May 30, 1995
Supplement to the Prospectus for
Pioneer Variable Contracts Trust
dated March 1, 1995
The Fund and the Pioneer
Organization
Effective May 1, 1995, John A. Carey, Vice President of Pioneering Management
Corporation became the portfolio manager responsible for the day-to-day
management of Balanced Portfolio. Mr. Carey joined Pioneer in 1979 and serves as
the portfolio manager for other Pioneer mutual funds. David D. Tripple,
Executive Vice President of all the Pioneer mutual funds, served as the manager
of this Portfolio from its inception through April 30, 1995.
0595-2558
(C) Pioneer Funds Distributor, Inc.
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Pioneer Variable Contracts Trust
Prospectus
February 15, 1995
TABLE OF CONTENTS
Page
I. HIGHLIGHTS 2
II. HOW THE FUND WORKS 3
III. RISK CONSIDERATIONS 6
IV. THE FUND AND THE PIONEER ORGANIZATION 9
V. FUND MANAGEMENT FEES AND OTHER EXPENSES 10
VI. PERFORMANCE 11
VII. DISTRIBUTIONS AND TAXES 11
VIII. SHAREHOLDER INFORMATION 12
IX. APPENDIX 14
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.
America Income Portfolio seeks as high a level of current income as is
consistent with the preservation of capital. The Portfolio invests exclusively
in securities backed by the full faith and credit of the United States 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) 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.
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I. HIGHLIGHTS
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust (the Fund) is an open-end management
investment company that currently consists of seven 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, except Real Estate Growth Portfolio, which is advised by Pioneer
Winthrop Advisors (PWA). 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 capi-
Growth tal 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 capi-
Growth tal 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.
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.
America Invests for as high a level of cur-
Income rent income as is consistent with
the preservation of capital exclusively
through investments in securities backed
by the full faith and credit
of the United States.
Money Market Invests for current income consistent with
preserving capital and providing liquidity.
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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 seven 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 (or PWA, for Real Estate Growth Portfolio) believes there to be
extraordinary risks in being substantially invested in the securities in which
the Portfolio normally concentrates its investments. Refer to the Appendix for a
description of short-term 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.
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."
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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."
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 PWA'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, PWA 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, PWA 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. PWA 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
4
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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 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 more 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.
America Income Portfolio seeks as high a level of current income as is
consistent with the preservation of capital. The Portfolio invests exclusively
in U.S. Government Securities that are backed by the full faith and credit of
the United States and in "when-issued" commitments and repurchase agreements
with respect to such securities.
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 U.S.
Government Securities in which the Portfolio invests is backed by the full faith
and credit of the United States, this guarantee does not extend to the market
value of these securities and, accordingly, the net asset value of the
Portfolio's shares will fluctuate.
The Portfolio is free to take advantage of the entire range of maturities
offered by the U.S. Government Securities in which it may invest, 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. 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.
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.
* U.S. Government Securities.
* Obligations of U.S. banks and their non-U.S. branches, savings
and loan associations with total assets in excess
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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.
* 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.
* 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).
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; 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% each, all of which may be invested in one
country. PWA 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 (and PWA, with
respect to Real Estate Growth Portfolio) will take these factors into
consideration in managing each Portfolio's non-U.S. investments.
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International Growth Portfolio may invest a portion of its assets in
developing countries, or in countries with new or developing capital markets;
for example, nations 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 International Growth Portfolio's non-U.S.
investments, and the value of dividends and interest earned by the Portfolio,
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. Although Pioneer
may attempt to manage currency exchange rate risks, 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
a foreign currency, and the currency's value rises, the Portfolio will lose the
opportunity to participate in the currency's appreciation.
Currency Management. The relative performance of foreign currencies can be
an important factor in the performance of International Growth Portfolio since
the Portfolio 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 (and PWA, with respect to Real
Estate Growth Portfolio) may manage each Portfolio's 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.
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
pay. 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 (and PWA with respect to Real Estate Growth Portfolio) 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 Portfolio
may not purchase lower rated debt securities, but up to 5% of its 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 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-
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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.
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's investments in mortgage-backed securities are limited to GNMA
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.
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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 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 other than Real Estate
Growth 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 December 31, 1994, 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 other than Real Estate Growth 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:
Capital Growth Portfolio: Warren J. Isabelle, Director of Research and Vice
President of Pioneer. Mr. Isabelle joined Pioneer in 1984.
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.
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: David D. Tripple, President of Pioneer.
Real Estate Growth Portfolio is advised by Pioneer Winthrop Advisors (PWA).
PWA is a joint venture of PGI and Winthrop Financial Associates, A Limited
Partnership (WFA), a Maryland limited partnership with its principal business
address at One International Place, Boston, Massachusetts 02110. WFA is one of
the nation's largest owners and managers of real estate. PWA provides investment
advice to other mutual funds and certain institutional accounts.
Real Estate Growth Portfolio's investment decisions are made by PWA's
advisory committee which relies on investment subadvisory services provided by
Pioneer and by Winthrop Advisors Limited Partnership (WALP), pursuant to their
investment subadvisory contracts with the Portfolio. The advisory committee
consists of David D. Tripple, Pioneer's President and Chief Investment Officer,
Robert Benson, Senior Vice President of Pioneer, Francis X. Jacoby, Managing
Director of WALP and W. Tod McGrath, Vice President of WALP. Day-to-day
management of the Portfolio is the responsibility of Mr. Benson, who joined
Pioneer in 1974.
Each Portfolio, other than Balanced 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
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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, except Real Estate Growth
Portfolio which pays PWA, 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 1.00%
Real Estate Growth Portfolio (1), (2)
Capital Growth Portfolio 0.65%
Equity-Income Portfolio
Balanced Portfolio
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.
(2) With regard to Real Estate Growth Portfolio, PWA has entered into
subadvisory agreements with Pioneer and WALP on behalf of Real Estate Growth
Portfolio. Under the subadvisory agreements, Pioneer and WALP provide investment
advice, research services and other services to assist PWA in managing the
Portfolio.
As compensation for their investment subadvisory services with respect to
Real Estate Growth Portfolio, Pioneer and WALP are each entitled to a fee
(computed daily and paid monthly) at an annual rate of 0.30% of the Portfolio's
average daily net assets. These subadvisory fees are payable solely by PWA, and
Real Estate Growth Portfolio is not responsible for their payment.
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 voluntary and temporary fee waiver or expense limitation
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%
America Income Portfolio 1.00%
Money Market Portfolio 0.75%
Under the terms of their respective management contracts with the Fund,
Pioneer and PWA (with respect to Real Estate Growth Portfolio) assist in the
management of each Portfolio and are authorized in their discretion to buy and
sell securities for the account of each Portfolio. Pioneer (PWA with respect to
Real Estate Growth Portfolio) 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 PWA in the case of Real Estate Growth
Portfolio) 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, PWA, the Fund (other than as
Trustees), PGI or PFD; (j) the cost of
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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, 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 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 and Capital Growth
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,
are distributed each year for the Portfolios. Such income and capital gains are
automatically reinvested in additional shares of the Portfolios.
International Growth, Capital Growth, Real Estate Growth, Equity-Income and
Balanced Portfolios make dividend and capital gain distributions on a per-share
basis. After every distribution from each of these Portfolios, the Portfolio's
share price drops by the amount 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.
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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, place certain limitations on the assets of a Portfolio that may be
invested in securities of a single issuer. 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 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.
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
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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 exist: 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.
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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
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. 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
U.S. Government 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, or PWA with respect to Real Estate Growth Portfolio, 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 or PWA 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 may
adopt guidelines and delegate to Pioneer the daily function of determining and
monitoring the liquidity of restricted securities. The Trustees, however, will
retain sufficient oversight and be ultimately responsible for the determination.
Under 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, 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 to enter 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.
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. Balanced and America Income Portfolios may purchase
GNMA Certificates which are a type of mortgage-backed security described above.
Balanced Portfolio may also purchase CMOs.
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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 and Balanced Portfolios will not invest in the lowest tranche of
CMOs and 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 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. 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) 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 and Real Estate Growth 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.
Options and futures can be volatile investments and involve certain risks.
If Pioneer or PWA 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
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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.
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
the Federal Farm Credit Bank or by 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 other U.S. Government Securities.
Warrants. International Growth, Captial 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.
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[PIONEER LOGO]
PIONEER VISION (SM)
VARIABLE ANNUITY
PROSPECTUS
March 1, 1995
SMA Life
Individual Variable Annuity
Pioneer Variable Contracts Trust
0195-2289
