File No. 33-84546
File No. 811-8786
As Filed with the Securities and Exchange Commission on April 30, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
Pre-Effective Amendment No. ___ /_ __/
Post-Effective Amendment No. _4_ /_X__/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /_X__/
Amendment No. 5 /_X__/
(Check appropriate box or boxes)
PIONEER VARIABLE CONTRACTS TRUST
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
(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)
_X_ on April 30, 1996 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)
___ on [date] 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 filed
its Rule 24f-2 Notice for the year ended December 31, 1996 on February 29, 1996.
<PAGE>
PIONEER VARIABLE CONRACTS 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
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
16. Investment Advisory and Other
Services....................................Statement of Additional
Information - Management
of the Trust; Investment
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 LOGO]
PIONEER VISION SM
VARIABLE ANNUITY
PROSPECTUS
Apriil 30, 1996
Allmerica Financial Life
Insurance and Annuity Company
Individual Variable Annuity
Pioneer Variable Contracts Trust
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
PROSPECTUS
APRIL 30, 1996
TABLE OF CONTENTS
PAGE
I. HIGHLIGHTS 2
II. HOW THE FUND WORKS 4
III. RISK CONSIDERATIONS 8
IV. THE FUND AND THE PIONEER ORGANIZATION 10
V. FUND MANAGEMENT FEES AND OTHER EXPENSES 12
VI. PERFORMANCE 13
VII. DISTRIBUTIONS AND TAXES 13
VIII. SHAREHOLDER INFORMATION 14
IX. APPENDIX 16
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- United States (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 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 THE SHARES OF THE PORTFOLIOS" for more
complete information.
A Statement of Additional Information dated April 30, 1996 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 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.
<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 performance
BOND 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.
<PAGE>
The following information has been derived from financial statements which have
been provided by Arthur Andersen LLP, independent public accountants, in
connection with their audit of the Porfolios' financial statements. Arthur
Andersen LLP's report on the Fund's financial statements as of December 31, 1995
appears in the Porfolios' Annual Report which is incorporated by reference into
the Statement of Additional Information. The information below should be read in
conjunction with financial statements contained in the Portfolios' Annual
Report.
FINANCIAL HIGHLIGHTS+
SELECTED DATA FOR A SHARE OUTSTANDING FROM
MARCH 1, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Real Swiss
International Capital Estate Equity- Franc America Money
Growth Growth Growth Income Balanced Bond+ Income Market
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.00 $10.00 $10.00 $10.00 $10.00 $15.00 $10.00 $1.00
------- ------- ------- ------- ------- ------- ------- -----
INCREASE FROM INVESTMENT OPERATIONS:
Net investment income $-- $0.02 $0.12 $0.19 $0.20 $0.04 $0.38 $0.04
Net realized and
unrealized gain (loss) on
investments 1.04* 1.69 1.55 2.16 1.87 0.02 0.18 ---
---- - ----- ---- ---- ---- ---- ----
Total increase (decrease)
from investment operations $1.04 $1.71 $1.67 $2.35 $2.07 -- $0.56 $ ---
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income (0.02) (0.02) (0.23) (0.18) (0.20) -- (0.38) (0.04)
Tax return of capital -- -- (0.18) -- -- -- -- --
Net realized gain (0.09) 0.12 (0.03) -- --- -- -- ---
------ ---- ------
Net increase (decrease) in
net asset value $0.93 $1.57 $1.23 $2.17 $1.87 $0.06 $(0.18) $0.00
------ ------ ----- ----- ----- ------- -----
Net asset value, end of period $10.93 $11.57 $11.23 $12.17 $11.87 $15.06 $10.18 $1.00
====== ====== ====== ====== ====== ------ ====== =====
Total return** 10.42% 17.13% 16.96% 23.62% 20.84% 0.40% 5.68% 4.35%
Ratio of net operating
expenses to average net
assets ***++ 2.10% 1.56% 2.10% 1.63% 1.76% 2.25% 1.12% 0.81%
Ratio of net investment
income (loss) to average
net assets ***++ (0.25)% 0.48% 2.68% 2.89% 2.99% 1.70 5.22% 5.00%
Portfolio turnover rate *** 138.64% 46.09% 1.43% ---% ---% --% 96.38% ---
Net assets end of period
(in thousands) $2,967 $9,357 $512 $6,914 $2661 $189 $3,514 $3,416
RATIOS ASSUMING NO REDUCTION OF FEES OR EXPENSES:
Net operating expenses *** 17.22% 3.95% 45.96% 5.32% 14.77% 69.22% 11.86% 8.34%
Net investment income (loss) *** (15.37)% (1.91)% (41.18)% (0.80%) (10.02)% (65.27) (5.52)% 2.53%
RATIOS ASSUMING A REDUCTION OF FEES AND EXPENSES BY PIONEER AND NO REDUCTION FOR FEES PAID INDIRECTLY:
Net operating expenses *** 1.75% 1.49% 1.57% 1.47% 1.45% 1.25% 0.99% 0.74%
Net investment income (loss) *** 0.10% 0.55% 3.21% 3.05% 3.30% 2.70% 5.35% 5.07%
</TABLE>
* 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.
+ Swiss Franc Bond Portfolio was first offered November 1, 1995.
++ Ratios assuming no reduction for fees paid directly.
<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.
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.
<PAGE>
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."
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
<PAGE>
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
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.
<PAGE>
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 Counsellors, 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. Pioneer expects that these
combination investments generally will represent no more than 10% of the
Portfolio's total assets. 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 if Pioneer determines that a longer weighted average maturity is
appropriate in response to existing or expected market conditions.
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. 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 PRACTICES. 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
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.
<PAGE>
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.
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.
<PAGE>
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).
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
<PAGE>
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
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
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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
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 xxx people in the United States and more than x,xxx 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.
THE MANAGER
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 December
31, 1995, Pioneer advised mutual funds with a total value of over $14 billion,
which includes more than 1,000,000 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.
<PAGE>
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 Senior
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 number of investment
management firms.
THE REAL ESTATE GROWTH PORTFOLIO SUBADVISER. Boston Financial Securities, Inc.
(BFS), the investment subadviser to Real Estate Growth Portfolio since May 1,
1996, is an affiliate of the Boston Financial Group Limited Partnership, a
Massachusetts limited partnership ("Boston Financial"), which together with a
predecessor business has extensive experience and expertise in placing,
evaluating and providing advice on a variety of real estate related investments
since 1969 for individuals, institutions and real estate professionals. Several
other affiliates of BFS also provide a variety of financial, consulting and
management services to real estate asset managers in the U.S., Boston Financial
oversees investment in over $5.5 billion of properties in 49 states. The company
serves over 37,000 investors with equity contributions in excess of $1.7 billion
in real estate investments.
In its capacity as subadviser to the Portfolio, BFS (i) identifies and analyzes
real estate industry companies, including real estate properties and other
permissible investments for the Portfolio, (ii) analyzes market conditions
affecting the real estate industry generally and specific geographical and
securities markets in which the Portfolio may invest or is invested, (iii)
continuously reviews and analyzes the investments in the Real Estate Growth
Portfolio's portfolio and (iv) furnishes advisory reports based on such analysis
to Pioneer.
Mr. Fred N. Pratt, Jr. has the ultimate responsibility for overseeing the
provisions of subadvisory services to the Real Estate Growth Portfolio. Mr.
Pratt is President and Chief Executive officer of Boston Financial, a Director
of BFS and a Trustee of the Real Estate Growth Portfolio. Mr. Pratt has worked
in the real estate industry since 1969. Mr. David Carter, a Vice President of
BFS, has been primarily responsibility for the day-to-day provision of
subadvisory services to the Real Estate Growth Portfolio since March 6, 1996.
Mr. Carter has worked as a real estate analyst since 1992.
The executive office of BFS are located at 101 Arch Street, Boston,
Massachusetts 02110. BFS has not previously served as an investment adviser or
subadviser to a registered investment company; however, on March 5, 1996, at a
Special Meeting of Shareholders, BFS was approved as the investment subadviser
to Pioneer Real Estate Growth Shares.
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 Real Estate Shares, 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
<PAGE>
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%. See "Financial
Highlights" for actual turnover rates. 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%
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(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.
During the fiscal period ended December, 1995, the Portflios incurred expenses
as follows: International Growth, $145,854; Capital Growth,$108,885; Real Estate
Growth, $86,959; Equity-Income, $90,061; Balanced, $90,240; Swiss Franc Bond,
$13,723; America Income, $83,708;and Money Market, $83,754. Such expenses
included management fees paid or payable to Pioneer as follows: International
Growth, $8,341; Capital Growth,$17,739; Real Estate Growth, $1,879;
Equity-Income, $10,878; Balanced, $3,924; Swiss Franc Bond, $127; America
Income,
<PAGE>
$3,861;and Money Market, $4,972. Pursuant to Pioneer's voluntary expense
limitation agreements, Pioneer did not impose its management fee on any of the
Portfolios.
Pioneer has agreed not to impose a portion of its management fee or to make
other arrangements to reduce Portfolio expenses to a specified percentage of
average daily net assets, as indicated below. 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 1.50%
Capital Growth Portfolio 1.25%
Real Estate Growth Portfolio 1.25%
Equity-Income Portfolio 1.25%
Balanced Portfolio 1.25%
Swiss Franc Bond Portfolio 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
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.
SUBADVISORY FEE FOR REAL ESTATE GROWTH PORTFOLIO. As compensation for its
subadvisory services, Pioneer will pay BFS a subadvisory fee equal to 0.30% per
annum of the Real Estate Growth Portfolio's average daily net assets. The
subadvisory fee payable by Pioneer to BFS could be reduced proportionally to the
extent that the management fee paid by the Real Estate Growth Portfolio to
Pioneer is reduced under Pioneer's voluntary expense limitation agreement or,
after written notice to BFS, to the extent that Pioneer elects to utilize a
portion of the management fees paid to Pioneer by the Real Estate Growth
Portfolio to make payments to third parties. No fees were paid by Pioneer to BFS
during fiscal 1995.
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.
<PAGE>
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
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, PURCHASERS OF SUCH
CONTRACTS SHOULD CAREFULLY REVIEW THE PROSPECTUS OF THE SELECTED INSURANCE
PRODUCT 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 a Variable Contract, including the tax
consequences of withdrawals or other payments, refer to the prospectus of the
Variable Contract 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. A Portfolio's dividends
and capital gain distributions are generally treated as ordinary income and
long-term capital gain, respectively, under the Code. Insurance companies should
consult their own tax advisers regarding the tax treatment of dividends or
capital gain distributions they receive from any Portfolio.
Each Portfolio is treated as a separate entity for federal income tax purposes
and has elected or 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.
<PAGE>
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,
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 the insurance
company's separate account prospectus and in the Fund's Statement of Additional
Information.
VIII. SHAREHOLDER INFORMATION
OPENING AN ACCOUNT
SINCE INDIVIDUAL INVESTORS MAY NOT PURCHASE PORTFOLIO SHARES DIRECTLY, THEY
SHOULD READ THE PROSPECTUS OF THE INSURANCE COMPANY'S SEPARATE ACCOUNT TO OBTAIN
INSTRUCTIONS FOR PURCHASING A VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE
CONTRACT AND INFORMATION ON THE ALLOCATION OF RETIREMENT PLAN PURCHASE PAYMENTS
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
foreign exchange rates employed by the Portfolios' independent pricing services.
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.
<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
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
<PAGE>
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, provided that the value of securities loaned by a Portfolio may not
exceed 33 1/3 % of its total assets. 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
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
<PAGE>
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. America 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
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
<PAGE>
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.
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.
<PAGE>
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 December 31, 1995, the Swiss
franc-U.S. dollar exchange rate was $1.154Sfr = US$1. Switzerland's Gross
Domestic Product in 1995 was U.S. $306.1 ($361.9 billion Sfr). Switzerland's
current account surplus totaled $23.86 billion Sfr or 6.5% of Gross Domestic
Product in 1995. Inflation in Switzerland averaged 1.8% in 1995.
<PAGE>
0596-3269
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1996
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 is not a Prospectus, but
should be read in conjunction with the Prospectus (the "Prospectus") dated April
30, 1996, 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-33
5. Custodian...........................................................B-33
6. Independent Public Accountant.......................................B-34
7. Portfolio Transactions..............................................B-34
8. Tax Status..........................................................B-37
9. Description of Shares...............................................B-41
10. Certain Liabilities.................................................B-42
11. Determination of Net Asset Value....................................B-43
12. Investment Results..................................................B-45
13. Financial Statements.......................................... B-49
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 and beneficial owners 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 by 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.
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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" or "PMC"), 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
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<PAGE>
secondary 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
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<PAGE>
the prices of portfolio securities subsequent to 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
mortgage loans. Because prepayment rates of individual
B-5
<PAGE>
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.
B-6
<PAGE>
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.
B-7
<PAGE>
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
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time of the contract. A 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 a 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
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exchanged is properly matched with the 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 purchasing 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 successful 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
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constant. In order to protect against such 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 (if the option is
exercised), 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 (if the option
is exercised) 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
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for a 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
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restricted securities eligible for resale under Rule 144A under the Securities
Act of 1933, as amended (the "1933 Act"), and, for the 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. ) 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
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invest in foreign securities may also enter into repurchase agreements involving
certain foreign government securities. The 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
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not so 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 of 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
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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 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 or the United Kingdom.
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
Boston, Massachusetts School of Management; Professor of
Public Health, Boston University
School of Public Health; Professor
of Surgery, Boston University
School of Medicine
B-26
<PAGE>
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
Vice President President and Director of PGI and
60 State Street PWA (since 1993); Director of PFD,
Boston, Massachusetts since 1989; Director of PCC and
Pioneer SBIC Corporation;
President (since 1993), Chief
Investment Officer and Director of
PMC.
STEPHEN K. WEST, Partner, Sullivan & Cromwell (a
Trustee law 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
Manchester, Massachusetts Director, 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.
B-27
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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,
Boston, Massachusetts PSC, 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
Boston, Massachusetts and 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
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
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<PAGE>
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 Money Market Account, Inc. 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. 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 14% of such shares.
As of April 23, 1996, the officers and Trustees of the Trust held in the
aggregate less than 1% of the outstanding shares of each Fund.
Compensation of Officers and Trustees
Commencing on December 1, 1995, the Fund will pay an annual variable
trustees' fee to each Trustee who is not affiliated with PGI, PMC, PFD or PSC,
calculated on the basis of the average net assets of each series, estimated to
be approximately $2,000 for 1996. The Fund also will pay an annual committee
participation fee to each Trustee who serves as a member of any committees
established to act on behalf of one or more of the of Pioneer mutual funds.
Committee fees will be allocated to the Fund on the basis of the Fund's average
net assets. Each Trustee who is a member of the Audit Committee for the Pioneer
mutual funds will receive an annual fee equal to 10% of the aggregate annual
trustees' fee, except the Committee Chair who will receive an annual trustees'
fee equal to 20% of the aggregate annual trustees' fee. The 1996 fees for the
Audit Committee members and Chair are expected to be approximately $6,000 and
$12,000, respectively. Members of the Pricing Committee for the Pioneer mutual
funds, as well as any other committee which renders material functional services
to the Board of Trustees for the Pioneer mutual funds, will receive an annual
fee equal to 5% of the annual trustees' fee, except the Committee Chair who will
receive an annual trustees' fee equal to 10% of the annual trustees' fee. The
1996 fees for the Pricing Committee members and Chair are expected to be
approximately $3,000 and $6,000, respectively. Any such fees paid to affiliates
or interested persons of PGI, PMC, PFD or PSC are reimbursed to the Trust under
its Management Contract. The Fund pays no salaries of compensation to any of its
officers.
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<PAGE>
For the fiscal year ended December 31, 1995, the Trust paid 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 received
an annual fee of $250. The Trust also paid 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 were
reimbursed to the Trust under its Management Contracts with PMC.
The following table sets forth the compensation of the Trustees from
the Trust and the other Pioneer Funds for the fiscal year of the Trust ending
December 31, 1995:
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.* $ 418 $0 $11,000
Richard H. Egdahl, M.D. $ 917 0 $63,315
Marguerite A. Piret $1,075 0 $76,704
David D. Tripple* $ 418 0 $11,000
Stephen K. West $1,050 0 $68,180
* PMC fully reimburses the Fund and the other Pioneer mutual funds for
compensation paid to Messrs. Cogan and Tripple.
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 both expire on May 31,
1997) 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.
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<PAGE>
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%
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, 1996. 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 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
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.
For the fiscal year ended December 31, 1995, the Portfolios paid no
management fees to PMC. The Portfolios would have incurred the following
management fees had the expense limitation agreements not been in place:
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<PAGE>
Management Fee
International Growth Portfolio $ 8,341
Capital Growth Portfolio $17,739
Real Estate Growth Portfolio $ 1,879
Equity-Income Portfolio $10,878
Balanced Portfolio $ 3,924
America Income Portfolio $ 127
Swiss Franc Bond Portfolio $ 3,861
Money Market Portfolio $ 4,972
Real Estate Growth Portfolio Subadviser. Boston Financial Securities, Inc.
("BFS"), 101 Arch Street, Boston, Massachusetts, serves as the Real Estate
Growth Portfolio's subadviser. The subadvisory agreement among the Portfolio,
PMC and BFS expires on May 31, 1997 but is renewable annually after such date by
the vote of a majority of the Board of Trustees of the Portfolio (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. This contract terminates if assigned and
may be terminated without penalty by any party by vote of its Board of Directors
or Trustees, as the case may be, or a majority of its outstanding voting
securities and the giving of 60 days' written notice.
As compensation for its subadvisory services, PMC will pay BFS a
subadvisory fee equal to 0.30% per annum of the Real Estate Growth Portfolio's
average daily net assets. The fee is normally computed daily and paid monthly.
The subadvisory fee payable by PMC to BFS will be reduced proportionally to the
extent that the management fee paid by the Portfolio to PMC is reduced under
PMC's voluntary expense limitation agreement or to the extent that PMC, after
written notice to BFS, elects to utilize a portion of the management fees paid
to PMC by the Portfolio to make payments to third parties
As of December 31, 1995, the following individuals owned beneficially
more than 10% of the outstanding common stock of BFS: Randolph G. Hawthorne
(10.53%), Fred N. Pratt, Jr. (12.17%), William B. Haynsworth (10.96%), Alvin H.
Howell (11.29%). The address for each of these individuals is BFS, 101 Arch
Street, Boston, Massachusetts 02110.
B-32
<PAGE>
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) the 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 valuation 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
contracts as described above under "Investment Policies and Restrictions."
B-33
<PAGE>
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.
B-34
<PAGE>
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.
B-35
<PAGE>
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
B-36
<PAGE>
the security. Similarly, a Portfolio may not be able to 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.
For the fiscal period ended December 31, 1995, the Portfolios paid or
owed aggregate brokerage commissions as follows:
Aggregate Brokerage Commissions
International Growth Portfolio $13,538
Capital Growth Portfolio $29,663
Real Estate Growth Portfolio $ 1,049
Equity-Income Portfolio $ 6,890
Balanced Portfolio $ 2,646
America Income Portfolio $ 0
Swiss Franc Bond Portfolio $ 0
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. These
requirements relate to the sources of a Portfolio's income, the diversification
of its assets, and the timing of its distributions to shareholders. 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 gross income
for each taxable year 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
B-37
<PAGE>
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
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
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<PAGE>
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
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.
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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
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.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax with respect to their investments in a Portfolio. Any loss
realized by a shareholder upon the redemption or other disposition 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 (including pursuant to automatic dividend reinvestments) 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.
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<PAGE>
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, 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
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
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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
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 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
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<PAGE>
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
itself would be unable to meet its obligations. In the light of Delaware law,
the nature of the Trust's 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
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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
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
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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.
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.
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<PAGE>
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
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
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<PAGE>
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)
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
YIELD = 2[ ( ------ +1)6-1]
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
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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
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
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<PAGE>
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
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
The Portfolios' average annual total returns for the periods from
commencement of operations to December 31, 1995 were as follows:
Average Annual
Total Return
International Growth Portfolio 10.42%*
Capital Growth Portfolio 17.13%*
Real Estate Growth Portfolio 16.96%*
Equity-Income Portfolio 23.62%*
Balanced Portfolio 20.84%*
America Income Portfolio 5.68%*
Swiss Franc Bond Portfolio 0.40%**
* Commencement of operations, March 1, 1995.
** Commencement of operations, November 1, 1995.
13. FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal period ended December
31, 1995 are included in the Trust's Annual Report to Shareholders, which report
is incorporated by reference into and is attached to this Statement of
Additional Information. The Trust's Annual Report to Shareholders is so
incorporated and attached in reliance upon the report of Arthur Andersen LLP,
independent public accountants, as experts in accounting and auditing. A copy of
the Trust's Annual Report may be obtained without charge by calling your
insurance company.
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<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, 1995, PMC employed a professional investment staff
of 44, with a combined average of 14 years' experience in the financial services
industry.
As of December 31, 1995, The Pioneer Group, Inc. ("PGI"), through its
wholly-owned subsidiary Pioneering Management Corporation ("PMC"), managed
approximately $12,764,708,124 in assets for more than 982,369 (637,000
non-retirement accounts and 345,369 retirement accounts) investors.
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<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
1-B
<PAGE>
very moderate and thereby not well 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.
<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.
- --------
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:
The financial highlights of the Registrant are included in
Part A of the Registration Statement and the financial
statements of the Registrant are incorporated by reference
into Part B of the Registration Statement from the 1995 Annual
Report to Shareholders for the year ended December 31, 1995
(filed electronically on __________, 1995; file no. 811-8786;
accession number _____).
(b) Exhibits:
1.1 Amended Agreement and Declaration of Trust of the
Registrant.2
1.2 Amended Certificate of Trust of the Registrant.2
2. Amended By-Laws of the Registrant.2
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.2
5.2 Interim Management Contract between the Registrant,
on behalf of Real Estate Growth Portfolio, and
Pioneering Management Corporation.2
5.3 Management Contract between the Registrant, on behalf
of Real Estate Growth Portfolio, and Pioneering
Management Corporation.1
5.4 Form of Management Contract between the Registrant,
on behalf of Swiss Franc Bond Portfolio, and
Pioneering Management Corporation.2
C-1
<PAGE>
5.5 Subadvisory Agreement among Pioneering Management
Corporation, Boston Financial Securities, Inc. and
the Registrant on behalf of Real Estate Growth
Portfolio.*
6. Underwriting Agreement between the Registrant and
Pioneer Funds Distributor, Inc.2
7. None.
8. Custodian Agreement between the Registrant and Brown
Brothers Harriman & Co.2
9. Form of Investment Company Service Agreement between
the Registrant and Pioneering Services Corporation.2
10. Not Applicable.
11. Consent of Independent Public Accountants.*
12. None.
13. Share Purchase Agreement.2
14. None.
15 None.
16. None.
17. Financial Data Schedules*
18. Powers of Attorney.2
- --------------
* Filed herewith.
1 Filed on February 29, 1996 with Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A and incorporated herein by
reference.
2 Filed on August 7, 1995 with Post-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A and incorporated herein by reference.
3 Filed with the Registrant's initial Registration Statement on September 29,
1994 and incorporated herein by reference.
C-2
<PAGE>
Item 25. Persons Controlled By or Under
Common Control With Registrant.
Percent State/Country
of of
Company Owned By Shares Incorporation
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer Capital Corp. (PCC) PGI 100% MA
Pioneer Fonds Marketing GmbH (GmbH) PGI 100% MA
Pioneer SBIC Corp. (SBIC) PGI 100% MA
Pioneer Associates, Inc. (PAI) PGI 100% MA
Pioneer International Corp. (PInt) PGI 100% MA
Pioneer Plans Corp. (PPC) PGI 100% MA
Pioneer Goldfields Ltd (PGL) PGI 100% MA
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Metals and Technology,
Inc. (PMT) PGI 100% DE
Pioneer First Polish Trust Fund
Joint Stock Co. (First Polish) PGI 100% Poland
Teberebie Goldfields Ltd. (TGL) PGI 90% Ghana
Pioneer Funds Distributor, Inc.
(PFD) PMC 100% MA
SBIC's outstanding capital stock PCC 100% MA
THE FUNDS: All are parties to management contracts with PMC.
BUSINESS
FUND TRUST
Pioneer International Growth Fund MA
Pioneer Europe Fund MA
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Growth Trust MA
Pioneer Mid-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Small Company Fund DE
Pioneer Fund MA
Pioneer II MA
Pioneer Real Estate Shares DE
Pioneer Short-Term Income Fund MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Income Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Tax-Free State Series Trust MA
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares, Inc. NE Corporation
C-3
<PAGE>
OTHER:
. SBIC is the sole general partner of Pioneer Ventures Limited Partnership, a
Massachusetts limited partnership.
. ITI Pioneer AMC Ltd. (ITI Pioneer) (Indian Corp.), is a joint venture
between PMC and Investment Trust of India Ltd. (ITI) (Indian Corp.)
. ITI and PMC own approximately 54% and 45%, respectively, of the total equity
capital of ITI Pioneer.
JOHN F. COGAN, JR.
Owns approximately 14% of the outstanding shares of PGI.
TRUSTEE/
ENTITY CHAIRMAN PRESIDENT DIRECTOR OTHER
Pioneer Family of
Mutual Funds X X X
PGL X X X
PGI X X X
PPC X X
PIC X X
Pintl X X
PMT X X
PCC X
PSC X
PMC X X
PFD X X
TGL X X
First Polish X Member of
Supervisory
Board
Hale and Dorr Partner
GmbH Chairman of
Supervisory
Board
C-4
<PAGE>
Item 26. Number of Holders of Securities.
As of January 31, 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
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.
C-5
<PAGE>
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 business and other connections of the
officers and directors of Real Estate Growth Portfolio's subadviser, Boston
Financial Securities Inc., are listed on the Form ADV of Boston Financial
Securities, Inc. as currently on file with the Commission (File No. 801-_____).
The following sections of both such Form ADVs are incorporated herein by
reference:
(a)Items 1 and 2 of Part 2;
(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 None
Vice President
C-6
<PAGE>
Stephen W. Long Senior None
Vice President
John W. Drachman Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy L. Supovitz Vice President None
Mary Kleeman 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
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.
C-7
<PAGE>
(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 certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 4 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 23rd day of April, 1996.
PIONEER VARIABLE CONTRACTS TRUST
By: /s/ John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman of the Board
and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 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
/s/ John F. Cogan, Jr. Chairman of the Board ) Apr. 23, 1996
John F. Cogan, Jr. and President )
(Principal Executive )
Officer) )
)
)
William H. Keough* Treasurer (Principal )
William H. Keough Financial and Accounting )
Officer) )
)
Trustees: )
)
)
)
/s/ 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/ John F. Cogan, Jr. Dated: April 23, 1996
-------------------------
John F. Cogan, Jr.
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit
Number Document Title
5.5. Subadvisory Agreement among Pioneering Management Corporation, Boston
Financial Securities, Inc. and the Registrant on behalf of Real Estate
Growth Portfolio.
11. Consent of Independent Public Accountants.
17. Financial Data Schedules
SUBADVISORY AGREEMENT
SUBADVISORY AGREEMENT made as of the 6th day of March, 1996, by and
among PIONEER VARIABLE CONTRACTS TRUST, a Delaware business trust (the "Trust"),
on behalf of the Real Estate Growth Portfolio (the "Fund"), PIONEERING
MANAGEMENT CORPORATION, a Delaware corporation (the "Manager") and BOSTON
FINANCIAL SECURITIES, INC., a Massachusetts corporation (the "Subadviser").
W I T N E S S E T H
WHEREAS, the Trust is an open-end, management investment company,
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and the Manager and the Subadviser are investment advisers registered
under the Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Fund is an investment series of the Trust, and
WHEREAS, pursuant to authority granted to the Manager by the Board of
Trustees of the Trust and pursuant to the provisions of the Management Contract
dated as of October 10, 1995 between the Manager and the Trust, on behalf of the
Fund (the "Management Contract"), the Manager has selected the Subadviser to act
as a sub-investment adviser of the Fund and to provide certain other services,
as more fully set forth below, and to perform such services under the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follow:
1. The Subadviser's Services.
(a) The Subadviser shall, to the extent reasonably required in the
conduct of the business of the Fund and upon request by the Fund or the Manager,
(i) identify, analyze and make investment recommendations regarding real estate
industry companies, including the real estate properties and other permissible
investments of the Fund, (ii) analyze market conditions affecting the real
estate industry generally and specific geographical and securities markets in
which the Fund may invest or is invested, (iii) continuously review and analyze
the investments in the Fund's portfolio, and (iv) furnish to the Manager and the
Fund advisory reports based on such analysis. The Subadviser shall 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
the contents of such reports.
<PAGE>
The Subadviser shall use its best efforts to ensure that any
recommendations it makes to the Manager regarding the purchase and sale of
portfolio securities are in compliance with the provisions of the Trust's
Declaration of Trust and By-laws and the 1940 Act, and with the investment
objectives, policies and restrictions (including, without limitation, the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
for qualification as a regulated investment company) of the Fund, as each of the
same shall be from time to time in effect as set forth in the Fund's Prospectus
and Statement of Additional Information, or any investment guidelines or other
instructions received in writing from the Manager, and subject, further, to such
policies and instructions as the Manager may from time to time establish and
deliver to the Subadviser. Notwithstanding the foregoing, pursuant to the terms
of the Management Contract, the Manager is solely responsible for the day-to-day
management of the Fund's investment portfolio and for ensuring that the Fund's
investments comply with the Trust's Declaration of Trust and By-laws and the
1940 Act, and with the investment objectives, policies and restrictions of the
Fund.
(b) The Subadviser shall not be responsible for the provision of
administrative, bookkeeping or accounting services to the Fund, except as
otherwise provided herein or as may be necessary for the Subadviser to supply to
the Manager, the Fund or its Trustees the information required to be supplied
under this Agreement.
(c) The Subadviser shall maintain separate books and detailed records
of all matters pertaining to the Fund (the "Fund's Books and Records"). The
Fund's Books and Records shall be available to the Manager at any time upon
request and shall be available for telecopying without delay to the Manager
during any day that the Fund is open for business.
(d) The Subadviser shall also ensure that its Access Persons (as
defined in the Trust's Code of Ethics) comply in all respects with the Trust's
Code of Ethics, as in effect from time to time.
(e) The Subadviser shall inform the Manager and the Trust's Trustees on
a current basis of changes in investment strategy or tactics or in key
personnel. The Subadviser will make its officers and employees available to meet
with the Trust's Trustees at least annually on due notice to review the
investments of the Fund in light of current and prospective economic and market
conditions.
(f) From time to time as the Manager or the Trustees of the Trust may
reasonably request, the Subadviser shall furnish to the Manager and to each of
the Trust's Trustees reports on securities held by the Fund, all in such detail
as the Manager or the Trustees may reasonably request.
(g) It shall be the duty of the Subadviser to furnish to the Trustees
of the Trust such information as may reasonably be necessary in order for the
Trustees to evaluate this Agreement or any proposed amendments thereto for the
purposes of casting a vote pursuant to Section 8 hereof.
-2-
<PAGE>
2. Allocation of Charges and Expenses. The Subadviser will bear its own
costs of providing services hereunder. Other than as herein specifically
indicated, the Subadviser shall not be responsible for the Fund's or the
Manager's expenses, including brokerage and other expenses incurred in placing
orders for the purchase and sale of securities. Specifically, the Subadviser
will not be responsible for expenses of the Fund or the Manager, as the case may
be, including, but not limited to, the following: (i) charges and expenses for
determining from time to time the value of the Fund's net assets and the keeping
of its books and records and related overhead; (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; (iv)
brokers' commissions, and issue and transfer taxes, chargeable to the Fund in
connection with securities transactions to which the Fund 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
Securities and Exchange Commission (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, if any; (x) compensation and expenses of Trustees of
the Trust. The Fund or the Manager, as the case may be, shall reimburse the
Subadviser for any such expenses or other expenses of the Fund or the Manager,
as may be reasonably incurred by such Subadviser on behalf of the Fund or the
Manager. The Subadviser shall keep and supply to the Fund and the Manager
adequate records of all such expenses.
3. Information supplied by the Manager. The Manager shall provide the
Subadviser with the Trust's Declaration of Trust, By-laws, Prospectus and
Statement of Additional Information, and instructions, as in effect from time to
time; and the Subadviser shall have no responsibility for actions taken in
reliance on any such documents.
4. Representations, Warranties and Covenants. The Subadviser represents
and warrants to each of the Fund and the Manager that it is registered as an
"investment adviser" under the Subadvisers Act and covenants that it will remain
so registered for the duration of this Agreement.
-3-
<PAGE>
The Subadviser has reviewed the Registration Statement of the Trust as
filed with the Commission and represents and warrants that with respect to
disclosure about the Subadviser or information relating directly or indirectly
to the Subadviser, such Registration Statement contains, as of the date hereof,
no untrue statement of any material fact and does not omit any statement of
material fact which was required to be stated therein or necessary to make the
statements contained therein not misleading.
Except as otherwise provided in Section 1(a) hereof, the Subadviser
agrees to comply with the requirements of the 1940 Act and the Advisers Act and
the respective rules and regulations thereunder, as applicable, as well as with
all other applicable Federal and state laws, rules, regulations and case law
that relate to the services and relationships described hereunder, and with the
provisions of the Registration Statement, as amended or supplemented, of the
Trust.
5. Subadviser's Compensation. The Manager shall pay to the Subadviser,
as compensation for the Subadviser's services hereunder, a fee equal to 0.30%
per annum of the Fund's average daily net assets. Such fee shall be computed
daily and paid monthly. The Fund shall have no responsibility for any fee
payable to the Subadviser.
The method of determining net assets of the Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of Fund shares as described in
the Fund's Prospectus. If this Agreement shall be effective for only a portion
of a month, the aforesaid fee shall be prorated for that portion of such month
during which this Agreement is in effect.
In the event that the advisory fee payable by the Fund to the Manager
shall be reduced or the Manager agrees, after written notice to the Subadviser,
to utilize a portion of the advisory fee to make payments to a third party, the
amount payable to the Subadviser shall be likewise reduced by a proportionate
amount. The Subadviser 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 portion thereof would otherwise accrue). Any such fee reduction may be
discontinued or modified by the Subadviser at any time.
-4-
<PAGE>
6. Independent Contractor. In the performance of its duties hereunder,
the Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund in any way or otherwise be deemed to
be an agent of the Fund or of the Manager.
7. Assignment and Amendments. This Agreement shall automatically
terminate, without the payment of any penalty, in the event of (i) its
assignment, including any change of control of the Manager or the Subadviser, or
(ii) in the event of the termination of the Management Contract; provided that
such termination shall not relieve the Manager or the Subadviser of any
liability incurred hereunder.
The terms of this Agreement shall not be changed unless such change is
approved at a meeting by the affirmative vote of a majority of the outstanding
voting securities of the Fund and unless also approved by the affirmative vote
of a majority of Trustees of the Trust voting in person, including a majority of
the Trustees who are not interested persons of the Trust, the Manager or the
Subadviser, at a meeting called for the purpose of voting on such change.
8. Duration and Termination. This Agreement shall become effective as
of the date first above written and shall remain in full force and effect
continually thereafter unless terminated automatically as set forth in Section 7
hereof or until terminated as follows:
(a) The Fund or the Manager may at any time terminate this Agreement by
not more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Subadviser.
Action of the Fund under this Subsection may be taken either (i) by vote of the
Trust's Trustees or (ii) by the affirmative vote of a majority of the
outstanding voting securities of the Fund;
(b) The Subadviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice delivered
or mailed by registered mail, postage prepaid, to the Manager; or
(c) This Agreement shall automatically terminate on May 31 of any year
beginning on May 31, 1997, in which its terms and renewal shall not have been
approved by (i) a majority vote of the Trustees of the Trust voting in person,
including a majority of the Trustees who are not interested persons of the
Trust, the Manager or the Subadviser, at a meeting called for the purpose of
voting on such approval or (ii) the affirmative vote of a majority of the
outstanding voting securities of the Fund; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of the Fund for
their approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Subadviser may continue to serve hereunder as
to the Fund in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
-5-
<PAGE>
Termination of this Agreement pursuant to this Section shall be without
payment of any penalty.
In the event of termination of this Agreement for any reason, the
Subadviser shall, immediately upon notice of termination or on such later date
as may be specified in such notice, cease all activity on behalf of the Fund and
with respect to any of its assets, except as expressly directed by the Manager.
In addition, the Subadviser shall deliver the Fund's Books and Records to the
Manager by such means and in accordance with such schedule as the Manager shall
direct and shall otherwise cooperate, as reasonably directed by the Manager, in
the transition of portfolio asset management to any successor of the Subadviser,
including the Manager.
9. Certain Definitions. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" means the affirmative vote, at an annual or special
meeting of shareholders of the Fund, duly called and held, (a) of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present (in person or by proxy), or
(b) of more than 50% of the outstanding shares of the Fund entitled to vote at
such meeting, whichever is less.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions as
may be granted by the Commission under said Act.
10. Liability and Indemnification. In the absence of willful
misfeasance, bad faith or gross negligence on the part of the Subadviser, or of
reckless disregard of its obligations and duties hereunder (collectively,
"Malfeasance"), the Subadviser shall not be subject to any liability to the
Manager or the Fund, to any shareholder of the Fund, or to any person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder. Nothing herein, however, shall derogate from the
Subadviser's obligations under federal and state securities laws (collectively,
the "Securities Laws").
The Manager shall indemnify the Subadviser for all liabilities and
related costs, including reasonable attorney's fees, which the Subadviser may
sustain in connection with the discharge without Malfeasance or negligence of
its obligations hereunder and in accordance with the Securities Laws. The
Subadviser shall indemnify the Manager and the Fund for all liabilities and
related costs, including reasonable attorneys fees, which either of them may
sustain as a result of the Subadviser's Malfeasance or violation of the
Securities Laws.
-6-
<PAGE>
11. Enforceability. 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 uneforceability 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.
12. Limitation of Liability. The parties to this Agreement acknowledge
and agree that all litigation arising hereunder, whether direct or indirect, and
of any and every nature whatsoever shall be satisfied solely out of the assets
of the Fund affected thereby and that no Trustee, officer or holder of shares of
beneficial interest of the Fund 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.
13. Jurisdiction. This Agreement shall be governed by and construed in
accordance with the substantive laws of The Commonwealth of Massachusetts and
the Subadviser consents to the jurisdiction of courts, both state or federal, in
Boston, Massachusetts, with respect to any dispute under this Agreement.
14. Counterparts. 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.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed on their behalf by their duly authorized officers as of the date first
above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
(on behalf of the Real Estate
Growth Portfolio)
Name: Joseph P. Barri Name: John F. Cogan, Jr.
Title: Secretary Title: President
ATTEST: PIONEERING MANAGEMENT CORPORATION
Name: Joseph P. Barri Name: David D. Tripple
Title: Secretary Title: President
ATTEST: BOSTON FINANCIAL SECURITIES, INC.
Name: Name:
Title: Title
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 2, 1996 included in Pioneer Variable Contracts Trust's
1995 Annual Report (and to all references to our firm) included in or made a
part of the Pioneer Variable Contracts Trust Post-Effective Amendment No. 4 to
Registration Statement File No. 33-84546 and Amendment No. 5 to Registration
File No. 811-8786.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 26, 1996
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 060
[NAME] AMERICA INCOME PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3111117
[INVESTMENTS-AT-VALUE] 3161811
[RECEIVABLES] 79643
[ASSETS-OTHER] 1085
[OTHER-ITEMS-ASSETS] 300589
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[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 28836
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[ACCUMULATED-NET-GAINS] (198)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 50499
[NET-ASSETS] 3514292
[DIVIDEND-INCOME] 0
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[OTHER-INCOME] 0
[EXPENSES-NET] (6992)
[NET-INVESTMENT-INCOME] 37752
[REALIZED-GAINS-CURRENT] (198)
[APPREC-INCREASE-CURRENT] 50499
[NET-CHANGE-FROM-OPS] 88053
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (37752)
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[NUMBER-OF-SHARES-SOLD] 364974
[NUMBER-OF-SHARES-REDEEMED] 33421
[SHARES-REINVESTED] 3744
[NET-CHANGE-IN-ASSETS] 3414292
[ACCUMULATED-NII-PRIOR] 0
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<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 050
[NAME] BALANCED PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2448048
[INVESTMENTS-AT-VALUE] 2558634
[RECEIVABLES] 35383
[ASSETS-OTHER] 1254
[OTHER-ITEMS-ASSETS] 95404
[TOTAL-ASSETS] 2690675
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 29412
[TOTAL-LIABILITIES] 29412
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[PAID-IN-CAPITAL-COMMON] 2550677
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[SHARES-COMMON-PRIOR] 0
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[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 110586
[NET-ASSETS] 2661263
[DIVIDEND-INCOME] 4011
[INTEREST-INCOME] 25037
[OTHER-INCOME] 0
[EXPENSES-NET] (8884)
[NET-INVESTMENT-INCOME] 20164
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 110586
[NET-CHANGE-FROM-OPS] 130750
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (20164)
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[NUMBER-OF-SHARES-SOLD] 214614
[NUMBER-OF-SHARES-REDEEMED] 2176
[SHARES-REINVESTED] 1781
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[ACCUMULATED-NII-PRIOR] 0
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[GROSS-EXPENSE] 90240
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[PER-SHARE-NAV-BEGIN] 10.00
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[EXPENSE-RATIO] 1.76
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<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 020
[NAME] CAPITAL GROWTH PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 9350475
[INVESTMENTS-AT-VALUE] 9312612
[RECEIVABLES] 40609
[ASSETS-OTHER] 1299
[OTHER-ITEMS-ASSETS] 28637
[TOTAL-ASSETS] 9383157
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 26223
[TOTAL-LIABILITIES] 26223
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 9248441
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[SHARES-COMMON-PRIOR] 0
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[ACCUMULATED-NET-GAINS] 146780
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (38287)
[NET-ASSETS] 9356934
[DIVIDEND-INCOME] 10952
[INTEREST-INCOME] 45318
[OTHER-INCOME] 0
[EXPENSES-NET] 41068
[NET-INVESTMENT-INCOME] 15202
[REALIZED-GAINS-CURRENT] 242294
[APPREC-INCREASE-CURRENT] (38287)
[NET-CHANGE-FROM-OPS] 219209
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (15202)
[DISTRIBUTIONS-OF-GAINS] (93860)
[DISTRIBUTIONS-OTHER] (1654)
[NUMBER-OF-SHARES-SOLD] 812531
[NUMBER-OF-SHARES-REDEEMED] 22995
[SHARES-REINVESTED] 9447
[NET-CHANGE-IN-ASSETS] 9256934
[ACCUMULATED-NII-PRIOR] 0
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[RETURNS-OF-CAPITAL] 0
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[EXPENSE-RATIO] 1.56
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[AVG-DEBT-PER-SHARE] 0
<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 040
[NAME] EQUITY-INCOME PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 6589276
[INVESTMENTS-AT-VALUE] 6943238
[RECEIVABLES] 74473
[ASSETS-OTHER] 1320
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7019031
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 105342
[TOTAL-LIABILITIES] 105342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6557450
[SHARES-COMMON-STOCK] 568005
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 2568
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[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 353669
[NET-ASSETS] 6913689
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[NET-INVESTMENT-INCOME] 51707
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[APPREC-INCREASE-CURRENT] 353669
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[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (49139)
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[EXPENSE-RATIO] 1.63
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[AVG-DEBT-PER-SHARE] 0
<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 070
[NAME] MONEY MARKET PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 3409260
[INVESTMENTS-AT-VALUE] 3409260
[RECEIVABLES] 27070
[ASSETS-OTHER] 974
[OTHER-ITEMS-ASSETS] 10908
[TOTAL-ASSETS] 3448212
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 32640
[TOTAL-LIABILITIES] 32640
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3415572
[SHARES-COMMON-STOCK] 3415572
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3415572
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 58322
[OTHER-INCOME] 0
[EXPENSES-NET] (7419)
[NET-INVESTMENT-INCOME] 50903
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 50903
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (50903)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 8860820
[NUMBER-OF-SHARES-REDEEMED] 5596133
[SHARES-REINVESTED] 50885
[NET-CHANGE-IN-ASSETS] 3315572
[ACCUMULATED-NII-PRIOR] 0
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[EXPENSE-RATIO] 0.81
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<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 010
[NAME] INTERNATIONAL GROWTH PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2666193
[INVESTMENTS-AT-VALUE] 2703689
[RECEIVABLES] 108770
[ASSETS-OTHER] 983
[OTHER-ITEMS-ASSETS] 303899
[TOTAL-ASSETS] 3117341
[PAYABLE-FOR-SECURITIES] 92513
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 58093
[TOTAL-LIABILITIES] 150606
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[PAID-IN-CAPITAL-COMMON] 2899408
[SHARES-COMMON-STOCK] 271494
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 29855
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 37472
[NET-ASSETS] 2966735
[DIVIDEND-INCOME] 5434
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[OTHER-INCOME] 0
[EXPENSES-NET] (14793)
[NET-INVESTMENT-INCOME] 827
[REALIZED-GAINS-CURRENT] 56014
[APPREC-INCREASE-CURRENT] 37472
[NET-CHANGE-FROM-OPS] 94313
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (827)
[DISTRIBUTIONS-OF-GAINS] (23264)
[DISTRIBUTIONS-OTHER] (2895)
[NUMBER-OF-SHARES-SOLD] 253350
[NUMBER-OF-SHARES-REDEEMED] 9366
[SHARES-REINVESTED] 2510
[NET-CHANGE-IN-ASSETS] 2716735
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8341
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 145854
[AVERAGE-NET-ASSETS] 1010461
[PER-SHARE-NAV-BEGIN] 10.00
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[PER-SHARE-DIVIDEND] (0.02)
[PER-SHARE-DISTRIBUTIONS] (0.09)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.93
[EXPENSE-RATIO] 2.10
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 080
[NAME] SWISS FRANC BOND PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 93431
[INVESTMENTS-AT-VALUE] 93227
[RECEIVABLES] 6844
[ASSETS-OTHER] 965
[OTHER-ITEMS-ASSETS] 165061
[TOTAL-ASSETS] 266097
[PAYABLE-FOR-SECURITIES] 69712
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7060
[TOTAL-LIABILITIES] 76772
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 188994
[SHARES-COMMON-STOCK] 12575
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 537
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (206)
[NET-ASSETS] 189325
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 782
[OTHER-INCOME] 0
[EXPENSES-NET] (245)
[NET-INVESTMENT-INCOME] 537
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] (206)
[NET-CHANGE-FROM-OPS] 331
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5908
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[NET-CHANGE-IN-ASSETS] 89325
[ACCUMULATED-NII-PRIOR] 0
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[GROSS-EXPENSE] 13723
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[PER-SHARE-NAV-BEGIN] 15.00
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[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.06
[EXPENSE-RATIO] 2.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[CIK] 0000930709
[NAME] PIONEER VARIABLE CONTRACTS TRUST
[SERIES]
[NUMBER] 030
[NAME] REAL ESTATE PORTFOLIO
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 417965
[INVESTMENTS-AT-VALUE] 450587
[RECEIVABLES] 32431
[ASSETS-OTHER] 962
[OTHER-ITEMS-ASSETS] 98525
[TOTAL-ASSETS] 582505
[PAYABLE-FOR-SECURITIES] 42590
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 27419
[TOTAL-LIABILITIES] 27419
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 479874
[SHARES-COMMON-STOCK] 45631
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[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 32622
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[EXPENSES-NET] (2964)
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[DISTRIBUTIONS-OF-INCOME] (5705)
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[EXPENSE-RATIO] 2.10
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[AVG-DEBT-PER-SHARE] 0
<PAGE>
