[PIONEER LOGO]
PIONEER VISION SM
VARIABLE ANNUITY
PROSPECTUS
April 30, 1996
(revised July 8, 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 25% 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%
- ------------------------
(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>
0796-3513
