --------- --------- --------- ---------- ---------- ---------
Net increase (decrease) in
net asset value $0.35 $0.65 $0.57 $0.92 $0.74 $(0.01) $0.00
------ ------ ----- ----- ----- ------- -----
Net asset value, end of period $10.35 $10.65 $10.57 $10.92 $10.74 $9.99 $1.00
====== ====== ====== ====== ====== ===== =====
Total return** 3.50% 6.50% 7.20% 9.90% 8.10% 1.29% 1.81%
Ratio of net operating
expenses to average net
assets *** 2.00% 1.71% 1.73% 1.98% 1.73% 0.98% 0.71%
Ratio of net investment
income to average net
assets *** 0.44% 1.66% 5.51% 2.79% 3.54% 4.39% 5.78%
Portfolio turnover rate *** 39.68% 28.83% --- --- --- --- ---
Net assets end of period
(in thousands) $521 $1,667 $177 $781 $266 $300 $566
Ratios assuming no reduction of fees or expenses:
Net operating expenses *** 65.73% 19.43% 80.10% 37.00% 66.96% 106.00% 33.76%
Net investment gain (loss) *** (63.29)% (16.06)% (72.86)% (32.23)% (61.69)% (100.63)% (27.27)%
<FN>
* Includes foreign currency transactions
** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of
the investment at net asset value at the end of period.
*** Annualized.
</FN>
</TABLE>
5
<PAGE>
II. HOW THE FUND WORKS
Investment Objectives and Policies
The Fund's Portfolios are designed to serve as investment vehicles primarily for
Variable Contracts of insurance companies. The Fund currently offers eight
Portfolios with different investment objectives and policies which are described
below. Each Portfolio's investment objective is fundamental and can be changed
only by vote of a majority of the outstanding shares of the Portfolio. All other
investment policies of each Portfolio are nonfundamental and may be changed by
the Fund's Trustees without shareholder approval. There is no assurance that a
Portfolio will achieve its investment objective.
Each Portfolio may invest up to 100% of its total assets in short-term
investments for temporary defensive purposes. A Portfolio will assume a
temporary defensive posture only when economic and other factors are such that
Pioneer believes there to be extraordinary risks in being substantially invested
in the securities in which the Portfolio normally concentrates its investments.
International Growth Portfolio seeks long-term growth of capital primarily
through investments in non-U.S. equity securities and related depositary
receipts. Non-U.S. equity securities are equity securities of issuers that are
organized and have principal offices in foreign countries. For information on
depositary receipts, please refer to the Appendix.
Normally, at least 80% of the Portfolio's total assets will be invested in
non-U.S. equity securities and related depositary receipts. The Portfolio may
not invest more than 25 % of its total assets in securities of issuers from any
one country except Japan or the United Kingdom. Also, with the exception of the
Japanese yen, the British pound and the U.S. dollar, no more than 25% of the
Portfolio's total assets may be denominated in the currency of any one country.
Substantial investments in Japan and the United Kingdom or their currencies will
subject the Portfolio to the risks associated with changing economic, market and
social conditions in Japan and the United Kingdom. Refer to "Risks of
International Investments" for more information.
The Portfolio is managed in accordance with Pioneer's "Investing for Value"
investment philosophy. This approach consists of developing a diversified
portfolio of securities consistent with the Portfolio's investment objective and
selected primarily on the basis of Pioneer's judgment that the securities have
an underlying value, or potential value, which exceeds their current prices. The
analysis and quantification of the economic worth, or "value," of an individual
company reflects Pioneer's assessment of the company's assets and the company's
prospects for earnings growth over the next three to five years. Pioneer relies
primarily on the knowledge, experience and judgment of its own research staff,
but also receives and uses information from a variety of outside sources,
including brokerage firms, electronic databases, specialized research firms and
technical journals.
When allocating the Portfolio's investments among geographic regions and
individual countries, Pioneer considers various criteria, such as prospects for
relative economic growth among countries, expected levels of inflation,
government policies influencing business conditions, and the outlook for
currency relationships. Pioneer currently expects to invest most of the
Portfolio's assets in securities of issuers located in countries such as:
Australia, Canada, Hong Kong, Japan, Malaysia, Mexico, Singapore, the United
Kingdom and the other developed countries of Western Europe. The Portfolio may
also invest in the securities of issuers located in countries with emerging
markets such as: Algeria, Argentina, Bangladesh, Brazil, Bulgaria, Chile, China,
Colombia, Czech Republic, Ecuador, Egypt, Ghana, Greece, Hungary, India,
Indonesia, Israel, Jamaica, Jordan, Kenya, Kuwait, Morocco, Nigeria, Pakistan,
Peru, the Philippines, Poland, Portugal, Russia, South Africa, South Korea, Sri
Lanka, Taiwan, Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.
Normally, at least 65% of the Portfolio's total assets will be invested in at
least three different non-U.S. countries. In addition, most of the securities
purchased by the Portfolio will be denominated in foreign currencies.
6
<PAGE>
Pioneer may normally invest up to 20% of the Portfolio's total assets in
short-term debt securities, including certain securities issued by U.S. and
non-U.S. governments and banks, and debt securities of non-U.S. and U.S.
companies. The Portfolio will not purchase lower rated debt securities or
unrated debt securities of comparable quality, but up to 5% of its net assets
may be invested in such securities as a result of credit quality downgrades. See
"Risk Considerations - Risks of Medium and Lower Rated Debt Securities." Pioneer
expects that opportunities for long-term growth of capital will come primarily
from the Portfolio's investments in equity securities, including common stock,
securities such as warrants or rights that are convertible into common stock,
preferred stock and depositary receipts for such securities.
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of illiquid investments, restricted securities,
warrants, options and futures contracts, forward foreign currency exchange
contracts and repurchase agreements, and its ability to lend securities.
Capital Growth Portfolio seeks capital appreciation through a diversified
portfolio of securities consisting primarily of common stocks. Normally, at
least 80% of the Portfolio's assets will be invested in common stocks and in
securities with common stock characteristics, such as convertible bonds and
preferred stocks. In selecting individual equity securities to be purchased by
the Portfolio, Pioneer uses the "Investing for Value" approach as described
above for International Growth Portfolio.
The Portfolio may invest up to 25% of its total assets in non-U.S. securities.
Investments in non-U.S. securities are not currently expected to exceed 10% of
the Portfolio's total assets. For a discussion of international investing,
please see "Risks of International Investments."
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements, illiquid investments,
restricted securities, options, futures contracts and forward foreign currency
exchange contracts, and its ability to lend securities.
Real Estate Growth Portfolio seeks long-term growth of capital primarily through
investments in the equity securities of real estate investment trusts (REITs)
and other real estate industry companies. Current income is the Portfolio's
secondary investment objective. The Portfolio will invest in a non-diversified
portfolio consisting primarily of equity securities of REITs and other real
estate industry companies and, to a lesser extent, in debt securities of such
companies and in mortgage-backed securities. Normally, at least 75% of the
Portfolio's assets will be invested in equity securities of REITs and other real
estate industry companies. See "Risks Associated with the Real Estate Industry"
and "Risks Associated with Real Estate Investment Trusts."
A real estate industry company is defined as a company that derives at least 50%
of its gross revenues or net profits from either (a) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate or (b) products or services related to the real estate
industry like building supplies or mortgage servicing. The equity securities of
real estate industry companies in which the Portfolio will invest consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock and debt securities convertible
into common stock.
The Portfolio may also invest up to 25% of its total assets in: (a) debt
securities of real estate industry companies, (b) mortgage-backed securities,
such as mortgage pass-through certificates, real estate mortgage investment
conduit (REMIC) certificates and collateralized mortgage obligations (CMOs) and
(c) short-term investments. See "Risks Associated with Mortgage-Backed
Securities." The Portfolio may invest up to 5% of its net assets in equity and
debt securities of non-U.S. real estate companies. See "Risks of International
Investments."
7
<PAGE>
Pioneer will invest no more than 5% of the Portfolio's net assets in lower rated
debt securities or unrated debt securities of comparable quality. See "Risk
Considerations - Risks of Medium and Lower Rated Debt Securities."
The Portfolio will purchase the securities of REITs and other real estate
industry companies when, in Pioneer's judgment, their market price appears to be
less than their fundamental value and/or which offer a high level of current
income consistent with reasonable investment risk. In selecting specific
investments, Pioneer will attempt to identify securities with significant
potential for appreciation relative to their downside exposure and/or which have
a timely record and high level of interest or dividend payments. In making these
determinations, Pioneer will take into account price/earnings ratios, cash flow,
the relationship of asset value to market price of the securities, interest or
dividend payment history and other factors which it may determine from time to
time to be relevant. Pioneer will attempt to allocate the Portfolio's
investments across regional economies and property types.
Unlike the other Portfolios, Real Estate Growth Portfolio is a non-diversified
mutual fund under the Investment Company Act of 1940 (the 1940 Act). As a
non-diversified mutual fund, the Portfolio may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified fund.
Other Investment Practices. Refer to the Appendix for information about the
Portfolio's possible use of repurchase agreements, illiquid investments,
restricted securities, options and futures, and its ability to lend securities.
Equity-Income Portfolio seeks current income and long-term capital growth
primarily by investing in the income-producing equity securities of U.S.
corporations. The Portfolio's goal is to achieve a current dividend yield which
exceeds the published composite yield of the securities comprising the Standard
& Poor's 500 Composite Stock Price Index (S&P 500 Index).
Normally, at least 80% of the Portfolio's total assets will be invested in
income-producing common or preferred stock. The remainder of the Portfolio's
assets may be invested in debt securities, most of which are expected to be
convertible into common stock. Pioneer will invest no more than 5% of the
Portfolio's net assets in lower rated debt securities or unrated debt securities
of comparable quality. See "Risk Considerations - Risks of Medium and Lower
Rated Debt Securities."
The Portfolio is managed in accordance with Pioneer's "Investing for Value"
investment philosophy as described above for International Growth Portfolio.
This approach consists of developing a diversified portfolio of securities
consistent with the Portfolio's investment objectives and selected primarily on
the basis of Pioneer's judgment that the securities have an underlying value, or
potential value, which exceeds their current prices.
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements and its ability to lend
securities.
Balanced Portfolio seeks capital growth and current income by actively managing
investments in a diversified portfolio of equity securities and bonds. Normally,
equity securities and bonds will each represent 35% to 65% of the Portfolio's
assets.
The assets of the Portfolio allocated to equity securities will be invested in
common stocks and in securities with common stock characteristics, such as
convertible bonds and preferred stocks. Normally, Portfolio assets allocated to
bonds will be invested in (1) debt securities rated "A" or higher by Standard &
Poor's Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's) or, if
unrated, judged by Pioneer to be of comparable quality, (2) commercial paper of
comparable quality and (3) U.S. Government Securities, GNMA Certificates
(described below) and CMOs. The Portfolio may, however, invest up to 20% of its
total assets in debt securities that are rated "BBB" by S&P or "Baa" by Moody's,
or, if unrated, judged by Pioneer to be of comparable quality, and in commercial
8
<PAGE>
paper that is of comparable quality. See "Risks of Medium and Lower Rated Debt
Securities." Although the Portfolio intends to be fully invested, normally a
portion of the Portfolio's total assets may be invested in cash and short-term
investments. Refer to the Appendix for a description of short-term investments.
Consistent with its investment objectives, the Portfolio may invest up to 25% of
its total assets in non-U.S. securities and related forward foreign currency
exchange contracts. For a further discussion of international investing, please
see "Risks of International Investments."
The allocation of the Portfolio's assets between stocks and bonds will vary in
response to conclusions drawn from Pioneer's continual assessment of business,
economic and market conditions. The mix of equity securities, bonds, short-term
investments and cash may be held in whatever proportions Pioneer determines are
necessary for defensive purposes.
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements and its ability to lend
securities. The Portfolio will not invest in futures or options, except that the
Portfolio may use forward foreign currency exchange contracts and purchase and
sell options and futures contracts relating to foreign currencies.
Swiss Franc Bond Portfolio seeks to approximate the performance of the Swiss
franc relative to the U.S. dollar while earning a reasonable level of income.
The Portfolio was developed by Pioneer with the assistance of JML Swiss
Investment Consultants, A.G., a Swiss financial consultant.
Normally, the Portfolio invests at least 65% of its total assets in (1)
government and corporate debt securities that are denominated in Swiss francs
and (2) combinations of forward foreign currency exchange contracts and debt
securities that are not denominated in Swiss francs ("non-Swiss franc
securities") designed to link the value of the investment in the non-Swiss franc
security to the performance of the Swiss franc. The Portfolio's investments in
debt securities are investment grade (i.e., rated "BBB", "Baa" or higher by S&P
or Moody's or, if unrated, determined by Pioneer to be of comparable quality).
The Portfolio's weighted average maturity normally will not exceed three years,
but may be as long as 5 years.
The Portfolio may invest up to 35% of its total assets in investment grade
commercial paper, bank obligations and money market instruments which may be
denominated in the Swiss franc or other currencies. Normally, at least 50% of
the Portfolio's investments will be denominated in Swiss francs.
The Portfolio is intended to serve as part of a diversified investment program.
Pioneer believes that an investment in the Portfolio may effectively hedge a
diversified investment program by offering protection against declines in the
value of the U.S. dollar relative to the Swiss franc.
Other Investment Practice. Refer to the Appendix for information on the
Portfolio's possible use of illiquid investments, restricted securities, futures
and options contracts, forward currency exchange contracts and repurchase
agreements, and its ability to lend securities.
America Income Portfolio seeks as high a level of current income as is
consistent with the preservation of capital. Normally, the Portfolio invests in
U.S. Government Securities and in "when-issued" commitments and repurchase
agreements with respect to such securities.
The Portfolio's investments in U.S. Governments Securities may include certain
mortgage-backed securities, such as mortgage pass-through certificates and
collateralized mortgage obligations (CMOs). See the Appendix and "Risks
Associated with Mortgage-Backed Securities."
U.S. Government Securities are debt securities issued or guaranteed as to
principal and interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government. Not all U.S. Government Securities are backed by the
full faith and credit of the United States. For example, securities issued by
9
<PAGE>
the Federal Farm Credit Bank, the Student Loan Marketing Association or the
Federal National Mortgage Association are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances. Securities
issued by the Federal Home Loan Bank are supported only by the credit of the
agency. There is no guarantee that the U.S. Government will support these types
of securities, and therefore they involve more risk than U.S. Government
Securities that are backed by the full faith and credit of the United States.
U.S. Government Securities that are backed by the full faith and credit of the
United States include (1) U.S. Treasury obligations, which differ only in their
interest rates, maturities and times of issuance, and (2) obligations of varying
maturities issued or guaranteed by certain agencies and instrumentalities of the
U.S. Government, such as mortgage participation certificates (GNMA Certificates)
guaranteed by the Government National Mortgage Association (GNMA) and Federal
Housing Administration (FHA) debentures, for which the U.S. Treasury
unconditionally guarantees payment of principal and interest. Although the
payment when due of interest and principal on these securities is backed by the
full faith and credit of the United States, this guarantee does not extend to
the market value of these securities. The net asset value of the Portfolio's
shares will fluctuate accordingly.
The Portfolio is free to take advantage of the entire range of maturities
offered by U.S. Government Securities and the average maturity of the Portfolio
may vary significantly. Under normal circumstances, however, the Portfolio's
dollar-weighted average portfolio maturity is not expected to exceed 20 years.
GNMA Certificates. The Portfolio may invest all or any portion of its assets in
GNMA Certificates but it is not obligated to do so; the portion of its assets so
invested will vary with Pioneer's view of the relative yields and values of GNMA
Certificates compared to U.S. Treasury obligations and other U.S. Government
Securities. GNMA Certificates are mortgage-backed securities which evidence part
ownership of a pool of mortgage loans. The GNMA Certificates which the Portfolio
may purchase are the "modified pass-through" type. Modified pass-through
certificates entitle the holder to receive all principal and interest owed on
the mortgages in the pool, net of fees paid to the issuer and GNMA, regardless
of whether or not the mortgagor actually makes the payment.
GNMA Certificates may offer yields higher than those available from other types
of U.S. Government Securities. However, because of principal prepayments and
foreclosures with respect to mortgages in the underlying pool, they may be less
effective than other types of securities as a means of "locking in" attractive
long-term interest rates. Prepayments generally can be invested only at lower
interest rates.
"When-Issued" GNMA Certificates. When-issued or delayed delivery transactions
arise when securities are purchased or sold by the Portfolio with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield which is fixed at the time of entering into the
transaction. However, the yield on a comparable GNMA Certificate when the
transaction is consummated may vary from the yield on the GNMA Certificate at
the time that the when-issued or delayed delivery transaction was made. Also,
the market value of the when-issued or delayed delivery GNMA Certificate may
increase or decrease as a result of changes in general interest rates.
When-issued and delayed delivery transactions involve risk of loss if the value
of a GNMA Certificate declines before the settlement date.
The value of when-issued GNMA Certificate purchase commitments at any time will
not exceed the value of the Portfolio's assets invested in U.S. Treasury bills
(i.e., U.S. Treasury obligations with maturities of one year or less) and other
debt securities having remaining maturities of less than six months. In
addition, the Portfolio's aggregate investments in when-issued or delayed
delivery commitments and repurchase agreements may not exceed 25% of its assets.
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements and its ability to lend
securities.
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Money Market Portfolio seeks current income consistent with preserving capital
and providing liquidity. The Portfolio should be considered as a temporary
investment rather than as an income or cash management vehicle. Pioneer will
invest the Portfolio's assets in the following types of high-quality money
market instruments.
o U.S. Government Securities.
o Obligations of U.S. banks and their non-U.S. branches, savings and
loan associations with total assets in excess of $1 billion and
certain smaller banks and savings and loan associations satisfying
criteria described in the Statement of Additional Information. These
obligations include certificates of deposit and bankers'
acceptances.
o Commercial Paper: that is, short-term unsecured promissory notes of
corporations, including variable amount master demand notes rated,
on the date of investment, A-1 by S&P or P-1 by Moody's, or, if
unrated, issued by companies having outstanding debt rated AAA or AA
by S&P or Aaa or Aa by Moody's.
o Short-Term Corporate Debt Securities: that is, bonds and
debentures with no more than 397 days remaining to maturity at date
of settlement and rated AAA or AA by S&P or Aaa or Aa by Moody's.
The Portfolio may enter into repurchase agreements with approved banks and
broker-dealers for periods not to exceed seven days and only with respect to
U.S. Government Securities that, throughout the period, have a value at least
equal to the amount of the repurchase agreement (including accrued interest). No
more than 25% of the Portfolio's assets will be invested in any one industry,
except that there is no percentage limitation on investments in bank obligations
or U.S. Government Securities.
Many of the instruments in which Money Market Portfolio may invest are described
in the Appendix.
Quality. Money Market Portfolio may purchase only high quality securities that
Pioneer believes present minimal credit risks. To be considered high quality, a
security must be rated, in accordance with applicable rules, in one of the two
highest categories for short-term securities by the major rating services, such
as S&P's or Moody's (or by one, if only one rating service has rated the
security), or, if unrated, judged to be of equivalent quality by Pioneer.
High quality securities are divided into "first tier" and "second tier"
securities. First tier securities have received the highest rating (e.g., S&P's
A-1 rating) from at least two rating services (or one, if only one has rated the
security). Second tier securities have received ratings within the two highest
categories (e.g., S&P's A-1 or A-2) from at least two rating services (or one,
if only one has rated the security), but do not qualify as first tier
securities. If a security has been assigned different ratings by different
rating services, at least two rating services must have assigned the higher
rating in order for Pioneer to determine eligibility on the basis of that higher
rating. Based on procedures adopted by the Fund's Board of Trustees, Pioneer may
determine that an unrated security is of equivalent quality to a rated first or
second tier security.
Diversification. As a money market fund, the Portfolio is subject to the
following special diversification requirements. The Portfolio may not invest
more than 5% of its total assets in securities issued by or subject to puts from
any one issuer (except U.S. Government Securities and repurchase agreements
collateralized by such securities). In addition, the Portfolio may not invest
(1) more than 5% of its total assets in second tier securities or (2) more than
1% of its total assets or $1 million (whichever is greater) in the second tier
securities of a single issuer (other than U.S. Government Securities).
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Maturity Policies. The Portfolio must limit its investments to securities with
remaining maturities of 397 days or less and must maintain a dollar-weighted
average maturity of 90 days or less.
III. RISK CONSIDERATIONS
Risks of International Investments
The information contained in these paragraphs is of particular importance to
International Growth Portfolio and Swiss Franc Bond Portfolio; however, Capital
Growth, Balanced and Real Estate Growth Portfolios may also make non-U.S.
investments. Pioneer limits the amount of Capital Growth and Balanced
Portfolio's net assets that may be invested in non-U.S. securities to 25%.
Pioneer limits the amount of Real Estate Growth Portfolio's net assets that may
be invested in non-U.S. securities to 5%. Investing outside the United States
involves different opportunities and different risks from U.S. investments.
Pioneer believes that it may be possible to obtain significant returns from a
portfolio of non-U.S. investments, or a combination of non-U.S. investments and
U.S. investments, and to achieve increased diversification in comparison to a
portfolio invested solely in U.S. securities. By including international
investments in your investment portfolio, you may gain increased diversification
by combining securities from various countries and geographic areas that offer
different investment opportunities and are affected by different economic
trends. At the same time, these opportunities and trends involve risks that may
not be encountered in U.S. investments.
International investing in general may involve greater risks than U.S.
investments. There is generally less publicly available information about
non-U.S. issuers, and there may be less government regulation and supervision of
non-U.S. stock exchanges, brokers and listed companies. There may be difficulty
in enforcing legal rights outside the United States. Non-U.S. companies
generally are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those that apply
to U.S. companies. Security trading practices abroad may offer less protection
to investors such as the Portfolios. Settlement of transactions in some non-U.S.
markets may be delayed or may be less frequent than in the U.S., which could
affect the liquidity of a Portfolio's investments. Additionally, in some foreign
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property, or other assets of a
Portfolio, political or social instability, or diplomatic developments which
could affect U.S. investments in foreign countries. Pioneer will take these
factors into consideration in managing each Portfolio's non-U.S. investments.
International Growth Portfolio may invest a portion of its assets in developing
countries, or in countries with new or developing capital markets; for example,
countries in Eastern Europe. The considerations noted above are generally
intensified for these investments. These countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities. Securities of issuers located in these
countries tend to have volatile prices and may offer significant potential for
loss as well as gain.
Foreign Currencies. The value of Swiss Franc Bond Portfolio's and International
Growth Portfolio's non-U.S. investments, and the value of dividends and interest
earned by these Portfolios, may be significantly affected by changes in currency
exchange rates. Currency exchange rates may also affect Capital Growth, Balanced
and Real Estate Growth Portfolios to the extent that these Portfolios invest in
non-U.S. securities. Some foreign currency values may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Portfolios.
Pioneer may attempt to manage currency exchange rate risks for the Portfolios
(other than Swiss Franc Bond Portfolio). However, there is no assurance that
Pioneer will do so at an appropriate time or that Pioneer will be able to
predict exchange rates accurately. For example, to the extent that Pioneer
increases a Portfolio's exposure to a foreign currency, and that currency's
value subsequently falls, Pioneer's currency management may result in increased
losses to the Portfolio. Similarly, if Pioneer hedges a Portfolio's exposure to
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a foreign currency, and the currency's value rises, the Portfolio will lose the
opportunity to participate in the currency's appreciation.
Because Swiss Franc Bond Portfolio seeks to approximate the performance of the
Swiss franc relative to the U.S. dollar, the Portfolio will be particularly
susceptible to the effects of social, political and economic events that affect
Switzerland and the value of the Swiss franc relative to the U.S. dollar.
Pioneer will not actively manage the currency exchange rate risk associated with
the Portfolio's investments. For information about the Swiss economy and the
Swiss franc, see the Appendix.
Currency Management. The relative performance of foreign currencies can be an
important factor in the performance of Swiss Franc Bond Portfolio, and in the
performance of International Growth Portfolio, each of which invests the
predominant portion of its assets outside the United States. The performance of
Capital Growth, Balanced and Real Estate Growth Portfolios may also be affected
by the relative performance of foreign currencies, but to a lesser extent.
Pioneer may manage International Growth, Capital Growth, Real Estate Growth and
Balanced Portfolios' exposure to various currencies to take advantage of
different yield, risk, and return characteristics that different currencies can
provide for U.S. investors.
To manage exposure to currency fluctuations, International Growth, Capital
Growth and Balanced Portfolios may enter into forward foreign currency exchange
contracts (agreements to exchange one currency for another at a future date) and
buy and sell options and futures contracts relating to foreign currencies. The
Portfolios will use forward foreign currency exchange contracts in the normal
course of business to lock in an exchange rate in connection with purchases and
sales of securities denominated in foreign currencies. Other currency management
strategies allow the Portfolios to hedge portfolio securities, to shift
investment exposure from one currency to another, or to attempt to profit from
anticipated declines in the value of a foreign currency relative to the U.S.
dollar. Subject to compliance with tax requirements, there is no overall
limitation on the amount of International Growth Portfolio's assets that may be
committed to currency management strategies. Capital Growth and Balanced
Portfolio may engage in currency management strategies only to the extent that
they invest in non-U.S. securities. Because Real Estate Growth Portfolio may
only invest up to 5% of its net assets in non-U.S. securities, it does not
actively seek to manage exposure to currency fluctuations.
Swiss Franc Bond Portfolio may enter into forward foreign currency exchange
contracts to purchase Swiss francs in connection with its investments in
non-Swiss franc securities. The Portfolio may engage in this practice in order
to link an investment in a non-Swiss franc security to the value of the Swiss
franc. The Portfolio's use of this strategy will be subject to compliance with
tax requirements.
Risks of Medium and Lower Rated Debt Securities
All the Portfolios except America Income and Money Market Portfolios may invest
in medium rated debt securities which are usually defined as securities rated
"BBB" by S&P or "Baa" by Moody's. Medium rated debt securities have speculative
characteristics and involve greater risk of loss than higher rated debt
securities, and are more sensitive to changes in the issuer's capacity to make
interest payments and repay principal. Medium rated debt securities represent a
somewhat more aggressive approach to income investing than higher rated debt
securities. If the rating of a debt security is reduced below investment grade
(i.e., below "BBB" by or "Baa"), Pioneer will consider whatever action is
appropriate, consistent with the Portfolio's investment objective and policies.
Real Estate Growth and Equity-Income Portfolios may invest up to 5% of their net
assets in lower rated debt securities. International Growth and Swiss Franc Bond
Portfolios may not purchase lower rated debt securities, but up to 5% of their
net assets may be invested in such securities as a result of credit quality
downgrades. Lower rated debt securities are usually defined as securities rated
below "BBB" by S&P or "Baa" by Moody's. Investments in lower rated debt
securities are speculative and changes in economic conditions or other
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circumstances are more likely to lead to a weakened capacity of the issuer to
make principal and interest payments on such securities.
The considerations discussed above for medium and lower rated debt securities
also apply to medium and lower quality, unrated debt instruments of all types.
Unrated debt instruments are not necessarily of lower quality than similar rated
instruments, but they may not be attractive to as many buyers. Each Portfolio
relies more on Pioneer's credit analysis when investing in debt securities that
are unrated.
Please refer to the Statement of Additional Information for a discussion of
Moody's and S&P's ratings.
Risks Associated with the Real Estate Industry
Real Estate Growth Portfolio does not invest directly in real estate; however,
an investment in the Portfolio may be subject to certain risks associated with
the direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earth-quakes or other
natural disasters; limitations on and variations in rents; and changes in
interest rates.
In addition, if Real Estate Growth Portfolio has rental income or income from
the disposition of real property acquired as a result of a default on securities
the Portfolio owns, the receipt of such income may adversely affect its ability
to retain its tax status as a regulated investment company. See "Distributions
and Taxes" in the Statement of Additional Information. Investments by the
Portfolio in securities of companies providing mortgage servicing will be
subject to the risks associated with refinancings and their impact on servicing
rights.
Risks Associated with Real Estate Investment Trusts
Real Estate Growth Portfolio may invest without limitation in shares of REITs.
REITs are pooled investment vehicles which invest primarily in income-producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Like
investment companies such as Real Estate Growth Portfolio, REITs are not taxed
on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the Code). The
Portfolio will indirectly bear its proportionate share of any expenses paid by
REITs in which it invests in addition to the expenses paid by the Portfolio.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified and
are subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax for distributed income under
the Code and failing to maintain their exemptions under the 1940 Act. REITs
whose underlying assets include long-term health care properties, such as
nursing, retirement and assisted living homes, may be affected by federal
regulations concerning the health care industry.
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REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
Risks Associated with Mortgage-Backed Securities
Real Estate Growth, Balanced and America Income Portfolios may invest in
mortgage-backed securities. Mortgage-backed securities are securities that
directly or indirectly represent participation in, or are collateralized by and
payable from, mortgage loans secured by real property. America Income Portfolio
may invest in mortgage-backed securities issued or guaranteed by the U.S.
Government and its agencies and instrumentalities, including CMOs collateralized
by GNMA, Fannie Mae or Freddie Mac certificates. Real Estate Growth Portfolio
may invest in a variety of mortgage-backed securities and Balanced Portfolio may
invest in GNMA Certificates and CMOs. Refer to the Appendix for a description of
these securities.
Investing in mortgage-backed securities involves certain unique risks in
addition to those risks associated with investing in the real estate industry in
general. These risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of prepayments on
mortgage cash flows. When interest rates decline, the value of an investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of an investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
The yield characteristics of mortgage-backed securities differ from those of
traditional fixed income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, Real Estate Growth Portfolio, Balanced
Portfolio and America Income Portfolio may fail to recoup fully their
investments in mortgage-backed securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Portfolio reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, mortgage-backed securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government Securities as a means of "locking
in" interest rates.
IV. THE FUND AND THE PIONEER ORGANIZATION
The Fund is an open-end, management investment company organized as a Delaware
business trust on September 16, 1994. The Fund has its own Board of Trustees,
which supervises its activities and reviews contractual arrangements with
companies that provide each Portfolio with services. The Fund is not required to
hold annual shareholder meetings, although special meetings may be called for a
specific Portfolio, or the Fund as a whole, for purposes such as electing or
removing Trustees, changing fundamental policies or approving a management
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contract. An insurance company issuing a Variable Contract that participates in
the Fund will vote shares of the Portfolios held by the insurance company's
separate accounts as required by law. In accordance with current law and
interpretations thereof, participating insurance companies are required to
request voting instructions from policyowners and must vote shares of the
Portfolios in proportion to the voting instructions received. For a further
discussion of voting rights, please refer to your insurance company's separate
account prospectus.
The Pioneer Group, Inc. (PGI), established in 1928, is one of America's oldest
investment managers and has its principal business address at 60 State Street,
Boston, Massachusetts. PGI is the parent company of Pioneer and a number of
different companies located in the United States and several other countries.
These companies provide a variety of financial services and products. PGI
employs more than 500 people in the United States and more than 800 people
abroad. Each Portfolio employs various PGI companies to perform certain
activities required for its operation.
John F. Cogan, Jr., Chairman and President of the Fund, President and a Director
of PGI and Chairman and a Director of Pioneer, owned approximately 15% of the
outstanding capital stock of PGI as of the date of this Prospectus.
Pioneer, the investment adviser to each Portfolio, provides investment research
and portfolio management services to a number of other retail mutual funds and
certain institutional clients. It maintains a staff of experienced investment
personnel and a full complement of related support facilities. As of June 30,
1995, Pioneer advised mutual funds with a total value of over $11 billion, which
includes more than 900,000 U.S. shareholder accounts, and other institutional
accounts. Pioneer Funds Distributor, Inc. (PFD), with its principal business
address at 60 State Street, Boston, Massachusetts, distributes shares of the
Portfolios and shares of Pioneer's retail mutual funds.
Each Portfolio is overseen by an Equity Investment Committee or Fixed Income
Investment Committee. Both Committees consist of Pioneer's most senior
investment professionals and are chaired by David D. Tripple, Pioneer's
President and Chief Investment Officer. Mr. Tripple joined Pioneer in 1974 and
has had general responsibility for Pioneer's investment operations and specific
portfolio assignments for more than five years. Fixed income investments made by
Pioneer are under the general supervision of Sherman B. Russ, Senior Vice
President of Pioneer. Mr. Russ joined Pioneer in 1983.
The Portfolio Managers responsible for day-to-day management of the Portfolios
are:
International Growth Portfolio: Norman Kurland, Senior Vice President of
Pioneer. Mr. Kurland joined Pioneer in 1990 after working with a variety of
investment and industrial concerns.
Capital Growth Portfolio: Warren J. Isabelle, Director of Research and Vice
President of Pioneer. Mr. Isabelle joined Pioneer in 1984.
Real Estate Growth Portfolio: Day-to-day management of the Portfolio is the
responsibility of Robert Benson, Senior Vice President of Pioneer, who joined
Pioneer in 1974.
Equity-Income Portfolio: John A. Carey, Vice President of Pioneer. Mr. Carey
joined Pioneer in 1979.
America Income Portfolio: Sherman B. Russ, Senior Vice President of Pioneer. Mr.
Russ joined Pioneer in 1983.
Balanced Portfolio: John A. Carey (since May 1, 1995).
Swiss Franc Bond Portfolio: Salvatore P. Pramas, Vice President of Pioneer. Mr.
Pramas joined Pioneer in 1994 after working for a variety of investment
management firms.
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Each Portfolio, other than Balanced Portfolio and Swiss Franc Bond Portfolio,
has an investment objective and policies similar to those of an existing Pioneer
retail mutual fund. International Growth Portfolio is most similar to Pioneer
International Growth Fund, Capital Growth Portfolio to Pioneer Capital Growth
Fund, Real Estate Growth Portfolio to Pioneer Winthrop Real Estate Investment
Fund, Equity-Income Portfolio to Pioneer Equity-Income Fund, America Income
Portfolio to Pioneer America Income Trust and Money Market Portfolio to Pioneer
Cash Reserves Fund. Performance of these Portfolios is not expected to be the
same as the performance of the corresponding retail mutual fund due in part to
dissimilarities in their investments. Various insurance costs will also affect
the performance of investments in the Portfolios, as measured for the
Accumulation Units of your Variable Contract.
Portfolio Transactions
Orders for each Portfolio's securities transactions are placed by Pioneer, which
strives to obtain the best price and execution for each transaction. In
circumstances where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells shares
of a Portfolio or other funds for which Pioneer or any affiliate serves as
investment adviser or manager. See the Statement of Additional Information for a
further description of Pioneer's brokerage allocation practices.
Each of the Portfolios is substantially fully invested at all times. It is the
policy of the Portfolios not to engage in trading for short-term profits,
although a Portfolio may do so when it believes a particular transaction will
contribute to the achievement of its investment objective. Nevertheless, changes
in any Portfolio will be made promptly when determined to be advisable by reason
of developments not foreseen at the time of the initial investment decision, and
usually without reference to the length of time a security has been held.
Accordingly, portfolio turnover rate is not considered a limiting factor in the
execution of investment decisions.
The frequency of portfolio transactions-a Portfolio's turnover rate-will vary
from year to year depending on market conditions. Portfolio turnover rates are
not generally expected to exceed 100% with the exception of International Growth
Portfolio's turnover rate, which may be as high as 300%. Because a higher
turnover rate increases transaction costs and may have certain tax consequences,
Pioneer carefully weighs the anticipated benefits of short-term investment
against these factors.
V. FUND MANAGEMENT FEES AND OTHER EXPENSES
Each Portfolio pays a management fee to Pioneer for managing its investments and
business affairs. Each Portfolio's management fee is computed daily and paid
monthly at the following annual rate:
Management Fee as a percentage
of Portfolio's average daily
Portfolio net assets
International Growth Portfolio (1) 1.00%
Capital Growth Portfolio 0.65%
Real Estate Growth Portfolio (1) 1.00%
Equity-Income Portfolio 0.65%
Balanced Portfolio 0.65%
Swiss Franc Bond Portfolio 0.65%
America Income Portfolio 0.55%
Money Market Portfolio 0.50%
------------------------
(1) International and real estate investing involves greater complexity, expense
and commitment of resources than ordinary equity investing and the management
fees for International Growth and Real Estate Growth Portfolios are higher as a
result, although not necessarily higher than those of other funds investing
primarily in similar types of securities.
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Pioneer has agreed not to impose a portion of its management fee or to make
other arrangements, if necessary, to limit certain other expenses of the
Portfolios to the extent necessary to reduce expenses to a specified percentage
of average daily net assets, as indicated below, for the fiscal period ending
December 31, 1995. Such agreements or arrangements may be terminated by Pioneer
at any time without notice.
Percentage of Portfolio's
Portfolio average daily net assets
International Growth Portfolio 2.00%
Capital Growth Portfolio 1.75%
Real Estate Growth Portfolio 1.75%
Equity-Income Portfolio 1.75%
Balanced Portfolio 1.75%
Swiss Franc Bond Portfolio 1.50%
America Income Portfolio 1.00%
Money Market Portfolio 0.75%
Under the terms of their respective management contracts with the Fund, Pioneer
assists in the management of each Portfolio and is authorized in its discretion
to buy and sell securities for the account of each Portfolio. Pioneer pays all
the expenses, including executive salaries and the rental of certain office
space, related to its services for each Portfolio, with the exception of the
following which are paid by each Portfolio: (a) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including, to
the extent such services are performed by personnel of Pioneer or its
affiliates, office space and facilities and personnel compensation, training and
benefits; (b) the charges and expenses of auditors; (c) the charges and expenses
of any custodian, transfer agent, plan agent, dividend disbursing agent and
registrar appointed by the Fund with respect to the Portfolio; (d) issue and
transfer taxes, chargeable to the Portfolio in connection with securities
transactions to which the Portfolio is a party; (e) insurance premiums, interest
charges, dues and fees for membership in trade associations, and all taxes and
corporate fees payable by the Portfolio to federal, state or other governmental
agencies; (f) fees and expenses involved in registering and maintaining
registrations of the Fund and/or its shares with the SEC, individual states or
blue sky securities agencies, territories and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the SEC; (g) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and distributing prospectuses, notices, proxy statements and
all reports to shareholders and to governmental agencies; (h) charges and
expenses of legal counsel to the Fund and the Trustees; (i) compensation of
those Trustees of the Trust who are not affiliated with or interested persons of
Pioneer, the Fund (other than as Trustees), PGI or PFD; (j) the cost of
preparing and printing share certificates; and (k) interest on borrowed money,
if any. In addition to the expenses described above, each Portfolio shall pay
all brokers' and underwriting commissions chargeable to the Portfolio in
connection with securities transactions to which the Portfolio is a party.
VI. PERFORMANCE
Each Portfolio's performance may be quoted in advertising in terms of yield and
total return if accompanied by performance for your insurance company's separate
account. Performance is based on historical results and is not intended to
indicate future performance. For additional performance information, contact
your insurance company for a free annual report.
For America Income Portfolio, Swiss Franc Bond Portfolio, Equity-Income
Portfolio and Balanced Portfolio, yield is a way of showing the rate of income
the Portfolio earns on its investments as a percentage of the Portfolio's share
price. To calculate yield, a Portfolio takes the dividend and interest income,
if any, it earned from its portfolio of investments for a specified 30-day
period (net of expenses), divides it by the number of its shares entitled to
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<PAGE>
receive dividends and expresses the result as an annualized percentage rate
based on the Portfolio's share price at the end of the 30-day period.
Money Market Portfolio's yield refers to the income generated by an investment
in the Portfolio over a specified seven-day period, expressed as an annual
percentage rate. The Portfolio's effective yield is calculated similarly, but
assumes that the income earned from investments is reinvested in shares of the
Portfolio. Money Market Portfolio's effective yield will tend to be slightly
higher than its yield because of the compounding effect of this reinvestment.
Yields are calculated according to accounting methods that are standardized for
all stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, a Portfolio's yield may not equal
its distribution rate, the income paid to an account or the income reported on
the Portfolio's financial statements.
A Portfolio's total return is based on the overall dollar or percentage change
in value of a hypothetical investment in the Portfolio, including changes in
share price (except for Money Market Portfolio) and assuming each Portfolio's
dividends and capital gain distributions are reinvested at net asset value. A
cumulative total return reflects a Portfolio's performance over a stated period
of time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if a
Portfolio's performance had been constant over the entire period. Because
average annual returns tend to smooth out variations in a Portfolio's actual
return, you should recognize that they are not the same as actual year-by-year
results. To illustrate the components of overall performance, a Portfolio may
separate its cumulative and average annual returns into income results and
capital gain or loss.
Yields and total returns quoted for the Portfolios include the effect of
deducting each Portfolio's expenses, but may not include charges and expenses
attributable to any particular insurance product. Since shares of the Portfolios
may be purchased primarily through a Variable Contract, you should carefully
review the prospectus of the insurance product you have chosen for information
on relevant charges and expenses. Excluding these charges from quotations of
each Portfolio's performance has the effect of increasing the performance
quoted. You should bear in mind the effect of these charges when comparing a
Portfolio's performance to that of other mutual funds.
VII. DISTRIBUTIONS AND TAXES
For a discussion of the tax status of your Variable Contract, including the tax
consequences of withdrawals or other payments, refer to the prospectus of your
insurance company's separate account. It is suggested you keep all statements
you receive to assist in your personal record keeping. It is expected that
shares of the Portfolios will be held primarily by life insurance company
separate accounts that fund Variable Contracts. Under current tax law, dividends
or capital gain distributions from any Portfolio are not currently taxable if
properly allocable to reserves for a Variable Contract.
Each Portfolio is treated as a separate entity for federal income tax purposes
and intends to elect to be treated as a regulated investment company under
Subchapter M of the Code and to qualify for such treatment for each taxable
year. To qualify as such, each Portfolio must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders. As a regulated investment company,
each Portfolio will not be subject to federal income tax on any net investment
income and net realized capital gains that are distributed to its shareholders
in accordance with certain timing requirements of the Code.
Each Portfolio intends to pay out all of its net investment income and net
realized capital gains for each year. International Growth, Capital Growth and
Swiss Franc Bond Portfolios distribute their dividends, if any, each year. Real
Estate Growth, Equity-Income and Balanced Portfolios distribute their dividends,
if any, quarterly. Dividends from America Income and Money Market Portfolios are
declared daily and paid monthly. Normally, net realized capital gains, if any,
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<PAGE>
are distributed each year for the Portfolios. Such income and capital gains are
automatically reinvested in additional shares of the Portfolios.
All Portfolios make dividend and capital gain distributions on a per-share
basis. After every distribution from each Portfolio, except Money Market
Portfolio and America Income Portfolio's dividend distributions from income, the
Portfolio's share price drops by the amount of the distribution as a result of
the distribution. Since dividends and capital gain distributions are reinvested,
the total value of an account will not be affected by such distributions
because, although the shares will have a lower price, there will be
correspondingly more of them.
In addition to the above, each Portfolio also follows certain portfolio
diversification requirements imposed by the IRS on separate accounts of
insurance companies relating to the tax-deferred status of Variable Contracts.
These requirements, which are in addition to the diversification requirements
imposed on the Portfolios by the 1940 Act (only Real Estate Growth Portfolio is
exempt from the 1940 Act's diversification requirements) and Subchapter M of the
Code generally, subject to a safe harbor or other available exception, place
certain percentage limitations on the assets of a Portfolio that may be
represented by any one, two, three or four investments. More specific
information on these diversification requirements is contained in your insurance
company's separate account prospectus and in the Fund's Statement of Additional
Information.
VIII. SHAREHOLDER INFORMATION
Opening An Account
Since you may not purchase Portfolio shares directly, you should read the
prospectus of your insurance company's separate account to obtain instructions
for purchasing a variable annuity or variable life insurance contract. It also
provides for instructions on how to allocate your retirement plan contributions
among the Portfolios.
Share Price
The term "net asset value" or NAV per share refers to the worth of one share. A
Portfolio's NAV per share is computed by adding the value of the Portfolio's
investments, cash and other assets, deducting liabilities and dividing the
result by the number of shares outstanding. Each Portfolio is open for business
each day the New York Stock Exchange (the NYSE) is open. The price of one share
of a Portfolio is its NAV which is normally calculated daily as of the close of
business of the NYSE (normally 4:00 p.m., Eastern time).
The investments of each Portfolio (other than Money Market Portfolio) are valued
at the last sale price on the principal exchange or market where they are
traded. Securities which have not traded on the date of valuation or securities
for which sales prices are not generally reported are valued at the mean between
the current bid and asked prices. The securities of each Portfolio (other than
Money Market Portfolio) are valued primarily on the basis of market quotations.
Securities quoted in foreign currencies are converted to U.S. dollars (utilizing
London foreign exchange rates) at the prevailing market rates as of the day of
valuation. Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the NAV of the Portfolios' shares are determined as
of such times. Foreign currency exchange rates are also generally determined
prior to the close of the NYSE. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the NYSE and will therefore not be
reflected in the computation of a Portfolio's NAV. If events materially
affecting the value of such securities occur during such period, then these
securities are valued at their fair value as determined in good faith by the
Trustees.
20
<PAGE>
Money Market Portfolio's investments are valued on the basis of amortized cost.
This means of valuation assumes a steady rate of amortization of any premium and
discount from the date of purchase until maturity.
For all Portfolios, investments for which market quotations are not readily
available will be valued by a method which the Fund's Trustees believe
accurately reflects fair value.
Investments in Shares of the Portfolios
Each Portfolio may sell its shares directly to separate accounts established and
maintained by insurance companies for the purpose of funding Variable Contracts
and to certain qualified pension and retirement plans (Qualified Plans). Shares
offered to Qualified Plans will be offered by a separate prospectus. Shares of
the Portfolios are sold at NAV. Variable Contracts may or may not make
investments in all the Portfolios described in this Prospectus. Investments in
each Portfolio are expressed in terms of the full and fractional shares of the
Portfolio purchased. Investments in a Portfolio are credited to an insurance
company's separate account immediately upon acceptance of the investment by the
Portfolio. Investments will be processed at the next NAV calculated after an
order is received and accepted by a Portfolio. The offering of shares of any
Portfolio may be suspended for a period of time and each Portfolio reserves the
right to reject any specific purchase order. Purchase orders may be refused if,
in Pioneer's opinion, they are of a size that would disrupt the management of a
Portfolio.
The Fund currently does not foresee any disadvantages to investors arising out
of the fact that each Portfolio may offer its shares to insurance company
separate accounts that serve as the investment medium for their Variable
Contracts or that each Portfolio may offer its shares to Qualified Plans.
Nevertheless, the Fund's Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise, and to
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more insurance companies' separate
accounts or Qualified Plans might be required to withdraw their investments in
one or more Portfolios and shares of another Portfolio may be substituted. This
might force a Portfolio to sell securities at disadvantageous prices. In
addition, the Board of Trustees may refuse to sell shares of any Portfolio to
any separate account or Qualified Plan or may suspend or terminate the offering
of shares of any Portfolio if such action is required by law or regulatory
authority or is in the best interests of the shareholders of the Portfolio.
Redemptions
Shares of a Portfolio may be redeemed on any business day. Redemptions are
effected at the per share NAV next determined after receipt and acceptance of
the redemption request by a Portfolio. Redemption proceeds will normally be
forwarded by bank wire to the redeeming insurance company on the next business
day after receipt of the redemption instructions by a Portfolio but in no event
later than 7 days following receipt of instructions. Each Portfolio may suspend
redemptions or postpone payment dates during any period in which any of the
following conditions exists: the NYSE is closed or trading on the NYSE is
restricted; an emergency exists as a result of which disposal by the Portfolio
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Portfolio to fairly determine the value of its net assets;
or the SEC, by order, so permits.
Please refer to the prospectus of your insurance company's separate account for
information on how to redeem from each Portfolio.
IX. APPENDIX
The following paragraphs provide a brief description of certain securities in
which the Portfolios may invest and certain investment practices in which they
may engage. Unless stated otherwise, each security and investment practice
listed below may be used by each Portfolio. No Portfolio is limited by this
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discussion, however, and each Portfolio may purchase other types of securities
and enter into other types of transactions if they are consistent with its
investment objective and policies.
Short-Term Investments. As described in "Investment Objectives and Policies,"
each Portfolio (other than Money Market Portfolio) may invest in short-term
investments consisting of: corporate commercial paper and other short-term
commercial obligations, in each case rated or issued by companies with similar
securities outstanding that are rated Prime-1, Aa or better by Moody's or A-1,
AA or better by S&P; obligations (including certificates of deposit, time
deposits, demand deposits and banker's acceptances) of banks with securities
outstanding that are rated Prime-1, Aa or better by Moody's, or A-1, AA or
better by S&P; obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities with remaining maturities not exceeding 18 months;
and repurchase agreements. Normally, Swiss Franc Bond Portfolio may invest in
similar short-term investments that are denominated in Swiss francs or other
non-U.S. currencies, but may invest in U.S. dollar-denominated short-term
securities for certain purposes, including temporary defensive purposes. Money
Market Portfolio's short-term investments are subject to certain additional
restrictions. See "Investment Objectives and Policies."
Bankers' Acceptances are obligations of a bank to pay a draft which has
been drawn on it by a customer. These obligations are backed by large
banks and usually backed by goods in international trade.
Certificates of Deposit represent a commercial bank's obligations to
repay funds deposited with it, earning specified rates of interest over
given periods.
Commercial Paper is a short-term unsecured promissory note, including
variable amount master demand notes, issued by banks, broker-dealers,
corporations or other entities for purposes such as financing their
current operations.
Repurchase Agreements and Lending of Securities. As described in "Investment
Objectives and Policies," each Portfolio may enter into repurchase agreements.
In a repurchase agreement, a Portfolio buys a security at one price and
simultaneously agrees to sell it back to the seller at a higher price, generally
for a period not exceeding seven days and fully collateralized with investment
grade debt securities with a market value of not less than 100% of the
obligation, valued daily. Each Portfolio other than America Income and Money
Market Portfolios may lend securities to broker-dealers and institutional
investors. In the event of the bankruptcy of the other party to a repurchase
agreement or a securities loan, a Portfolio could experience delays in
recovering its cash or the securities it lent. To the extent that, in the
meantime, the value of the securities purchased had decreased, or the value of
the securities lent had increased, the Portfolio could experience a loss. In all
cases, Pioneer must find the creditworthiness of the other party to the
transaction satisfactory.
Restricted Securities. Each Portfolio (other than America Income and Money
Market Portfolios) may invest up to 5% of its net assets in "restricted
securities," (i.e., securities that would be required to be registered prior to
distribution to the public), excluding restricted securities eligible for resale
to certain institutional investors pursuant to Rule 144A under the Securities
Act of 1933 and, for Portfolios that allow non-U.S. investments, foreign
securities which are offered or sold outside the United States. In no instance,
however, may more than 15% of a Portfolio's net assets be invested in restricted
securities, including securities eligible for resale under Rule 144A. It is not
possible to predict with assurance exactly how the market for such restricted
securities will develop and investments in restricted securities will be
carefully monitored by Pioneer and by the Fund's Trustees.
Illiquid Investments. Each Portfolio may invest up to 15% (except Money Market
Portfolio which is limited to 10%) of its net assets in illiquid investments
which includes securities that are not readily marketable and repurchase
agreements maturing in more than seven days. The Fund's Trustees have adopted
guidelines and delegated to Pioneer the daily function of determining and
monitoring the liquidity of restricted securities. The Trustees, however, retain
sufficient oversight and are ultimately responsible for the determination. Under
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<PAGE>
the supervision of the Board of Trustees, Pioneer determines the liquidity of
each Portfolio's investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for a Portfolio to sell them promptly at
an acceptable price.
Forward Currency Exchange Contracts. International Growth, Swiss Franc Bond,
Capital Growth, Real Estate Growth and Balanced Portfolios each has the ability
to hold a portion of its assets in non-U.S. currencies and purchase or sell
forward currency exchange contracts to facilitate settlement of non-U.S.
securities transactions or to protect against changes in currency exchange
rates. A Portfolio might sell a non-U.S. currency on either a spot (i.e., cash)
or forward basis to hedge against an anticipated decline in the U.S. dollar
value of securities that it owns or securities that it intends to sell or to
preserve the U.S. dollar value of dividends, interest or other amounts it
expects to receive. Alternatively, a Portfolio might purchase a non-U.S.
currency or enter into a forward purchase contract for the non-U.S. currency to
preserve the U.S. dollar price of securities it intends to purchase. A portfolio
may also engage in cross-hedging by using forward contracts in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency.
Swiss Franc Bond Portfolio may also purchase and sell forward currency exchange
contracts for Swiss francs in order to link the value of an investment in a
non-Swiss franc security to the value of the Swiss franc. See "Risk
Considerations--Currency Management."
Mortgage-Backed Securities. Real Estate Growth Portfolio may invest up to 25% of
its total assets in mortgage pass-through certificates and multiple-class
pass-through securities, such as guaranteed mortgage pass-through securities,
real estate mortgage investment conduit (REMIC) pass-through certificates,
collateralized mortgage obligations (CMOs) and stripped mortgage-backed
securities (SMBS) and other types of mortgage-backed securities that may be
available in the future. American Income Portfolio may invest in mortgage-backed
securities that are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and in CMOs. Balanced Portfolio may invest in GNMA
Certificates, which are a type of mortgage pass-through security, and in CMOs.
Mortgage-backed securities are issued by government and non-government entities
such as banks, mortgage lenders or other financial institutions. A
mortgage-backed security may be an obligation of the issuer backed by a mortgage
or pool of mortgages or a direct interest in an underlying pool of mortgages.
Some mortgage-backed securities, such as collateralized mortgage obligations or
CMOs, make payments of both principal and interest at a variety of intervals;
others make semiannual interest payments at a predetermined rate and repay
principal at maturity (like a typical bond). Mortgage-backed securities are
based on different types of mortgages including those on commercial real estate
or residential properties. Other types of mortgage-backed securities will likely
be developed in the future, and a Portfolio may invest in them if Pioneer
determines they are consistent with its investment objective and policies. Real
Estate Growth, Balanced and America Income Portfolios will not invest in the
lowest tranche of CMOs or REMIC certificates.
The value of mortgage-backed securities may change due to shifts in the market's
perception of issuers. In addition, regulatory or tax changes may adversely
affect the mortgage securities market as a whole. Non-government mortgage-backed
securities may offer higher yields than those issued by government entities, but
also may be subject to greater price changes than government issues.
Mortgage-backed securities are subject to prepayment risk. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
total returns.
Guaranteed Mortgage Pass-Through Securities may be purchased by Real
Estate Growth, Balanced and America Income Portfolios. These securities
represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and
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<PAGE>
guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the Government National
Mortgage Association (GNMA), the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac).
Multiple-Class Pass-Through Securities and Collateralized Mortgage
Obligations. Real Estate Growth Portfolio's investments in
mortgage-backed securities may include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders.
Balanced Portfolio's investments in mortgage-backed securities may
include CMOs. America Income Portfolio may invest in CMOs
collateralized by GNMA, Fannie Mae or Freddie Mac certificates. CMOs
and REMIC certificates are issued in multiple classes and the principal
of and interest on the underlying mortgage assets may be allocated
among the several classes of CMOs or REMIC certificates in various
ways. Each class of CMOs or REMIC certificates, often referred to as a
"tranche," is issued at a specific adjustable or fixed interest rate
and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis.
Typically, CMOs are collateralized by GNMA, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets
such as whole loans or private mortgage pass-through securities. Debt
service on CMOs is provided from payments of principal and interest on
collateral of mortgaged assets and any reinvestment income thereon.
Real Estate Mortgage Interest Conduit (REMIC) interests may be
purchased by Real Estate Growth Portfolio. A REMIC is a CMO that
qualifies for special tax treatment under the Code and invests in
certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts
although the Portfolio does not intend to invest in residual interests.
Stripped Mortgage-Backed Securities are currently intended for use only
by Real Estate Growth Portfolio. Such securities are created when a
U.S. Government agency or a financial institution separates the
interest and principal components of a mortgage-backed security and
sells them as individual securities. The holder of the "principal-only"
security (PO) receives the principal payments made by the underlying
mortgage-backed security, while the holder of the "interest-only"
security (IO) receives interest payments from the same underlying
security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall,
prepayment rates tend to increase, which tends to reduce prices of IOs
and increase prices of POs. Rising interest rates can have the opposite
effect.
Options and Futures Contracts provide a way for International Growth, Capital
Growth, Real Estate Growth and Swiss Franc Bond Portfolios to manage their
exposure to changing interest rates, security prices, and currency exchange
rates. Some options and futures strategies, including selling futures, buying
puts and writing calls, tend to hedge a Portfolio's investments against price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other or with forward contracts in order to adjust the risk
and return characteristics of a Portfolio's overall strategy. A Portfolio may
invest in options and futures based on any type of security, index or currency,
including options and futures traded on non-U.S. exchanges and options not
traded on exchanges.
Subject to compliance with tax and other requirements, Swiss Franc Bond
Portfolio may enter into options and futures contracts in order to gain
investment exposure to the Swiss franc.
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<PAGE>
Options and futures can be volatile investments and involve certain risks. If
Pioneer applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower a Portfolio's return. A
Portfolio could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could not
close out its positions because of an illiquid secondary market.
Depositary Receipts. International Growth Portfolio and, to a lesser extent
Capital Growth, Real Estate Growth and Balanced Portfolios may invest in
securities of non-U.S. issuers in the form of American Depositary Receipts
(ADRs), Global Depositary Receipts (GDRs) and other similar instruments.
Generally, ADRs in registered form are designed for use in U.S. securities
markets, and GDRs and other similar global instruments in bearer form are
designed for use in non-U.S. securities markets. ADRs are denominated in U.S.
dollars and represent an interest in the right to receive securities of non-U.S.
issuers deposited in a U.S. bank or a correspondent bank. ADRs do not eliminate
all the risk inherent in investing in the securities of non-U.S. issuers.
However, by investing in ADRs rather than directly in the stock of non-U.S.
issuers, a Portfolio will avoid currency risks during the settlement period for
either purchases or sales. GDRs are not necessarily denominated in the same
currency as the securities for which they may be exchanged. For purposes of the
Portfolios' investment policies, investments in ADRs, GDRs and similar
instruments will be deemed to be investments in the equity securities into which
they may be converted.
Warrants. International Growth, Capital Growth, Real Estate Growth,
Equity-Income and Balanced Portfolios may invest in warrants, which entitle the
holder to buy equity securities at a specific price over a specific period of
time. Warrants may be considered more speculative than certain other types of
investments, in that they do not entitle the holder to dividends or voting
rights with respect to the securities which may be purchased nor do they
represent any rights in the assets of the issuing company. The value of a
warrant may be more volatile than the value of the warrant's underlying
securities. Also, the value of the warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to have value if it is
not exercised prior to the expiration date.
The Swiss Franc and the Swiss Economy. As of June 30, 1995, the Swiss franc-U.S.
dollar exchange rate was $1.148Sfr = US$1. Switzerland's Gross Domestic Product
in 1994 was U.S.$ _____ ($354.3 billion Sfr). Switzerland's current account
surplus totaled $24.8 billion Sfr or 7% of Gross Domestic Product in 1994.
Inflation in Switzerland averaged 0.9% in 1994.
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<PAGE>
[PIONEER LOGO]
PIONEER VISION (SM)
VARIABLE ANNUITY
PROSPECTUS
February 15, 1995
(revised October 23, 1995)
SMA Life
Individual Variable Annuity
Pioneer Variable Contracts Trust
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 15, 1995
(revised October 23, 1995)
PIONEER VARIABLE CONTRACTS TRUST
(consisting of eight portfolios)
International Growth Portfolio
Capital Growth Portfolio
Real Estate Growth Portfolio
Equity-Income Portfolio
Balanced Portfolio
Swiss Franc Bond Portfolio
America Income Portfolio
Money Market Portfolio
60 State Street
Boston, Massachusetts 02109
This Statement of Additional Information (Part B of the Registration
Statement) is not a Prospectus, but should be read in conjunction with the
Prospectus (the "Prospectus") dated February 15, 1995 (revised October 23,
1995), as amended and/or supplemented from time to time, of Pioneer Variable
Contracts Trust (the "Trust"). A copy of the Prospectus can be obtained free of
charge from your insurance company.
TABLE OF CONTENTS
Page
1. Investment Policies and Restrictions.................................B-2
2. Management of the Trust..............................................B-26
3. Investment Adviser...................................................B-30
4. Principal Underwriter................................................B-31
5. Custodian............................................................B-32
6. Independent Public Accountant........................................B-32
7. Portfolio Transactions...............................................B-33
8. Tax Status...........................................................B-35
9. Description of Shares................................................B-40
10. Certain Liabilities..................................................B-40
11. Determination of Net Asset Value.....................................B-41
12. Investment Results...................................................B-43
13. Financial Statements.................................................B-47
APPENDIX A -- Additional General Economic
Information and Information Regarding
Pioneer................................................1-A
APPENDIX B -- Bond Ratings...........................................1-B
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Trust consists of separate portfolios, each of which is an
investment vehicle for variable annuity and variable life insurance contracts
(the "Variable Contracts") offered by the separate accounts (the "Accounts") of
various insurance companies ("Participating Insurance Companies"). As described
in the Prospectus, the portfolios also may be offered to certain qualified
pension and retirement plans (the "Qualified Plans"). The Trust currently
consists of the following eight distinct portfolios: International Growth
Portfolio, Capital Growth Portfolio, Real Estate Growth Portfolio, Equity-Income
Portfolio, Balanced Portfolio, Swiss Franc Bond Portfolio, America Income
Portfolio and Money Market Portfolio (each a "Portfolio"). The terms and
conditions of the Variable Contracts and any limitations upon the Portfolios in
which the Accounts may be invested are set forth in a separate prospectus and
statement of additional information relating to the Variable Contracts. The
terms and conditions of a Qualified Plan and any limitations upon the Portfolios
in which such Plan may be invested are set forth in such Plan's governing
documents. The Trust reserves the right to limit the types of Accounts and the
types of Qualified Plans that may invest in any Portfolio.
Qualified Plans and Participating Insurance Companies are the record
holders of shares of beneficial interest in each Portfolio of the Trust. In
accordance with any limitations set forth in their Variable Contracts, contract
holders may direct through their Participating Insurance Companies the
allocation of amounts available for investment among the Trust's Portfolios.
Similarly, in accordance with any limitations set forth in their Qualified
Plans, Qualified Plan participants may direct through their Qualified Plan
administrators the allocation of amounts available for investment among the
Trust's Portfolios. Instructions for any such allocation, or for the purchase or
redemption of shares of a Portfolio, must be made through the investor's
Participating Insurance Company or Qualified Plan administrator, as the case may
be, as the record holder of the Portfolio's shares. The rights of Participating
Insurance Companies and Qualified Plans as record holders of shares of a
Portfolio are different from the rights of contract holders and Qualified Plan
participants. The term "shareholder" in this Statement of Additional Information
refers only to Participating Insurance Companies and Qualified Plans, and not to
contract holders or Qualified Plan participants.
The Trust's Prospectus identifies the investment objective and the
principal investment policies of each Portfolio and the risk factors associated
with the Portfolio's investments. Other investment policies of the Portfolios
and associated risk factors are set forth below. This Statement of Additional
Information should be read in conjunction with the Prospectus.
B-2
<PAGE>
Lower Quality Debt Obligations
Real Estate Growth Portfolio and Equity-Income Portfolio may each
invest up to 5% of their respective net assets in debt securities which are
rated in the lowest rating categories by Standard & Poor's Ratings Group
("Standard & Poor's") or by Moody's Investors Service, Inc. ("Moody's") (i.e.,
ratings of BB or lower by Standard & Poor's or Ba or lower by Moody's) or, if
unrated by such rating organizations, determined to be of comparable quality by
Pioneering Management Corporation (the "Manager"), each Portfolio's investment
adviser. International Growth and Swiss Franc Bond Portfolios may not purchase
such lower quality debt securities, but up to 5% of their net assets may be
invested in such securities as a result of credit quality downgrades. In
addition, each Portfolio other than America Income and Money Market Portfolios
may invest in medium quality debt securities (i.e., securities rated BBB by
Standard & Poor's or Baa by Moody's, or unrated securities determined by the
Manager to be of comparable quality).
Bonds rated BB or Ba or below or comparable unrated securities are
commonly referred to as "junk bonds" and are considered speculative and may be
questionable as to principal and interest payments. In some cases, such bonds
may be highly speculative, have poor prospects for reaching investment standing
and be in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment grade
bonds (i.e., bonds rated BBB or better by Standard & Poor's or Baa or better by
Moody's or, if unrated by such rating organizations, determined to be of
comparable quality by the Manager). See Appendix B to this Statement of
Additional Information for a description of the ratings issued by Standard &
Poor's and Moody's.
The amount of junk bond securities outstanding has proliferated in
conjunction with the increase in merger and acquisition and leveraged buyout
activity. An economic downturn could severely affect the ability of highly
leveraged issuers to service their debt obligations or to repay their
obligations upon maturity. Factors having an adverse impact on the market value
of lower quality securities will have an adverse effect on a Portfolio's net
asset value to the extent that it invests in such securities. In addition, a
Portfolio may incur additional expenses to the extent it is required to seek
recovery upon a default in payment of principal or interest on its portfolio
holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on a
Portfolio's ability to dispose of a particular security when necessary to meet
its liquidity needs. Under adverse market or economic conditions, the secondary
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market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result, a
Portfolio could find it more difficult to sell these securities or may be able
to sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices used in calculating the
Portfolio's net asset value.
Certain proposed and recently enacted federal laws including the
required divestiture by federally insured savings and loan associations of their
investments in junk bonds and proposals designed to limit the use, or tax and
other advantages, of junk bond securities could adversely affect a Portfolio's
net asset value and investment practices. Such proposals could also adversely
affect the secondary market for junk bond securities, the financial condition of
issuers of these securities and the value of outstanding junk bond securities.
The form of such proposed legislation and the possibility of such legislation
being passed are uncertain.
Since investors generally perceive that there are greater risks
associated with the medium to lower quality debt securities of the type in which
each Portfolio other than America Income and Money Market Portfolios may invest
a portion of its assets, the yields and prices of such securities may tend to
fluctuate more than those for higher rated securities. In the lower quality
segments of the debt securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the debt securities market,
resulting in greater yield and price volatility.
Medium to lower rated and comparable unrated debt securities tend to
offer higher yields than higher rated securities with the same maturities
because the historical financial condition of the issuers of such securities may
not have been as strong as that of other issuers. Since medium to lower rated
securities generally involve greater risks of loss of income and principal than
higher rated securities, investors should consider carefully the relative risks
associated with investment in securities which carry medium to lower ratings and
in comparable unrated securities. In addition to the risk of default, there are
the related costs of recovery on defaulted issues. The Manager will attempt to
reduce these risks through portfolio diversification and by analysis of each
issuer and its ability to make timely payments of income and principal, as well
as broad economic trends and corporate developments.
The prices of all debt securities generally fluctuate in response to
the general level of interest rates. Another factor which causes fluctuations in
the prices of debt securities is the supply and demand for similarly rated
securities. Fluctuations in the prices of portfolio securities subsequent to
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their acquisition will not affect any cash income from such securities but will
be reflected in a Portfolio's net asset value.
Certificates of Deposit
Swiss Franc Bond Portfolio may invest in investment grade certificates
of deposit of domestic banks and savings and loan associations and foreign
banks, without regard to the size of the issuing institution. Money Market
Portfolio may invest in certificates of deposit of large domestic banks and
savings and loan associations (i.e., banks which at the time of their most
recent annual financial statements show total assets in excess of $1 billion),
including foreign branches of such domestic banks, and of smaller banks as
described below. Money Market Portfolio will not invest in certificates of
deposit of foreign banks.
Investment in certificates of deposit issued by foreign banks and
foreign branches of domestic banks involves investment risks that are different
in some respects from those associated with investment in certificates of
deposit issued by domestic banks, including the possible imposition of
withholding taxes on interest income, the possible adoption of foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such certificates of deposit, or other adverse political or
economic developments. In addition, it might be more difficult to obtain and
enforce a judgment against a foreign bank or a foreign branch of a domestic
bank.
Although Money Market Portfolio recognizes that the size of a bank is
important, this fact alone is not necessarily indicative of its
creditworthiness. Accordingly, Money Market Portfolio may invest in certificates
of deposit issued by banks and savings and loan associations which had at the
time of their most recent annual financial statements total assets of less than
$1 billion, provided that (i) the principal amounts of such certificates of
deposit are insured by an agency of the U.S. Government, (ii) at no time will
the Portfolio hold more than $100,000 principal amount of certificates of
deposit of any one such bank and (iii) at the time of acquisition, no more than
10% of the Portfolio's assets (taken at current value) are invested in
certificates of deposit of such banks having total assets not in excess of $1
billion.
Additional Information Regarding GNMA Certificates
As discussed in the Prospectus, America Income Portfolio's investments
in U.S. Government Securities may include mortgage participation certificates
("GNMA Certificates") guaranteed by the Government National Mortgage Association
("GNMA"). Real Estate Growth Portfolio and Balanced Portfolio also may invest in
GNMA Certificates. GNMA Certificates evidence part ownership of a pool of
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mortgage loans. Because prepayment rates of individual mortgage pools will vary
widely, it is not possible to predict with certainty the average life of a
particular issue of GNMA Certificates. However, statistics published by the
Farmers' Home Administration ("FHA") are normally used as an indicator of the
expected average life of GNMA Certificates. These statistics indicate the
average life of single-family dwelling mortgages with 25- to 30-year maturities,
the type of mortgages backing the vast majority of GNMA Certificates, is
approximately 12 years. For this reason, it is customary to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. The actual life of a particular issue of GNMA Certificates,
however, will depend on the coupon rate of the underlying mortgages, with higher
interest rate mortgages being more prone to prepayment or refinancing.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the Veterans Administration-guaranteed or FHA-insured
mortgages underlying the GNMA Certificates, but only by the amount of the fees
paid to GNMA and the issuer. For the most common type of mortgage pool,
containing single-family dwelling mortgages, GNMA receives an annual fee of
6/100 of 1% of the outstanding principal for providing its guarantee, and the
issuer is paid an annual fee of 44/100 of 1% for assembling the mortgage pool
and for passing through monthly payments of interest and principal to GNMA
Certificate holders.
The coupon rate by itself, however, does not indicate the yield that
will be earned on GNMA Certificates for the reasons given in the section
"Investment Objective and Policies" in the Prospectus. In quoting yields for
GNMA Certificates, the customary practice is to assume that the GNMA
Certificates will have a 12-year life. Compared on this basis, GNMA Certificates
have historically yielded roughly 25/100 of 1% more than U.S. Government and
U.S. Government agency bonds. As the life of individual pools may vary widely,
however, the actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a 12-year life.
Since the inception of the GNMA mortgage-backed securities program in
1970, the amount of GNMA Certificates outstanding has grown rapidly. The size of
the market and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA Certificates a highly liquid
instrument. Prices of GNMA Certificates are readily available from securities
dealers and depend on, among other things, the level of market interest rates,
the GNMA Certificate's coupon rate and the prepayment experience of the pools of
mortgages backing each GNMA Certificate.
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Securities Index Options
International Growth Portfolio, Capital Growth Portfolio, Real Estate
Growth Portfolio, Equity-Income Portfolio and Swiss Franc Bond Portfolio may
invest in call and put options on securities indices for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
the Portfolio's securities or securities the Portfolio intends to buy. The
Portfolios will not invest in securities index options for speculative purposes.
Currently, options on stock indices are traded only on national
securities exchanges and over-the-counter, both in the United States and in
foreign countries. However, a Portfolio will not purchase over-the-counter
options. A securities index fluctuates with changes in the market values of the
securities included in the index. For example, some stock index options are
based on a broad market index such as the S&P 500 or the Value Line Composite
Index in the U.S., the Nikkei in Japan or the FTSE 100 in the United Kingdom.
Index options may also be based on a narrower market index.
A Portfolio may purchase put options in order to hedge against an
anticipated decline in securities prices that might adversely affect the value
of securities held by the Portfolio. If a Portfolio purchases a put option on a
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the level of the securities
index below the exercise price. Such payments would tend to offset a decline in
the value of securities held by the Portfolio. However, if the level of the
securities index increases and remains above the exercise price while the put
option is outstanding, the Portfolio will not be able to profitably exercise the
option and will lose the amount of the premium and any transaction costs. Such
loss may be partially offset by an increase in the value of the securities held
by the Portfolio.
A Portfolio may purchase call options on securities indices in order to
lock in a favorable price on securities that it intends to buy in the future. If
a Portfolio purchases a call option on a securities index, the amount of the
payment it receives upon exercising the option depends on the extent of any
increase in the level of the securities index above the exercise price. Such
payments may offset increases in the price of securities that the Portfolio
intends to purchase. If, however, the level of the securities index declines and
remains below the exercise price while the call option is outstanding, the
Portfolio will not be able to exercise the option profitably and will lose the
amount of the premium and transaction costs. Such loss may be partially offset
by a reduction in the price the Portfolio pays to buy additional securities for
its portfolio.
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A Portfolio may sell any securities index option it has purchased or
write a similar offsetting securities index option in order to close out a
position in a securities index option which it has purchased. These closing sale
transactions enable a Portfolio to immediately realize gains or minimize losses
on its options positions. However, there is no assurance that a liquid secondary
market on an options exchange will exist for any particular option, or at any
particular time, and for some options no secondary market may exist. In
addition, securities index prices may be distorted by interruptions in the
trading of securities of certain companies or of issuers in certain industries,
or by restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such indices
and preclude a Portfolio from closing out its options positions. If a Portfolio
is unable to effect a closing sale transaction with respect to options that it
has purchased, it would have to exercise the options in order to realize any
profit.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that can not
be reflected in the options markets. The purchase of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between securities
held by a Portfolio and the index underlying the option, the purchase of
securities index options involves the risk that the premium and transaction
costs paid by a Portfolio in purchasing an option will be lost. This could occur
as a result of unanticipated movements in prices of the securities comprising
the securities index on which the option is based.
Forward Foreign Currency Transactions
International Growth Portfolio, Swiss Franc Bond Portfolio, Capital
Growth Portfolio, Real Estate Growth Portfolio and Balanced Portfolio each may
enter into foreign currency transactions on a spot (i.e., cash) basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. Each of these Portfolios also has authority to purchase and sell forward
foreign currency exchange contracts involving currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rate between these currencies and the U.S. dollar. This is
accomplished through contractual agreements to purchase or sell a specified
currency at a specified future date and price set at the time of the contract. A
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Portfolio may close out a forward position in a currency by selling the forward
contract or entering into an offsetting forward contract.
Each Portfolio's dealings in forward foreign currency contracts will be
limited to hedging either specific transactions or portfolio positions, except
that, as described below, Swiss Franc Bond Portfolio may also enter into such
contracts in order to link the value of an investment in a "non-Swiss franc
security" (as defined in the Prospectus) to the performance of the Swiss franc.
Transaction hedging is the purchase or sale of forward foreign currency
contracts with respect to specific receivables or payables of a Portfolio
accruing in connection with the purchase and sale of its portfolio securities
denominated in foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in such foreign currencies. There is no guarantee that a Portfolio will
be engaged in hedging activities when adverse exchange rate movements occur. A
Portfolio may not necessarily, and Swiss Franc Bond Portfolio will not, attempt
to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Manager.
A Portfolio may engage in cross-hedging by using forward contracts in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency, if the Manager determines that there is a
pattern of correlation between the two currencies. Cross-hedging may also
include entering into a forward transaction involving two foreign currencies,
using one foreign currency as a proxy for the U.S. dollar to hedge against
variations in the other foreign currency, if the Manager determines that there
is a pattern of correlation between the proxy currency and the U.S. dollar.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for a Portfolio to hedge against a devaluation that is so generally
anticipated that the Portfolio is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
Swiss Franc Bond Portfolio may combine forward contracts to purchase
Swiss francs with investments in securities denominated in another currency in
an attempt to construct a combined investment position whose overall performance
will be similar to that of a security denominated in Swiss francs. For example,
the Portfolio could purchase dollar-denominated security and at the same time
enter into a forward contract to exchange dollars for Swiss francs at a future
date. If the amount of dollars to be exchanged is properly matched with the
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anticipated value of the dollar-denominated security, the Portfolio should be
able to "lock in" the Swiss franc value of the security, and the Portfolio's
overall investment return from the combined position should be similar to the
return from purcahsing a Swiss franc-denominated instrument. This is commonly
referred to as a "synthetic" investment position.
Synthetic investment positions may offer greater liquidity than actual
purchases of Swiss franc-denominated securities because of the broad variety of
highly liquid short-term instruments available in the United States and other
countries (other than Switzerland). However, the execution of a synthetic
investment strategy may not be successful. It is impossible to forecast with
absolute precision what the market value of a particular security will be at any
given time. If the value of a non-Swiss franc security is not exactly matched
with Swiss Franc Bond Portfolio's obligation under the forward currency exchange
contract on the contract's maturity date, the Portfolio may be exposed to some
risk of loss from fluctuation in the exchange rate between the Swiss franc and
the non-Swiss franc currency. Although the Manager will attempt to match such
investments, there can be no assurance that the Manager will be sucessful in
doing so.
If a Portfolio enters into a forward contract to purchase foreign
currency, its custodian bank will segregate cash or liquid, high grade debt
securities in a separate account of the Portfolio in an amount equal to the
value of the Portfolio's total assets committed to the consummation of such
forward contract. Those assets will be valued at market daily and if the value
of the assets in the separate account declines, additional cash or securities
will be placed in the accounts so that the value of the account will equal the
amount of the Portfolio's commitment with respect to such contracts.
The cost to a Portfolio of engaging in foreign currency transactions
varies with such factors as the currency involved, the size of the contract, the
length of the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved.
Options on Foreign Currencies
International Growth Portfolio, Capital Growth Portfolio, Real Estate
Growth Portfolio, Balanced Portfolio and Swiss Franc Bond Portfolio each may
purchase options on foreign currencies for hedging purposes in a manner similar
to that of transactions in forward contracts. For example, a decline in the U.S.
dollar value of a foreign currency in which portfolio securities are quoted or
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
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decreases in the value of portfolio securities, a Portfolio may purchase put
options on the foreign currency. If the value of the currency declines, the
Portfolio will have the right to sell such currency for a fixed amount of U.S.
dollars which exceeds the market value of such currency. This would result in a
gain that may offset, in whole or in part, the negative effect of currency
depreciation on the value of the Portfolio's securities quoted or denominated in
that currency.
Conversely, if a rise in the U.S. dollar value of a currency is
projected for those securities to be acquired, thereby increasing the cost of
such securities, a Portfolio may purchase call options on such currency. If the
value of such currency increased, the purchase of such call options would enable
the Portfolio to purchase currency for a fixed amount of U.S. dollars which is
less than the market value of such currency. Such a purchase would result in a
gain that may offset, at least partially, the effect of any currency related
increase in the price of securities the Portfolio intends to acquire. As in the
case of other types of options transactions, however, the benefit a Portfolio
derives from purchasing foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, if currency exchange
rates do not move in the direction or to the extent anticipated, a Portfolio
could sustain losses on transactions in foreign currency options which would
deprive it of a portion or all of the benefits of advantageous changes in such
rates.
A Portfolio may close out its position in a currency option by either
selling the option it has purchased or entering into an offsetting option.
Futures Contracts and Options on Futures Contracts
To hedge against changes in securities prices or currency exchange
rates, International Growth Portfolio, Capital Growth Portfolio, Real Estate
Growth Portfolio and Swiss Franc Bond Portfolio may purchase and sell various
kinds of futures contracts, and purchase and write (sell) call and put options
on any of such futures contracts. Balanced Portfolio may only purchase and sell
futures contracts that relate to foreign currencies and related options. Each
Portfolio may also enter into closing purchase and sale transactions with
respect to such futures contracts and options. Futures contracts may be based on
various securities (such as U.S. Government securities), securities indices,
foreign currencies and other financial instruments and indices. All futures
contracts entered into by the Portfolios are traded on U.S. exchanges or boards
of trade that are licensed and regulated by the Commodity Futures Trading
Commission (the "CFTC") or on foreign exchanges.
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Futures Contracts. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, a
Portfolio can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, a Portfolio, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. Similarly, a
Portfolio can sell futures contracts on a specified currency to protect against
a decline in the value of such currency and a decline in the value of its
portfolio securities which are quoted or denominated in such currency. A
Portfolio can purchase futures contracts on foreign currency to establish the
price in U.S. dollars of a security quoted or denominated in such currency that
the Portfolio has acquired or expects to acquire.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures contracts on securities or currency
will usually be liquidated in this manner, a Portfolio may instead make, or
take, delivery of the underlying securities or currency whenever it appears
economically advantageous to do so. A clearing corporation associated with the
exchange on which futures on securities or currency are traded guarantees that,
if still open, the sale or purchase will be performed on the settlement date.
Each Portfolio will be required, in connection with transactions in
futures contracts and the writing of options on futures, to make margin
deposits, which will be held by the Portfolio's custodian for the benefit of the
futures commission merchant through whom the Portfolio engages in such futures
contracts and options transactions. In the case of futures contracts or options
requiring a Portfolio to purchase securities, the Portfolio must place cash or
liquid, high grade debt securities in a segregated account maintained by the
custodian and marked to market daily to cover such futures contracts and
options.
Hedging Strategies. Hedging, by use of futures contracts, seeks to
establish with more certainty the effective price, rate of return and currency
exchange rate on portfolio securities and securities that a Portfolio owns or
proposes to acquire. A Portfolio may, for example, take a "short" position in
the futures market by selling futures contracts in order to hedge against an
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anticipated rise in interest rates or a decline in market prices or foreign
currency rates that would adversely affect the value of securities held by the
Portfolio. Such futures contracts may include contracts for the future delivery
of securities held by the Portfolio or securities with characteristics similar
to those securities held by the Portfolio. Similarly, a Portfolio may sell
futures contracts in currency in which its portfolio securities are quoted or
denominated, or in one currency to hedge against fluctuations in the value of
securities quoted or denominated in a different currency if there is an
established historical pattern of correlation between the two currencies. If, in
the opinion of the Manager, there is a sufficient degree of correlation between
price trends for the securities held by the Portfolio and futures contracts
based on other financial instruments, securities indices or other indices, the
Portfolio may also enter into such futures contracts as part of its hedging
strategy. Although under some circumstances prices of securities held by a
Portfolio may be more or less volatile than prices of such futures contracts,
the Manager will attempt to estimate the extent of this volatility difference
based on historical patterns and compensate for any such differential by having
the Portfolio enter into a greater or lesser number of futures contracts or by
attempting to achieve only a partial hedge against price changes affecting the
Portfolio's securities portfolio. When hedging of this character is successful,
any depreciation in the value of securities held by a Portfolio will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of securities held
by a Portfolio would be substantially offset by a decline in the value of the
futures position.
On other occasions, a Portfolio may take a "long" position by
purchasing futures contracts. This would be done, for example, when the
Portfolio anticipates the subsequent purchase of particular securities when it
has the necessary cash, but expects the prices or currency exchange rates then
available in the applicable market to be less favorable than prices or rates
that are currently available.
Options on Futures Contracts. International Growth Portfolio, Capital
Growth Portfolio, Real Estate Growth Portfolio, Balanced Portfolio and Swiss
Franc Bond Portfolio may each purchase and write options on futures contracts
for hedging purposes. The acquisition of put and call options on futures
contracts will give a Portfolio the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Portfolio obtains the benefit of the futures position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.
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The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of a Portfolio's assets. By
writing a call option, a Portfolio becomes obligated, in exchange for the
premium, to sell a futures contract, which may have a value higher than the
exercise price. Conversely, the writing of a put option on a futures contract
generates a premium which may partially offset an increase in the price of
securities that the Portfolio intends to purchase. However, by writing a put
option, the Portfolio becomes obligated to purchase a futures contract which may
have a value lower than the exercise price. Thus, the loss that a Portfolio may
incur by writing options on futures is potentially unlimited and may exceed the
amount of the premium received. A Portfolio will incur transaction costs in
connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option of the same series.
There is no guarantee that such closing transactions can be effected. A
Portfolio's ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid market.
Other Considerations. As noted above, International Growth Portfolio,
Capital Growth Portfolio, Real Estate Growth Portfolio, Balanced Portfolio and
Swiss Franc Bond Portfolio may each engage in futures and related options
transactions for hedging purposes. CFTC regulations permit principals of an
investment company registered under the 1940 Act to engage in such transactions
for bona fide hedging (as defined in such regulations) and certain other limited
purposes without registering as commodity pool operators. Each Portfolio will
determine that the price fluctuations in the futures contracts and options on
futures contracts used for hedging purposes are substantially related to price
fluctuations in securities held by the Portfolio or which it expects to
purchase. Except as stated below, each Portfolio's futures transactions will be
entered into for traditional hedging purposes--i.e., futures contracts will be
sold to protect against a decline in the price of securities (or the currency in
which they are quoted or denominated) that the Portfolio owns, or futures
contracts will be purchased to protect the Portfolio against an increase in the
price of securities (or the currency in which they are quoted or denominated) it
intends to purchase. As evidence of this hedging intent, each Portfolio expects
that on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities or assets quoted or denominated in the related currency in
the cash market at the time when the futures or option position is closed out.
However, in particular cases, when it is economically advantageous for a
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Portfolio to do so, a long futures position may be terminated or an option may
expire without the corresponding purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits a Portfolio to elect to comply with a
different test under which the sum of the amounts of initial margin deposits on
the Portfolio's existing futures contracts and premiums paid for options on
futures entered into for the purpose of seeking to increase total return (net of
the amount the positions were "in the money" at the time of purchase) may not
exceed 5% of the market value of the Portfolio's net assets. A Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification
as a regulated investment company for federal income tax purposes.
Transaction costs associated with futures contracts and related options
include brokerage costs, required margin deposits and, in the case of contracts
and options obligating a Portfolio to purchase securities or currencies, the
requirement that the Portfolio segregate assets to cover such contracts and
options.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other risks.
Thus, while a Portfolio may benefit from the use of futures and options on
futures, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Portfolio than
if it had not entered into any futures contracts or options transactions. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and a Portfolio may be exposed to risk of loss.
Perfect correlation between a Portfolio's futures positions and
portfolio positions will be difficult to achieve because the only futures
contracts available to hedge a Portfolio's portfolio are various futures on U.S.
Government securities and foreign currencies, futures on a municipal securities
index and stock index futures. In addition, it is not possible to hedge fully or
perfectly against the effect of currency fluctuations on the value of foreign
securities because currency movements affect the value of different securities
in differing degrees.
Restricted and Illiquid Securities
Each Portfolio, other than America Income Portfolio and Money Market
Portfolio, may invest up to 5% of its net assets in "restricted securities"
(i.e., securities that would be required to be registered prior to distribution
to the public), excluding restricted securities eligible for resale under Rule
144A under the Securities Act of 1933, as amended (the "1933 Act"), and, for the
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Portfolios that allow non-U.S. investments, foreign securities which are offered
or sold outside the United States. In addition, each Portfolio other than Money
Market Portfolio may invest up to 15% of its net assets in illiquid investments,
which includes securities that are not readily marketable and repurchase
agreements maturing in more than seven days. Money Market Portfolio may invest
up to 10% of its net assets in such investments. Generally, a security may be
considered illiquid if a Portfolio is unable to dispose of such security within
seven days at approximately the price at which it values such security.
Securities may also be considered illiquid as a result of certain legal or
contractual restrictions on resale. The sale of illiquid securities, if they can
be sold at all, generally will require more time and result in higher brokerage
charges and other selling expenses than will the sale of liquid securities, such
as securities eligible for trading on U.S. securities exchanges or in the
over-the-counter markets. Moreover, restricted securities (i.e., securities that
would be required to be registered prior to distribution to the general public),
such as securities eligible for resale pursuant to Rule 144A ("144A
securities"), which may be illiquid for purposes of this limitation, often sell,
if at all, at a price lower than similar securities that are not subject to
restrictions on resale.
With respect to liquidity determinations generally, the Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including Rule 144A securities, are liquid or illiquid. The Board
has delegated the function of making day-to-day determinations of liquidity for
each Portfolio to the Manager, pursuant to guidelines reviewed by the Trustees.
The Manager takes into account a number of factors in reaching liquidity
decisions. These factors may include, but are not limited to: (i) the frequency
of trading in the security; (ii) the number of dealers who make quotes for the
security; (iii) the number of dealers who have undertaken to make a market in
the security; (iv) the number of other potential purchasers; and (v) the nature
of the security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Manager
will monitor the liquidity of securities held by the Portfolio and report
periodically on such decisions to the Trustees.
State securities laws may impose further limitations on the amount of
illiquid securities that a Portfolio may purchase.
Repurchase Agreements
Each Portfolio may enter into repurchase agreements with "primary
dealers" in U.S. Government securities and banks which furnish collateral at
least equal in value or market price to the amount of their repurchase
obligation. Each Portfolio that may invest in foreign securities may also enter
into repurchase agreements involving certain foreign government securities. The
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primary risk associated with repurchase agreements is that, if the seller
defaults, a Portfolio might suffer a loss to the extent that the proceeds from
the sale of the underlying securities and other collateral held by the Portfolio
in connection with the related repurchase agreement are less than the repurchase
price. Another risk is that, in the event of bankruptcy of the seller, a
Portfolio could be delayed in or prohibited from disposing of the underlying
securities and other collateral held by the Portfolio in connection with the
related repurchase agreement pending court proceedings. In evaluating whether to
enter into a repurchase agreement for a Portfolio, the Manager will carefully
consider the creditworthiness of the seller pursuant to procedures reviewed and
approved by the Trustees. See "Repurchase Agreements" in the Prospectus.
Lending of Portfolio Securities
Each Portfolio other than America Income Portfolio and Money Market
Portfolio may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury Bills
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. A Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned as well as
the benefit of an increase in the market value of the securities loaned and
would also receive compensation based on investment of the collateral. A
Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
of the giving or withholding of consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovery
or even loss of rights in the collateral should the borrower of the securities
fail financially. A Portfolio will lend portfolio securities only to firms which
have been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned by a Portfolio exceed 33 1/3% of the value of its total assets.
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Investment Restrictions
The Trust, on behalf of each Portfolio, has adopted certain fundamental
investment restrictions which may not be changed without the affirmative vote of
the record holders of a "majority" (as defined in the 1940 Act) of the
Portfolio's outstanding voting securities. As used in the Prospectus and this
Statement of Additional Information, such approval means the approval of the
lesser of (i) the recordholders of 67% or more of the shares of a Portfolio
represented at a meeting if the recordholders of more than 50% of the
outstanding shares of the Portfolios are present in person or by proxy, or (ii)
the holders of more than 50% of the Portfolio's outstanding shares.
Restrictions That Apply to International Growth Portfolio, Capital Growth
Portfolio, Real Estate Growth Portfolio, Equity-Income Portfolio, Balanced
Portfolio and Swiss Franc Bond Portfolio:
Each Portfolio may not:
(1) Issue senior securities, except as permitted by paragraphs (2), (6)
and (7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Portfolio's
investment policy, and the pledge, mortgage or hypothecation of the Portfolio's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes and except pursuant to reverse repurchase
agreements and (for Swiss Franc Bond Portfolio only) forward roll transactions,
and then only in amounts not to exceed 33 1/3% of the Portfolio's total assets
(including the amount borrowed) taken at market value. The Portfolio will not
use leverage to attempt to increase income. The Portfolio will not purchase
securities while outstanding borrowings (including reverse repurchase
agreements) exceed 5% of the Portfolio's total assets.
(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Portfolio's total
assets taken at market value.
(4) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Portfolio may be deemed to be
an underwriter for purposes of the Securities Act of 1933.
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(5) Purchase or sell real estate, except that the Portfolio may (i)
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities that are
secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Portfolio as a result of the ownership of securities.
(6) Make loans, except that the Portfolio may lend portfolio securities
in accordance with the Portfolio's investment policies and may purchase or
invest in repurchase agreements, bank certificates of deposit, a portion of an
issue of publicly distributed bonds, bank loan participation agreements,
bankers' acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.
(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward foreign
currency exchange contracts, forward commitments, securities index put or call
warrants, interest rate swaps, caps and floors and repurchase agreements entered
into in accordance with the Fund's investment policies.
(8) (This restriction No. 8 does not apply to Real Estate Growth
Portfolio) With respect to 75% of its total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the Portfolio's
total assets, taken at market value, to be invested in the securities
of such issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Portfolio.
It is the fundamental policy of each Portfolio other than Real Estate
Growth Portfolio not to concentrate its investments in securities of companies
in any particular industry. In the opinion of the staff of the Securities and
Exchange Commission (the "SEC"), investments are concentrated in a particular
industry if such investments aggregate 25% or more of the Portfolio's total
assets. The foregoing industry concentration policy does not apply to
investments in U.S. Government securities.
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Real Estate Growth Portfolio will invest 25% or more of its total
assets in securities issued by companies in the real estate industry.
As a matter of nonfundamental investment policy and in connection with
the offering of its shares in various states and foreign countries, the Trust,
on behalf of each Portfolio, has agreed not to:
(a) Participate on a joint-and-several basis in any securities trading
account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Manager to
save commissions or to average prices among them is not deemed to result in a
securities trading account.
(b) Purchase securities on margin or make short sales unless by virtue
of its ownership of other securities, the Portfolio has the right to obtain,
without payment of additional consideration, securities equivalent in kind and
amount to the securities sold and, if the right is conditional, the sale is made
upon the same conditions, except that the Portfolio may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities and in connection with transactions involving forward foreign
currency exchange transactions, options, futures contracts and options on
futures contracts.
(c) Purchase a security if, as a result, (i) more than 10% of the
Portfolio's total assets would be invested in securities of investment
companies, (ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one investment company being held by the
Portfolio, or (iii) more than 5% of the Portfolio's total assets would be
invested in any one investment company; provided, however, the Portfolio can
exceed such limitations in connection with a plan of merger or consolidation
with or acquisition of substantially all the assets of such other closed-end
investment company.
(d) Purchase securities of any issuer which, together with any
predecessor, has a record of less than three years' continuous operations prior
to the purchase if such purchase would cause investments of the Portfolio in all
such issuers to exceed 5% of the value of the total assets of the Portfolio.
(e) Invest for the purpose of exercising control over or management of
any company.
(f) Purchase warrants of any issuer, if, as a result of such purchases,
more than 2% of the value of the Portfolio's total assets would be invested in
warrants which are not listed on the New York Stock Exchange, the American Stock
Exchange or comparable international exchanges or more than 5% of the value of
the Portfolio's net assets would be invested in warrants, whether or not so
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listed. For these purposes, warrants are to be valued at the lesser of cost or
market, but warrants acquired by the Portfolio in units with or attached to debt
securities shall be deemed to be without value.
(g) Knowingly purchase or retain securities of an issuer if one or more
of the Trustees or officers of the Portfolio or directors or officers of the
Portfolio's Manager or any investment management subsidiary of such Manager
individually owns beneficially more than 1/2% and together own beneficially more
than 5% of the securities of such issuer.
(h) Purchase interests in oil, gas or other mineral leases or
exploration programs; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas or
other minerals.
(i) Purchase any security which is illiquid, if more than 15% of the
net assets of the Portfolio, taken at market value, would be invested in such
securities. The Portfolio may not invest in repurchase agreements maturing in
more than seven days. The Portfolio currently intends to limit its investments
in illiquid securities to illiquid Rule 144A securities.
(j) Invest more than 5% of its total assets in restricted securities,
excluding Rule 144A securities; provided, however, the Portfolio may not invest
more than 15% of its total assets in restricted securities, including such Rule
144A securities.
(k) Write covered calls or put options with respect to more than 25% of
the value of its total assets or invest more than 5% of its total assets in
puts, calls, spreads, or straddles, other than protective put options.
(l) Invest in real estate limited partnerships.
(m) Real Estate Growth Portfolio may not invest more than 10% of its
total assets in shares of REITs that are not readily marketable.
Restrictions That Apply to America Income Portfolio
America Income Portfolio may not:
(1) borrow money, except from banks to meet redemptions in amounts not
exceeding 33 1/3% (taken at the lower of cost or current value) of its total
assets (including the amount borrowed). The Portfolio does not intend to borrow
money during the coming year, and will do so only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Portfolio will not
purchase securities while any borrowings are outstanding;
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(2) purchase securities on margin;
(3) make loans to any person, except by (a) the purchase of a debt
obligation in which the Portfolio is permitted to invest and (b) engaging in
repurchase agreements;
(4) act as an underwriter, except as it may be deemed to be an
underwriter in a sale of restricted securities; or
(5) issue senior securities, except as permitted by restrictions nos. 2
and 4 above, and, for purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts and repurchase agreements
entered into in accordance with the Portfolio's investment policies.
The Trust, on behalf of America Income Portfolio, has agreed to adopt
certain additional investment restrictions which are not fundamental and may be
changed by a vote of the Trust's Board of Trustees and without shareholder
approval or notification. Pursuant to these additional restrictions, the
Portfolio may not:
(a) make short sales of securities, unless by virtue of its ownership
of other securities, the Portfolio has the right to obtain securities equivalent
in kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same terms and conditions, except that the Portfolio may
obtain such short-term credits as may be necessary for the clearance of purchase
and sale securities;
(b) write, purchase or otherwise invest in any put, call, straddle or
spread options;
(c) invest in any security, including any repurchase agreement maturing
in more than seven days, which is illiquid, if more than 15% of the net assets
of the Portfolio, taken at market value, would be invested in such securities;
(d) pledge, mortgage or hypothecate its portfolio securities if at the
time of such action the value of the securities so pledged, mortgaged or
hypothecated would exceed 10% of the value of the Portfolio;
(e) invest in warrants;
(f) invest in oil, gas or other mineral leases or exploration or
development programs;
(g) purchase or sell real estate, including real estate limited
partnerships except that the Portfolio may (i) acquire or lease office space for
its own use, (ii) invest in securities of issuers that invest in real estate or
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interests therein, (iii) invest in securities that are secured by real estate or
interests therein, (iv) purchase and sell mortgage-related securities and (v)
hold and sell real estate acquired by the Portfolio as a result of the ownership
or securities; and
(h) invest in assets, except in U.S. Government Securities and in
when-issued commitments and repurchase agreements with respect to these
securities;
Restrictions That Apply to Money Market Portfolio
Money Market Portfolio may not:
(1) except with respect to investments in obligations of (a) the U.S.
Government, its agencies, authorities or instrumentalities and (b) domestic
banks, purchase any security if, as a result (i) more than 5% of the assets of
the Portfolio would be invested in the securities of any one issuer, or (ii)
more than 25% of its assets would be invested in a particular industry;
(2) borrow money, except from banks to meet redemptions in amounts not
exceeding 33 1/3% (taken at the lower of cost or current value) of its total
assets (including the amount borrowed). The Portfolio does not intend to borrow
money during the coming year, and will do so only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Portfolio will not
purchase securities while any borrowings are outstanding;
(3) make short sales of securities;
(4) purchase securities on margin;
(5) write, purchase or otherwise invest in any put, call, straddle or
spread option or buy or sell real estate, commodities or commodity futures
contracts or invest in oil, gas or mineral exploration or development programs;
(6) make loans to any person, except by (a) the purchase of a debt
obligation in which the Portfolio is permitted to invest and (b) engaging in
repurchase agreements;
(7) knowingly purchase any security that is subject to legal or
contractual restrictions on resale or for which there is no readily available
market;
(8) purchase the securities of other investment companies or investment
trusts, unless they are acquired as part of a merger, consolidation or
acquisition of assets;
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(9) purchase or retain the securities of any issuer if any officer or
Trustee of the Trust or the Portfolio or its investment adviser is an officer or
director of such issuer and beneficially owns more than 1/2 of 1% of the
securities of such issuer and all of the officers and the Trustees of the Trust
and the Portfolio's investment adviser together own more than 5% of the
securities of such issuer;
(10) act as an underwriter, except as it may be deemed to be an
underwriter in a sale of restricted securities;
(11) invest in companies for the purpose of exercising control or
management; or
(12) issue senior securities.
In addition, in order to comply with certain nonfundamental policies of
the Portfolio, the Portfolio will not (i) pledge, mortgage or hypothecate its
portfolio securities if at the time of such action the value of the securities
so pledged, mortgaged or hypothecated would exceed 10% of the value of the
Portfolio, (ii) will not commit more than 10% of its assets to illiquid
investments, such as repurchase agreements that mature in more than seven days,
(iii) invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years continuous operation, or
(iv) invest in warrants. The term "person" as used in Investment Restriction No.
6 includes institutions as well as individuals. Policies in this paragraph may
be changed by the Trustees without shareholder approval or notification.
Certain Additional Non-Fundamental Restrictions that apply to the Portfolios
Except with respect to the 300% asset coverage required with respect to
borrowings by each Portfolio, if a percentage restriction on investment or
utilization of assets as set forth above is adhered to at the time an investment
is made, a later change in percentage resulting from changes in the values of
the Portfolio's assets will not be considered a violation of the restriction.
In order to permit the sale of shares of the Portfolios in certain
states, the Trustees may, in their sole discretion, adopt restrictions on
investment policy more restrictive than those described above. Should the
Trustees determine that any such more restrictive policy is no longer in the
best interest of a Portfolio and its shareholders, the Portfolio may cease
offering shares in the state involved and the Trustees may revoke such
restrictive policy. Moreover, if the states involved shall no longer require any
such restrictive policy, the Trustees may, in their sole discretion, revoke such
policy.
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In connection with the offering and sale in California of the Variable
Contracts of Participating Insurance Companies, the Trust has agreed that
certain Portfolios (as noted below) will be subject to the foreign country and
borrowing guidelines set forth below. These guidelines will apply to a Portfolio
only for as long as Variable Contracts for which the Portfolio serves as an
investment vehicle are offered for sale in California, and only for as long as
required by applicable California laws.
Foreign Country Guidelines
(Applicable to International Growth Portfolio, Capital Growth
Portfolio, Real Estate Growth Portfolio and Balanced Portfolio)
A. Each Portfolio will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when
foreign country investments comprise less than 80% of the Portfolio's
net asset value; to three when less than 60% of such value; to two when
less than 20%.
B. Except as set forth in items C and D below, the Portfolio will have no
more than 20% of its net asset value invested in securities of issuers
located in any one country.
C. The Portfolio may have an additional 15% of its value invested in
securities of issuers located in any one of the following countries:
Australia, Germany, France, Japan, the United Kingdom or West Germany.
D. The Portfolio's investments in U.S. issuers are not subject to the
foreign country diversification guidelines.
Borrowing Guidelines
(Applicable to all Portfolios other than Swiss Franc Bond Portfolio)
Pursuant to these guidelines, the borrowing limits for each Portfolio
are:
A. 10% of net asset value when borrowing for any general purposes; and
B. 25% of net asset value when borrowing as a temporary measure to
facilitate redemptions.
The net asset value of a Portfolio is the market value of all investments or
assets owned, less outstanding liabilities of the Portfolio at the time that any
new or additional borrowing is undertaken. Additionally, borrowing is not
acceptable for leveraging purposes.
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2. MANAGEMENT OF THE TRUST
The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trustees and executive officers of the Trust are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are interested persons of the Trust within
the meaning of the 1940 Act.
JOHN F. COGAN, JR., President and a Director of
Chairman and President PGI; Chairman and a Director
60 State Street of PMC, Pioneer Funds Distributor,
Boston, Massachusetts Inc. ("PFD") and Teberebie Goldfields
Limited; Chairman, a Managing Partner
and Chief Executive Officer of PWA;
Director of Pioneering Services
Corporation ("PSC"), Pioneer Capital
Corporation ("PCC") and Forest-Starma
(a Russian corporation); President and
Director of Pioneer Plans Corporation
("PPC"), Pioneer Investment Corporation
("PIC"), Pioneer Metals and Technology,
Inc. ("PMT"), Pioneer International
Corporation ("P. Intl."), Luscinia,
Inc., Pioneer First Russia, Inc.
("First Russia"), Pioneer Omega, Inc.
("Omega") and Theta Enterprises, Inc.;
Chairman, President and Director of
Pioneer Goldfields Limited ("PGL");
Chairman, President and Trustee of each
of the mutual funds in the Pioneer
Complex of Funds; Chairman, President
and Director of Pioneer Interest
Shares, Inc. ("Interest Shares);
Chairman of the Supervisory Board of
Pioneer Fonds Marketing GmbH ("Pioneer
GmbH"); Member of the Supervisory Board
of Pioneer First Polish Trust Fund
Joint Stock Company ("PFPT"); and
Chairman and Partner, Hale and Dorr
(Counsel to the Trust).
RICHARD H. EGDAHL, M.D., Trustee or Director of all the
Trustee Pioneer Funds; Professor of
53 Bay State Road Management, Boston University School
Boston, Massachusetts of Management; Professor of Public
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Health, Boston University School of
Public Health; Professor of Surgery,
Boston University School of Medicine
and Boston University Health Policy
Institute; Director, Boston University
Medical Center; Executive Vice
President and Vice Chairman of the
Board, University Hospital; Academic
Vice President for Health Affairs,
Boston University; Director, Essex
Investment Management Company, Inc.
(investment adviser), Health Payment
Review, Inc. (health care containment
software firm), Mediplex Group, Inc.
(nursing care facilities firm), Peer
Review Analysis, Inc. (health care
utilization management firm) and
Springer-Verlag New York, Inc.
(publisher); Honorary Director,
Franciscan Children's Hospital.
MARGUERITE A. PIRET, Trustee or Director of all the
Trustee Pioneer Funds; President, Newbury,
One Boston Place Piret & Company, Inc. (a merchant
Suite 2635 banking firm).
Boston, Massachusetts
DAVID D. TRIPPLE*, Trustee or Director of all the
Trustee and Executive Pioneer Funds; Executive Vice President
Vice President and Director of PGI and PWA (since
60 State Street 1993); Director of PFD, since 1989
Boston, Massachusetts Director of PCC and Pioneer SBIC
Corporation; President (since 1993),
Chief Investment Officer and Director
of PMC.
STEPHEN K. WEST, Partner, Sullivan & Cromwell (a law
Trustee firm).
125 Broad Street
New York, New York
STEPHEN G. KASNET Trustee and Vice President of
Vice President Pioneer Winthrop Real Estate
One University Lane Investment Fund; Managing Director,
Manchester, Massachusetts Winthrop Financial Associates, a
limited partnership, since 1991;
Director and Vice President of Pioneer
Winthrop Advisers, since 1993;
Executive Vice President, Cabot, Cabot
& Forbes, 1989 to 1991.
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WILLIAM H. KEOUGH, Senior Vice President, Chief
Treasurer Financial Officer and Treasurer of
60 State Street PGI and Treasurer of PFD, PMC, PSC,
Boston, Massachusetts PCC, PPC, PIC, PIntl, PMT, PWA and
Pioneer SBIC Corporation.
JOSEPH P. BARRI, Secretary of PGI, PMC, PCC, PPC,
Secretary PIC, PIntl, PMT and PWA; Clerk
60 State Street of PFD and PSC and Partner, Hale and
Boston, Massachusetts Dorr (counsel to the Trust).
ERIC W. RECKARD, Manager of Fund Accounting and
Assistant Treasurer Compliance of PMC since May, 1994;
60 State Street Manager of Auditing and Business
Boston, Massachusetts Analysis of PGI prior to May, 1994.
ROBERT P. NAULT, General Counsel of PGI since 1995;
Assistant Secretary formerly of Hale and Dorr (counsel
60 State Street to the Fund) where he most recently
Boston, Massachusetts served as a junior partner.
The Trust's Agreement and Declaration of Trust provides that the
recordholders of two-thirds of its outstanding shares may vote to remove a
Trustee of the Trust at any special meeting of shareholders. The business
address of all officers is 60 State Street, Boston, Massachusetts 02109.
All of the outstanding capital stock of PMC and PSC is owned by PGI, a
Delaware corporation. All of the outstanding capital stock of PFD is owned by
PMC. The table below lists all the Pioneer funds currently offered to the public
(other than the Portfolios) and the investment adviser and principal underwriter
for each fund.
Investment Principal
Fund Name Adviser Underwriter
Pioneer Fund PMC PFD
Pioneer II PMC PFD
Pioneer Three PMC PFD
Pioneer Growth Shares PMC PFD
Pioneer Capital Growth Fund PMC PFD
Pioneer Equity-Income Fund PMC PFD
Pioneer Gold Shares PMC PFD
Pioneer Winthrop Real Estate Investment Fund PMC PFD
Pioneer Europe Fund PMC PFD
Pioneer International Growth Fund PMC PFD
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Pioneer Emerging Markets Fund PMC PFD
Pioneer India Fund PMC PFD
Pioneer Bond Fund PMC PFD
Pioneer America Income Trust PMC PFD
Pioneer Short-Term Income Trust PMC PFD
Pioneer Income Fund PMC PFD
Pioneer Tax-Free Income Fund PMC PFD
Pioneer Intermediate Tax-Free Fund PMC PFD
Pioneer California Double Tax-Free Fund PMC PFD
Pioneer New York Triple Tax-Free Fund PMC PFD
Pioneer Massachusetts Double Tax-Free Fund PMC PFD
Pioneer Cash Reserves Fund PMC PFD
Pioneer U.S. Government Money Market Fund PMC PFD
Pioneer Tax-Free Money Fund PMC PFD
Pioneer Interest Shares, Inc. PMC *
------------------------------
* This fund is a closed-end investment company.
PMC, the investment adviser to each Portfolio, also manages the
investments of certain institutional private accounts. Messrs. Cogan, Tripple,
Keough and Barri, officers and/or Trustees of the Trust, are also officers
and/or directors of PFD, PMC, PSC (except Mr. Tripple) and PGI. To the knowledge
of the Trust, no officer or Trustee of the Trust owned 5% or more of the issued
and outstanding shares of PGI as of the date of this Statement of Additional
Information, except Mr. Cogan who then owned approximately 15% of such shares.
Compensation of Officers and Trustees
The Trust pays no salaries or compensation to any of its officers. The
Trust pays an annual trustees' fee of $500 to each Trustee who is not affiliated
with PMC, PFD or PSC as well as an annual fee of $200 to each of the Trustees
who is a member of the Trust's Audit Committee, except for the Chairman of such
Committee, who receives an annual fee of $250. The Trust also pays an annual
trustees' fee of $500 plus expenses to each Trustee affiliated with PMC, PSC or
PFD. Any such fees and expenses paid to affiliates or interested persons of PMC,
PFD or PSC are reimbursed to the Trust under its Management Contracts with PMC.
The following table sets forth the estimated compensation of the
Trustees from the Trust and the other Pioneer Funds for the fiscal year of the
Fund ending December 31, 1995:
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Pension or Total
Retirement Compensation
Benefits from Pioneer
Aggregate Accrued as Family of Funds
Compensation Part of (including
Name of Trustee From the Trust Trust's Expenses Trust)
John F. Cogan, Jr. $0 $0 $0
Richard H. Egdahl, M.D. $1,000 0 $56,650
Marguerite A. Piret $1,050 0 $56,700
David D. Tripple $0 0 $0
Stephen K. West $1,000 0 $56,650
3. INVESTMENT ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston,
Massachusetts, serves as the investment adviser to each Portfolio. Each of the
Trust's management contracts (other than the contracts applicable to Real Estate
Growth Portfolio and Swiss Franc Bond Portfolio, which expire on September __,
1996 and October __, 1996, respectively) expires initially on February 1, 1996,
but each contract is renewable annually after such date by the vote of a
majority of the Board of Trustees of the Trust (including a majority of the
Board of Trustees who are not parties to the contract or interested persons of
any such parties) cast in person at a meeting called for the purpose of voting
on such renewal. Each contract terminates if assigned and may be terminated with
respect to one or more Portfolios without penalty by either party by vote of its
Board of Directors or Trustees, as the case may be, or a majority of the
affected Portfolio's outstanding voting securities and the giving of sixty days'
written notice.
As compensation for the management services and expenses incurred, the
Manager is entitled to management fees at the annual rate of the applicable
Portfolio's average daily net assets set forth below.
Percentage of Average
Portfolio Daily Net Assets
International Growth Portfolio 1.00%
Real Estate Growth Portfolio
Capital Growth Portfolio 0.65%
Equity-Income Portfolio
Balanced Portfolio
Swiss Franc Bond Portfolio
America Income Portfolio 0.55%
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Money Market Portfolio 0.50%
The above management fees are normally computed daily and paid monthly
in arrears. The Manager has voluntarily agreed not to impose a portion of its
management fee and to make other arrangements, if necessary, to limit certain
other expenses of the Portfolios to the extent necessary to reduce expenses to a
specified percentage of average daily net assets, as indicated below, for the
fiscal period ending December 31, 1995. Any such arrangements may be terminated
by the Manager at any time without notice.
Percentage of Portfolio's
Portfolio Average Daily Net Assets
International Growth Portfolio 2.00%
Capital Growth Portfolio 1.75%
Real Estate Growth Portfolio 1.75%
Equity-Income Portfolio 1.75%
Balanced Portfolio 1.75%
Swiss Franc Bond Portfolio 1.50%
America Income Portfolio 1.00%
Money Market Portfolio 0.75%
In addition, the Manager has agreed that if in any fiscal year the
aggregate expenses of a Portfolio exceed the expense limitation established by
any state having jurisdiction over the Portfolio, the Manager will reduce its
management fee to the extent required by state law.
The Manager, at its own expense, has contracted with
an independent consultant for consulting advice regarding real estate projects
in which issuers of Real Estate Growth Portfolio's portfolio securities have an
interest.
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4. PRINCIPAL UNDERWRITER
Pioneer Funds Distributor, Inc., 60 State Street, Boston,
Massachusetts, serves as the principal underwriter for the Trust in connection
with the continuous offering of shares of the Portfolios. The Trust will not
generally issue shares for consideration other than cash. At the Trust's sole
discretion, however, it may issue shares for consideration other than cash in
connection with an acquisition of portfolio securities pursuant to a bona fide
purchase of assets, merger or other reorganization provided (i) securities meet
the investment objectives and policies of the Portfolio; (ii) the securities are
acquired by the Portfolio for investment and not for resale; (iii) the
securities are not restricted as to transfer either by law or liquidity of
market; and (iv) the securities have a value which is readily ascertainable (and
not established only by evaluation procedures) as evidenced by the listing on
the American Stock Exchange or the New York Stock Exchange, or by quotation
under the Nasdaq National Market. An exchange of securities for shares of a
Portfolio will generally be a taxable transaction to the shareholder.
The redemption price of shares of beneficial interest of a Portfolio
may, at PMC's discretion, be paid in cash or portfolio securities. The Trust
has, however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which each Portfolio is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the Portfolio's net asset value during any 90-day
period for any one shareholder. Should the amount of redemptions by any
shareholder exceed such limitation, the Trust will have the option of redeeming
the excess in cash or portfolio securities. In the latter case, the securities
are taken at their value employed in determining the Portfolio's net asset
value. A shareholder whose shares are redeemed in-kind may incur brokerage
charges in selling the securities received in-kind. The selection of such
securities will be made in such manner as the Board deems fair and reasonable.
5. CUSTODIAN
Brown Brothers Harriman & Co. (the "Custodian") is the custodian of
each Portfolio's assets. The Custodian's responsibilities include safekeeping
and controlling each Portfolio's cash and securities in the United States as
well as in foreign countries, handling the receipt and delivery of securities,
and collecting interest and dividends on the Portfolio's investments. The
Custodian fulfills its function in foreign countries through a network of
subcustodian banks located in the foreign countries (the "Subcustodians"). The
Custodian also provides fund accounting, bookkeeping and pricing assistance to
the Portfolios and assistance in arranging for forward currency exchange
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contracts as described above under "Investment Policies and Restrictions."
The Custodian does not determine the investment policies of any
Portfolio or decide which securities it will buy or sell. Each Portfolio may
invest in securities issued by the Custodian or any of the Subcustodians,
deposit cash in the Custodian or any Subcustodian and deal with the Custodian or
any of the Subcustodians as a principal in securities transactions. Portfolio
securities may be deposited into the Federal Reserve-Treasury Department Book
Entry System or the Depository Trust Company in the United States or in
recognized central depositories in foreign countries. In selecting Brown
Brothers Harriman & Co. and its network of foreign subcustodians as the
custodians for foreign countries securities, the Board of Trustees made certain
determinations required by Rule 17f-5 promulgated under the 1940 Act. The
Trustees annually review and approve the continuations of its international
subcustodian arrangements.
6. INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP is the Trust's independent public accountant,
providing audit services, tax return review, and assistance and consultation
with respect to the preparation of filings with the SEC.
7. PORTFOLIO TRANSACTIONS
Money Market Portfolio
PMC intends to fully manage Money Market Portfolio by buying and
selling securities, as well as holding securities to maturity. In managing
Pioneer Money Market Portfolio, PMC seeks to take advantage of market
developments and yield disparities, which may include use of the following
strategies:
(1) shortening the average maturity of the Portfolio in anticipation of
a rise in interest rates so as to minimize depreciation of principal;
(2) lengthening the average maturity of the Portfolio in anticipation
of a decline in interest rates so as to maximize yield;
(3) selling one type of debt security and buying another when
disparities arise in the relative values of each; and
(4) changing from one debt security to an essentially similar debt
security when their respective yields appear distorted due to market factors.
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All Portfolios
All orders for the purchase or sale of portfolio securities are placed
on behalf of a Portfolio by the Manager pursuant to authority contained in the
Management Contracts. The primary consideration in placing portfolio security
transactions is execution at the most favorable prices. Additionally, in
selecting brokers and dealers, the Manager considers other factors relating to
best execution, including, but not limited to, the size and type of the
transaction; the nature and character of the markets for the security to be
purchased or sold; the execution efficiency, settlement capability, and
financial condition of the dealer; the dealer's execution services rendered on a
continuing basis; and the reasonableness of any dealer spreads. Most
transactions in foreign equity securities are executed by broker-dealers in
foreign countries in which commission rates are fixed and, therefore, are not
negotiable (as such rates are in the United States) and are generally higher
than in the United States. In addition, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers.
The cost of securities purchased from underwriters includes an
underwriter's commission or concession, and the prices at which securities are
purchased and sold from and to dealers include a dealer's mark-up or mark-down.
The Manager attempts to negotiate with underwriters to decrease the commission
or concession for the benefit of the Portfolios. The Manager normally seeks to
deal directly with the primary market makers unless, in its opinion, better
prices are available elsewhere.
The Manager may select broker-dealers which provide brokerage and/or
research services to the Portfolios and/or other investment companies or
accounts managed by the Manager. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The Manager maintains a
listing of broker-dealers who provide such services on a regular basis. However,
because many transactions on behalf of the Portfolios and other investment
companies or accounts managed by the Manager are placed with broker-dealers
(including broker-dealers on the listing) without regard to the furnishing of
such services, it is not possible to estimate the proportion of such
transactions directed to such dealers solely because such services were
provided. Management believes that no exact dollar value can be calculated for
such services.
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The research received from broker-dealers may be useful to the Manager
in rendering investment management services to a Portfolio as well as to other
investment companies or accounts managed by the Manager, although not all of
such research may be useful to the Portfolio. Conversely, such information
provided by brokers or dealers who have executed transaction orders on behalf of
such other accounts may be useful to the Manager in carrying out its obligations
to a Portfolio. The receipt of such research has not reduced the Manager's
normal independent research activities; however, it enables the Manager to avoid
the additional expenses which might otherwise be incurred if it were to attempt
to develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of other investment companies or accounts managed by the Manager. This
policy does not imply a commitment to execute all portfolio transactions through
all broker-dealers that sell shares of such investment companies and accounts.
In addition, if the Manager determines in good faith that the amount of
commissions charged by a broker is reasonable in relation to the value of the
brokerage and research services provided by such broker, a Portfolio may pay
commissions to such broker in an amount greater than the amount another firm may
charge.
In addition to serving as investment adviser to the Portfolios, the
Manager acts as investment adviser to other Pioneer mutual funds and certain
private accounts with investment objectives similar to those of the Portfolios.
As such, securities may meet investment objectives of a Portfolio, such other
funds and such private accounts. In such cases, the decision to recommend
purchases for one Portfolio, fund or account rather than another is based on a
number of factors. The determining factors in most cases are the amount of
securities of the issuer then outstanding, the value of those securities and the
market for them. Other factors considered in the investment recommendations
include other investments which each Portfolio, fund or account presently has in
a particular industry or country and the availability of investment funds in
each Portfolio, fund or account.
It is possible that, at times, identical securities will be held by
more than one Portfolio, fund and/or account. However, the position of any
Portfolio, fund or account in the same issue may vary and the length of time
that any Portfolio, fund or account may choose to hold its investment in the
same issue may likewise vary. To the extent that a Portfolio, another fund in
the Pioneer group or a private account managed by the Manager seeks to acquire
the same security at about the same time, the Portfolio may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, a Portfolio may not be able to
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obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the Manager decides to sell on behalf of
another account the same portfolio security at the same time. On the other hand,
if the same securities are bought or sold at the same time by more than one
account, the resulting participation in volume transactions could produce better
executions for a Portfolio or other account. In the event that more than one
account purchases or sells the same security on a given date, the purchases and
sales will normally be made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each.
The Trustees periodically review the Manager's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Portfolios.
8. TAX STATUS
Each Portfolio is treated as a separate entity for tax and accounting
purposes. It is each Portfolio's policy to meet the requirements of Subchapter M
of the Code for qualification as a regulated investment company. If a Portfolio
meets all such requirements and distributes to its shareholders, in accordance
with the Code's timing requirements, all investment company taxable income and
net capital gain, if any, which it receives, the Portfolio will be relieved of
the necessity of paying federal income tax.
In order to qualify as a regulated investment company under Subchapter
M, a Portfolio must, among other things, derive at least 90% of its annual gross
income from dividends, interest, gains from the sale or other disposition of
stock, securities or foreign currencies, or other income (including gains from
options, futures and forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% income test"), limit
its gains from the sale of stock, securities and certain other investments held
for less than three months to less than 30% of its annual gross income (the "30%
test") and satisfy certain annual distribution and quarterly diversification
requirements. For purposes of the 90% income test, income that a Portfolio earns
from equity interests in certain entities that are not treated as corporations
(e.g., are treated as partnerships or trusts) for U.S. tax purposes will
generally have the same character for the Portfolio as in the hands of such
entities; consequently, the Portfolio may be required to limit its equity
investments in such entities that earn fee income, rental income, or other
nonqualifying income.
As noted in the Prospectus, each Portfolio must, and intends to, comply
with the diversification requirements imposed by Section 817(h) of the Code and
the regulations thereunder. These requirements, which are in addition to the
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diversification requirements imposed on a Portfolio by the Investment Company
Act and Subchapter M of the Code, place certain limitations on the assets of
each separate account. Section 817(h) and those regulations treat the assets of
the Portfolios as assets of the related separate account and, among other
things, limit the assets of a Portfolio that may be invested in securities of a
single issuer. Specifically, the regulations provide that, except as permitted
by the "safe harbor" described below, as of the end of each calendar quarter or
within 30 days thereafter no more than 55% of the total assets of a Portfolio
may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments and no more than 90% by
any four investments. For this purpose, all securities of the same issuer are
considered a single investment, and each U.S. Government agency and
instrumentality is considered a separate issuer for this purpose. Section 817(h)
provides, as a safe harbor, that a separate account will be treated as being
adequately diversified if the diversification requirements under Subchapter M
are satisfied and no more than 55% of the value of the account's total assets
are cash and cash items (including receivables), U.S. Government securities and
securities of other regulated investment companies. Failure by a Portfolio to
both qualify as a regulated investment company and satisfy the Section 817(h)
requirements would generally result in adverse treatment of the variable
contract holders, other than as described in the applicable variable contract
prospectus, by requiring a contract holder to include in ordinary income any
income accrued under the contracts for the current and all prior taxable years.
Any such failure may also result in adverse tax consequences for the insurance
company issuing the contracts.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains are treated as ordinary
income, whether received in cash or in additional shares. Dividends from net
long-term capital gains, if any, whether received in cash or additional shares,
are treated by a Portfolio's shareholders as long-term capital gains for federal
income tax purposes without regard to the length of time shares of the Portfolio
have been held. The federal income tax status of all distributions will be
reported to shareholders annually.
Any dividend declared by a Portfolio in October, November or December
as of a record date in such a month and paid during the following January will
be treated for federal income tax purposes as received by shareholders on
December 31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by a Portfolio in connection
with certain transactions involving foreign currency- denominated debt
securities, certain options and futures contracts relating to foreign currency,
forward foreign currency contracts, foreign currencies, or payables or
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receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not directly
related to a Portfolio's investment in stock or securities may increase the
amount of gain it is deemed to recognize from the sale of certain investments
held for less than 3 months for purposes of the 30% test and may under future
Treasury regulations produce income not among the types of "qualifying income"
for purposes of the 90% income test. If the net foreign exchange loss for a year
were to exceed the Portfolio's investment company taxable income (computed
without regard to such loss) the resulting overall ordinary loss for such year
would not be deductible by the Portfolio or its shareholders in future years.
If a Portfolio acquires the stock of certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Portfolio could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Portfolio is timely distributed to its
shareholders. The Portfolio would not be able to pass through to its
shareholders any credit or deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but any such election
would require the Portfolio to recognize taxable income or gain without the
concurrent receipt of cash. A Portfolio may limit and/or manage its holdings in
passive foreign investment companies to minimize its tax liability or maximize
its return from these investments.
Real Estate Growth Portfolio and Equity-Income Portfolio may invest in
debt obligations that are in the lowest rating categories or are unrated,
including debt obligations of issuers not currently paying interest as well as
issuers who are in default. International Growth Portfolio may hold such
securities only as a result of credit quality downgrades. Investments in debt
obligations that are at risk of or in default present special tax issues for a
Portfolio. Tax rules are not entirely clear about issues such as when a
Portfolio may cease to accrue interest, original issue discount, or market
discount, when and to what extent deductions may be taken for bad debts or
worthless securities, how payments received on obligations in default should be
allocated between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by a Portfolio, in the event it invests in such securities, in order
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to ensure that it distributes sufficient income to preserve its status as a
regulated investment company and to avoid becoming subject to federal income or,
if applicable, excise tax.
Any loss realized by a shareholder upon the redemption of shares with a
tax holding period of six months or less will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares. Losses on certain redemptions may be
disallowed under "wash sale" rules in the event of other investments in the same
Portfolio within a period of 61 days beginning 30 days before and ending 30 days
after a sale of shares.
For federal income tax purposes, each Portfolio is permitted to carry
forward a net capital loss in any year to offset capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in federal income tax
liability to the Portfolio and are not expected to be distributed as such to
shareholders.
Each Portfolio that may invest in foreign countries, may be subject to
withholding and other taxes imposed by foreign countries with respect to its
investments in those countries. Tax conventions between certain countries and
the United States may reduce or eliminate such taxes.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
Provided that each Portfolio qualifies as a regulated investment
company ("RIC") under the Code, it will not be required to pay any Massachusetts
income, corporate excise or franchise taxes. Provided that each Portfolio
qualifies as a RIC and meets certain income-source requirements under Delaware
law, each Portfolio should also not be required to pay Delaware corporation
income tax.
Options written or purchased and futures contracts entered into by a
Portfolio on certain securities, securities indices and foreign currencies, as
well as certain foreign currency forward contracts, may cause the Portfolio to
recognize gains or losses from marking-to-market at the end of its taxable year
even though such options may not have lapsed, been closed out, or exercised or
such futures or forward contracts may not have been closed out or disposed of
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and may affect the characterization as long-term or short-term of some capital
gains and losses realized by the Portfolio. Certain options, futures and forward
contracts on foreign currency may be subject to Section 988, described above,
and accordingly produce ordinary income or loss. Losses on certain options,
futures or forward contracts and/or offsetting positions (portfolio securities
or other positions with respect to which the Portfolio's risk of loss is
substantially diminished by one or more options, futures or forward contracts)
may also be deferred under the tax straddle rules of the Code, which may also
affect the characterization of capital gains or losses from straddle positions
and certain successor positions as long-term or short-term. The tax rules
applicable to options, futures, forward contracts and straddles may affect the
amount, timing and character of the Portfolio's income and loss and hence of
distributions to shareholders. Certain tax elections may be available that would
enable the Portfolio to ameliorate some adverse effects of the tax rules
described in this paragraph.
The description above relates solely to U.S. Federal income tax law as
it applies to the Portfolios and to certain aspects of their distributions. It
does not address special tax rules applicable to certain classes of investors,
such as tax-exempt entities and insurance companies. Shareholders should consult
their own tax advisers on these matters and on state, local and other applicable
tax laws.
9. DESCRIPTION OF SHARES
The Trust's Agreement and Declaration of Trust permits the Board of
Trustees to authorize the issuance of an unlimited number of full and fractional
shares of beneficial interest (without par value) which may be divided into such
separate series as the Trustees may establish. Currently, the Trust consists of
eight Portfolios. The Trustees may establish additional portfolios of shares in
the future, and may divide or combine the shares into a greater or lesser number
of shares without thereby changing the proportionate beneficial interests. Each
share of a Portfolio represents an equal proportionate interest in the
Portfolio. The shares of each Portfolio participate equally in the earnings,
dividends and assets of the Portfolio, and are entitled to vote separately to
approve investment advisory agreements or changes in investment restrictions,
but shareholders of all Portfolios vote together in the election and selection
of Trustees and accountants. Upon liquidation of a Portfolio, the Portfolio's
shareholders are entitled to share pro rata in the Portfolio's net assets
available for distribution to shareholders.
Shareholders are entitled to one vote for each share held
and may vote in the election of Trustees and on other matters submitted to
meetings of shareholders. Although Trustees are not elected annually by the
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shareholders, shareholders have, under certain circumstances, the right to
remove one or more Trustees. No amendment adversely affecting the rights of
shareholders may be made to the Trust's Agreement and Declaration of Trust
without the affirmative vote of a majority of its shares. Shares have no
preemptive or conversion rights. Shares are fully paid and non-assessable by the
Trust, except as stated below.
The rights, if any, of Variable Contract holders to vote the shares of
a Portfolio beneficially owned by such Variable Contract holders are governed by
the relevant Variable Contract. For information on such voting rights, see the
prospectus describing such Variable Contract.
10. CERTAIN LIABILITIES
As a Delaware business trust, the Trust's operations are governed by
its Agreement and Declaration of Trust dated September 16, 1994, as amended
January 25, 1995. A copy of the Trust's Certificate of Trust, also dated
September 16, 1994, as amended February 3, 1995, is on file with the Office of
the Secretary of State of the State of Delaware. Generally, Delaware business
trust shareholders are not personally liable for obligations of a Delaware
business trust under Delaware law. The Delaware Business Trust Act (the
"Delaware Act") provides that a shareholder of a Delaware business trust shall
be entitled to the same limitation of liability extended to shareholders of
private for-profit corporations. The Trust's Agreement and Declaration of Trust
expressly provides that the Trust has been organized under the Delaware Act and
that the Agreement and Declaration of Trust is to be governed by Delaware law.
It is nevertheless possible that a Delaware business trust, such as the Trust,
might become a party to an action in another state whose courts refused to apply
Delaware law, in which case the Trust's shareholders could be subject to
personal liability.
To guard against this risk, the Agreement and Declaration of Trust (i)
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides that notice of such disclaimer may be given in each
agreement, obligation and instrument entered into or executed by the Trust or
its Trustees, (ii) provides for the indemnification out of Trust or Portfolio
property of any shareholders held personally liable for any obligations of the
Trust or of such Portfolio and (iii) provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust and satisfy any judgment thereon. Thus, the risk
of a Trust shareholder incurring financial loss beyond his or her investment
because of shareholder liability with respect to a Portfolio is limited to
circumstances in which all of the following factors are present: (1) a court
refused to apply Delaware law; (2) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (3) the Portfolio
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itself would be unable to meet its obligations. In the light of Delaware law,
the nature of the Trust business and the nature of its assets, the risk of
personal liability to a Trust shareholder is remote.
The Agreement and Declaration of Trust further provides that the Trust
shall indemnify each of its Trustees and officers against liabilities and
expenses reasonably incurred by them, in connection with, or arising out of, any
action, suit or proceeding, threatened against or otherwise involving such
Trustee or officer, directly or indirectly, by reason of being or having been a
Trustee or officer of the Trust. The Agreement and Declaration of Trust does not
authorize the Trust or any Portfolio to indemnify any Trustee or officer against
any liability to which he or she would otherwise be subject by reason of or for
willful misfeasance, bad faith, gross negligence or reckless disregard of such
person's duties.
11. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the
close of regular trading (currently 4:00 p.m., Eastern Time) on each day on
which the New York Stock Exchange (the "Exchange") is open for trading. As of
the date of this Statement of Additional Information, the Exchange is open for
trading every weekday except for the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share of each
Portfolio is also determined on any other day in which the level of trading in
its portfolio securities is sufficiently high so that the current net asset
value per share might be materially affected by changes in the value of its
portfolio securities. No Portfolio is required to determine its net asset value
per share on any day in which no purchase orders for the shares of the Portfolio
become effective and no shares of the Portfolio are tendered for redemption.
The net asset value per share of each Portfolio is computed by taking
the value of all of the Portfolio's assets less the Portfolio's liabilities, and
dividing it by the number of outstanding shares of the Portfolio. For purposes
of determining net asset value, expenses of each Portfolio are accrued daily.
Money Market Portfolio
Except as set forth in the following paragraph, Money Market
Portfolio's investments are valued on each business day on the basis of
amortized cost, if the Board of Trustees determines in good faith that the
method approximates fair value. This technique involves valuing an instrument at
its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
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the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price such Portfolio would receive
if it sold the investment. During periods of declining interest rates, the yield
on shares of Money Market Portfolio computed as described below may tend to be
higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio investments. Thus, if the use of amortized cost
by Money Market Portfolio resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Portfolio would be able to obtain
a somewhat higher yield than would result from investment in a fund utilizing
solely market values. The converse would apply in a period of rising interest
rates.
In determining Money Market Portfolio's net asset value, "when-issued"
securities will be valued at the value of the security at the time the
commitment to purchase is entered into.
The valuation of Money Market Portfolio's investments based upon their
amortized cost and the concomitant maintenance of the Portfolio's per share net
asset value of $1.00 is permitted in accordance with Rule 2a-7 under the 1940
Act, pursuant to which the Portfolio must adhere to certain conditions which are
described in detail in the Prospectus. Money Market Portfolio must maintain a
dollar-weighted average portfolio maturity of 90 days or less. The maturities of
variable rate demand instruments held by the Portfolio will be deemed to be the
longer of the demand period or the period remaining until the next interest rate
adjustment, although stated maturities may be in excess of one year. The
Trustees have established procedures designed to stabilize, to the extent
reasonably possible, the price per share of Money Market Portfolio for the
purpose of maintaining sales and redemptions at a single value. Such procedures
will include review of the Portfolio's holdings by the Trustees, at such
intervals as they may deem appropriate, to determine whether the Portfolio's net
asset value calculated by using available market quotations deviates from $1.00
per share and, if so, whether such deviation may result in material dilution or
is otherwise unfair to existing shareholders. In the event the Trustees
determine that such a deviation exists, they have agreed to take such corrective
action as they regard as necessary and appropriate, including: (i) the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; (ii) withholding dividends; (iii) redeeming
shares in kind; or (iv) establishing a net asset value per share by using
available market quotations. It is the intention of the Trust to maintain Money
Market Portfolio's per-share net asset value at $1.00 but there can be no
assurance of this.
B-43
<PAGE>
All Other Portfolios
Securities which have not traded on the date of valuation or securities
for which sales prices are not generally reported are valued at the mean between
the last bid and asked prices. Securities for which no market quotations are
readily available (including those the trading of which has been suspended) will
be valued at fair value as determined in good faith by the Trust's Board of
Trustees, although the actual computations may be made by persons acting
pursuant to the direction of the Board.
12. INVESTMENT RESULTS
Each Portfolio's average annual total return quotations and yield
quotations as they may appear in the Prospectus, this Statement of Additional
Information or in advertising are calculated by standard methods prescribed by
the SEC.
Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of a Portfolio may be illustrated
and/or compared with that of other mutual funds with similar investment
objectives, and to other relevant indices. In addition, the performance of a
Portfolio may be compared to alternative investment or savings vehicles and/or
to indices or indicators of economic activity, e.g., inflation or interest
rates. Performance rankings and listings reported in newspapers or national
business and financial publications, such as Barron's, Business Week, Consumers
Digest, Consumer Reports, Financial World, Forbes, Fortune, Investors Business
Daily, Kiplinger's Personal Finance Magazine, Money Magazine, New York Times,
Personal Investor, Smart Money, USA Today, U.S. News and World Report, The Wall
Street Journal, and Worth may also be cited (if the Portfolio is listed in such
publications) or used for comparisons, as well as performance listings and
rankings from various other sources including CDA/Weisenberger Investment
Companies Service, Donoghue's Mutual Fund Almanac, Investment Company Data,
Inc., Ibbotson Associates, Johnson's Charts, Kanon Block Carre and Co., Lipper
Analytical Services, Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems, Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements, in sales
literature or in reports to Trust shareholders.
One of the primary methods used to measure the performance of each
Portfolio is "total return." Total return will normally represent the percentage
change in value of an account, or of a hypothetical investment in a Portfolio,
over any period up to the lifetime of that Portfolio. Total return calculations
B-44
<PAGE>
will usually assume the reinvestment of all dividends and capital gains
distributions and will be expressed as a percentage increase or decrease from an
initial value, for the entire period or for one or more specified periods within
the entire period. Total return percentages for periods of less than one year
will usually be annualized; total return percentages for periods longer than one
year will usually be accompanied by total return percentages for each year
within the period and/or by the average annual compounded total return for the
period. The income and capital components of a given return may be separated and
portrayed in a variety of ways in order to illustrate their relative
significance. Performance may also be portrayed in terms of cash or investment
values, without percentages. Past performance cannot guarantee any particular
future result.
The Trust may also present, from time to time, historical information
depicting the value of a hypothetical account in a Portfolio since the
Portfolio's inception.
In presenting investment results, the Trust may also include references
to certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
Standardized Average Annual Total Return Quotations
Average annual total return quotations for shares of the Portfolios are
computed by finding the average annual compounded rates of return that would
cause a hypothetical investment made on the first day of a designated period
(assuming all dividends and distributions are reinvested) to equal the ending
redeemable value of such hypothetical investment on the last day of the
designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000
initial payment made at the beginning of the designated
period (or fractional portion thereof)
B-45
<PAGE>
For purposes of the above computation, it is assumed that all dividends and
distributions made by a Portfolio are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts are
taken into consideration. For any account fees that vary with the size of the
account, the account fee used for purposes of the above computation is assumed
to be the fee that would be charged to the mean account size.
Standardized Yield Quotations
The yield of a Portfolio is computed by dividing the Portfolio's net
investment income per share during a base period of 30 days, or one month, by
the maximum offering price per share of the Portfolio on the last day of such
base period in accordance with the following formula:
a-b 6
YIELD = 2[ ( ------ +1) -1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding
during the period that were entitled to
receive dividends
d = the maximum offering price per share on the
last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the Portfolio is
computed based on the market value of the obligation (including actual accrued
interest, if any) at the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the month, the purchase
price (plus actual accrued interest, if any) on settlement date, and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then divided by 360
and the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has
B-46
<PAGE>
been made on each obligation during the 30-day base period.
(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.
(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), each Portfolio accounts for
gain or loss attributable to actual monthly pay downs as an increase or decrease
to interest income during the period. In addition, a Portfolio may elect (i) to
amortize the discount or premium on a remaining security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the discount or premium
on a remaining security.
For purposes of computing a Portfolio's yield, interest income is
recognized by accruing 1/360 of the stated interest rate of each obligation held
by the Portfolio each day that the obligation is held by the Portfolio.
Yield Quotations for Money Market Portfolio
Money Market Portfolio's yield quotations are computed as follows: the
net change, exclusive of capital changes (i.e., realized gains and losses from
the sale of securities and unrealized appreciation and depreciation), in the
value of a hypothetical pre-existing account having a balance of one share of
the Portfolio at the beginning of the seven-day base period is determined by
subtracting a hypothetical charge reflecting expense deductions from the
hypothetical account, and dividing the net change in value by the value of the
share at the beginning of the base period. This base period return is then
multiplied by 365/7 with the resulting yield figure carried to the nearest 100th
of 1%. The determination of net change in account value reflects the value of
additional shares purchased with dividends from the original share, dividends
declared on both the original share and any such additional shares, and all fees
that are charged to the Portfolio, in proportion to the length of the base
period and the Portfolio's average account size (with respect to any fees that
vary with the size of an account).
Money Market Portfolio may also advertise quotations of effective
yield. Effective yield is computed by compounding the unannualized base period
return determined as in the preceding paragraph by adding 1 to the base period
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<PAGE>
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result, according to the following formula:
Effective Yield = (base period return +1) 365/7 - 1
13. FINANCIAL STATEMENTS
The Balance Sheet as of February 6, 1995 and the Report of Independent
Public Accountants included with this Statement of Additional Information have
been included in reliance upon the report of Arthur Andersen LLP, independent
public accountants, as experts in accounting and auditing. The financial
statements of each Portfolio (other than Swiss Franc Bond Portfolio) for the
period ended June 30, 1995 included with this Statement of Additional
Information are unaudited.
B-48
<PAGE>
APPENDIX A
ADDITIONAL GENERAL ECONOMIC INFORMATION
AND INFORMATION REGARDING PIONEER
Pioneer
The Pioneer family of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest, most respected and
successful money managers in the United States.
As of December 31, 1994, PMC employed a professional investment staff
of 46, with a combined average of 14 years' experience in the financial services
industry.
As of December 31, 1994, The Pioneer Group, Inc. ("PGI"), through its
wholly-owned subsidiary Pioneering Management Corporation ("PMC"), managed
approximately $10.04 billion in assets for more than 920,000 investors.
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF BOND RATINGS
The rating systems described herein are believed to be the most recent
ratings systems available from Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group at the date of this Statement of Additional Information for
the securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year end.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
1-B
<PAGE>
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believe possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1 and B1.
2-B
<PAGE>
Standard & Poor's Ratings Group1
AAA: Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.
D: Bonds rated D are in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Unrated: Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligations as a matter of policy.
1 Rates all governmental bodies having $1,000,000 or more of debt outstanding,
unless adequate information is not available.
3-B
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Included in Part A:
International Growth Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
International Growth Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement
of operations through June 30, 1995.
Included in Part A:
Capital Growth Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
Capital Growth Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement of
operations through June 30, 1995.
Included in Part A:
Real Estate Growth Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
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Real Estate Growth Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement of
operations through June 30, 1995.
Included in Part A:
Equity-Income Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
Equity-Income Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement of
operations through June 30, 1995.
Included in Part A:
Swiss Franc Bond Portfolio
Not applicable.
Included in Part B:
Swiss Franc Bond Portfolio
Not applicable.
Included in Part A:
America Income Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
America Income Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement of
operations through June 30, 1995.
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<PAGE>
Included in Part A:
Money Market Portfolio
Financial Highlights for period from
commencement of operations through June 30, 1995.
Included in Part B:
Money Market Portfolio
The financial statements (unaudited)
and notes thereto for period from commencement of
operations through June 30, 1995.
Included in Part B:
All Portfolios except Swiss Franc Bond Portfolio
Balance Sheet and Report of Independent Public
Accountants.
(b) Exhibits:
1.1 Amended Agreement and Declaration of Trust of the
Registrant.*
1.2 Amended Certificate of Trust of the Registrant.*
2. Amended By-Laws of the Registrant.*
3. None.
4. None.
5.1 Management Contract between the Registrant, on behalf
of each of its series other than Real Estate Growth
Portfolio and Swiss Franc Bond Portfolio, and
Pioneering Management Corporation.*
5.2 Interim Management Contract between the Registrant, on
behalf of Real Estate Growth Portfolio, and Pioneering
Management Corporation.*
5.3 Form of Management Contract between the Registrant, on
behalf of Swiss Franc Bond Portfolio, and Pioneering
Management Corporation.*
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6. Underwriting Agreement between the Registrant and
Pioneer Funds Distributor, Inc.*
7. None.
8. Custodian Agreement between the Registrant and Brown
Brothers Harriman & Co.*
9. Form of Investment Company Service Agreement
between the Registrant and Pioneering Services
Corporation.1
10. Opinion and Consent of Counsel.*
11. Consent of Independent Public Accountants.*
12. None.
13. Share Purchase Agreement.*
14. None.
15 None.
16. None.
17. Powers of Attorney.*
--------------
* Filed herewith.
1 Filed with the Registrant's initial Registration Statement on September
29, 1994 and incorporated herein by reference.
Item 25. Persons Controlled By or Under
Common Control With Registrant.
The Pioneer Group, Inc., a publicly traded Delaware corporation ("PGI"), owns
100% of the outstanding capital stock of Pioneering Management Corporation, a
Delaware corporation ("PMC"), Pioneering Services Corporation ("PSC"), Pioneer
Funds Distributor, Inc. ("PFD"), Pioneer Capital Corporation ("PCC"), Pioneer
Fonds Marketing GmbH ("GmbH"), Pioneer SBIC Corp. ("SBIC"), Pioneer Associates,
Inc., Pioneer International Corporation, Pioneer Plans Corporation ("PPC"),
Pioneer Goldfields Limited ("PGL"), and Pioneer Investments Corporation ("PIC"),
all Massachusetts corporations. PGI also owns 100% of the outstanding capital
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<PAGE>
stock of Pioneer Metals and Technology, Inc. ("PMT"), a Delaware corporation,
and Pioneer First Polish Trust Fund Joint Stock Company ("First Polish"), a
Polish corporation. PGI owns 90% of the outstanding shares of Teberebie
Goldfields Limited ("TGL"). Pioneer Winthrop Advisers ("PWA"), a Massachusetts
general partnership, is a joint venture between PGI and Winthrop Financial
Associates, A Limited Partnership, a Delaware limited partnership. Pioneer Fund,
Pioneer II, Pioneer Three, Pioneer Bond Fund, Pioneer Intermediate Tax-Free
Fund, Pioneer Growth Trust, Pioneer Europe Fund, Pioneer International Growth
Fund, Pioneer Short-Term Income Trust, Pioneer Tax-Free State Series Trust and
Pioneer America Income Trust (each of the foregoing, a Massachusetts business
trust); Pioneer Interest Shares, Inc. (a Nebraska corporation); Pioneer Growth
Shares, Pioneer Income Fund, Pioneer Emerging Markets Fund, Pioneer India Fund,
Pioneer Money Market Trust, Pioneer Tax-Free Income Fund, Pioneer Winthrop Real
Estate Investment Fund and the Registrant (each of the foregoing, a Delaware
business trust) are all parties to management contracts with PMC. PCC owns 100%
of the outstanding capital stock of SBIC. SBIC is the sole general partner of
Pioneer Ventures Limited Partnership, a Massachusetts limited partnership. John
F. Cogan, Jr. owns approximately 15% of the outstanding shares of PGI. Mr. Cogan
is Chairman of the Board, President and Trustee of the Registrant and of each of
the Pioneer mutual funds; Director and President of PGI; President and Director
of PPC, PIC, Pioneer International Corporation and PMT; Director of PCC and PSC;
Chairman of the Board and Director of PMC, PFD and TGL; Chairman, President and
Director of PGL; Chairman of the Supervisory Board of GmbH; Chairman and Chief
Executive Officer of PWA; Chairman and Member of Supervisory Board of First
Polish; and Chairman and Partner, Hale and Dorr.
Item 26. Number of Holders of Securities.
As of June 30, 1995, the number of record holders of securities of each
series of the Registrant were as follows:
Number of
Title of Class Record Holders
International Growth Portfolio 2
Capital Growth Portfolio 2
Real Estate Growth Portfolio 2
Equity-Income Portfolio 2
Balanced Portfolio 2
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Swiss Franc Bond Portfolio 0
America Income Portfolio 2
Money Market Portfolio 2
Item 27. Indemnification.
Except for the Agreement and Declaration of Trust dated September 16,
1994, as amended dated January 25, 1995 (the "Declaration"), establishing the
Registrant as a business trust under Delaware law, there is no contract,
arrangement or statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified. The Declaration
provides that no Trustee or officer will be indemnified against any liability to
which the Registrant would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be available to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
The business and other connections of the officers and directors of the
Registrant's investment manager, Pioneering Management Corporation, are listed
on the Form ADV of Pioneering Management Corporation as currently on file with
the Commission (File No. 801-8255). The following sections of such Form ADV are
incorporated herein by reference:
(a)Items 1 and 2 of Part 2;
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(b) Section 6, Business Background, of Schedule D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John F. Cogan, Jr. Director and Chairman Chairman of the Board,
President and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
John W. Drachman Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Rice Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy Supovitz Vice President None
Steven R. Berke Assistant None
Vice President
Mary Sue Hoban Assistant None
Vice President
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
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<PAGE>
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's office at
60 State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is not a party to any management-related service
contract, except as described in the Prospectus and the Statement of Additional
Information.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes, on behalf of Swiss Franc Bond Portfolio,
to file a post-effective amendment, using financial statements which need not be
certified, within four to six months from the later of the effective date of the
post-effective amendment which added such Portfolio as a series of the
Registrant or the commencement of operations of such Portfolio.
(c) The Registrant undertakes to deliver, or cause to be delivered,
with the Registrant's prospectus to each person to whom such prospectus is sent
or given a copy of the Registrant's report to shareholders furnished pursuant to
and meeting the requirements of Rule 30d-1 under the Investment Company Act of
1940, as amended, from which the specified information is incorporated by
reference, unless such person currently holds securities of the Registrant and
otherwise has received a copy of such report, in which case the Registrant shall
state in its prospectus that it will furnish, without charge, a copy of such
report on request, and the name, address and telephone number of the person to
whom such a request should be directed.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 1 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and The Commonwealth of Massachusetts, on the 1st day of August, 1995.
PIONEER VARIABLE CONTRACTS TRUST
By: /s/ Joseph P. Barri
Joseph P. Barri
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registrant's Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the date indicated:
Signature Title Date
John F. Cogan, Jr.* Chairman of the Board ) August 1, 1995
John F. Cogan, Jr. and President )
(Principal Executive )
Officer) )
)
)
William H. Keough* Treasurer (Principal )
William H. Keough Financial and Accounting )
Officer) )
)
Trustees: )
)
)
)
John F. Cogan, Jr.* )
John F. Cogan, Jr. )
)
)
Richard H. Egdahl, M.D.* )
Richard H. Egdahl, M.D. )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
<PAGE>
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
------------------
*By:/s/ Joseph P. Barri Dated: August 1, 1995
Joseph P. Barri
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit
Number Document Title
1.1 Amended Agreement and Declaration of Trust of the Registrant.
1.2 Amended Certificate of Trust of the Registrant.
2. Amended By-Laws of the Registrant.
5.1 Management Contract between the Registrant, on behalf of each of its series
other than Real Estate Growth Portfolio and Swiss Franc Bond Portfolio, and
Pioneering Management Corporation.
5.2 Interim Management Contract between the Registrant, on behalf of Real
Estate Growth Portfolio, and Pioneering Management Corporation.
5.3 Form of Management Contract between the Registrant, on behalf of Swiss
Franc Bond Portfolio, and Pioneering Management Corporation.
6. Underwriting Agreement between the Registrant and Pioneer Funds
Distributor, Inc.
8. Custodian Agreement between the Registrant and Brown Brothers Harriman &
Co.
10. Opinion and Consent of Counsel.
11. Consent of Independent Public Accountants.
13. Share Purchase Agreement.
17. Powers of Attorney.
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
AMENDED AGREEMENT AND DECLARATION OF TRUST
This AGREEMENT AND DECLARATION OF TRUST is made on September 16, 1994 by John F.
Cogan, Jr. and David D. Tripple (together with all other persons from time to
time duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, the "Trustees"), as amended as of January 25,
1995.
NOW, THEREFORE, the Trustees declare that all money and property contributed to
the Trust shall be held and managed in trust pursuant to this Agreement and
Declaration of Trust.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. The name of the Trust created by this Agreement and Declaration
of Trust is "Pioneer Variable Contracts Trust."
Section 2. Definitions. Unless otherwise provided or required by the context:
(a)"Administrator" means the party, other than the Trust, to
the contract described in Article III, Section 3 hereof.
(b)"By-laws" means the By-laws of the Trust adopted by the
Trustees, as amended from time to time, which By-laws are
expressly herein incorporated by reference as part of the
"governing instrument" within the meaning of the Delaware
Act.
(c)"Class" means the class of Shares of a Series established
pursuant to Article V.
<PAGE>
(d)"Commission," "Interested Person" and "Principal
Underwriter" have the meanings provided in the 1940 Act.
Except as such term may be otherwise defined by the Trustees
in conjunction with the establishment of any Series of
Shares, the term "vote of a majority of the Shares
outstanding and entitled to vote" shall have the same
meaning as is assigned to the term "vote of a majority of
the outstanding voting securities" in the 1940 Act.
(e)"Covered Person" means a person so defined in Article IV,
Section 2.
(f)"Custodian" means any Person other than the Trust who has
custody of any Trust Property as required by Section 17(f)
of the 1940 Act, but does not include a system for the
central handling of securities described in said Section
17(f).
(g)"Declaration" shall mean this Agreement and Declaration
of Trust, as amended or restated from time to time.
Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein," and "hereunder" shall be deemed to refer
to this Declaration rather than exclusively to the article
or section in which such words appear.
(h)"Delaware Act" means Chapter 38 of Title 12 of the
Delaware Code entitled "Treatment of Delaware Business
Trusts," as amended from time to time.
(i)"Distributor" means the party, other than the Trust, to
the contract described in Article III, Section 1 hereof.
(j)"His" shall include the feminine and neuter, as well as
the masculine, genders.
(k)"Investment Adviser" means the party, other than the
Trust, to the contract described in Article III, Section 2
hereof.
(l)"Net Asset Value" means the net asset value of each
Series of the Trust, determined as provided in Article VI,
Section 3.
<PAGE>
(m)"Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates
and other entities, and governments and agencies and
political subdivisions, thereof, whether domestic or
foreign.
(n)"Series" means a series of Shares established pursuant to
Article V.
(o)"Shareholder" means a record owner of Outstanding Shares;
(p)"Shares" means the equal proportionate transferable units
of interest into which the beneficial interest of each
Series or Class is divided from time to time (including
whole Shares and fractions of Shares). "Outstanding Shares"
means Shares shown in the books of the Trust or its transfer
agent as then issued and outstanding, but does not include
Shares which have been repurchased or redeemed by the Trust
and which are held in the treasury of the Trust.
(q)"Transfer Agent" means any Person other than the Trust
who maintains the Shareholder records of the Trust, such as
the list of Shareholders, the number of Shares credited to
each account, and the like.
(r)"Trust" means Variable Insurance Contracts Trust
established hereby, and reference to the Trust, when
applicable to one or more Series, refers to that Series.
(s)"Trustees" means the persons who have signed this
Declaration of Trust, so long as they shall continue in
office in accordance with the terms hereof, and all other
persons who may from time to time be duly qualified and
serving as Trustees in accordance with Article II, in all
cases in their capacities as Trustees hereunder.
(t)"Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by
or for the Trust or any Series or the Trustees on behalf of
the Trust or any Series.
(u)The "1940 Act" means the Investment Company Act of 1940,
as amended from time to time.
<PAGE>
ARTICLE II
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the
Trust shall be managed by or under the direction of the Trustees, and they shall
have all powers necessary or desirable to carry out that responsibility. The
Trustees may execute all instruments and take all action they deem necessary or
desirable to promote the interests of the Trust. Any determination made by the
Trustees in good faith as to what is in the interests of the Trust shall be
conclusive. In construing the provisions of this Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
Section 2. Powers. The Trustees in all instances shall act as
principals, free of the control of the Shareholders. The Trustees shall have
full power and authority to take or refrain from taking any action and to
execute any contracts and instruments that they may consider necessary or
desirable in the management of the Trust. The Trustees shall not in any way be
bound or limited by current or future laws or customs applicable to trust
investments, but shall have full power and authority to make any investments
which they, in their sole discretion, deem proper to accomplish the purposes of
the Trust. The Trustees may exercise all of their powers without recourse to any
court or other authority. Subject to any applicable limitation herein or in the
By-laws or resolutions of the Trust, the Trustees shall have power and
authority, without limitation:
(a)To operate as and carry on the business of an investment
company, and exercise all the powers necessary and
appropriate to the conduct of such operations.
(b)To invest in, hold for investment, or reinvest in, cash;
securities, including common, preferred and preference
stocks; warrants; subscription rights; profit-sharing
interests or participations and all other contracts for or
evidence of equity interests; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or
non-negotiable instruments; government securities, including
securities of any state, municipality or other political
subdivision thereof, or any governmental or
quasi-governmental agency or instrumentality; and money
market instruments including bank certificates of deposit,
finance paper, commercial paper, bankers' acceptances and
all kinds of repurchase agreements, of any corporation,
<PAGE>
company, trust, association, firm or other business
organization however established, and of any country, state,
municipality or other political subdivision, or any
governmental or quasi-governmental agency or
instrumentality; or any other security, property or
instrument in which the Trust or any of its Series shall be
authorized to invest.
(c)To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or
options to purchase or sell, to sell or otherwise dispose
of, to lend and to pledge any such securities, to enter into
repurchase agreements, reverse repurchase agreements, firm
commitment agreements and forward foreign currency exchange
contracts, to purchase and sell options on securities,
securities indices, currency and other financial assets,
futures contracts and options on futures contracts of all
descriptions and to engage in all types of hedging and
risk-management transactions.
(d)To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase
agreements included in the Trust Property, including the
right to vote thereon and otherwise act with respect thereto
and to do all acts for the preservation, protection,
improvement and enhancement in value of all such securities
and repurchase agreements.
(e)To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise)
any property, real or personal, including cash or foreign
currency, and any interest therein.
(f)To borrow money or other property in the name of the
Trust exclusively for Trust purposes and in this connection
issue notes or other evidence of indebtedness; to secure
borrowings by mortgaging, pledging or otherwise subjecting
as security the Trust Property; and to endorse, guarantee,
or undertake the performance of any obligation or engagement
of any other Person and to lend Trust Property.
(g)To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in
which is included in the Trust Property or in the affairs of
<PAGE>
which the Trustees have any direct or indirect interest; to
do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest;
and to guarantee or become surety on any or all of the
contracts, stocks, bonds, notes, debentures and other
obligations of any such corporation, company, trust,
association or firm.
(h)To adopt By-laws not inconsistent with this Declaration
providing for the conduct of the business of the Trust and
to amend and repeal them to the extent such right is not
reserved to the Shareholders.
(i)To elect and remove such officers and appoint and
terminate such agents as they deem appropriate.
(j)To employ as custodian of any assets of the Trust,
subject to any provisions herein or in the By-laws, one or
more banks, trust companies or companies that are members of
a national securities exchange, or other entities permitted
by the Commission to serve as such.
(k)To retain one or more transfer agents and shareholder
servicing agents, or both.
(l)To provide for the distribution of Shares either through
a Principal Underwriter as provided herein or by the Trust
itself, or both, or pursuant to a distribution plan of any
kind.
(m)To set record dates in the manner provided for herein or
in the By- laws.
(n)To delegate such authority as they consider desirable to
any officers of the Trust and to any agent, independent
contractor, manager, investment adviser, custodian or
underwriter.
(o)To hold any security or other property (i) in a form not
indicating any trust, whether in bearer, book entry,
unregistered or other negotiable form, or (ii) either in the
Trust's or Trustees' own name or in the name of a custodian
or a nominee or nominees, subject to safeguards according to
the usual practice of business trusts or investment
companies.
<PAGE>
(p)To establish separate and distinct Series with separately
defined investment objectives and policies and distinct
investment purposes, and with separate Shares representing
beneficial interests in such Series, and to establish
separate Classes, all in accordance with the provisions of
Article V.
(q)To the full extent permitted by Section 3804 of the
Delaware Act, to allocate assets, liabilities and expenses
of the Trust to a particular Series and assets, liabilities
and expenses to a particular Class or to apportion the same
between or among two or more Series or Classes, provided
that any liabilities or expenses incurred by a particular
Series or Class shall be payable solely out of the assets
belonging to that Series or Class as provided for in Article
V, Section 4.
(r)To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation
or concern whose securities are held by the Trust; to
consent to any contract, lease, mortgage, purchase, or sale
of property by such corporation or concern; and to pay calls
or subscriptions with respect to any security held in the
Trust.
(s)To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes.
(t)To make distributions of income, capital gains, returns
of capital (if any) and redemption proceeds to Shareholders
in the manner hereinafter provided for.
(u)To establish committees for such purposes, with such
membership, and with such responsibilities as the Trustees
may consider proper, including a committee consisting of
fewer than all of the Trustees then in office, which may act
for and bind the Trustees and the Trust with respect to the
institution, prosecution, dismissal, settlement, review or
investigation of any legal action, suit or proceeding,
pending or threatened.
(v)To issue, sell, repurchase, redeem, cancel, retire,
acquire, hold, resell, reissue, dispose of and otherwise
<PAGE>
deal in Shares; to establish terms and conditions regarding
the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance,
disposition of or dealing in Shares; and, subject to
Articles V and VI, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of
Shares any funds or property of the Trust or of the
particular Series with respect to which such Shares are
issued.
(w)To invest part or all of the Trust Property (or part or
all of the assets of any Series), or to dispose of part or
all of the Trust Property (or part or all of the assets of
any Series) and invest the proceeds of such disposition, in
securities issued by one or more other investment companies
registered under the 1940 Act all without any requirement of
approval by Shareholders. Any such other investment company
may (but need not) be a trust (formed under the laws of the
State of New York or of any other state) which is classified
as a partnership for federal income tax purposes.
(x)To carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything
necessary or desirable to accomplish any purpose or to
further any of the foregoing powers, and to take every other
action incidental to the foregoing business or purposes,
objects or powers.
(y) To sell or exchange any or all of the assets of the
Trust, subject to Article IX, Section 4.
(z)To enter into joint ventures, partnerships and other
combinations and associations.
(aa)To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in
that connection to deposit any security with, or transfer
any security to, any such committee, depositary or trustee,
and to delegate to them such power and authority with
relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and
compensation of such Committee, depositary or trustee as the
Trustees shall deem proper;
<PAGE>
(bb)To purchase and pay for entirely out of Trust Property
such insurance as the Trustees may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets
of the Trust or payment of distributions and principal on
its portfolio investments, and, subject to applicable law
and any restrictions set forth in the By-laws, insurance
policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, Principal
Underwriters, or independent contractors of the Trust,
individually, against all claims and liabilities of every
nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of
any action alleged to have been taken or omitted by any such
Person as Trustee, officer, employee, agent, investment
adviser, Principal underwriter, or independent contractor,
including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would
have the power to indemnify such Person against liability;
(cc)To adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans and
trusts, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement
and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust;
(dd) To enter into contracts of any kind and description;
(ee)To interpret the investment policies, practices or
limitations of any Series or Class; and
(ff)To guarantee indebtedness and contractual obligations of
others.
The clauses above shall be construed as objects and powers, and the enumeration
of specific powers shall not limit in any way the general powers of the
Trustees. Any action by one or more of the Trustees in their capacity as such
hereunder shall be deemed an action on behalf of the Trust or the applicable
Series, and not an action in an individual capacity. No one dealing with the
Trustees shall be under any obligation to make any inquiry concerning the
authority of the Trustees, or to see to the application of any payments made or
property transferred to the Trustees or upon their order. In construing this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
<PAGE>
Section 3. Certain Transactions. Except as prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
Section 4. Initial Trustees; Election and Number of Trustees. The
initial Trustees shall be the persons initially signing this Declaration. The
number of Trustees (other than the initial Trustees) shall be fixed from time to
time by a majority of the Trustees; provided, that there shall be at least one
(1) Trustee and no more than fifteen (15). The Shareholders shall elect the
Trustees (other than the initial Trustees) on such dates as the Trustees may fix
from time to time.
Section 5. Term of Office of Trustees. Each Trustee shall hold office
for life or until his successor is elected or the Trust terminates; except that
(a) any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon such delivery or a later date
specified therein; (b) any Trustee may be removed with or without cause at any
time by a written instrument signed by at least a majority of the then Trustees,
specifying the effective date of removal; (c) any Trustee who requests to be
retired, or who is declared bankrupt or has become physically or mentally
incapacitated or is otherwise unable to serve, may be retired by a written
instrument signed by a majority of the other Trustees, specifying the effective
date of retirement; and (d) any Trustee may be removed at any meeting of the
Shareholders by a vote of at least two-thirds of the Outstanding Shares.
Section 6. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, consistent with the limitations under the 1940
Act. Such appointment shall be made by a written instrument signed by a majority
of the Trustees or by a resolution of the Trustees, duly adopted and recorded in
the records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only at or after the expected vacancy occurs. As soon as
any such Trustee has accepted his appointment in writing, the trust estate shall
<PAGE>
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder. The
Trustees' power of appointment is subject to Section 16(a) of the 1940 Act.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided in this Article II, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by the Declaration. The
death, declination to serve, resignation, retirement, removal or incapacity of
one or more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust.
Section 7. Temporary Vacancy or Absence. Whenever a vacancy in the
Board of Trustees shall occur, until such vacancy is filled, or while any
Trustee is absent from his domicile (unless that Trustee has made arrangements
to be informed about, and to participate in, the affairs of the Trust during
such absence), or is physically or mentally incapacitated, the remaining
Trustees shall have all the powers hereunder and their certificate as to such
vacancy, absence, or incapacity shall be conclusive. Any Trustee may, by power
of attorney, delegate his powers as Trustee for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees.
Section 8. Chairman. The Trustees shall appoint one of their number to
be Chairman of the Board of Trustees. The Chairman shall preside at all meetings
of the Trustees, shall be responsible for the execution of policies established
by the Trustees and the administration of the Trust, and may be the chief
executive, financial and/or accounting officer of the Trust.
Section 9. Action by the Trustees. The Trustees shall act by majority
vote at a meeting duly called at which a quorum is present, including a meeting
held by conference telephone, teleconference or other electronic media or
communication equipment by means of which all persons participating in the
meeting can communicate with each other; or by written consent of a majority of
Trustees (or such greater number as may be required by applicable law) without a
meeting. A majority of the Trustees shall constitute a quorum at any meeting.
Meetings of the Trustees may be called orally or in writing by the President or
by any one of the Trustees. Notice of the time, date and place of all Trustees'
meetings shall be given to each Trustee as set forth in the By-laws; provided,
however, that no notice is required if the Trustees provide for regular or
stated meetings. Notice need not be given to any Trustee who attends the meeting
without objecting to the lack of notice or who signs a waiver of notice either
before or after the meeting. The Trustees by majority vote may delegate to any
Trustee or Trustees or committee authority to approve particular matters or take
particular actions on behalf of the Trust. Any written consent or waiver may be
provided and delivered to the Trust by facsimile or other similar electronic
mechanism.
<PAGE>
Section 10. Ownership of Trust Property. The Trust Property of the
Trust and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in and beneficial ownership of all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees may cause legal title in and beneficial ownership of
any Trust Property to be held by, or in the name of one or more of the Trustees
acting for and on behalf of the Trust, or in the name of any person as nominee
acting for and on behalf of the Trust. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have, as
provided in Article V, a proportionate undivided beneficial interest in the
Trust or Series or Class thereof represented by Shares. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument. The Trust, or at the determination of the Trustees one or more of
the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed
to hold legal title and beneficial ownership of any income earned on securities
of the Trust issued by any business entities formed, organized, or existing
under the laws of any jurisdiction, including the laws of any foreign country.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
Section 11. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration.
Section 12. Trustees, etc. as Shareholders. Subject to any restrictions
in the By-laws, any Trustee, officer, agent or independent contractor of the
Trust may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
Section 13. Series of Trustees. In connection with the establishment of
one or more Series or Classes, the Trustees establishing such Series or Class
may appoint, to the extent permitted by the Delaware Act, separate Trustees with
respect to such Series or Classes (the "Series Trustees"). Series Trustees may,
but are not required to, serve as Trustees of the Trust or any other Series or
<PAGE>
Class of the Trust. The Trustees shall have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees hereunder with
respect to such Series or Class, but shall have no power or authority with
respect to any other Series or Class. Any provision of this Declaration relating
to election of Trustees by Shareholders only shall entitle the Shareholders of a
Series or Class for which Series Trustees have been appointed to vote with
respect to the election of such Series Trustees and the Shareholders of any
other Series or Class shall not be entitled to participate in such vote. In the
event that Series Trustees are appointed, the Trustees initially appointing such
Series Trustees shall, without the approval of any Outstanding Shares, amend
either the Declaration or the By-laws to provide for the respective
responsibilities of the Trustees and the Series Trustees in circumstances where
an action of the Trustees or Series Trustees affects all Series of the Trust or
two or more Series represented by different Trustees.
ARTICLE III
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Underwriting Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive distribution contract
or contracts providing for the sale of the Shares whereby the Trustees may
either agree to sell the Shares to the other party to the contract or appoint
such other party as their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers or persons to whom the Investment Adviser
delegates certain or all of their duties, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees may
<PAGE>
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
Section 3. Administration Agreement. The Trustees may in their
discretion from time to time enter into an administration agreement or, if the
Trustees establish multiple Series or Classes separate administration agreements
with respect to each Series or Class, whereby the other party to such agreement
shall undertake to manage the business affairs of the Trust or of a Series or
Class thereof of the Trust and furnish the Trust or a Series or a Class thereof
with office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 4. Service Agreement. The Trustees may in their discretion from
time to time enter into service agreements with respect to one or more Series or
Classes of Shares whereby the other parties to such Service Agreements will
provide administration and/or support services pursuant to administration plans
and service plans, and all upon such terms and conditions as the Trustees in
their discretion may determine.
Section 5. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 6. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
<PAGE>
undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000), or any other entity satisfying the requirements of
the 1940 Act, to serve as Custodian with authority as its agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in the By-laws of the Trust. The Trustees may also authorize the
Custodian to employ one or more sub-custodians, including such foreign banks and
securities depositories as meet the requirements of applicable provisions of the
1940 Act, and upon such terms and conditions as may be agreed upon between the
Custodian and such sub-custodian, to hold securities and other assets of the
Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
Section 7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust or any Series thereof is a shareholder, director, officer,
partner, trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other organization
or of or for any parent or affiliate of any organization, with which a
contract of the character described in this Article III or for services
as Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder of
or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in
Sections 1, 2, 3 or 4 of this Article III or for services as Custodian,
Transfer Agent or disbursing agent or for related services may have
been or may hereafter be made also has any one or more of such
contracts with one or more other partnerships, corporations, trusts,
associations or other organizations, or has other business or
interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
COMPENSATION, LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
<PAGE>
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. All persons contracting with or
having any claim against the Trust or a particular Series shall look only to the
assets of all Series or such particular Series for payment under such contract
or claim; and neither the Trustees nor, when acting in such capacity, any of the
Trust's officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Every written instrument or obligation on behalf of
the Trust or any Series shall contain a statement to the foregoing effect, but
the absence of such statement shall not operate to make any Trustee or officer
of the Trust liable thereunder. Provided they have exercised reasonable care and
have acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees and officers of the Trust shall not be
responsible or liable for any act or omission or for neglect or wrongdoing of
them or any officer, agent, employee, investment adviser or independent
contractor of the Trust, but nothing contained in this Declaration or in the
Delaware Act shall protect any Trustee or officer of the Trust against liability
to the Trust or to Shareholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 3. Indemnification. (a) Subject to the exceptions and
limitations contained in subsection (b) below:
(i)every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust (including any individual who
serves at its request as director, officer, partner, trustee
or the like of another organization in which it has any
interest as a shareholder, creditor or otherwise) ("Covered
Person") shall be indemnified by the Trust or the appropriate
Series to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Covered
Person and against amounts paid or incurred by him in the
settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
<PAGE>
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i)who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, or (B) not to have
acted in good faith in the reasonable belief that his action
was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(A) by the court or other body approving the settlement; (B)
by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to
a full trial-type inquiry); (C) by written opinion of
independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry) or
(D) by a vote of a majority of the Outstanding Shares entitled
to vote (excluding any Outstanding Shares owned of record or
beneficially by such individual).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or
applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
<PAGE>
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article IV by the Shareholders,
or adoption or modification of any other provision of the Declaration or By-
laws inconsistent with this Article, shall be prospective only, to the extent
that such repeal, or modification would, if applied retrospectively, adversely
affect any limitation on the liability of any Covered Person or indemnification
available to any Covered Person with respect to any act or omission which
occurred prior to such repeal, modification or adoption.
Section 3. Indemnification of Shareholders. If any Shareholder or
former Shareholder of any Series shall be held personally liable solely by
reason of his being or having been a Shareholder and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives or in the
case of any entity, its general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by such Shareholder, assume the
defense of any claim made against such Shareholder for any act or obligation of
the Series and satisfy any judgment thereon from the assets of the Series.
Section 4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5. No Duty of Investigation; Notice in Trust Instruments, Etc.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust or a Series thereof shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or agent or be liable
for the application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees may recite that the same is executed
<PAGE>
or made by them not individually, but as Trustees under the Declaration, and
that the obligations of the Trust or a Series thereof under any such instrument
are not binding upon any of the Trustees or Shareholders individually, but bind
only the Trust Property or the Trust Property of the applicable Series, and may
contain any further recital which they may deem appropriate, but the omission of
such recital shall not operate to bind the Trustees individually. The Trustees
shall at all times maintain insurance for the protection of the Trust Property
or the Trust Property of the applicable Series, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 6. Reliance on Experts, Etc. Each Trustee, officer or employee
of the Trust or a Series thereof shall, in the performance of his duties, powers
and discretions hereunder be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust or a Series thereof,
upon an opinion of counsel, or upon reports made to the Trust or a Series
thereof by any of its officers or employees or by the Investment Adviser, the
Administrator, the Distributor, Transfer Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE V
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of
one or more Series. The Trustees hereby establish the following Series:
Capital Growth Portfolio
International Growth Portfolio
Real Estate Growth Portfolio
Equity-Income Portfolio
America Income Portfolio
Balanced Portfolio
Money Market Portfolio
Each additional Series shall be established and is effective upon the adoption
of a resolution of a majority of the Trustees or any alternative date specified
in such resolution. The Trustees may designate the relative rights and
preferences of the Shares of each Series. The Trustees may divide the Shares of
<PAGE>
any Series into Classes. The Shares of the existing Series and each Class
thereof herein established and designated and any Shares of any further Series
and Classes that may from time to time be established and designated by the
Trustees shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
for such variations as shall be fixed and determined between different Series or
Classes by the Trustees in establishing and designating such Class or Series.
All references to Shares in this Declaration shall be deemed to be Shares of any
or all Series or Classes as the context may require. The Trust shall maintain
separate and distinct records for each Series and hold and account for the
assets thereof separately from the other assets of the Trust or of any other
Series. A Series may issue any number of Shares or any Class thereof and need
not issue Shares. Each Share of a Series shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
a Class thereof shall be entitled to receive his pro rata share of all
distributions made with respect to such Series or Class. Upon redemption of his
Shares, such Shareholder shall be paid solely out of the funds and property of
such Series. The Trustees may adopt and change the name of any Series or Class.
Section 2. Shares. The beneficial interest in the Trust shall be
divided into transferable Shares of one or more separate and distinct Series or
Classes established by the Trustees. The number of Shares of each Series and
Class is unlimited and each Share shall have no par value per Share or such
other amount as the Trustees may establish. All Shares issued hereunder shall be
fully paid and nonassessable. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust. The Trustees shall have full power and authority, in their sole
discretion and without obtaining Shareholder approval, to issue original or
additional Shares at such times and on such terms and conditions as they deem
appropriate; to issue fractional Shares and Shares held in the treasury; to
establish and to change in any manner Shares of any Series or Classes with such
preferences, terms of conversion, voting powers, rights and privileges as the
Trustees may determine (but the Trustees may not change Outstanding Shares in a
manner materially adverse to the Shareholders of such Shares); to divide or
combine the Shares of any Series or Classes into a greater or lesser number; to
classify or reclassify any unissued Shares of any Series or Classes into one or
more Series or Classes of Shares; to abolish any one or more Series or Classes
of Shares; to issue Shares to acquire other assets (including assets subject to,
and in connection with, the assumption of liabilities) and businesses; and to
take such other action with respect to the Shares as the Trustees may deem
desirable. Shares held in the treasury shall not confer any voting rights on the
Trustees and shall not be entitled to any dividends or other distributions
declared with respect to the Shares.
<PAGE>
Section 3. Investment in the Trust. The Trustees shall accept
investments in any Series or Class from such persons and on such terms as they
may from time to time authorize. At the Trustees' discretion, such investments,
subject to applicable law, may be in the form of cash or securities in which
that Series is authorized to invest, valued as provided in Article VI, Section
3. Investments in a Series shall be credited to each Shareholder's account in
the form of full Shares at the Net Asset Value per Share next determined after
the investment is received or accepted as may be determined by the Trustees;
provided, however, that the Trustees may, in their sole discretion, (a) impose a
sales charge upon investments in any Series or Class, (b) issue fractional
Shares, (c) determine the Net Asset Value per Share of the initial capital
contribution or (d) authorize the issuance of Shares at a price other than Net
Asset Value to the extent permitted by the 1940 Act or any rule, order or
interpretation of the Commission thereunder. The Trustees shall have the right
to refuse to accept investments in any Series at any time without any cause or
reason therefor whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof (including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be), shall be held and accounted for separately from the assets of every other
Series and are referred to as "assets belonging to" that Series. The assets
belonging to a Series shall belong only to that Series for all purposes, and to
no other Series, subject only to the rights of creditors of that Series. Any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series shall
be allocated by the Trustees between and among one or more Series as the
Trustees deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes, and such assets,
earnings, income, profits or funds, or payments and proceeds thereof shall be
referred to as assets belonging to that Series. The assets belonging to a Series
shall be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the Shareholders of that Series. The assets
belonging to a Series shall be charged with the liabilities of that Series and
all expenses, costs, charges and reserves attributable to that Series, except
that liabilities and expenses allocated solely to a particular Class shall be
borne by that Class. Any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to any
particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series or Classes in such manner as the
Trustees deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series or Classes for all purposes.
<PAGE>
Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of any other Series. Notice of this contractual limitation on liabilities
among Series may, in the Trustees' discretion, be set forth in the certificate
of trust of the Trust (whether originally or by amendment) as filed or to be
filed in the Office of the Secretary of State of the State of Delaware pursuant
to the Delaware Act, and upon the giving of such notice in the certificate of
trust, the statutory provisions of Section 3804 of the Delaware Act relating to
limitations on liabilities among Series (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, with respect to that
Series. No Shareholder or former Shareholder of any Series shall have a claim on
or any right to any assets allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust or a transfer or
similar agent for the Trust shall maintain a register containing the names and
addresses of the Shareholders of each Series and Class thereof, the number of
Shares of each Series and Class held by such Shareholders, and a record of all
Share transfers. The register shall be conclusive as to the identity of
Shareholders of record and the number of Shares held by them from time to time.
The Trustees may authorize the issuance of certificates representing Shares and
adopt rules governing their use. The Trustees may make rules governing the
transfer of Shares, whether or not represented by certificates. Except as
otherwise provided by the Trustees, Shares shall be transferable on the books of
the Trust only by the record holder thereof or by his duly authorized agent upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate if one is outstanding,
and such evidence or the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery, and subject to any further requirements specified by the Trustees or
contained in the By-laws, the transfer shall be recorded on the books of the
Trust. Until a transfer is so recorded, the Shareholder of record of Shares
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any transfer agent or registrar or any
officer, employee or agent of the Trust, shall be affected by any notice of a
proposed transfer.
Section 6. Status of Shares; Limitation of Shareholder Liability.
Shares shall be deemed to be personal property giving Shareholders only the
<PAGE>
rights provided in this Declaration. Every Shareholder, by virtue of having
acquired a Share, shall be held expressly to have assented to and agreed to be
bound by the terms of this Declaration and to have become a party hereto. No
Shareholder shall be personally liable for the debts, liabilities, obligations
and expenses incurred by, contracted for, or otherwise existing with respect to,
the Trust or any Series. The death, incapacity, dissolution, termination or
bankruptcy of a Shareholder during the existence of the Trust shall not operate
to terminate the Trust, nor entitle the representative of any such Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but entitles such representative only to the rights of such
Shareholder under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust Property or
right to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders as partners. Neither
the Trust nor the Trustees shall have any power to bind any Shareholder
personally or to demand payment from any Shareholder for anything, other than as
agreed by the Shareholder. Shareholders shall have the same limitation of
personal liability as is extended to shareholders of a private corporation for
profit incorporated in the State of Delaware. Every written obligation of the
Trust or any Series shall contain a statement to the effect that such obligation
may only be enforced against the assets of the appropriate Series or all Series;
however, the omission of such statement shall not operate to bind or create
personal liability for any Shareholder or Trustee.
ARTICLE VI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees or a committee of one or more
Trustees and one or more officers may declare and pay dividends and other
distributions, including dividends on Shares of a particular Series and other
distributions from the assets belonging to that Series. No dividend or
distribution, including, without limitation, any distribution paid upon
termination of the Trust or of any Series (or Class) with respect to, nor any
redemption or repurchase of, the Shares of any Series (or Class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any particular Series otherwise have any
right or claim against the assets held with respect to any other Series except
to the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders. The amount and payment of dividends or distributions and their
form, whether they are in cash, Shares or other Trust Property, shall be
<PAGE>
determined by the Trustees. Dividends and other distributions may be paid
pursuant to a standing resolution adopted once or more often as the Trustees
determine. All dividends and other distributions on Shares of a particular
Series shall be distributed pro rata to the Shareholders of that Series in
proportion to the number of Shares of that Series they held on the record date
established for such payment, except that such dividends and distributions shall
appropriately reflect expenses allocated to a particular Class of such Series.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or similar plans as the Trustees deem
appropriate.
Section 2. Redemptions. Each Shareholder of a Series shall have the
right at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his Shares at a redemption price per Share equal to
the Net Asset Value per Share at such time as the Trustees shall have prescribed
by resolution, or, to the extent permitted by the 1940 Act, at such other
redemption price and at such times as the Trustees shall prescribe by
resolution. In the absence of such resolution, the redemption price per Share
shall be the Net Asset Value next determined after receipt by the Series of a
request for redemption in proper form less such charges as are determined by the
Trustees and described in the Trust's Registration Statement for that Series
under the Securities Act of 1933. The Trustees may specify conditions, prices,
and places of redemption, may specify binding requirements for the proper form
or forms of requests for redemption and may specify the amount of any deferred
sales charge to be withheld from redemption proceeds. Payment of the redemption
price may be wholly or partly in securities or other assets at the value of such
securities or assets used in such determination of Net Asset Value, or may be in
cash. Upon redemption, Shares may be reissued from time to time. The Trustees
may require Shareholders to redeem Shares for any reason under terms set by the
Trustees, including, but not limited to, the failure of a Shareholder to supply
a taxpayer identification number if required to do so, or to have the minimum
investment required, or to pay when due for the purchase of Shares issued to
him. To the extent permitted by law, the Trustees may retain the proceeds of any
redemption of Shares required by them for payment of amounts due and owing by a
Shareholder to the Trust or any Series or Class or any governmental authority.
Notwithstanding the foregoing, the Trustees may postpone payment of the
redemption price and may suspend the right of the Shareholders to require any
Series or Class to redeem Shares during any period of time when and to the
extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause
the Net Asset Value of Shares of each Series or Class to be determined from time
to time in a manner consistent with applicable laws and regulations. The
Trustees may delegate the power and duty to determine Net Asset Value per Share
to one or more Trustees or officers of the Trust or to a custodian, depository
<PAGE>
or other agent appointed for such purpose. The Net Asset Value of Shares shall
be determined separately for each Series or Class at such times as may be
prescribed by the Trustees or, in the absence of action by the Trustees, as of
the close of regular trading on the New York Stock Exchange on each day for all
or part of which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees postpone payment of the redemption price
and suspend the right of Shareholders to redeem their Shares, such suspension
shall take effect at the time the Trustees shall specify, but not later than the
close of business on the business day next following the declaration of
suspension. Thereafter Shareholders shall have no right of redemption or payment
until the Trustees declare the end of the suspension. If the right of redemption
is suspended, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined after the
suspension terminates.
Section 5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the Net
Asset Value per Share determined as of the time when the purchase or contract of
purchase is made or the Net Asset Value as of any time which may be later
determined, provided payment is not made for the Shares prior to the time as of
which such Net Asset Value is determined.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote
only with respect to (a) the election of Trustees as provided in Section 2 of
this Article; (b) the removal of Trustees as provided in Article II, Section
3(d); (c) any investment advisory or management contract as provided in Article
VIII, Section 1; (d) any termination of the Trust as provided in Article IX,
Section 4; (e) the amendment of this Declaration to the extent and as provided
in Article X, Section 8; and (f) such additional matters relating to the Trust
as may be required or authorized by law, this Declaration, or the By-laws or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted by individual Series or Class, except (a) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series or
Class, and (b) when the Trustees have determined that the matter affects the
interests of more than one Series or Class, then the Shareholders of all such
<PAGE>
Series or Classes shall be entitled to vote thereon. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the By-laws. The By-laws
may provide that proxies may be given by any electronic or telecommunications
device or in any other manner, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Shareholders of any Series or
Class, or if there is a proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees, Shares may be voted only
in person or by written proxy. Until Shares of a Series are issued, as to that
Series the Trustees may exercise all rights of Shareholders and may take any
action required or permitted to be taken by Shareholders by law, this
Declaration or the By-laws. Meetings of Shareholders shall be called and notice
thereof and record dates therefor shall be given and set as provided in the
By-laws.
Section 2. Quorum; Required Vote. One-third of the Outstanding Shares
of each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Declaration or the By-laws, a majority of
the Shares voting at a Shareholders' meeting in person or by proxy shall decide
any matters to be voted upon with respect to the entire Trust and a plurality of
such Shares shall elect a Trustee; provided, that if this Declaration or
applicable law permits or requires that Shares be voted on any matter by
individual Series or Classes, then a majority of the Shares of that Series or
Class (or, if required by law, a majority of the Shares outstanding and entitled
to vote of that Series or Class) voting at a Shareholders' meeting in person or
by proxy on the matter shall decide that matter insofar as that Series or Class
is concerned. Shareholders may act as to the Trust or any Series or Class by the
written consent of a majority (or such other amount as may be required by
applicable law) of the Outstanding Shares of the Trust or of such Series or
Class, as the case may be.
Section 3. Record Dates. For the purpose of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or Class) having the right to receive such dividend or distribution.
Without fixing a record date, the Trustees may for distribution purposes close
<PAGE>
the register or transfer books for one or more Series (or Classes) any time
prior to the payment of a distribution. Nothing in this Section shall be
construed as precluding the Trustees from setting different record dates for
different Series (or Classes).
Section 4. Additional Provisions. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Section 1. Payment of Expenses by the Trust. Subject to Article V,
Section 4, the Trust or a particular Series shall pay, or shall reimburse the
Trustees from the assets belonging to all Series or the particular Series, for
their expenses (or the expenses of a Class of such Series) and disbursements,
including, but not limited to, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; certain
insurance premiums; applicable fees, interest charges and expenses of third
parties, including the Trust's investment advisers, managers, administrators,
distributors, custodians, transfer agents and fund accountants; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Trust and its
Series and maintaining its existence; costs of preparing and printing the
prospectuses of the Trust and each Series, statements of additional information
and Shareholder reports and delivering them to Shareholders; expenses of
meetings of Shareholders and proxy solicitations therefor; costs of maintaining
books and accounts; costs of reproduction, stationery and supplies; fees and
expenses of the Trustees; compensation of the Trust's officers and employees and
costs of other personnel performing services for the Trust or any Series; costs
of Trustee meetings; Commission registration fees and related expenses; state or
foreign securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust. The
Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto,
for the reimbursement to them of such expenses, disbursements, losses and
liabilities.
Section 2. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
<PAGE>
arrears, for charges of the Trust's custodian or transfer, shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
ARTICLE IX
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Declaration creates a trust
and not a partnership. No Trustee shall have any power to bind personally either
the Trust's officers or any Shareholder.
Section 2. Trustee Action. The exercise by the Trustees of their powers
and discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article IV, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law.
Section 3. Record Dates. The Trustees may fix in advance a date up to
ninety (90) days before the date of any Shareholders' meeting, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares.
Section 4. Termination of the Trust. (a) This Trust shall have
perpetual existence. Subject to the vote of a majority of the Shares outstanding
and entitled to vote of the Trust or of each Series to be affected, the Trustees
may
(i)sell and convey all or substantially all of the assets of
all Series or any affected Series to another Series or to
another entity which is an open-end investment company as
defined in the 1940 Act, or is a series thereof, for adequate
consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Trust or any affected Series, and which
may include shares of or interests in such Series, entity, or
series thereof; or
<PAGE>
(ii) at any time sell and convert into money all or
substantially all of the assets of all Series or any affected
Series.
Upon making reasonable provision for the payment of all known liabilities of all
Series or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of all Series or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining the vote of a majority of the Shares
Outstanding and entitled to vote of the Trust or any Series if a majority of the
Trustees determines that the continuation of the Trust or Series is not in the
best interests of the Trust, such Series, or their respective Shareholders as a
result of factors or events adversely affecting the ability of the Trust or such
Series to conduct its business and operations in an economically viable manner.
Such factors and events may include the inability of the Trust or a Series to
maintain its assets at an appropriate size, changes in laws or regulations
governing the Trust or the Series or affecting assets of the type in which the
Trust or Series invests, or economic developments or trends having a significant
adverse impact on the business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Section 5. Reorganization. (a) Notwithstanding anything else herein, to
change the Trust's form or place of organization the Trustees may, without
Shareholder approval unless such approval is required by applicable law, (i)
cause the Trust to merge or consolidate with or into one or more entities, if
the surviving or resulting entity is the Trust or another open-end management
investment company under the 1940 Act, or a series thereof, that will succeed to
or assume the Trust's registration under the 1940 Act, (ii) cause the Shares to
be exchanged under or pursuant to any state or federal statute to the extent
permitted by law, or (iii) cause the Trust to incorporate under the laws of
Delaware or any other U.S. jurisdiction. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of Trustees
and facsimile signatures conveyed by electronic or telecommunication means shall
be valid.
<PAGE>
(b) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, an agreement of merger or consolidation approved by
the Trustees in accordance with this Section 5 may effect any amendment to the
Declaration or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
(c) The Trustees may create one or more business trusts to which all or
any part of the assets, liabilities, profits or losses of the Trust or any
Series or Class thereof may be transferred and may provide for the conversion of
Shares in the Trust or any Series or Class thereof into beneficial interests in
any such newly created trust or trusts or any series or classes thereof.
Section 6. Declaration of Trust. The original or a copy of this
Declaration of Trust and of each amendment hereto or Declaration of Trust
supplemental shall be kept at the office of the Trust where it may be inspected
by any Shareholder. Anyone dealing with the Trust may rely on a certificate by a
Trustee or an officer of the Trust as to the authenticity of the Declaration of
Trust or any such amendments or supplements and as to any matters in connection
with the Trust. The masculine gender herein shall include the feminine and
neuter genders. Headings herein are for convenience only and shall not affect
the construction of this Declaration of Trust. This Declaration of Trust may be
executed in any number of counterparts, each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration and the Trust created
hereunder are governed by and construed and administered according to the
Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Declaration of Trust (a) the provisions of Section 3540 of Title 12 of the
Delaware Code, or (b) any provisions of the laws (statutory or common) of the
State of Delaware (other than the Delaware Act) pertaining to trusts which
relate to or regulate (i) the filing with any court or governmental body or
agency of trustee accounts or schedules of trustee fees and charges, (ii)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
<PAGE>
in this Declaration. The Trust shall be of the type commonly called a Delaware
business trust, and, without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote,
amend or otherwise supplement this Declaration by making an amendment, a
Declaration of Trust supplemental hereto or an amended and restated trust
instrument; provided, that Shareholders shall have the right to vote on any
amendment (a) which would affect the voting rights of Shareholders granted in
Article VII, Section l, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, and (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IV
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds of
the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Derivative Actions. In addition to the requirements set
forth in Section 3816 of the Delaware Act, a Shareholder may bring a derivative
action on behalf of the Trust only if the following conditions are met:
(a) Shareholders eligible to bring such derivative action under the
Delaware Act who hold at least 10% of the Outstanding Shares of the Trust, or
10% of the Outstanding Shares of the Series or Class to which such action
relates, shall join in the request for the Trustees to commence such action; and
(b) the Trustees must be afforded a reasonable amount of time to
consider such shareholder request and to investigate the basis of such claim.
The Trustees shall be entitled to retain counsel or other advisers in
considering the merits of the request and shall require an undertaking by the
Shareholders making such request to reimburse the Trust for the expense of any
such advisers in the event that the Trustees determine not to bring such action.
Section 10. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the By-laws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
<PAGE>
Section 11. Severability. The provisions of this Declaration are
severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination. If any
provision hereof shall be held invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall attach only to such provision only in
such jurisdiction and shall not affect any other provision of this Declaration.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date first written above.
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.,
as Trustee and not individually
975 Memorial Drive, #802
Cambridge, Massachusetts 02138
/s/ David D. Tripple
David D. Tripple,
as Trustee and not individually
6 Woodbine Road
Belmont, Massachusetts 02178
CERTIFICATE OF AMENDMENT
to
CERTIFICATE OF TRUST
of
VARIABLE INSURANCE CONTRACTS TRUST
THIS Certificate of Amendment, dated February 3, 1995, to the
Certificate of Trust, dated September 16, 1994, of Variable Insurance Contracts
Trust (the "Trust") is being duly executed and filed by John F. Cogan, Jr. and
David D. Tripple, as Trustees, to amend the Certificate of Trust filed by the
Trust on September 27, 1994 with the Office of the Secretary of State of the
State of Delaware.
1. Amendment. Effective as of the date and time of fililng of this
Certificate of Amendment, the name of the Trust is changed from "Variable
Insurance Contracts Trust" to "Pioneer Variable Contracts Trust."
IN WITNESS WHEREOF, the undersigned being the Trustees of the Trust
have executed this Amended and Restated Certificate of Trust as of the date
first above-written.
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
As Trustee and not individually
/s/ David D. Tripple
David D. Tripple
As Trustee and not individually
AMENDED BY-LAWS
of
PIONEER VARIABLE CONTRACTS TRUST
ARTICLE I
Officers and Their Election
SECTION 1. Officers. The officers of the Trust shall be a Chairman, a President,
a Treasurer, a Secretary, and such other officers with such other titles as
provided for herein or as the Trustees may from time to time elect. It shall not
be necessary for any Trustee or other officer to be a holder of shares in the
Trust.
SECTION 2. Election of Officers. The Treasurer and Secretary shall be chosen
annually by the Trustees. The Chairman and President shall be chosen annually by
and from the Trustees.
Two or more offices may be held by a single person except the offices
of President and Secretary. The officers shall hold office until their
successors are duly chosen and qualified.
SECTION 3. Resignations and Removals. Any officer of the Trust may resign by
filing a written resignation with the President, the Trustees or the Secretary,
which shall take effect upon such filing unless it is specified to be effective
at some other time or upon the happening of some other event. Any officer may be
removed at any time, with or without cause, by vote of a majority of the
Trustees.
SECTION 4. Vacancies. The Trustees may fill any vacancy occurring in any office
for any reason and may, in their discretion, leave unfilled for such period as
they may determine any offices other than those of Chairman, President,
Treasurer and Secretary. Each such successor shall hold office until his
successor is duly chosen and qualified.
<PAGE>
ARTICLE II
Powers and Duties of Officers and Trustees
SECTION 1. Trustees. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to fully
carry out that responsibility.
SECTION 2. Executive and other Committees. The Trustees may elect from their own
number an Executive Committee to consist of not less than three nor more than
five members, which shall have the power and duty to conduct the current and
ordinary business of the Trust, and such other powers and duties as the Trustees
may from time to time delegate to such Committee. The Trustees may also elect
from their own number other Committees from time to time, the number composing
such Committees and the powers conferred upon the same to be determined by vote
of the Trustees.
SECTION 3. Chairman of the Trustees. The Chairman shall preside at all meetings
of the Trustees and he may be the chief executive, financial and accounting
officer of the Trust. The Chairman may also perform such other duties as the
Trustees may from time to time designate.
SECTION 4. President. The President shall be the chief operating officer of the
Trust and, subject to the Trustees, shall have general supervision over the
business and policies of the Trust. The President shall have full power and
authority to bind the Trust and in connection therewith may execute and deliver
in the name and on behalf of the Trust any and all agreements, instruments,
notes and writings of any nature that he may consider necessary or appropriate
in connection with the management of the Trust. The President shall perform such
duties additional to all of the foregoing as the Trustees may from time to time
designate.
SECTION 5. Treasurer. The Treasurer may be the principal financial and
accounting officer of the Trust. He shall deliver all funds and securities of
<PAGE>
the Trust which may come into his hands to such bank(s) or trust compan(ies) as
the Trustees shall employ as Custodian(s) in accordance with Section 3.6 of the
Declaration of Trust and these By-Laws. He shall have the custody of the seal of
the Trust. He shall make annual reports in writing of the business conditions of
the Trust, which reports shall be preserved upon its records, and he shall
furnish such other reports regarding its business and condition as the Trustees
may from time to time require. The Treasurer shall perform such duties
additional to all of the foregoing as the Trustees or the President may from
time to time designate.
SECTION 6. Secretary. The Secretary shall record in books kept for the purpose
all votes and proceedings of the Trustees and the shareholders at their
respective meetings.
The Secretary shall perform such duties and possess such powers
additional to the foregoing as the Trustees or the President may from time to
time designate.
SECTION 7. Vice Presidents. Each Vice President of the Trust shall perform such
duties and possess such powers as the Trustees or the President may from time to
time designate. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Trustees) shall perform the duties of
the President and when so performing shall have all the powers of and be subject
to all the restrictions upon the President.
SECTION 8. Assistant Treasurer. The Assistant Treasurer of the Trust shall
perform such duties and possess such powers as the Trustees, the President or
the Treasurer may from time to time designate.
ARTICLE III
Shareholders' Meetings
SECTION 1. General. Voting powers and meetings of Shareholders shall be governed
by applicable provisions of law, the Declaration of Trust and as hereinafter
provided by these By-Laws.
<PAGE>
SECTION 2. Special Meetings. A special meeting of the Shareholders of any Series
shall be called by the Secretary whenever ordered by the Trustees or requested
in writing by the holder or holders of at least one-tenth of the outstanding
Shares of any such Series entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than two days to call such special
meeting, the Trustees or the Shareholders so requesting may, in the name of the
Secretary, call the meeting by giving notice thereof in the manner required when
notice is given by the Secretary.
SECTION 3. Notices. Except as above provided, notices of any special meeting of
the Shareholders shall be given by the Secretary by delivering or mailing,
postage prepaid, to each Shareholder entitled to vote at said meeting, a written
or printed notification of such meeting, at least fifteen days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
SECTION 4. Place of Meeting. All special meetings of the Shareholders shall be
held at the principal place of business of the Trust in Boston, Massachusetts or
at such other place in the United States as the Trustees may designate.
ARTICLE IV
Trustees' Meetings
SECTION 1. Meetings. Meetings of the Trustees shall be called orally or in
writing by the Chairman or at his order or direction or by any two other
Trustees, and if the Secretary when so requested refuses or fails for more than
one day to call such meeting, the Chairman, or such two other Trustees, may in
the name of the Secretary call such meeting by giving due notice in the manner
required when notice is given by the Secretary.
SECTION 2. Quorum. A majority of the Trustees shall constitute a quorum for the
transaction of business.
SECTION 3. Notices. Except as otherwise provided, notice of any meeting of the
Trustees shall be given by the Secretary to each Trustee, by mailing to him,
postage prepaid, addressed to him at his address as registered on the books of
the Trust or, if not so registered, at his last known address, a written or
printed notification of such meeting at least three days before the meeting or
<PAGE>
by delivering such notice to him at least two days before the meeting, or by
telephoning him or by sending to him at least one day before the meeting, by
prepaid telegram, addressed to him at his said registered address, if any, or if
he has no such registered address, at his last known address, notice of such
meeting.
SECTION 4. Place of Meeting. All meetings of the Trustees shall be held at the
principal place of business of the Trust in Boston, Massachusetts, or such other
place within or without the Commonwealth as the person or persons requesting
said meeting to be called may designate, but any meeting may adjourn to any
other place.
SECTION 5. Special Action. When all the Trustees shall be present at any
meeting, however called, or wherever held, or shall assent to the holding of the
meeting without notice, or after the meeting shall sign a written assent thereto
on the record of such meeting, the acts of such meeting shall be valid as if
such meeting had been regularly held.
SECTION 6. Action by Consent. Any action by the Trustees may be taken without a
meeting if a written consent thereto is signed by a majority of the Trustees and
filed with the records of the Trustees' meetings, or by telephone consent
provided a quorum of Trustees participate in any such telephone meeting. Such
consent shall be treated as a vote of the Trustees for all purposes, provided
however, no such consent shall be effective if the Investment Company Act of
1940 requires that a particular action be taken only at a meeting of the
Trustees.
ARTICLE V
Shares of Beneficial Interest
SECTION 1. Beneficial Interest. The beneficial interest in the Trust and the
status of the owners thereof shall be defined, established and governed by
applicable provisions of law, the Declaration of Trust and as herein provided by
these By-Laws.
SECTION 2. Transfers. Shares may be transferred on the books of the Trust by
written request to the Trust or its transfer agent, with such proof of authority
<PAGE>
or the authenticity of signature as the Trust or its transfer agent may
reasonably require. Except as may be otherwise required by law, by the
Declaration of Trust or by these By-Laws, the Trust shall be entitled to treat
the record holder of shares of beneficial interest as shown on its books as the
owner of such shares for all purposes, including the payment of dividends and
the right to vote with respect thereto, regardless of any transfer, pledge or
other disposition of such shares until the shares have been transferred on the
books of the Trust in accordance with the requirements of these By-Laws.
ARTICLE VI
Inspection of Books
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the shareholders; and no shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees or by resolution of the shareholders.
ARTICLE VII
Custodian
The Custodian(s) employed by the Trust pursuant to Section 3.6 of
the Declaration of Trust shall be required to enter into a contract with the
Trust which shall contain in substance the following provisions:
(a) The Trust will cause all securities and funds owned by the
Trust to be delivered or paid to the Custodian(s).
(b) The Custodian(s) will receive and receipt for any moneys due to
the Trust and deposit the same in its own banking department and in such
other banking institutions, if any, as the Custodian(s) and the Trustees
may approve. The Custodian(s) shall have the sole power to draw upon any
such account.
<PAGE>
(c) The Custodian(s) shall release and deliver securities owned by
the Trust in the following cases only:
(1) Upon the sale of such securities for the account of the Trust and
receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that in any such case,
the cash is to be delivered to the Custodian(s);
(3) To the issuer thereof or its agent for transfer into the name of the
Trust, the Custodian(s) or a nominee of either, or for exchange for a different
number of bonds or certificates representing the same aggregate face amount or
number of units; provided that in any such case the new securities are to be
delivered to the Custodian(s);
(4) To the broker selling the same for examination, in accord with the
"street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities or pursuant to provisions to any
deposit agreement; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian(s);
(6) In the case of warrants, rights, or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities for definitive securities;
(7) To any pledge by way of pledge or hypothecation to secure any loan;
and
(8) For deposit in a system for the central handling of securities.
(d) The Custodian(s) shall pay out moneys of the Trust only upon
the purchase of securities for the account of the Trust and the delivery
in due course of such securities to the Custodian(s), or in connection
with the conversion, exchange or surrender of securities owned by the
Trust as set forth in (c), or for the redemption or repurchase of shares
<PAGE>
issued by the Trust or for the making of any disbursements authorized by
the Trustees pursuant to the Declaration of Trust or these By-laws, or for
the payment of any expense or liability incurred by the Trust; provided
that, in every case where payment is made by the Custodian(s) in advance
of receipt of the securities purchased, the Custodian(s) shall be
absolutely liable to the Trust for such securities to the same extent as
if the securities had been received by the Custodian(s).
(e) The Custodian(s) shall make deliveries of securities and
payments of cash only upon written instructions signed or initialed by
such officer or officers or other agent or agents of the Trust as may be
authorized to sign or initial such instructions by resolution of the
Trustees; it being understood that the Trustees may from time to time
authorize a different person or persons to sign or initial instructions
for different purposes.
The contract between the Trust and the Custodian(s) may contain any
such other provisions not inconsistent with the provisions of Section 3.6 of the
Declaration of Trust or with these By-laws as the Trustees may approve.
Such contract shall be terminable by either party upon written
notice to the other within such time not exceeding sixty (60) days as may be
specified in the contract; provided, however, that upon termination of the
contract or inability of the Custodian(s) to continue to serve, the Custodian(s)
shall, upon written notice of appointment of another bank or trust company as
custodian, deliver and pay over to such successor custodian all securities and
moneys held by it for account of the Trust. In such case, the Trustees shall
promptly appoint a successor custodian, but in the event that no successor
custodian can be found having the required qualifications and willing to serve,
it shall be the duty of the Trustees to call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding Shares, the Custodian(s) shall deliver
and pay over all property of the Trust held by it as specified in such vote.
Such contract shall also provide that, pending appointment of a
successor custodian or a vote of the shareholders specifying some other
disposition of the funds and property, the Custodian(s) shall not deliver funds
and property of the Trust to the Trust, but it may deliver them to a bank or
<PAGE>
trust company doing business in Boston, Massachusetts, of its own selection
having aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than $2,000,000 as the property of the Trust to be
held under terms similar to those on which they were held by the retiring
custodian.
Any sub-custodian employed by the Custodian(s) pursuant to
authorization to do so granted by the Trust pursuant to Section 3.6 of the
Declaration of Trust shall be required to enter into a contract with the
Custodian containing in substance the same provisions as those described in
paragraphs (a) through (e) above, except that any contract with a sub-custodian
performing its duties outside the United States and its territories and
possessions, may omit or limit any of such conditions, provided that, any such
omission or limitation shall be expressly approved by a majority of the Trustees
of the Trust.
ARTICLE VIII
Miscellaneous Provisions
SECTION 1. Seal. The Seal of the Trust shall be generic in nature and shall bear
the inscription "SEAL."
SECTION 2. Fiscal Year. The fiscal year of the Trust shall be the period of
twelve months ending on the last day of December in each calendar year.
SECTION 3. Reports to Shareholders. The Trustees shall at least semi-annually
submit to the shareholders a written financial report of the transactions of the
Trust including financial statements which shall at least annually be certified
by independent public accountants.
SECTION 4. Voting of Securities. Except as the Trustees may otherwise designate,
the President or Treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for the Trust (with or
without power of substitution) at, any meeting of stockholders or shareholders
of any corporation or other organization, the securities of which may be held by
the Trust.
<PAGE>
SECTION 5. Evidence of Authority. A certificate by the Secretary or Assistant
Secretary, or a temporary Secretary, as to any action taken by the shareholders,
Trustees, any committee or any officer or representative of the Trust shall as
to all persons who rely on the certificate in good faith be conclusive evidence
of such action.
SECTION 6. Declaration of Trust. All references in these By-Laws to the
Declaration of Trust shall be deemed to refer to the Amended Agreement and
Declaration of Trust of the Trust dated September 16, 1994, amended as of
January 25, 1995, and known as "Pioneer Variable Contracts Trust," as further
amended and in effect from time to time.
SECTION 7 Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws or the Declaration of Trust.
SECTION 8. Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 15th day of February, 1995 between Pioneer
Variable Contracts Trust, a Delaware business trust (the "Fund"), and Pioneering
Management Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") for the
purpose of registering its shares for public offering under the Securities Act
of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Fund's Board of
Trustees and officers, to manage the Fund,
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Fund and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Fund with investment
research, advice and supervision and will furnish continuously an investment
program for the following series of the Fund, consistent with the investment
objectives and policies of each such series: Capital Growth Portfolio,
International Growth Portfolio, Equity-Income Portfolio, America Income
Portfolio, Balanced Portfolio and Money Market Portfolio (each a "Portfolio").
The Manager will determine from time to time what securities shall be purchased
for each Portfolio, what securities shall be held or sold by the Portfolios and
what portion of each Portfolio's assets shall be held uninvested as cash,
subject always to the provisions of the Fund's Certificate of Trust, Agreement
and Declaration of Trust, By-Laws and its registration statements under the 1940
Act and under the 1933 Act covering the Fund's shares, as filed with the
Securities and Exchange Commission, and to the investment objectives, policies
and restrictions of each Portfolio, as each of the same shall be from time to
time in effect, and subject, further, to such policies and instructions as the
Board of Trustees of the Fund may from time to time establish. To carry out such
<PAGE>
determinations, the Manager will exercise full discretion and act for each
Portfolio in the same manner and with the same force and effect as the Fund
itself might or could do with respect to purchases, sales or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Fund and upon the Fund's request, furnish to the
Fund research, statistical and advisory reports upon the industries, businesses,
corporations or securities as to which such requests shall be made, whether or
not a Portofolio shall at the time have any investment in such industries,
businesses, corporations or securities. The Manager will use its best efforts in
the preparation of such reports and will endeavor to consult the persons and
sources believed by it to have information available with respect to such
industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to
the Fund's securities transactions required by sub-paragraphs (b)(5), (6), (9)
and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the custodian or transfer agent appointed by the
Fund) and preserve such records for the periods prescribed therefor by Rule
31a-2 under the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Fund office space in the offices of the Manager or
in such other place as may be agreed upon from time to time, and all necessary
office facilities, equipment and personnel for managing the Fund's affairs and
investments, and shall arrange, if desired by the Fund, for members of the
Manager's organization to serve as officers or agents of the Fund.
(b) The Manager shall pay directly or reimburse the Fund for: (i)
the compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and all
officers of the Fund as such; and (ii) all expenses not hereinafter specifically
assumed by the Fund where such expenses are incurred by the Manager or by the
Fund in connection with the management of the affairs of, and the investment and
reinvestment of the assets of, the Portfolios.
(c) The Fund shall assume and shall pay: (i) charges and expenses
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the
Manager, or its affiliates, office space and facilities and personnel
compensation, training and benefits; (ii) the charges and expenses of auditors;
<PAGE>
(iii) the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Fund with respect to
the Fund; (iv) issue and transfer taxes chargeable to the Fund in connection
with securities transactions to which a Portfolio is a party; (v) insurance
premiums, interest charges, dues and fees for membership in trade associations
and all taxes and corporate fees payable by the Fund to federal, state or other
governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Fund and/or its shares with the Commission,
state or blue sky securities agencies and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the Commission; (vii) all expenses of shareholders' and Trustees' meetings
and of preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies; (viii)
charges and expenses of legal counsel to the Fund and the Trustees; (ix)
distribution fees paid by the Fund in accordance with Rule 12b-1 promulgated by
the Commission pursuant to the 1940 Act; (x) compensation of those Trustees of
the Fund who are not affiliated with or interested persons of the Manager, the
Fund (other than as Trustees), The Pioneer Group, Inc. or Pioneer Funds
Distributor, Inc.; (xi) the cost of preparing and printing share certificates;
and (xii) interest on borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above, the
Fund shall pay all brokers' and underwriting commissions chargeable to the Fund
in connection with securities transactions to which a Portfolio is a party.
3. (a) The Fund shall pay to the Manager, as compensation for the
Manager's services and expenses assumed hereunder, a fee at the annual rates of
each Portfolio's average daily net assets set forth below. Management fees
payable hereunder shall be computed daily and paid monthly in arrears. In the
event of termination of this Agreement, the fee provided in this Section shall
be computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the number
of days elapsed in the current month as a percentage of the total number of days
in such month.
<PAGE>
Management Fee
(as a percentage of average
Portfolio daily net assets)
International Growth Portfolio 1.00%
Capital Growth Portfolio 0.65%
Equity-Income Portfolio
Balanced Portfolio
America Income Portfolio 0.55%
Money Market Portfolio 0.50%
(b) If the operating expenses of a Portfolio in any year exceed the
limits set by state securities laws or regulations in states in which shares of
the Portfolio are sold, the amount payable to the Manager under subsection (a)
above will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulations. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Fund to the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or a portion thereof would otherwise accrue) and/or
undertake to pay or reimburse a Portfolio for all or a portion of its expenses
not otherwise required to be borne or reimbursed by the Manager. Any such fee
reduction or undertaking may be discontinued or modified by the Manager at any
time.
4. It is understood that the Manager may employ one or more
sub-investment advisers (each a "Subadviser") to provide investment advisory
services to one or more Portfolios by entering into a written agreement with
each such Subadviser; provided, that any such agreement first shall be approved
by the vote of a majority of the Trustees, including a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Fund, the
Manager or any such Subadviser, at a meeting of Trustees called for the purpose
<PAGE>
of voting on such approval and by the affirmative vote of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the affected
Portfolio(s). The authority given to the Manager in Sections 1 through 6 hereof
may be delegated by it under any such agreement; provided, that any Subadviser
shall be subject to the same restrictions and limitations on investments and
brokerage discretion as the Manager. The Trust agrees that the Manager shall not
be accountable to the Fund or any Portfolio or Portfolio's shareholders for any
loss or other liability relating to specific investments directed by any
Subadviser, even though the Manager retains the right to reverse any such
investment, because, in the event a Subadviser is retained, the Fund and the
Manager will rely almost exclusively on the expertise of such Subadviser for the
selection and monitoring of specific investments.
5. The Manager will not be liable for any error of judgment or mistake
of law or for any loss sustained by reason of the adoption of any investment
policy or the purchase, sale, or retention of any security on the recommendation
of the Manager, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, but nothing contained herein will be
construed to protect the Manager against any liability to any Portfolio or its
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, Trustees, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Fund or deemed to violate or give rise to any duty or
obligation of the Manager to the Fund except as otherwise imposed by law. The
Fund recognizes that the Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
<PAGE>
(b) In connection with purchases or sales of securities for the
account of a Portfolio, neither the Manager nor any of its Trustees, officers or
employees will act as a principal or agent or receive any commission except as
permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of securities for the Fund's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager is directed at all times to
seek for the Fund the most favorable execution and net price available except as
described herein. It is also understood that it is desirable for the Fund that
the Manager have access to supplemental investment and market research and
security and economic analyses provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Fund with such brokers, subject to
review by the Fund's Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Manager in connection with its or its
affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of a Portfolio as well as other clients, the
Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
7. This Agreement shall become effective on the date hereof and shall
remain in force until February 15, 1997 and from year to year thereafter, but
only so long as its continuance is approved annually by a vote of the Trustees
of the Fund voting in person, including a majority of its Trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such parties, at a meeting of Trustees called for the purpose of voting
on such approval or by a vote of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Fund, subject to the right of
the Fund and the Manager to terminate this contract as provided in Section 8
hereof.
<PAGE>
8. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Trustees or Directors, as the case may be, or by vote of
a "majority of its outstanding voting securities" (as defined in the 1940 Act)
of the Fund and the giving of 60 days' written notice to the other party.
9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Fund agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Fund, the name of the
Fund, and any series thereof, will be changed to one that does not contain the
name "Pioneer" or otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Fund for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Fund, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Fund or series thereof.
12. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts.
14. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their seal to be hereto affixed
as of the day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
on behalf of
Capital Growth Portfolio
International Growth Portfolio
Equity-Income Portfolio
America Income Portfolio
Money Market Portfolio
/s/ Joseph P. Barri By:/s/ John F. Cogan, Jr.
Joseph P. Barri John F. Cogan, Jr.
Secretary Chairman and President
ATTEST: PIONEERING MANAGEMENT CORPORATION
/s/ Joseph P. Barri By:/s/ David D. Tripple
Joseph P. Barri David D. Tripple
Secretary President
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 17th day of July, 1995 between Pioneering
Management Corporation, a Delaware corporation (the "Manager"), and Pioneer
Variable Contracts Trust, a Delaware business trust, on behalf of Real Estate
Growth Portfolio (the "Portfolio").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") for the purpose of registering its shares for public offering under
the Securities Act of 1933, as amended,
WHEREAS, the Trust currently issues seven series of shares, including
the Portfolio,
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Trust's Board of
Trustees and officers, to manage the Portfolio,
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Trust and the Manager do hereby agree as follows:
1. (a) The Manager will regularly provide the Portfolio with investment
research, advice and supervision and will furnish continuously an investment
program for the Portfolio consistent with the investment objectives and policies
of the Portfolio. The Manager will determine from time to time what securities
shall be purchased for the Portfolio, what securities shall be held or sold by
the Portfolio and what portion of the Portfolio's assets shall be held
uninvested as cash, subject always to the provisions of the Trust's Declaration
of Trust, By-Laws and its registration statements under the 1940 Act and under
the Securities Act of 1933 covering the Trust's shares, as filed with the
Securities and Exchange Commission, and to the investment objectives, policies
and restrictions of the Portfolio, as each of the same shall be from time to
time in effect, and subject, further, to such policies and instructions as the
Board of Trustees of the Trust may from time to time establish. To carry out
such determinations, the Manager will exercise full discretion and act for the
Portfolio in the same manner and with the same force and effect as the Trust
itself might or could do with respect to purchases, sales or other transactions,
as well as with respect to all other things necessary or incidental to the
furtherance or conduct of such purchases, sales or other transactions.
<PAGE>
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Portfolio and upon the Trust's request, furnish
to the Portfolio research, statistical and advisory reports upon the industries,
businesses, corporations or securities as to which such requests shall be made,
whether or not the Portfolio shall at the time have any investment in such
industries, businesses, corporations or securities. The Manager will use its
best efforts in the preparation of such reports and will endeavor to consult the
persons and sources believed by it to have information available with respect to
such industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to
the Portfolio's securities transactions required by sub-paragraphs(b)(5), (6),
(9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than
those records being maintained by the custodian or transfer agent appointed by
the Trust with respect to the Portfolio) and preserve such records for the
periods prescribed therefor by Rule 31a-2 of the 1940 Act. The Manager will also
provide to the Board of Trustees such periodic and special reports as the Board
may reasonably request.
2. The Manager recognizes that the Trust may from time to time create
additional portfolios of the Trust, that this agreement relates only to the
management of the assets of the single existing Portfolio of the Trust, and that
the management of the assets of any additional portfolio of the Trust will be
subject to one or more separate investment management agreements.
3. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Trust office space in the offices of the Manager
or in such other place as may be agreed upon from time to time, and all
necessary office facilities, equipment and personnel for managing the affairs
and investments with respect to the Portfolio, and shall arrange, if desired by
the Trust, for members of the Manager's organization to serve as officers or
agents of the Trust.
(b) The Manager shall pay directly or reimburse the Trust for: (i)
the compensation (if any) of the Trustees who are affiliated with, or interested
persons of, the Manager and all officers of the Trust as such; and (ii) all
expenses not hereinafter specifically assumed by the Trust or the Portfolio
where such expenses are incurred by the Manager or by the Trust or the Portfolio
in connection with the management of the affairs of, and the investment and
reinvestment of the assets of, the Portfolio.
<PAGE>
(c) The Trust shall assume and shall pay: (i) charges and expenses
for fund accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the Manager
or its affiliates, office space and facilities and personnel compensation,
training and benefits; (ii) the charges and expenses of auditors; (iii) the
charges and expenses of any custodian, transfer agent, plan agent, dividend
disbursing agent and registrar appointed by the Trust with respect to the
Portfolio; (iv) issue and transfer taxes, chargeable to the Trust in connection
with securities transactions to which the Trust is a party; (v) insurance
premiums, interest charges, dues and fees for membership in trade associations
and all taxes and corporate fees payable by the Trust to federal, state or other
governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Trust and/or its shares with the Commission,
state or blue sky securities agencies and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the Commission; (vii) all expenses of shareholders' and Trustees' meetings
and of preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies; (viii)
charges and expenses of legal counsel to the Trust; (ix) distribution fees paid
by the Trust in accordance with Rule 12b-1 promulgated by the Commission
pursuant to the 1940 Act; (x) compensation of those Trustees of the Trust who
are not affiliated with or interested persons of the Manager, the Trust (other
than as Trustees), The Pioneer Group, Inc. or Pioneer Funds Distributor, Inc.;
(xi) the cost of preparing and printing share certificates; (xii) interest on
borrowed money, if any; and (xii) organizational expenses of the Trust or
Portfolio.
(d) In addition to the expenses described in Section 3(c) above, the
Trust shall pay all brokers' and underwriting commissions chargeable to the
Portfolio in connection with securities transactions to which the Portfolio is a
party.
4. It is understood that the Manager may employ one or more
sub-investment advisers (each a "Subadviser") under written agreements with each
such Subadviser, provided that any such agreement is first approved by the vote
of a majority of the Trustees, including a majority of the Trustees who are not
"interested persons" (as the term "interested person" is defined in the 1940
Act) of the Trust, the Manager or any such Subadviser, at a meeting of Trustees
called for the purpose of voting on such approval and by a vote of a "majority
of the outstanding voting securities" (as defined in the 1940 Act) of the
Portfolio. The authorization given to the Manager in Sections 1 and 7 hereof may
be delegated by it under any such agreement to any of the Subadvisers, provided
that the Subadvisers shall be subject to the same restrictions and limitations
on the investments and brokerage discretion as the Manager. While the Manager
shall be responsible for allocating assets among the Subadvisers and monitoring
<PAGE>
their relative performances, the Trust agrees that the Manager should not be
accountable to the Trust or the Portfolio or the Portfolio's shareholders for
any loss or other liability relating to specific investments directed by any
Subadviser (even though the Manager retains the right to reserve any such
investment), because the Trust and the Manager will be relying almost
exclusively on the expertise of the Subadvisers for the selection and monitoring
of specific investments directed by the Subadvisers.
5. (a) The Trust shall pay into an escrow account a fee at the rate of
1.00% per annum of the Portfolio's average daily net assets. The fee shall be
released from the escrow account to the Manager as compensation for the
Manager's services hereunder only upon approval of the Fund's shareholders, else
the fee shall be released to the Fund and the Manager shall have no recourse
against the Fund or its shareholders for the services it rendered hereunder. The
management fee payable hereunder shall be computed daily and paid monthly in
arrears. In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current month as a percentage of the total
number of days in such month.
(b) If the operating expenses of the Portfolio in any year exceed
the limits set by state securities laws or regulations in states in which shares
of the Portfolio are sold, the amount payable to the Manager under subsection
(a) above will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulation. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Trust to the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or a portion thereof would otherwise accrue) and/or
undertake to pay or reimburse the Trust for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Manager. Any such fee
reduction or undertaking may be discontinued or modified by the Manager at any
time.
6. The Manager will not be liable for any error of judgment or mistake
of law or for any loss sustained by reason of the adoption of any investment
policy or the purchase, sale, or retention of any security on the recommendation
of the Manager, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, but nothing contained herein will be
construed to protect the Manager against any liability to the Trust or Portfolio
or its shareholders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
<PAGE>
7. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, directors, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Trust or deemed to violate or give rise to any duty or
obligation of the Manager to the Trust except as otherwise imposed by law. The
Trust recognizes that Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
(b) In connection with purchases or sales of portfolio securities
for the account of the Portfolio, neither the Manager nor any of its Directors,
officers or employees will act as a principal or agent or receive any commission
except as permitted by the 1940 Act. The Manager shall arrange for the placing
of all orders for the purchase and sale of portfolio securities for the
Portfolio's account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such orders, the Manager
is directed at all times to seek for the Portfolio the most favorable execution
and net price available except as described herein. It is also understood that
it is desirable for the Portfolio that the Manager have access to supplemental
investment and market research and security and economic analyses provided by
brokers who may execute brokerage transactions at a higher cost to the Portfolio
than may result when allocating brokerage to other brokers on the basis of
seeking the most favorable price and efficient execution. Therefore, the Manager
is authorized to place orders for the purchase and sale of securities for the
Portfolio with such brokers, subject to review by the Trust's Trustees from time
to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Manager in connection with its or its affiliates services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients,
the Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
<PAGE>
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Portfolio
and to such clients.
8. This Agreement shall become effective on the date hereof and shall
remain in force until October 30, 1995, subject to the right of the Trust and
the Manager to terminate this contract as provided in Section 9 hereof.
9. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Directors or its Board of Trustees, as the case may be,
or by vote of a "majority of its outstanding voting securities" (as defined in
the 1940 Act) of the Portfolio and the giving of 60 days' written notice to the
other party.
10. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
11. The Trust agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Trust, the name of the
Trust, and any series thereof, will be changed to one that does not contain the
name "Pioneer" or otherwise suggest an affiliation with the Manager.
12. The Manager is an independent contractor and not an employee of the
Fund for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Portfolio, the Manager
will act solely as investment counsel for such clients and not in any way on
behalf of the Trust or Portfolio.
13. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
14. This Agreement and all performance hereunder shall be governed by
the laws of The Commonwealth of Massachusetts, which apply to contracts made and
to be performed in The Commonwealth of Massachusetts.
15. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
<PAGE>
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
16. The parties to this Agreement acknowledge and agree that all
liabilities arising hereunder, whether direct or indirect, and of any and every
nature whatsoever shall be satisfied solely out of the assets of the portfolio
affected thereby and that no Trustee, officer or holder of shares of beneficial
interest of the Trust shall be personally liable for any of the foregoing
liabilities. The Trust's Certificate of Trust, as amended from time to time, is
on file in the Office of the Secretary of State of the State of Delaware. Such
Certificate of Trust and the Trust's Declaration of Trust describe in detail the
respective responsibilities and limitations on liability of the Trustees,
officers, and holders of shares of beneficial interest.
17. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their seal to be hereto affixed
as of the day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
on behalf of
Real Estate Growth Portfolio
/s/ Joseph P. Barri /s/ John F. Cogan, Jr.
Joseph P. Barri John F. Cogan, Jr.
Secretary Chief Executive Officer
ATTEST: PIONEERING MANAGEMENT CORPORATION
/s/ Joseph P. Barri /s/ David D. Tripple
Joseph P. Barri David D. Tripple
Secretary President
FORM OF MANAGEMENT CONTRACT
THIS AGREEMENT dated this ____ day of October, 1995 between Pioneer
Variable Contracts Trust, a Delaware business trust (the "Fund"), on behalf of
Swiss Franc Bond Portfolio (the "Portfolio"), and Pioneering Management
Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement") for the
purpose of registering its shares for public offering under the Securities Act
of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Fund's Board of
Trustees and officers, to manage the Portfolio.
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Fund, on behalf of the Portfolio, and the Manager do
hereby agree as follows:
1. (a) The Manager will regularly provide the Portfolio with investment
research, advice and supervision and will furnish continuously an investment
program for the Portfolio, consistent with the investment objectives and
policies of the Portfolio. The Manager will determine from time to time what
securities shall be purchased for the Portfolio, what securities shall be held
or sold by the Portfolio and what portion of the Portfolio's assets shall be
held uninvested as cash, subject always to the provisions of the Fund's
Certificate of Trust, Agreement and Declaration of Trust, By-Laws and its
registration statements under the 1940 Act and under the 1933 Act covering the
Fund's shares, as filed with the Securities and Exchange Commission, and to the
investment objectives, policies and restrictions of the Portfolio, as each of
the same shall be from time to time in effect, and subject, further, to such
policies and instructions as the Board of Trustees of the Fund may from time to
time establish. To carry out such determinations, the Manager will exercise full
discretion and act for the Portfolio in the same manner and with the same force
and effect as the Fund itself might or could do with respect to purchases, sales
or other transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or other
transactions.
(b) The Manager will, to the extent reasonably required in the
conduct of the business of the Portfolio and upon the Fund's request, furnish to
the Portfolio research, statistical and advisory reports upon the industries,
businesses, corporations or securities as to which such requests shall be made,
whether or not the Portfolio shall at the time have any investment in such
industries, businesses, corporations or securities. The Manager will use its
best efforts in the preparation of such reports and will endeavor to consult the
<PAGE>
persons and sources believed by it to have information available with respect to
such industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to
the Portfolio's securities transactions required by sub-paragraphs (b)(5), (6),
(9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than
those records being maintained by the custodian or transfer agent appointed by
the Fund) and preserve such records for the periods prescribed therefor by Rule
31a-2 under the 1940 Act. The Manager will also provide to the Board of Trustees
such periodic and special reports as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Fund office space in the offices of the Manager or
in such other place as may be agreed upon from time to time, and all necessary
office facilities, equipment and personnel for managing the Portfolio's affairs
and investments, and shall arrange, if desired by the Fund, for members of the
Manager's organization to serve as officers or agents of the Fund.
(b) The Manager shall pay directly or reimburse the Fund for: (i)
the compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and all
officers of the Fund as such; and (ii) all expenses not hereinafter specifically
assumed by the Fund where such expenses are incurred by the Manager or by the
Fund in connection with the management of the affairs of, and the investment and
reinvestment of the assets of, the Portfolio.
(c) The Fund, on behalf of the Portfolio, shall assume and shall
pay: (i) charges and expenses for fund accounting, pricing and appraisal
services and related overhead, including, to the extent such services are
performed by personnel of the Manager, or its affiliates, office space and
facilities and personnel compensation, training and benefits; (ii) the charges
and expenses of auditors; (iii) the charges and expenses of any custodian,
transfer agent, plan agent, dividend disbursing agent and registrar appointed by
the Fund with respect to the Portfolio; (iv) issue and transfer taxes chargeable
to the Fund in connection with securities transactions to which the Portfolio is
a party; (v) insurance premiums, interest charges, dues and fees for membership
in trade associations and all taxes and corporate fees payable by the Fund to
federal, state or other governmental agencies; (vi) fees and expenses involved
in registering and maintaining registrations of the Fund and/or its shares with
the Commission, state or blue sky securities agencies and foreign countries,
including the preparation of Prospectuses and Statements of Additional
Information for filing with the Commission; (vii) all expenses of shareholders'
and Trustees' meetings and of preparing, printing and distributing prospectuses,
notices, proxy statements and all reports to shareholders and to governmental
agencies; (viii) charges and expenses of legal counsel to the Fund and the
Trustees; (ix) any distribution fees paid by the Portfolio in accordance with
Rule 12b-1 promulgated by the Commission pursuant to the 1940 Act; (x)
compensation of those Trustees of the Fund who are not affiliated with or
interested persons of the Manager, the Fund (other than as Trustees), The
Pioneer Group, Inc. or Pioneer Funds Distributor, Inc.; (xi) the cost of
preparing and printing share certificates; and (xii) interest on borrowed money,
if any.
<PAGE>
(d) In addition to the expenses described in Section 2(c) above, the
Fund, on behalf of the Portfolio, shall pay all brokers' and underwriting
commissions chargeable to the Fund in connection with securities transactions to
which the Portfolio is a party.
3. (a) The Fund, on behalf of the Portfolio, shall pay to the Manager,
as compensation for the Manager's services and expenses assumed hereunder, a fee
at the annual rate of 0.60% of the Portfolio's average daily net assets.
Management fees payable hereunder shall be computed daily and paid monthly in
arrears. In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current month as a percentage of the total
number of days in such month.
(b) If the operating expenses of the Portfolio in any year exceed
the limits set by state securities laws or regulations in states in which shares
of the Portfolio are sold, the amount payable to the Manager under subsection
(a) above will be reduced (but not below $0), and the Manager shall make other
arrangements concerning expenses but, in each instance, only as and to the
extent required by such laws or regulations. If amounts have already been
advanced to the Manager under this Agreement, the Manager will return such
amounts to the Fund, on behalf of the Portfolio, to the extent required by the
preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or a portion thereof would otherwise accrue) and/or
undertake to pay or reimburse the Portfolio for all or a portion of its expenses
not otherwise required to be borne or reimbursed by the Manager. Any such fee
reduction or undertaking may be discontinued or modified by the Manager at any
time.
4. It is understood that the Manager may employ one or more
sub-investment advisers (each a "Subadviser") to provide investment advisory
services to the Portfolio by entering into a written agreement with each such
Subadviser; provided, that any such agreement first shall be approved by the
vote of a majority of the Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Fund, the Manager
or any such Subadviser, at a meeting of Trustees called for the purpose of
voting on such approval and by the affirmative vote of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio.
The authority given to the Manager in Sections 1 through 6 hereof may be
delegated by it under any such agreement; provided, that any Subadviser shall be
subject to the same restrictions and limitations on investments and brokerage
discretion as the Manager. The Trust agrees that the Manager shall not be
accountable to the Fund or the Portfolio or the Portfolio's shareholders for any
loss or other liability relating to specific investments directed by any
Subadviser, even though the Manager retains the right to reverse any such
investment, because, in the event a Subadviser is retained, the Fund and the
Manager will rely almost exclusively on the expertise of such Subadviser for the
selection and monitoring of specific investments.
<PAGE>
5. The Manager will not be liable for any error of judgment or mistake
of law or for any loss sustained by reason of the adoption of any investment
policy or the purchase, sale, or retention of any security on the recommendation
of the Manager, whether or not such recommendation shall have been based upon
its own investigation and research or upon investigation and research made by
any other individual, firm or corporation, but nothing contained herein will be
construed to protect the Manager against any liability to the Portfolio or its
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, Trustees, or employees from buying, selling or
trading in any securities for its or their own accounts or other accounts. The
Manager may act as an investment advisor to any other person, firm or
corporation, and may perform management and any other services for any other
person, association, corporation, firm or other entity pursuant to any contract
or otherwise, and take any action or do any thing in connection therewith or
related thereto; and no such performance of management or other services or
taking of any such action or doing of any such thing shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the
Manager to or with the Fund or deemed to violate or give rise to any duty or
obligation of the Manager to the Fund except as otherwise imposed by law. The
Fund recognizes that the Manager, in effecting transactions for its various
accounts, may not always be able to take or liquidate investment positions in
the same security at the same time and at the same price.
(b) In connection with purchases or sales of securities for the
account of the Portfolio, neither the Manager nor any of its Trustees, officers
or employees will act as a principal or agent or receive any commission except
as permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of securities for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager is directed at all times to
seek for the Portfolio the most favorable execution and net price available
except as described herein. It is also understood that it is desirable for the
Fund that the Manager have access to supplemental investment and market research
and security and economic analyses provided by brokers who may execute brokerage
transactions at a higher cost to the Portfolio than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Portfolio with such brokers, subject
to review by the Fund's Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Manager in connection with its or its
affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients,
the Manager, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
<PAGE>
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Manager in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Fund, the
Portfolio and to such clients.
7. This Agreement shall become effective on the date hereof and shall
remain in force until October __, 1997 and from year to year thereafter, but
only so long as its continuance is approved annually by a vote of the Trustees
of the Fund voting in person, including a majority of its Trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such parties, at a meeting of Trustees called for the purpose of voting
on such approval or by a vote of a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Portfolio, subject to the right
of the Fund and the Manager to terminate this contract as provided in Section 8
hereof.
8. Either party hereto may, without penalty, terminate this Agreement
by vote of its Board of Trustees or Directors, as the case may be, or by vote of
a "majority of its outstanding voting securities" (as defined in the 1940 Act)
and the giving of 60 days' written notice to the other party.
9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Fund agrees that in the event that neither the Manager nor any
of its affiliates acts as an investment adviser to the Fund, the name of the
Fund, and the Portfolio, will be changed to one that does not contain the name
"Pioneer" or otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Fund for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Fund, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Fund or any series thereof.
12. This Agreement states the entire agreement of the parties hereto,
and is intended to be the complete and exclusive statement of the terms hereof.
It may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by
and construed in accordance with the laws of The Commonwealth of Massachusetts.
14. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
<PAGE>
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and their seal to be hereto affixed
as of the day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
on behalf of
Swiss Franc Bond Portfolio
By:
Joseph P. Barri John F. Cogan, Jr.
Secretary Chairman and President
ATTEST: PIONEERING MANAGEMENT CORPORATION
By:
Joseph P. Barri David D. Tripple
Secretary President
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT, dated this 15th day of February 1995, by and
between Pioneer Variable Contracts Trust, a Delaware business trust (the
"Trust"), and Pioneer Funds Distributor, Inc., a Massachusetts corporation (the
"Underwriter").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") for
the purpose of registering shares of beneficial interest for offering under the
Securities Act of 1933, as amended;
WHEREAS, the Underwriter engages in the purchase and sale of securities both as
a broker and a dealer and is registered as a broker-dealer with the Commission
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, the parties hereto deem it mutually advantageous that the Underwriter
should act as Principal Underwriter, as defined in the 1940 Act, for the sale to
insurance company separate accounts and certain other qualified investors of the
shares of beneficial interest of the securities portfolio of each series of the
Trust which the Trustees may establish from time to time (individually, a
"Portfolio" and collectively, the "Portfolios"); and
NOW, THEREFORE, in consideration of the mutual covenants and benefits set forth
herein, the Trust and the Underwriter do hereby agree as follows:
1.The Trust does hereby grant to the Underwriter the right and option
to purchase shares of beneficial interest of each class of each Portfolio of the
<PAGE>
Trust (the "Shares") for sale to insurance company separate accounts and certain
other qualified investors. The Underwriter is not required to purchase any
specified number of Shares, but will purchase from the Trust only a sufficient
number of Shares as may be necessary to fill unconditional orders received from
time to time by the Underwriter from insurance company separate accounts and
other other qualified investors.
2.The Underwriter shall offer Shares at an offering price based upon
the net asset value of the Shares, to be calculated for each class of Shares as
described in the Registration Statement, including the Prospectus, filed with
the Commission and in effect at the time of the offering, plus any sales charges
as approved by the Underwriter and the Trustees of the Trust and as further
outlined in the Trust's Prospectus. The offering price shall be subject to any
provisions set forth in the Prospectus from time to time with respect thereto,
including, without limitation, rights of accumulation, letters of intention,
exchangeability of shares, reinstatement privileges, net asset value purchases
by certain persons and reinvestments of dividends and capital gain
distributions.
3.This Agreement shall terminate on any anniversary hereof if its terms
and renewal have not been approved by a majority vote of the Trustees of the
Trust voting in person, including a majority of its Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Underwriting Agreement (the "Qualified
Trustees"), at a meeting of Trustees called for the purpose of voting on such
approval. This Agreement may also be terminated at any time, without payment of
any penalty, by the Trust on 60 days' written notice to the Underwriter, or by
the Underwriter upon similar notice to the Trust. This Agreement may also be
terminated by a party upon five (5) days' written notice to the other party in
the event that the Commission has issued an order or obtained an injunction or
other court order suspending effectiveness of the Registration Statement
covering the Shares of the Trust. Finally, this Agreement may also be terminated
by the Trust upon five (5) days' written notice to the Underwriter provided
either of the following events has occurred: (i) the NASD has expelled the
Underwriter or suspended its membership in that organization; or (ii) the
qualification, registration, license or right of the Underwriter to sell Shares
in a particular state has been suspended or cancelled in a state in which sales
of the Shares of the Trust during the most recent 12 month period exceeded 10%
of all Shares of the Trust sold by the Underwriter during such period.
<PAGE>
4.The parties to this Agreement acknowledge and agree that all
liabilities arising hereunder, whether direct or indirect, of any nature
whatsoever, including without limitation, liabilities arising in connection with
any agreement of the Trust or its Trustees as set forth herein to indemnify any
party to this Agreement or any other person, if any, shall be satisfied out of
the assets of the Trust and that no Trustee, officer or holder of shares of
beneficial interest of Pioneer shall be personally liable for any of the
foregoing liabilities. The Trust's Certificate of Trust, as amended from time to
time, is on file in the Office of Secretary of State of the State of Delaware,
and a copy of the Trust's Declaration of Trust, as amended from time to time,
has been provided to the Underwriter. The Declaration of Trust describes in
detail the respective responsibilities and limitations on liability of the
Trustees, officers, and holders of Shares of the Trust.
5.This Agreement shall automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
6.In the event of any dispute between the parties, this Agreement shall
be construed according to the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers and their seal to be hereto affixed
as of day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
/s/ Joseph P. Barri /s/ John F. Cogan,Jr.
Joseph P. Barri John F. Cogan, Jr.
Secretary Chairman and President
ATTEST: PIONEER FUNDS DISTRIBUTOR, INC.
/s/ Joseph P. Barri /s/ Robert L. Butler
Joseph P. Barri Robert L. Butler
Clerk President
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
PIONEER VARIABLE CONTRACTS TRUST
<PAGE>
TABLE OF CONTENTS
1. Employment of Custodian
2. Powers and Duties of the Custodian
with respect to Property of the Fund
held by the Custodian
A. Safekeeping 2
B. Manner of Holding Securities 2
C. Registered Name; Nominee 2
D. Purchases 2
E. Exchanges 4
F. Sales of Securities 4
G. Depositary Receipts 5
H. Exercise of Rights; Tender Offers 6
I. Stock Dividends, Rights, Etc. 6
J. Options 6
K. Borrowings 7
L. Demand Deposit Bank Accounts 7
M. Interest Bearing Call or Time Deposits 8
N. Foreign Exchange Transactions
and Futures Contracts 9
0. Stock Loans 10
P. Collections 10
Q. Dividends, Distributions and Redemptions 11
R. Proxies, Notices, Etc. 12
S. Nondiscretionary Details 13
T. Bills 13
U. Deposit of Fund Assets in Securities Systems 13
V. Other Transfers 16
W. Investment Limitations 16
X. Restricted Securities 17
Y. Proper Instructions 18
Z. Segregated Account 19
3. Powers and Duties of the Custodian with
Respect to the Appointment of Subcustodians 20
4. Assistance by the Custodian as to Certain Matters 24
5. Powers and Duties of the Custodian with
Respect to its Role as Financial Agent 24
A. Records 24
B. Accounts 25
C. Access to Records 25
D. Disbursements 25
<PAGE>
6. Standard of Care and Related Matters 25
A. Liability of the Custodian with
Respect to Proper Instructions;
Evidence of Authority; Etc.
B. Liability of the Custodian with
Respect to Use of Securities System
C. Liability of the Custodian with
Respect to Subcustodians
D. Standard of Care; Liability;
Indemnification
E. Reimbursement of Advances
F. Security for obligations to Custodian
G. Appointment of Agents
H. Powers of Attorney
7. Compensation of the Custodian
8. Termination; Successor Custodian
9. Amendment
10. Governing Law
11. Notices
12. Binding Effect
13. Counterparts
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this 15th day of February, 1995 between PIONEER VARIABLE
CONTRACTS TRUST (the "Fund") and each of the Funds listed in Appendix B attached
hereto as said Exhibit may from time to time be revised (collectively, the
"Funds" individually, a "Fund") and Brown Brothers Harriman & Co. (the
"Custodian");
WITNESSETH: That in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian: The Fund hereby employs and appoints the
Custodian as a custodian for the term and subject to the provisions of this
Agreement. The Custodian shall not be under any duty or obligation to require
the Fund to deliver to it any securities or funds owned by the Fund and shall
have no responsibility or liability for or on account of securities or funds not
so delivered. The Fund will deposit with the Custodian copies of the Declaration
of Trust or Certificate of Incorporation and By-Laws (or comparable documents)
of the Fund and all amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or convenient to the Custodian
in the performance of its duties. 2. Powers and Duties of the Custodian with
respect to Property of the Fund held by the Custodian: Except for securities and
funds held by any Subcustodians or held by the Custodian through a non-U.S.
securities depository appointed pursuant to the provisions of Section 3 hereof,
the Custodian shall have and perform the following powers and duties:
A. Safekeeping - To keep safely the securities and other assets of the Fund
that have been delivered to the Custodian and, on behalf of the Fund, from time
to time to receive delivery of securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2U).
C. Registered Name; Nominee - To hold registered securities of the Fund (1)
in the name or any nominee name of the Custodian or the Fund, or in the name or
<PAGE>
any nominee name of any Agent appointed pursuant to Section 6F, or (2) in street
certificate form, so-called, and in any case with or without any indication of
fiduciary capacity, provided that securities are held in an account of the
Custodian containing only assets of the Fund or only assets held as fiduciary or
custodian for customers.
D. Purchases - Upon receipt of Proper Instructions, as defined in Section X
on Page 18, insofar as funds are available for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being made
only upon receipt of the securities (1) by the Custodian, or (2) by a clearing
corporation of a national securities exchange of which the Custodian is a
member, or (3) by a Securities System. However, (i) in the case of repurchase
agreements entered into by the Fund, the Custodian (as well as an Agent) may
release funds to a Securities System or to a Subcustodian prior to the receipt
of advice from the Securities System or Subcustodian that the securities
underlying such repurchase agreement have been transferred by book entry into
the Account (as defined in Section 2U) of the Custodian (or such Agent)
maintained with such Securities System or Subcustodian, so long as such payment
instructions to the Securities System or Subcustodian include a requirement that
delivery is only against payment for securities, (ii) in the case of foreign
exchange contracts, options, time deposits, call account deposits, currency
deposits, and other deposits, contracts or options pursuant to Sections 2J, 2L,
2M and 2N, the Custodian may make payment therefor without receiving an
instrument evidencing said deposit, contract or option so long as such payment
instructions detail specific securities to be acquired, and (iii) in the case of
securities in which payment for the security and receipt of the instrument
evidencing the security are under generally accepted trade practice or the terms
of the instrument representing the security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar securities, the
Custodian may make payment for such securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such security.
E. Exchanges - Upon receipt of proper instructions, to exchange securities
held by it for the account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities and to deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without proper instructions, the
Custodian may surrender securities in temporary form for definitive securities,
may surrender securities for transfer into a name or nominee name as permitted
in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System; provided,
however, that (i) in the case of delivery of physical certificates or
instruments representing securities, the Custodian may make delivery to the
broker buying the securities, against receipt therefor, for examination in
accordance with "street delivery" custom, provided that the payment therefor is
<PAGE>
to be made to the Custodian (which payment may be made by a broker's check) or
that such securities are to be returned to the Custodian, and (ii) in the case
of securities referred to in clause (iii) of the last sentence of Section 2D,
the Custodian may make settlement, including with respect to the form of
payment, in accordance with generally accepted trade practice relating to such
securities or the terms of the instrument representing said security.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct a
Subcustodian or an Agent to surrender securities to the depositary used by an
issuer of American Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such securities against a
written receipt therefor adequately describing such securities and written
evidence satisfactory to the Subcustodian or Agent that the depositary has
acknowledged receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian, for delivery
to the Custodian in Boston, Massachusetts, or at such other place as the
Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to the issuer
thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or an Agent.
H. Exercise of Rights; Tender Offers - Upon timely receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Options - Upon receipt of proper instructions, to receive and retain
confirmations or other documents evidencing the purchase or writing of an option
on a security or securities index by the Fund; to deposit and maintain in a
segregated account, either physically or by book-entry in a Securities System,
securities subject to a covered call option written by the Fund; and to release
and/or transfer such securities or other assets only in accordance with the
provisions of any agreement among the Fund, the Custodian and a broker-dealer
relating to such securities or other assets a notice or other communication
evidencing the expiration, termination or exercise of such covered option
furnished by The Options Clearing Corporation, the securities or options
exchange on which such covered option is traded or such other organization as
may be responsible for handling such options transactions.
K. Borrowings - Upon receipt of proper instructions, to deliver securities
of the Fund to lenders or their agents as collateral for borrowings effected by
the Fund, provided that such borrowed money is payable to or upon the
Custodian's order as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
<PAGE>
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) (hereinafter collectively referred
to as "demand deposit bank accounts") shall be in the name of the Custodian for
account of the Fund and subject only to the Custodian's draft or order. Such
demand deposit accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U. S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To place interest bearing fixed
term and call deposits with such banks and in such amounts as the Fund may
authorize pursuant to proper instructions. Such deposits may be placed with the
Custodian or with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U. S. Dollars or other currencies and
need not be evidenced by the issuance or delivery of a certificate to the
Custodian, provided that the Custodian shall include in its records with respect
to the assets of the Fund appropriate notation as to the amount and currency of
each such deposit, the accepting Banking Institution and other appropriate
details, and shall retain such forms of advice or receipt evidencing the
deposit, if any, as may be forwarded to the Custodian by the Banking
Institution. Such deposits, other than those placed with the Custodian, shall be
deemed portfolio securities of the Fund and the responsibilities of the
Custodian therefor shall be the same as those for demand deposit bank accounts
placed with other banks, as described in Section K of this Agreement. The
responsibility of the Custodian for such deposits accepted on the Custodian's
books shall be that of a U. S. bank for a similar deposit.
N. Foreign Exchange Transactions and Futures Contracts - Pursuant to proper
instructions, to enter into foreign exchange contracts or options to purchase
and sell foreign currencies for spot and future delivery on behalf and for the
account of the Fund. Such transactions may be undertaken by the Custodian with
such Banking Institutions, including the Custodian and Subcustodian(s) as
principals, as approved and authorized by the Fund. Foreign exchange contracts
and options other than those executed with the Custodian, shall be deemed to be
portfolio securities of the Fund and the responsibilities of the Custodian
therefor shall be the same as those for demand deposit bank accounts placed with
other banks as described in Section 2L of this agreement. Upon receipt of proper
instructions, to receive and retain confirmations evidencing the purchase or
sale of a futures contract or an option on a futures contract by the Fund; to
deposit and maintain in a segregated account, for the benefit of any futures
commission merchant or to pay to such futures commission merchant, assets
designated by the fund as initial, maintenance or variation "margin" deposits
intended to secure the Fund's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts written by the
Fund, in accordance with the provisions of any agreement or agreements among any
of the Fund, the Custodian and such futures commission merchant, designated to
comply with the rules of the Commodity Futures Trading Commission and/or any
contract market, or any similar organization or organizations, regarding such
margin deposits; and to release and/or transfer assets in such margin accounts
only in accordance with any such agreements or rules.
0. Stock Loans - Upon receipt of proper instructions, to deliver securities
of the Fund, in connection with loans of securities by the Fund, to the borrower
thereof prior to receipt of the collateral, if any, for such borrowing, provided
that for stock loans secured by cash collateral the Custodian's instructions to
<PAGE>
the Securities System require that the Securities System may deliver the
securities to the borrower thereof only upon receipt of the collateral for such
borrowing.
P. Collections - To collect, receive and deposit in said account or
accounts all income, payments of principal and other payments with respect to
the securities held hereunder, and in connection therewith to deliver the
certificates or other instruments representing the securities to the issuer
thereof or its agent when securities are called, redeemed, retired or otherwise
become payable; provided, that the payment is to be made in such form and manner
and at such time, which may be after delivery by the Custodian of the instrument
representing the security, as is in accordance with the terms of the instrument
representing the security, or such proper instructions as the Custodian may
receive, or governmental regulations, the rules of Securities Systems or other
U.S. securities depositories and clearing agencies or, with respect to
securities referred to in clause (iii) of the last sentence of Section 2D, in
accordance with generally accepted trade practice; (ii) to execute ownership and
other certificates and affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with respect to securities
of the Fund or in connection with transfer of securities, and (iii) pursuant to
proper instructions to take such other actions with respect to collection or
receipt of funds or transfer of securities which involve an investment decision.
Q. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
R. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
S. Nondiscretionary Details - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealings with securities, funds or other property of the Portfolio held by the
Custodian except as otherwise directed from time to time by the Directors or
Trustees of the Fund, and (2) to make payments to itself or others for minor
expenses of handling securities or other similar items relating to the
Custodian's duties under this Agreement, provided that all such payments shall
be accounted for to the Fund.
<PAGE>
T. Bills - Upon receipt of proper instructions, to pay or cause to be paid,
insofar as funds are available for the purpose,, bills, statements, or other
obligations of the Fund.
U. Deposit of Fund Assets in Securities Systems - The Custodian may deposit
and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart 0 of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart 0, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in accordance
with applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred to above, and
be provided to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the Custodian will terminate the use
of any such Securities System on behalf of the Fund as promptly as practicable.
<PAGE>
V. Other Transfers - Upon receipt of proper instructions, to deliver
securities, funds and other property of the Fund to a Subcustodian or another
custodian of the Fund; and, upon receipt of proper instructions, to make such
other disposition of securities, funds or other property of the Fund in a manner
other than or for purposes other than as enumerated elsewhere in this Agreement,
provided that the instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons to whom
delivery is to be made.
W. Investment Limitations - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Declaration
of Trust or Certificate of Incorporation or By-Laws (or comparable documents) or
votes or proceedings of the shareholders or Directors of the Fund. The Custodian
shall in no event be liable to the Fund and shall be indemnified by the Fund for
any violation which occurs in the course of carrying out instructions given by
the Fund of any investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to make expenditures, encumber
securities, borrow or take similar actions affecting the Fund.
X. Restricted Securities. Notwithstanding any other provision of this
Agreement, the Custodian shall not be liable for failure to take any action in
respect of a "restricted security" (as hereafter defined) if the Custodian has
not received Proper Instructions to take such action (including but not limited
to the failure to exercise in a timely manner any right in respect of any
restricted security) unless the Custodian's responsibility to take such action
is set forth in a writing, agreed upon by the Custodian and the Fund or the
investment adviser of the Fund, which specifies particular actions the Custodian
is to take without Proper Instructions in respect of specified rights and
obligations pertaining to a particular restricted security. Further, the
Custodian shall not be responsible for transmitting to the Fund information
concerning a restricted security, such as with respect to exercise periods and
expiration dates for rights relating to the restricted security, except such
information which the Custodian actually receives or which is published in a
source which is publicly distributed and generally recognized as a major source
of information with respect to corporate actions of securities similar to the
particular restricted security. As used herein, the term "restricted securities"
shall mean securities which are subject to restrictions on transfer, whether by
reason of contractual restrictions or federal, state or foreign securities or
similar laws, or securities which have special rights or contractual features
which do not apply to publicly-traded shares of, or comparable interests
representing, such security.
Y. Proper Instructions - Proper instructions shall mean a tested telex from
the Fund or a written request, direction, instruction or certification signed or
initialled on behalf of the Fund by one or more person or persons as the Board
of Directors or Trustees of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the delivery of
securities or the payment of funds to an authorized signatory of the Fund shall
be signed by such person. Those persons authorized to give proper instructions
may be identified by the Board of Directors or Trustees by name, title or
position and will include at least one officer empowered by the Board to name
other individuals who are authorized to give proper instructions on behalf of
the Fund. Telephonic or other oral instructions given by any one of the above
persons will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
<PAGE>
instructions with respect to the transaction involved. Oral instructions will be
confirmed by tested telex or in writing in the manner set forth above but the
lack of such confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions. The Fund authorizes the
Custodian to tape record any and all telephonic or other oral instructions given
to the Custodian by or on behalf of the Fund (including any of its officers,
Directors, Trustees, employees or agents) and will deliver to the Custodian a
similar authorization from any investment manager or adviser or person or entity
with similar reponsibilities which is authorized to give proper instructions on
behalf of the Fund to the Custodian. Proper instructions may relate to specific
transactions or to types or classes of transactions, and may be in the form of
standing instructions.
Proper instructions may include communications effected directly between
electromechanical or electronic devices or systems, in addition to tested telex,
provided that the Fund and the Custodian agree to the use of such device or
system.
Z. Segregated Account - The Custodian shall upon receipt of proper
instructions establish and maintain on its books a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund, including securities maintained
by the Custodian pursuant to Section 2U hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. (or any futures commission
merchant registered under the Commodity Exchange Act) relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Fund or commodity futures contracts or
options thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies, and (iv) as mutually agreed from time to time
between the Fund and the Custodian.
3. Powers and Duties of the Custodian with Respect to the Appointment of
Subcustodians: The Fund hereby authorizes and instructs the Custodian to hold
securities, funds and other property of the Fund which are maintained outside
the United States at subcustodians appointed pursuant to the provisions of this
Section 3 (a "Subcustodian"). The Fund shall approve in writing (1) the
appointment of each Subcustodian and the subcustodian agreement to be entered
into between such Subcustodian and the Custodian, and (2) if the Subcustodian is
organized under the laws of a country other than the United States, the country
or countries in which the Subcustodian is authorized to hold securities, cash
and other property of the Fund. The Fund hereby further authorizes and instructs
the Custodian and any Subcustodian to utilize such securities depositories
located outside the United States which are approved in writing by the Fund to
hold securities, cash and other property of the Fund. Upon such approval by the
<PAGE>
Fund, the Custodian is authorized on behalf of the Fund to notify each
Subcustodian of its appointment as such. The Custodian may, at any time in its
discretion, remove any Subcustodian that has been appointed as such but will
promptly notify the Fund of any such action.
Those Subcustodians, and the countries where and the securities
depositories through which they or the Custodian may hold securities, cash and
other property of the Fund which the Fund has approved to date are set forth on
Appendix A hereto. Such Appendix shall be amended from time to time as
Subcustodians, and/or countries and/or securities depositories are changed,
added or deleted. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country not listed on Appendix A, in order that there shall be sufficient time
for the Fund to give the approval required by the preceding paragraph and for
the Custodian to put the appropriate arrangements in place with such
Subcustodian, including negotiation of a subcustodian agreement and submission
of such subcustodian agreement to the Fund for approval.
If the Fund shall have invested in a security to be held in a country
before the foregoing procedures have been completed, such security shall be held
by such agent as the Custodian may appoint. In any event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to the extent the
Custodian shall have recovered from such agent for any damages caused the Fund
by such agent. At the request of the Fund, Custodian agrees to remove any
securities held on behalf of the Fund by such agent, if practical, to an
approved Subcustodian. Under such circumstances Custodian will collect income
and respond to corporate actions on a best efforts basis.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a securities depository or clearing
agency), notwithstanding any provision of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of the securities or payment, respectively, and securities or
payment may be received in a form, in accordance with governmental regulations,
rules of securities depositories and clearing agencies, or generally accepted
trade practice in the applicable local market.
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian in accordance with the termination
provisions under the applicable subcustodian agreement and, if necessary or
desirable, appoint another subcustodian in accordance with the provisions of
this Section 3. At the election of the Fund, it shall have the right to enforce,
to the extent permitted by the subcustodian agreement and applicable law, the
Custodian's rights against any such Subcustodian for loss or damage caused the
Fund by such Subcustodian.
The Custodian will not amend any subcustodian agreement or agree to change
or permit any changes thereunder except upon the prior written approval of the
Fund.
The Custodian may, at any time in its discretion upon notification to the
Fund, terminate any Subcustodian of the Fund in accordance with the termination
provisions under the applicable Subcustodian Agreement, and at the written
<PAGE>
request of the Fund, the Custodian will terminate any Subcustodian in accordance
with the termination provisions under the applicable Subcustodian Agreement.
If necessary or desirable, the Custodian may appoint another subcustodian
to replace a Subcustodian terminated pursuant to the foregoing provisions of
this Section 3, such appointment to be made upon approval of the successor
subcustodian by the Fund's Board of Directors or Trustees in accordance with the
provisions of this Section 3.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. Assistance by__the Custodian as to Certain Matters: The Custodian may
assist generally in the preparation of reports to Fund shareholders and others,
audits of accounts, and other ministerial matters of like nature.
5. Powers and Duties of the Custodian with Respect to its Role as Financial
Agent: The Fund hereby also appoints the Custodian as the Funds financial agent.
With respect to the appointment as financial agent, the Custodian shall have and
perform the following powers and duties:
A. Records - To create, maintain and retain such records relating to its
activities and obligations under this Agreement as are required under the
Investment Company Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 3la-1 and 3la-2 thereunder) and under
applicable Federal and State tax laws. All such records will be the property of
the Fund and in the event of termination of this Agreement shall be delivered to
the successor custodian.
B. Accounts - To keep books of account and render statements, including
interim monthly and complete quarterly financial statements, or copies thereof,
from time to time as reasonably requested by proper instructions.
C. Access to Records - The books and records maintained by the Custodian
pursuant to Sections 5A and 5B shall at all times during the Custodian's regular
business hours be open to inspection and audit by officers of, attorneys for and
auditors employed by the Fund and by employees and agents of the Securities and
Exchange Commission, provided that all such individuals shall observe all
security requirements of the Custodian applicable to its own employees having
access to similar records within the Custodian and such regulations as may be
reasonably imposed by the Custodian.
D. Disbursements - Upon receipt of proper instructions, to pay or cause to
be paid, insofar as funds are available for the purpose, bills, statements and
other obligations of the Fund (including but not limited to interest charges,
taxes, management fees, compensation to Fund officers and employees, and other
operating expenses of the Fund).
6. Standard of Care and Related Matters:
A. Liability of the Custodian with Respect to Proper Instructions; Evidence
of Authority, Etc. The Custodian shall not be liable for any action taken or
omitted in reliance upon proper instructions believed by it to be genuine or
upon any other written notice, request, direction, instruction, certificate or
other instrument believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to give proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or Trustees or shareholders. Such certificate may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and may be considered in full force and effect until receipt
of a similar certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement.
<PAGE>
The Custodian shall be entitled, at the expense of the Fund, to receive and
act upon advice of (i) counsel regularly retained by the Custodian in respect of
custodian matters, (ii) counsel for the Fund, or (iii) such other counsel as the
Fund and the Custodian may agree upon, with respect to all matters, and the
Custodian shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
B. Liability of the Custodian with Respect to Use of Securities System -
With respect to the portfolio securities, cash and other property of the Fund
held by a Securities System, the Custodian shall be liable to the Fund only for
any loss or damage to the Fund resulting from use of the Securities System if
caused by any negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from any failure of the
Custodian or any such agent to enforce effectively such rights as it may have
against the Securities System. At the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian may have
as a consequence of any such loss or damage to the Fund if and to the extent
that the Fund has not been made whole for any such loss or damage.
C. Liability of the Custodian with Respect to Subcustodians The Custodian
shall be liable to the Fund for any loss or damage to the Fund caused by or
resulting from the acts or omissions of any Subcustodian to the extent that
under the terms set forth in the subcustodian agreement between the Custodian
and the Subcustodian (or in the subcustodian agreement between a Subcustodian
and any secondary Subcustodian), the Subcustodian (or secondary Subcustodian)
has failed to perform in accordance with the standard of conduct imposed under
such subcustodian agreement as determined in accordance with the law which is
adjudicated to govern such agreement and in accordance with any determination of
any court as to the duties of said Subcustodian pursuant to said agreement. The
Custodian shall also be liable to the Fund for its own negligence in
transmitting any instructions received by it from the Fund and for its own
negligence in connection with the delivery of any securities or funds held by it
to any Subcustodian.
D. Standard of Care; Liability; Indemnification - The Custodian shall be
held only to the exercise of reasonable care and diligence in carrying out the
provisions of this Agreement, provided that the Custodian shall not thereby be
required to take any action which is in contravention of any applicable law. The
Fund agrees to indemnify and hold harmless the Custodian and its nominees from
all claims and liabilities (including counsel fees) incurred or assessed against
it or its nominees in connection with the performance of this Agreement, except
such as may arise from its or its nominee's breach of the relevant standard of
conduct set forth in this Agreement. Without limiting the foregoing
indemnification obligation of the Fund, the Fund agrees to indemnify the
Custodian and any nominee in whose name portfolio securities or other property
of the Fund is registered against any liability the Custodian or such nominee
may incur by reason of taxes assessed to the Custodian or such nominee or other
costs, liability or expense incurred by the Custodian or such nominee resulting
directly or indirectly from the fact that portfolio securities or other property
of the Fund is registered in the name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, a securities depository, an agent of
the Custodian or a Subcustodian, a Securities System, or a Banking Institution,
or for any loss arising from a foreign currency transaction or contract, where
the loss results from a Sovereign Risk or where the entity maintaining such
securities, currencies, deposits or other property of the Fund, whether the
<PAGE>
Custodian, a Subcustodian, a securities depository, an agent of the
Custodian or a Subcustodian, a Securities System or a Banking Institution, has
exercised reasonable care maintaining such property or in connection with the
transaction involving such property. A "Sovereign Risk" shall mean
nationalization, expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental authority, de
facto or de jure; or enactment, promulgation, imposition or enforcement by any
such governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's property; or acts of war,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's control.
E. Reimbursement of Advances - The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner provided in Section 7, for
its cash disbursements, expenses and charges (including the fees and expenses of
any Subcustodian or any Agent) in connection with this Agreement, but excluding
salaries and usual overhead expenses.
F. Security for Obligations to Custodian - If the Fund shall require the
Custodian to advance cash or securities for any purpose for the benefit of the
Fund, including in connection with foreign exchange contracts or options
(collectively, an "Advance"), or if the Custodian or any nominee thereof shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement (collectively a
"Liability"), except such as may arise from its or such nominee's breach of the
relevant standard of conduct set forth in this Agreement, then in such event any
property at any time held for the account of the Fund by the Custodian or a
Subcustodian shall be security for such Advance or Liability and if the Fund
shall fail to repay or indemnify the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund's property,
including securities, to the extent necessary to obtain reimbursement or
indemnification.
G. Appointment of Agents - The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
as its agent (an "Agent") to carry out such of the provisions of this Agreement
as the Custodian may from time to time direct, provided, however, that the
appointment of such Agent (other than an Agent appointed pursuant to the third
paragraph of Section 3) shall not relieve the Custodian of any of its
responsibilities under this agreement.
H. Powers of Attorney - Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the performance by the
Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement.
7. Compensation of the Custodian: The Fund shall pay the Custodian a
custody fee based on such fee schedule as may from time to time be agreed upon
in writing by the Custodian and the Fund. Such fee, together with all amounts
for which the Custodian is to be reimbursed in accordance with Section 6D, shall
be billed to the Fund in such a manner as to permit payment by a direct cash
payment to the Custodian.
8. Termination; Successor Custodian: This Agreement shall continue in full
force and effect until terminated by either party by an instrument in writing
delivered or mailed, postage prepaid, to the other party, such termination to
take effect not sooner than seventy five (75) days after the date of such
<PAGE>
delivery or mailing. In the event of termination the Custodian shall be entitled
to receive prior to delivery of the securities, funds and other property held by
it all accrued fees and unreimbursed expenses the payment of which is
contemplated by Sections 6D and 7, upon receipt by the Fund of a statement
setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that
the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the Fund in execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
9. Amendment: This Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof. No
provision of this Agreement may be amended or terminated except by a statement
in writing signed by the party against which enforcement of the amendment or
termination is sought.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
The section headings in this Agreement are for the convenience of the
parties and in no way alter, amend, limit or restrict the contractual
obligations of the parties set forth in this Agreement.
10. Governing Law: This instrument is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and construed according
to the laws of said Commonwealth.
11. Notices: Notices and other writings delivered or mailed postage prepaid
to the Fund addressed to the Fund at 60 State Street, Boston, Massachusetts
02109 or to such other address as the Fund may have designated to the Custodian
in writing, or to the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other address as the
Custodian may have designated to the Fund in writing, shall be deemed to have
been properly delivered or given hereunder to the respective addressee.
12. Binding Effect: This Agreement shall be binding on and shall inure to
the benefit of the Fund and the Custodian and their respective successors and
assigns, provided that neither party hereto may assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of the
other party.
13. Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
PIONEER VARIABLE CONTRACTS TRUST BROWN BROTHERS HARRIMAN & CO.
By per pro
August 2, 1995
Pioneer Variable Contracts Trust
60 State Street
Boston, Massachusetts 02109
Re: Pioneer Variable Contracts Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel to Pioneer Variable Contracts
Trust (formerly named Variable Insurance Contracts Trust), a Delaware business
trust (the "Trust"), in connection with certain matters relating to the issuance
of Shares of beneficial interest in the Trust. Capitalized terms used herein and
not otherwise herein defined are used as defined in the Agreement and
Declaration of Trust of the Trust dated September 16, 1994, as amended,
effective as of January 25, 1995, by resolution of the Trustees dated February
3, 1995 (as so amended, the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on September 27, 1994 (the "Certificate"), as amended
by a Certificate of Amendment of the Trust filed in the Recording Office on
February 6, 1995; the Governing Instrument; the By-laws of the Trust; certain
resolutions of the Trustees of the Trust; the Trust's Notification of
Registration Filed Pursuant to Section 8(a) of the Investment Company Act of
1940 on Form N-8A as filed with the Securities and Exchange Commission on
September 29, 1994; the Trust's Amended Notification of Registration on Form
N-8A as filed with the Securities and Exchange Commission on February 10, 1995;
the Trust's Registration Statement on Form N-1A as filed with the Securities and
Exchange Commission on September 29, 1994 (the "Registration Statement");
Pre-Effective Amendment No. 1 to the Trust's Registration Statement as filed
with the Securities and Exchange Commission on February 10, 1995; and a
<PAGE>
Pioneer Variable Contracts Trust
August 2, 1995
Page 2
certification of good standing of the Trust obtained as of a recent date from
the Recording Office. In such examinations, we have assumed the genuineness of
all signatures, the conformity to original documents of all documents submitted
to us as copies or drafts of documents to be executed or filed, and the legal
capacity of natural persons to complete the execution of documents. We have
further assumed for the purpose of this opinion: (i) the due authorization,
execution and delivery by, or on behalf of, each of the parties thereto of the
above-referenced instruments, certificates and other documents, and of all
documents contemplated by the Governing Instrument, the By-laws and applicable
resolutions of the Trustees to be executed by investors desiring to become
Shareholders; (ii) the payment of consideration for Shares, and the application
of such consideration, as provided in the Governing Instrument, and compliance
with the other terms, conditions and restrictions set forth in the Governing
Instrument and all applicable resolutions of the Trustees of the Trust in
connection with the issuance of Shares (including, without limitation, the
taking of all appropriate action by the Trustees to designate Series of Shares
and the rights and preferences attributable thereto as contemplated by the
Governing Instrument); (iii) that appropriate notation of the names and
addresses of, the number of Shares held by, and the consideration paid by,
Shareholders will be maintained in the appropriate registers and other books and
records of the Trust in connection with the issuance, redemption or transfer of
Shares; (iv) that no event has occurred subsequent to the filing of the
Certificate that would cause a termination or reorganization of the Trust under
Section 4 or Section 5 of Article IX of the Governing Instrument; (v) that the
activities of the Trust have been and will be conducted in accordance with the
terms of the Governing Instrument and the Delaware Business Trust Act, 12 Del.
C. ss.ss. 3801 et seq. (the "Delaware Act"); and (vi) that each of the documents
examined by us is in full force and effect and has not been modified,
supplemented or otherwise amended except as herein referenced. No opinion is
expressed herein with respect to the requirements of, or compliance with,
federal or state securities or blue sky laws. Further, we express no opinion on
the sufficiency or accuracy of any registration or offering documentation
relating to the Trust or the Shares. As to any facts material to our opinion,
other than those assumed, we have relied without independent investigation on
the above-referenced documents and on the accuracy, as of the date hereof, of
the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly organized and validly existing business trust in
good standing under the laws of the State of Delaware.
<PAGE>
Pioneer Variable Contracts Trust
August 2, 1995
Page 3
2. The Shares of Swiss Franc Bond Portfolio, a Series of the Trust,
when issued to Shareholders of such Series in accordance with the terms,
conditions, requirements and procedures set forth in the Governing Instrument,
will constitute legally issued, fully paid and non-assessable Shares of
beneficial interest in the Trust.
3. Under the Delaware Act and the terms of the Governing Instrument,
each Shareholder of the Trust, in such capacity, will be entitled to the same
limitation of personal liability as that extended to stockholders of private
corporations for profit organized under the general corporation law of the State
of Delaware; provided, however, that we express no opinion with respect to the
liability of any Shareholder who is, was or may become a named Trustee of the
Trust. Neither the existence nor exercise of the voting rights granted to
Shareholders under the Governing Instrument will, of itself, cause a Shareholder
to be deemed a trustee of the Trust under the Delaware Act. Notwithstanding the
foregoing or the opinion expressed in paragraph 2 above, we note that, pursuant
to Section 2 of Article VIII of the Governing Instrument, the Trustees have the
power to cause Shareholders, or Shareholders of a particular Series, to pay
certain custodian, transfer, servicing or similar agent charges by setting off
the same against declared but unpaid dividends or by reducing Share ownership
(or by both means).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission as part of an amendment to the Trust's
Registration Statement. In giving this consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as provided in this
paragraph, the opinion set forth above is expressed solely for the benefit of
the addressee hereof and may not be relied upon by, or filed with, any other
person or entity for any purpose without our prior written consent.
Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL
/S/MORRIS, NICHOLS, ARSHT & TUNNELL
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 6, 1995 (and to all references to our firm) included in or made a
part of the Pioneer Variable Contracts Trust Post-Effective Amendment No. 1 and
Amendment No. 2 to Registration Statement File Nos. 33-84546 and 811-8786.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 7, 1995
FORM OF SHARE PURCHASE AGREEMENT
This Agreement is made as of the ___ day of ______, 1994 between The Pioneer
Group, Inc., a Delaware corporation ("PGI"), and Variable Insurance Contracts
Trust, a Delaware business trust (the "Trust").
WHEREAS, the Trust wishes to sell to PGI, and PGI wishes to purchase from
the Trust, $100,000 of shares of beneficial interest of the Trust (_______
shares) at a purchase price of $_____ per share (the "Shares"); and
WHEREAS, PGI is purchasing the Shares for the purpose of providing the
initial capitalization of the Trust;
NOW, THEREFORE, the parties hereto agree as follows:
1.Simultaneously with the execution of this Agreement, PGI is delivering to
the Trust a check in the amount of $100,000 in full payment for the Shares.
2.PGI agrees that it is purchasing the Shares for investment and has no
present intention of redeeming or reselling the Shares.
3.PGI further agrees that it may not withdraw the Shares from the Trust at
a rate, which at any time during the Trust's first five years of operations,
exceeds $1,666.67 per month.
Executed as of the date first set forth above.
THE PIONEER GROUP, INC.
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.
President
VARIABLE INSURANCE CONTRACTS TRUST
/s/ Joseph P. Barri
Joseph P. Barri
Secretary
POWER OF ATTORNEY
The undersigned Trustee of Pioneer Variable Contracts Trust, a Delaware
business trust, does hereby severally constitute and appoint John F. Cogan, Jr.,
David D. Tripple and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A of Pioneer Variable Contracts Trust (formerly named Variable Insurance
Contracts Trust) under the Investment Company Act of 1940, as amended (the "1940
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), with
respect to the offering of its shares of beneficial interest and any and all
other documents and papers relating thereto, and generally to do all such things
in my name and on my behalf in the capacities indicated to enable Pioneer
Variable Contracts Trust to comply with the 1940 Act and the 1933 Act, and all
requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
1st day of February, 1995.
/s/ Richard H. Egdahl, M.D.
Richard H. Egdahl, M.D., Trustee
<PAGE>
POWER OF ATTORNEY
The undersigned officer and Trustee of Variable Insurance Contracts
Trust, a Delaware business trust, does hereby severally constitute and appoint
John F. Cogan, Jr. and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A to be filed by Variable Insurance Contracts Trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), and under the Securities Act
of 1933, as amended (the "1933 Act"), with respect to the offering of its shares
of beneficial interest and any and all other documents and papers relating
thereto, and generally to do all such things in my name and on my behalf in the
capacities indicated to enable Variable Insurance Contracts Trust to comply with
the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any and all amendments to
said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
26th day of September, 1994.
/s/ David D. Tripple
David D. Tripple, Trustee and
Executive Vice President
<PAGE>
POWER OF ATTORNEY
The undersigned officer and Trustee of Variable Insurance Contracts
Trust, a Delaware business trust, does hereby severally constitute and appoint
David D. Tripple and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A to be filed by Variable Insurance Contracts Trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), and under the Securities Act
of 1933, as amended (the "1933 Act"), with respect to the offering of its shares
of beneficial interest and any and all other documents and papers relating
thereto, and generally to do all such things in my name and on my behalf in the
capacities indicated to enable Variable Insurance Contracts Trust to comply with
the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any and all amendments to
said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
26th day of September, 1994.
/s/ John F. Cogan, Jr.
John F. Cogan, Jr., Chairman,
Trustee and President
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of Pioneer Variable Contracts Trust, a Delaware
business trust, does hereby severally constitute and appoint John F. Cogan, Jr.,
David D. Tripple and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A of Pioneer Variable Contracts Trust (formerly named Variable Insurance
Contracts Trust) under the Investment Company Act of 1940, as amended (the "1940
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), with
respect to the offering of its shares of beneficial interest and any and all
other documents and papers relating thereto, and generally to do all such things
in my name and on my behalf in the capacities indicated to enable Pioneer
Variable Contracts Trust to comply with the 1940 Act and the 1933 Act, and all
requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
6th day of February, 1995.
/s/ John Winthrop
John Winthrop, Trustee
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of Pioneer Variable Contracts Trust, a Delaware
business trust, does hereby severally constitute and appoint John F. Cogan, Jr.,
David D. Tripple and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A of Pioneer Variable Contracts Trust (formerly named Variable Insurance
Contracts Trust) under the Investment Company Act of 1940, as amended (the "1940
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), with
respect to the offering of its shares of beneficial interest and any and all
other documents and papers relating thereto, and generally to do all such things
in my name and on my behalf in the capacities indicated to enable Pioneer
Variable Contracts Trust to comply with the 1940 Act and the 1933 Act, and all
requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
7th day of February, 1995.
/s/ Marguerite A. Piret
Marguerite A. Piret, Trustee
<PAGE>
POWER OF ATTORNEY
The undersigned officer of Variable Insurance Contracts Trust, a
Delaware business trust, does hereby severally constitute and appoint John F.
Cogan, Jr., David D. Tripple and Joseph P. Barri, and each of them acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each of them acting singly, to sign for me, in my name and in the
capacity indicated below, any and all amendments to the Registration Statement
on Form N-1A to be filed by Variable Insurance Contracts Trust under the
Investment Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), with respect to the
offering of its shares of beneficial interest and any and all other documents
and papers relating thereto, and generally to do all such things in my name and
on my behalf in the capacity indicated to enable Variable Insurance Contracts
Trust to comply with the 1940 Act and the 1933 Act, and all requirements of the
Securities and Exchange Commission thereunder, hereby ratifying and confirming
my signature as it may be signed by said attorneys or each of them to any and
all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument the
23rd day of September, 1994.
/s/ William H. Keough
William H. Keough
Treasurer
<PAGE>
POWER OF ATTORNEY
The undersigned Trustee of Pioneer Variable Contracts Trust, a Delaware
business trust, does hereby severally constitute and appoint John F. Cogan, Jr.,
David D. Tripple and Joseph P. Barri, and each of them acting singly, to be my
true, sufficient and lawful attorneys, with full power to each of them, and each
of them acting singly, to sign for me, in my name and in the capacities
indicated below, any and all amendments to the Registration Statement on Form
N-1A of Pioneer Variable Contracts Trust (formerly named Variable Insurance
Contracts Trust) under the Investment Company Act of 1940, as amended (the "1940
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), with
respect to the offering of its shares of beneficial interest and any and all
other documents and papers relating thereto, and generally to do all such things
in my name and on my behalf in the capacities indicated to enable Pioneer
Variable Contracts Trust to comply with the 1940 Act and the 1933 Act, and all
requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 1st day of August, 1995.
/s/ Stephen K. West
Stephen K. West, Trustee
