File No. 33-84546
File No. 811-8786
As Filed with the Securities and Exchange Commission on July 16, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_X__/
Pre-Effective Amendment No. ___ /_ __/
Post-Effective Amendment No. _8_ /_X__/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT _____
OF 1940 /_X__/
Amendment No. 9 /_X__/
(Check appropriate box or boxes)
PIONEER VARIABLE CONTRACTS TRUST
(Exact name of registrant as specified in charter)
60 State Street, Boston, Massachusetts 02109
(Address of principal executive office) Zip Code
(617) 742-7825
(Registrant's Telephone Number, including Area Code)
Joseph P. Barri, Hale and Dorr LLP, 60 State
Street, Boston, MA 02109
(Name and address of agent for service)
It is proposed that this filing will become effective (check
appropriate box):
___ immediately upon filing pursuant to paragraph (b)
___ on [date] pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on [date] pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
_X_ on October 1, 1998 pursuant to paragraph (a)(2) of Rule 485
Title of Securities: Shares of Beneficial Interest, no par value
<PAGE>
PIONEER VARIABLE CONRACTS TRUST
Cross-Reference Sheet Showing Location in Prospectus and Statement of
Additional Information of Information Required by Items of the Registration
Form
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
1. Cover Page Prospectus - Cover Page
2. Synopsis Prospectus
Highlights--Pioneer
Variable Contracts Trust
3 Condensed Financial Information Financial Highlights
4. General Description of Registrant Prospectus -
Highlights--Pioneer
Variable
Contracts Trust;
Investment
Objectives and
Policies;
The Fund
and the Pioneer
Organization;
Shareholder Information.
5. Management of the Fund Prospectus -
The Fund and
the Pioneer
Organization;
Fund
Management Fees and
Other
Expenses.
6. Capital Stock and Other Securities Prospectus
- Investment
Objectives and Policies;
Shareholder Information.
7. Purchase of Securities Being
Offered Prospectus -
Shareholder
Information.
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- ---------------
8. Redemption or Repurchase Prospectus - Shareholder
Information.
9. Pending Legal Proceedings Not Applicable
10. Cover Page Statement of Additional
Information - Cover Page
11. Table of Contents Statement of Additional
Information - Cover Page
12. General Information and History Statement of Additional
Information - Cover Page;
Description of Shares
13. Investment Objectives and Policy Statement of Additional
Information - Investment
Policies and Restrictions
14. Management of the Fund Statement of Additional
Information - Management
of the Trust;
Investment Adviser
15. Control Persons and Principal Holders
of Securities Statement of Additional
Information - Management
of the Trust
16. Investment Advisory and Other
Services Statement of Additional
Information - Management
of the
Trust; Investment
Adviser;
Principal Underwriter;
Custodian; Independent
Public
Accountant
<PAGE>
Location in
Prospectus or
Statement of
Additional
Form N-1A Item Number and Caption Information
- --------------------------------- -----------
17. Brokerage Allocation and Other
Practices Statement of Additional
Information - Portfolio
Transactions
18. Capital Stock and Other Securities Statement of Additional
Information -
Description
of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered Statement of Additional
Information -
Determination of
Net Asset Value
20. Tax Status Statement of Additional
Information - Tax Status
21. Underwriters Statement of Additional
Information - Principal
Underwriter
22. Calculation of Performance Data Statement of Additional
Information - Investment
Results
23. Financial Statements Statement of Additional
Information - Financial
Statements
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
PART A
CLASS I SHARES PORTFOLIO PROSPECTUS
STATEMENT OF INCORPORATION BY REFERENCE
The Class I Shares prospectus (10 portfolios) and the Capital Growth
and Real Estate Growth Portfolio prospectus (Part A) contained in Post-Effective
Amendment No. 7 filed on April 30, 1998 (Accession No. 0000930709-98-00009)
hereby are incorporated by reference in their entirety into this Post-Effective
Amendment No. 8.
<PAGE>
OCTOBER 1, 1998
SUPPLEMENT TO THE PROSPECTUS OF:
PIONEER VARIABLE CONTRACTS TRUST
DATED MAY 1, 1998
Effective October 1, 1998, Pioneer Variable Contracts Trust offers two
additional Portfolios. The following information supplements the corresponding
sections of the Prospectus. Please consult the Prospectus for the full text of
each section so supplemented.
FRONT COVER OF THE PROSPECTUS
The following is added to the listing of Portfolios in the left-hand column:
EMERGING MARKETS PORTFOLIO seeks long-term growth of capital. The Portfolio
invests primarily in securities of issuers that are domiciled or primarily doing
business in countries with emerging economies or securities markets.
EUROPE PORTFOLIO seeks long-term growth of capital. The Portfolio invests in a
diversified portfolio consisting primarily of securities of European companies.
I. HIGHLIGHTS
PIONEER VARIABLE CONTRACTS TRUST
The number "12" is substituted for the word "ten" in the first sentence listing
the number of portfolios.
CHOOSING A PORTFOLIO
The following is inserted into the listing of Portfolio descriptions. The
description of Emerging Markets is at the top of the list (i.e., the most
aggressive portfolio); and the description of Europe follows that of
International Growth (i.e., the third most aggressive):
PORTFOLIO STRATEGIC FOCUS
EMERGING MARKETS seeks long-term growth of capital by
investing primarily in securities of issuers
that are domiciled or primarily doing
business in countries with emerging
economies or securities markets.
EUROPE seeks long-term growth of capital by
investing in a diversified portfolio
consisting primarily of securities of
European companies.
II. HOW THE FUND WORKS
INVESTMENT OBJECTIVES AND POLICIES
The number "12" is substituted for the word "ten" in the first sentence listing
the number of portfolios. The following description of Emerging Markets
Portfolio is inserted as the first portfolio description and that of Europe
Portfolio is inserted as the third description.
EMERGING MARKETS PORTFOLIO seeks long-term growth of capital. The Portfolio
pursues this objective by investing primarily in securities of issuers that are
domiciled or primarily doing business in countries with emerging economies or
securities markets. See "Risks of International Investments" in the prospectus
and "Risks of Emerging Market Investments" below. Any current income generated
from these securities is incidental to the investment objective of the
Portfolio.
Under normal circumstances, at least 65% of the Portfolio's total assets are
invested in securities of issuers that are domiciled or primarily doing business
in emerging countries, related depositary receipts and securities of these
countries' governmental issuers. For purposes of the Portfolio's investments,
"emerging countries" are countries with economies or securities markets that are
not considered by Pioneering Management Corporation ("Pioneer") to be developed.
An issuer is considered by Pioneer to be domiciled in an emerging country if it
is organized under the laws of, or has a principal office in, such country. An
issuer is considered by Pioneer to be primarily doing business in an emerging
country if that issuer derives at least 50% of its gross revenues or profits
from either (i) goods or services produced in emerging countries or (ii) sales
made in emerging countries.
Under normal circumstances, the Portfolio maintains investments in at least six
emerging countries. Except for temporary defensive purposes, the Portfolio will
not invest 25% or more of its net assets in securities of issuers in any one
country, emerging or developed. From time to time, the Portfolio may invest more
than 25% of its net assets in investments in a particular region.
The Portfolio may invest up to 35% of its total assets in equity and debt
securities of issuers that are domiciled or primarily doing business in any
developed country, other than the U.S., and of such countries' government
issuers and in short-term investments. See the Appendix for more information on
these types of investments.
Although the Portfolio may invest in both equity and debt securities, Pioneer
expects that equity and equity-related securities will ordinarily offer the
greatest potential for long-term growth of capital and will constitute the
majority of the Portfolio's assets. The equity and equity-related securities of
companies in which the Portfolio invests consist of common stock and securities
with common stock characteristics, such as preferred stock, equity interests in
unincorporated entities, warrants, stock purchase rights or debt securities
convertible into common stock, and depositary receipts for these securities.
Debt securities in which the Portfolio invests may be of any credit quality or
maturity. Many of the debt securities of emerging market issuers are of poor
credit quality and may be in default. However, the Portfolio will not invest
more than 10% of its total assets in non-convertible debt securities rated below
investment grade or unrated securities of comparable quality. See "Risks of
Medium and Lower Rated Debt Securities." The value of debt securities,
particularly those with longer maturities, can generally be expected to rise as
interest rates decline and to fall as interest rates rise. Movements in currency
exchange rates may offset or amplify such fluctuations, as measured in U.S.
dollars.
In selecting securities for investment by the Portfolio, Pioneer assesses both
the relative attractiveness of investment in specific countries and also the
market for specific issuers. Pioneer considers a market's internal conditions,
including political stability, financial practices, market practices, economic
growth prospects, levels of interest rates and inflation, general market
valuations and potential changes in currency relationships when evaluating
potential investments. Based on the relative return and risk among countries, a
target weighting is set for the allocation of the Portfolio's assets among
emerging countries. As a parallel process, Pioneer performs a fundamental
analysis of each issuer being considered for investment by the Portfolio. In
performing this analysis, Pioneer considers a variety of factors, including
financial condition, growth prospects, asset valuation, management expertise,
existing or potential dividend payments, stock liquidity and the market
valuation of the company. The specific size of the Portfolio's investment in any
one issuer is determined by the relationship of the relative return and risk
among individual investments and the target weighting of that market. Because
current income is not the Portfolio's investment objective, the Portfolio will
not restrict its investments to securities of issuers with a record of timely
dividend payments.
OTHER INVESTMENT PRACTICES. Refer to the Appendix for information about the
Portfolio's possible use of forward foreign currency exchange contracts, options
and futures, repurchase agreements, illiquid investments, restricted securities,
and its ability to lend securities.
EUROPE PORTFOLIO seeks long-term growth of capital. The Portfolio seeks this
objective by investing in a diversified portfolio consisting primarily of
securities of companies (a) that are organized under the laws of a European
country and have a principal office in a European country or (b) that derive 50%
or more of their total revenues from business in Europe or (c) the equity
securities of which are traded principally on a stock exchange in Europe; and in
depositary receipts for such securities (collectively, "European Securities").
See "Risks of International Investments" in the Prospectus.
Normally, at least 80% of the Portfolio's assets are invested in European
Securities consisting of common stock and securities with common stock
characteristics, such as preferred stock, warrants and debt securities
convertible into common stock and depositary receipts for such securities. The
Portfolio will not invest more than 5% of its net assets in convertible debt
securities rated at the time of purchase by a national ratings agency below
investment grade, i.e., BBB or better by Moody's Investors Service or Baa by
Standard & Poor's Ratings Group. See "Risks of Medium and Lower Rated Debt
Securities" in the Prospectus.
The Portfolio may invest in the securities of companies domiciled in any
European country, including but not limited to Austria, Belgium, Denmark,
Finland, France, Germany, Italy, Ireland, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. The Portfolio may invest up
to 10% of its net assets in securities of countries with principal executive
offices located in Eastern European countries and which trade on recognized
European exchanges.
OTHER INVESTMENT PRACTICES. Refer to the Appendix for information about the
Portfolio's possible use of forward foreign currency contracts, options and
futures, repurchase agreements, illiquid investments, restricted securities, and
its ability to lend securities.
The following replaces the first sentence of the third paragraph of the Balanced
Portfolio description:
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.
III. RISK CONSIDERATIONS
RISKS OF INTERNATIONAL INVESTMENTS
The first sentence is replaced by the following:
The information contained in these paragraphs is of particular importance to
Emerging Markets Portfolio, International Growth Portfolio, Europe Portfolio and
Swiss Franc Bond Portfolio; however, Capital Growth, Growth Shares, Balanced,
Real Estate Growth and Growth and Income Portfolios may also make non-U.S.
investments.
The last paragraph is deleted, and the following section inserted:
RISKS OF EMERGING MARKET INVESTMENTS
The information contained in these paragraphs is of particular importance to
Emerging Markets and International Growth Portfolios; however, Europe Portfolio
may invest up to 10% of its net assets in securities of issuers from Eastern
European countries certain of which may be considered emerging markets.
Investments in emerging markets are subject to risks in addition those described
in "Risks of International Investments." The political and economic structures
in many emerging countries may experience significant evolution and rapid
development, and such countries may lack the social, political and economic
stability characteristic of more developed countries. Unanticipated political or
social developments may affect the values of a Portfolio's investments and the
availability to a Portfolio of additional investments in such countries.
Securities of issuers located in these countries tend to have volatile prices
and may offer significant potential for loss as well as gain. The small size and
limited history of the securities markets in certain of such countries and the
limited volume of trading in securities in those countries makes a Portfolio's
investments in such countries less liquid and more volatile than investments in
countries with more developed securities markets, such as the U.S., Japan and
most Western European countries.
Economies in individual emerging countries may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency valuation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging countries have
experienced substantial, and in some cases extremely high, rates of inflation
for many years. Inflation and rapid fluctuations in inflation rates have had,
and may continue to have, very negative effects on the economies and securities
markets of certain emerging countries.
Economies in emerging countries generally depend heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been, and may continue to be,
affected adversely by economic conditions in the countries with which they
trade.
In addition, the value of securities denominated or quoted in international
currencies may also be adversely affected by fluctuations in the relative rates
of exchange between the currencies of different nations and by exchange control
regulations. A Portfolio's investment performance may be negatively affected by
a devaluation of a currency in which the Portfolio's investments are denominated
or quoted. Further, a Portfolio's investment performance may be significantly
affected, either positively or negatively, by currency exchange rates because
the U.S. dollar value of securities denominated or quoted in another currency
will increase or decrease in response to changes in the value of such currency
in relation to the U.S. dollar.
FOREIGN CURRENCIES
The first sentence is replaced by the following:
The value of Emerging Markets, International Growth, Europe and Swiss Franc Bond
Portfolios' 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 MANAGEMENT
The first paragraph and the first sentence of the second paragraph are replaced
by the following:
The relative performance of non-U.S. currencies can be an important factor in
the performance of Swiss Franc Bond, Emerging Markets, International Growth and
Europe Portfolios, each of which invests the predominant portion of its assets
outside the United States. The performance of Capital Growth, Growth Shares,
Balanced, Real Estate Growth and Growth and Income Portfolios may also be
affected by the relative performance of foreign currencies, but to a lesser
extent. Pioneer may manage Emerging Markets, International Growth, Europe,
Capital Growth, Growth Shares, Real Estate Growth, Growth and Income and
Balanced Portfolio's exposure to various currencies to take advantage of
different yield, risk, and return characteristics that different currencies can
provide for U.S. investors.
To manage exposure to currency fluctuations, Emerging Markets, International
Growth, Europe, Capital Growth, Growth Shares, Growth and Income and Balanced
Portfolios may enter into forward foreign currency exchange contracts
(agreements to exchange one currency for another at a future date at a specified
rate) 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 quoted or denominated in foreign currencies.
Other currency management strategies allow the Portfolios to hedge portfolio
securities, to shift investment exposure from one currency to another, or to
attempt to profit from anticipated declines in the value of a foreign currency
relative to the U.S. dollar.
Subject to compliance with tax requirements, there is no overall limitation on
the amount of Emerging Markets, International Growth and Europe Portfolios'
assets that may be committed to currency management strategies. Capital Growth,
Growth Shares, Growth and Income 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 10% of
its net assets in non-US. securities, it does not actively seek to manage
exposure to currency fluctuations.
RISKS OF MEDIUM AND LOWER RATED DEBT SECURITIES
The first sentence of the second paragraph is replaced by the following,
inserting the two new Portfolios in the discussion:
Emerging Markets and Equity Income Portfolios may invest up to 10% of their net
assets in non-convertible debt securities rated below investment grade or
unrated securities of comparable quality. Europe, Growth Shares, Real Estate
Growth and Growth and Income Portfolios may invest up to 5% of their net assets
in lower rated debt securities.
IV. THE FUND AND THE PIONEER ORGANIZATION
The following is inserted as the second paragraph.
Effective October 1, 1998, the Fund continuously offers two classes of shares
designated as Class I and Class II shares. This prospectus only offers Class I
shares. Information with regard to Class II shares is available in a separate
prospectus. The Fund's Class II shares are subject to a distribution plan, have
higher operating expenses and are only available through certain variable
annuity and variable life insurance contracts and qualified plans.
THE MANAGER
The following replaces the second paragraph:
Mr. David Tripple, President and Chief Investment Officer of Pioneer and
Executive Vice President of the Fund, has general responsibility for Pioneer's
investment operations. Mr. Tripple joined Pioneer in 1974. Ms. Theresa Hamacher,
Senior Vice President of Pioneer, oversees U.S. equity research and portfolio
management.
Research and management of the Emerging Markets, International Growth and Europe
Portfolios is the responsibility of a team of portfolio managers and analysts
focusing on non-U.S. securities. Members of the team meet regularly to discuss
holdings, prospective investments and portfolio composition. Dr. Norman Kurland,
a Senior Vice President of Pioneer, is the senior member of the team. Dr.
Kurland joined Pioneer in 1990.
The following are inserted as the first and third items in the listing of
Portfolio Managers as the persons responsible for day-to-day management of the
Fund's portfolios.
EMERGING MARKETS PORTFOLIO: Mark Madden, Vice President of Pioneer. Mr. Madden
joined Pioneer in 1990 and has 13 years of investment experience.
EUROPE PORTFOLIO: Patrick M. Smith, Vice President of Pioneer. Mr. Smith joined
Pioneer in 1992 and has 12 years of investment experience.
The following replaces the corresponding section in the Prospectus:
BALANCED PORTFOLIO: William C. Field, Vice President of Pioneer, is responsible
for day-to-day management of the Portfolio's equity investments. Mr. Field
joined Pioneer in 1991 and has over six years of investment experience. Richard
A. Schlanger, Vice President of Pioneer, together with Mr. Field is responsible
for the day-to-day management of the fixed income investments of the Portfolio.
Mr. Schlanger joined Pioneer in 1988 and has over 20 years of investment
experience.
The following replaces the corresponding section in the Prospectus:
Each Portfolio, other than Swiss Franc Bond Portfolio, has an investment
objective and policies similar to those of an existing Pioneer retail mutual
fund. Emerging Markets Portfolio is most similar to Pioneer Emerging Markets
Fund, International Growth Portfolio to Pioneer International Growth Fund,
Europe Portfolio to Pioneer Europe Fund, Capital Growth Portfolio to Pioneer
Capital Growth Fund, Growth Shares Portfolio to Pioneer Growth Shares, Real
Estate Growth Portfolio to Pioneer Real Estate Shares, Growth and Income
Portfolio to Pioneer Fund, Equity-Income Portfolio to Pioneer Equity-Income
Fund, America Income Portfolio to Pioneer America Income Trust, Balanced
Portfolio to Pioneer Balanced Fund and Money Market Portfolio to Pioneer Cash
Reserves Fund.
V. FUND MANAGEMENT FEES AND OTHER EXPENSES
The following are inserted as the first and third items in the listing of
management fee rates:
MANAGEMENT FEE AS A PERCENTAGE
PORTFOLIO OF PORTFOLIO'S AVERAGE DAILY NET ASSETS
Emerging Markets Portfolio 1.15%
Europe Portfolio 1.00%
The following are inserted as the first and third items in the total expense
limitation:
PERCENTAGE OF PORTFOLIO'S
PORTFOLIO AVERAGE DAILY NET ASSETS
Emerging Markets Portfolio %
Europe Portfolio %
VI. PERFORMANCE
The following replaces the text in the prospectus.
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 for each class of shares is based on historical results and
is not intended to indicate future performance. For additional performance
information, contact your insurance company for a free annual report.
For America Income Portfolio, Swiss Franc Bond Portfolio, Growth and Income
Portfolio, Equity-Income Portfolio and Balanced Portfolio, yield is a way of
showing the rate of income the each class of shares of a Portfolio earns on its
investments as a percentage of the class's share price. To calculate yield for
each class of shares, 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 shares of each class entitled to
receive dividends and expresses the result as an annualized percentage rate
based on the class's share price at the end of the 30-day period.
Money Market Portfolio's yield for each class of shares 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 the same class of 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 for a class of shares 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 in the same class of shares at net asset value. A cumulative total
return reflects the performance of a class of shares for a Portfolio 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 class of 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 EACH CLASS OF THE PORTFOLIOS INCLUDE THE
EFFECT OF DEDUCTING THE PORTFOLIO EXPENSES ATTRIBUTABLE TO THE CLASS, 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 class of a
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
The first sentence of the second paragraph is replaced by the following:
Each Portfolio is treated as a separate entity for federal income tax purposes
and intends to qualify each year as a regulated investment company under
Subchapter M of the Code.
The second sentence of the third paragraph is replaced by the following.
Emerging Markets, International Growth, Europe, Capital Growth, Growth Shares
and Swiss Franc Bond Portfolios distribute their dividends, if any, each year.
VIII. SHAREHOLDER INFORMATION
SHARE PRICE
The following replaces the first paragraph.
The term "net asset value" or NAV per share for each class refers to the worth
of one share. A Portfolio's NAV per share of each class of shares is computed by
adding the value of the Portfolio's investments, cash and other assets,
deducting liabilities attributable to that class and dividing the result by the
number of shares of that class outstanding. Each Portfolio is open for business
each day the New York Stock Exchange (the NYSE) is open. The price of one share
of each class of a Portfolio is its NAV which is normally calculated daily as of
the close of regular trading on the NYSE (normally 4:00 p.m., Eastern time).
IX. APPENDIX
SHORT TERM INVESTMENTS. The following is inserted as the second and third
sentences of the first paragraph.
Emerging Markets Portfolio may invest in short-term investments of both U.S. and
non U.S. issuers. Europe Portfolio may invest in short-term investments of both
U.S. and European issuers as well as obligations of international organizations
designated or supported by multiple foreign governmental entities to promote
economic reconstruction or development.
FORWARD CURRENCY EXCHANGE CONTRACTS. The following replaces the first sentence
of the first paragraph.
Emerging Markets, International Growth, Europe, Swiss Franc Bond, Capital
Growth, Growth Shares, Real Estate Growth, Growth and Income and Balanced
Portfolios each has the ability to hold a portion of its assets in non-U.S.
currencies and purchase or sell forward currency exchange contracts to
facilitate settlement of non-U.S. securities transactions or to protect against
changes in currency exchange rates.
OPTIONS AND FUTURES CONTRACTS. The following replaces the first sentence of the
first paragraph.
Options and futures contracts provide a way for Emerging Markets, International
Growth, Europe, Capital Growth, Real Estate Growth, Growth Shares, Growth and
Income and Swiss Franc Bond Portfolios to manage their exposure to change
interest rates, security prices and currency exchange rates.
DEPOSITARY RECEIPTS. The following replaces the text in the prospectus.
Emerging Markets, International Growth, Europe, 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), European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) and other similar
instruments convertible into securities of eligible issuers.
Generally, ADRs in registered form are designed for use in U.S. securities
markets, and EDRs, GDRs and other similar global instruments in bearer form are
designed for use in non-U.S. securities markets.
ADRs are quoted 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 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
equity securities of non-U.S. issuers, a Portfolio will avoid currency risks
during the settlement period for either purchases or sales. EDRs and GDRs are
not necessarily quoted in the same currency as the underlying securities which
they represent.
Emerging Markets Portfolio may also invest in Russian Depositary Trust
Certificates (RDCs). RDCs are offered through a unit trust with one or more
sub-trusts in which each RDC represents a fractional undivided beneficial
interest in a specific sub-trust. Each sub-trust holds as its only assets the
shares of a single Russian issuer. RDCs are generally not denominated in the
same currency as the underlying security that they represent. Voting rights for
an RDC holder of any Russian company are not direct and the trust votes in
accordance with the wishes of the majority of the RDC holders of such company.
RDCs are subject to the risks inherent in a direct investment in any Russian
issuer's shares, including the possibility of adverse changes in the Russian
government and Russian securities regulations, and certain RDC-specific risks
such as custodial, title and registration risk and the volatility of the Russian
secondary securities market. RDCs are considered to be Rule 144A securities
under the Securities Act of 1933.
For purposes of a Portfolio's investment policies, investments in ADRs, EDRs,
GDRs, RDCs and similar instruments will be deemed to be investments in the
underlying equity securities of the foreign issuers. A Portfolio may acquire
depositary receipts from banks that do not have a contractual relationship with
the issuer of the security underlying the depositary receipt to issue and secure
such depositary receipt. To the extent a Portfolio invests in such unsponsored
depositary receipts there may be an increased possibility that the Portfolio may
not become aware of events affecting the underlying security and thus the value
of the related depositary receipt. In addition, certain benefits (i.e., rights
offerings) which may be associated with the security underlying the depositary
receipt may not inure to the benefit of the holder of such depositary receipt.
WARRANTS. The following replaces the first sentence of the paragraph.
Each Portfolio (with the exception of America Income and Money Market
Portfolios) may invest in warrants, which entitle the holder to buy equity
securities at a specific price over a specific period of time.
WHEN ISSUED SECURITIES. The following replaces the first sentence of the
paragraph.
Growth Shares and Balanced Portfolios may purchase and sell securities on a
"when issued" and "delayed delivery" basis. Balanced Portfolio's aggregate
investments in when-issued or delayed delivery commitments and repurchase
agreements may not exceed 25% of its assets.
The following section is inserted at the end of the Appendix:
BRADY BONDS. Emerging Markets Portfolio may invest in Brady Bonds and other
sovereign debt securities of countries that have restructured or are in the
process of restructuring sovereign debt pursuant to the "Brady Plan." Brady
Bonds are debt securities issued under the framework of the Brady Plan as a
mechanism for debtor nations to restructure their outstanding external
indebtedness (generally, commercial bank debt). In restructuring its external
debt under the Brady Plan framework, a debtor nation negotiates with its
existing bank lenders as well as multilateral institutions such as the World
Bank and the International Monetary Fund. The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for newly issued
bonds (Brady Bonds). Dollar denominated collateralized Brady Bonds are generally
collateralized by U.S. Treasury zero coupon bonds having the same maturity as
the Brady Bonds.
Brady Bonds may involve a high degree of risk, may be in default or present the
risk of default Agreements implemented under the Brady Plan to date are designed
to achieve debt and debt-service reduction through specific options negotiated
by a debtor nation with its creditors. As a result, the financial packages
offered by each country differ.
<PAGE>
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
Emerging Markets Portfolio
Europe Portfolio
Growth Shares Portfolio
Growth and Income Portfolio
Class II Shares
Prospectus
October 1, 1998
TABLE OF CONTENTS
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PAGE PAGE
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I. HIGHLIGHTS ....................... 2 V. FUND MANAGEMENT FEES
II. HOW THE FUND WORKS ............... 3 AND OTHER EXPENSES ............... 8
III. RISK CONSIDERATIONS .............. 4 VI. PERFORMANCE ...................... 9
IV. THE FUND AND THE PIONEER VII. DISTRIBUTIONS AND TAXES .......... 9
ORGANIZATION ..................... 7 VIII. SHAREHOLDER INFORMATION .......... 10
IX. APPENDIX ......................... 11
</TABLE>
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 consists of 12 portfolios with different
investment objectives (Portfolio or Portfolios).
The following Portfolios are currently available to you:
Emerging Markets Portfolio seeks long-term growth of capital. The Portfolio
invests primarily in securities of issuers that are domiciled or primarily
doing business in countries with emerging economies or securities markets.
Europe Portfolio seeks long-term growth of capital. The Portfolio invests in a
diversified portfolio consisting primarily of securities of European companies.
Growth Shares Portfolio seeks appreciation of capital through investments in
common stocks, together with preferred stocks, bonds, and debentures which are
convertible into common stocks.
Growth and Income Portfolio seeks reasonable income and growth of capital by
investing in a broad list of carefully selected, reasonably priced securities.
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 U.S. government. There is no
assurance that a Portfolio will achieve its objective.
Investors considering the purchase of shares of any Portfolio should read
this Prospectus before investing. It is designed to provide you with
information and help you decide if the goal of one or more of the Portfolios
matches your own. Retain this document for future reference.
Shares of each Portfolio may be purchased primarily by the separate
accounts of insurance companies, for the purpose of funding Variable Contracts.
Particular Portfolios may not be available in your state due to various
insurance or other regulations. Please check with your insurance company for
available Portfolios. Inclusion of a Portfolio in this Prospectus which is not
available in your state is not to be considered a solicitation. This Prospectus
should be read in conjunction with the separate account prospectus of the
specific insurance product which accompanies this Prospectus. Shares of each
Portfolio also may be purchased by certain qualified pension and retirement
plans (Qualified Plans). See "Shareholder Information -- Investments in Shares
of the Portfolios" for more complete information.
A Statement of Additional Information dated October 1, 1998 as
supplemented or revised from time to time for the Fund has been filed with the
Securities and Exchange Commission (the SEC) and is incorporated herein by
reference. This free Statement is available upon request from your insurance
company. Other information about the Fund has been filed with the SEC and is
available though the SEC's internet web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
I. HIGHLIGHTS PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust (the Fund) is an open-end management
investment company that currently consists of 12 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, 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.
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
Refer to "How the Fund Works" for additional information on each Portfolio's
investment objective and policies.
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Portfolio Strategic Focus
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Emerging Seeks long-term growth of
Markets capital by investing primarily in
securities of issuers that are
domiciled or primarily doing
business in countries with
emerging economies or
securities markets.
Europe Seeks long-term growth of
capital by investing in a
diversified portfolio consisting
primarily of securities of
European companies.
Growth Invests for appreciation of
Shares capital through investments in
common stocks, together with
preferred stocks, bonds, and
debentures which are convertible
into common stocks.
Growth and Invests for reasonable income
Income and growth of capital by
investing in a broad list of
carefully selected, reasonably
priced securities.
</TABLE>
Financial Highlights
Class II shares are a new class of shares; financial highlights are not
currently available for Class II shares. Arthur Andersen LLP's report on the
Fund's audited financial statements as of December 31, 1997, for Class I shares
appears in the Fund's Annual Report which is incorporated by reference into the
Statement of Additional Information. The Annual Report includes more
information about the Fund's performance and is available free of charge by
calling Shareholder Services at 1-800-225-6292.
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<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 12
Portfolios with different investment objectives and policies; the four
Portfolios currently available to you 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.
Emerging Markets Portfolio seeks long-term growth of capital. The Portfolio
pursues this objective by investing primarily in securities of issuers that are
domiciled or primarily doing business in countries with emerging economies or
securities markets. See "Risks of International Investments" and "Risks of
Emerging Market Investments" below. Any current income generated from these
securities is incidental to the investment objective of the Portfolio.
Under normal circumstances, at least 65% of the Portfolio's total assets are
invested in securities of issuers that are domiciled or primarily doing
business in emerging countries, related depositary receipts and securities of
these countries' governmental issuers. For purposes of the Portfolio's
investments, "emerging countries" are countries with economies or securities
markets that are not considered by Pioneer to be developed.
An issuer is considered by Pioneer to be domiciled in an emerging country if it
is organized under the laws of, or has a principal office in, such country. An
issuer is considered by Pioneer to be primarily doing business in an emerging
country if that issuer derives at least 50% of its gross revenues or profits
from either (i) goods or services produced in emerging countries or (ii) sales
made in emerging countries.
Under normal circumstances, the Portfolio maintains investments in at least six
emerging countries. Except for temporary defensive purposes, the Portfolio will
not invest 25% or more of its net assets in securities of issuers in any one
country, emerging or developed. From time to time, the Portfolio may invest
more than 25% of its net assets in investments in a particular region.
The Portfolio may invest up to 35% of its total assets in equity and debt
securities of issuers that are domiciled or primarily doing business in any
developed country, other than the U.S., and of such countries' government
issuers and in short-term investments. See the Appendix for more information on
these types of investments.
Although the Portfolio may invest in both equity and debt securities, Pioneer
expects that equity and equity-related securities will ordinarily offer the
greatest potential for long-term growth of capital and will constitute the
majority of the Portfolio's assets. The equity and equity-related securities of
companies in which the Portfolio invests consist of common stock and securities
with common stock characteristics, such as preferred stock, equity interests in
unincorporated entities, warrants, stock purchase rights or debt securities
convertible into common stock, and depositary receipts for these securities.
Debt securities in which the Portfolio invests may be of any credit quality or
maturity. Many of the debt securities of emerging market issuers are of poor
credit quality and may be in default. However, the Portfolio will not invest
more than 10% of its total assets in non-convertible debt securities rated
below investment grade or unrated securities of comparable quality. See "Risks
of Medium and Lower Rated Debt Securities." The value of debt securities,
particularly those with longer maturities, can generally be expected to rise as
interest rates decline and to fall as interest rates rise. Movements in
currency exchange rates may offset or amplify such fluctuations, as measured in
U.S. dollars.
In selecting securities for investment by the Portfolio, Pioneer assesses both
the relative attractiveness of investment in specific countries and also the
market for specific issuers. Pioneer considers a market's conditions, including
political stability, financial practices, market practices, economic growth
prospects, levels of interest rates and inflation, general market valuations
and potential changes in currency relationships when evaluating potential
investments. Based on the relative return and risk among countries, a target
weighting is set for the allocation of the Portfolio's assets among emerging
countries. As a parallel process, Pioneer performs a fundamental analysis of
each issuer being considered for investment by the Portfolio. In performing
this analysis, Pioneer considers a variety of factors, including financial
condition, growth prospects, asset valuation, management expertise, existing or
potential dividend payments, stock liquidity and the market valuation of the
company. The specific size of the Portfolio's investment in any one company is
determined by the relationship of the relative return and risk among individual
investments and the target weighting of that market. Because current income is
not the Portfolio's investment objective, the Portfolio will not restrict its
investments to securities of issuers with a record of timely dividend payments.
Other Investment Practices. Refer to the Appendix for information about the
Portfolio's possible use of forward foreign currency exchange contracts,
options and futures, repurchase agreements, illiquid investments, restricted
securities, and its ability to lend securities.
Europe Portfolio seeks long-term growth of capital. The Portfolio seeks this
objective by investing in a diversified portfolio
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consisting primarily of securities of companies (a) that are organized under
the laws of a European country and have a principal office in a European
country or (b) that derive 50% or more of their total revenues from business in
Europe or (c) the equity securities of which are traded principally on a stock
exchange in Europe; and in depositary receipts for such securities
(collectively, "European Securities"). See "Risks of International Investments"
in the Prospectus.
Normally, at least 80% of the Portfolio's assets are invested in European
Securities consisting of common stock and securities with common stock
characteristics, such as preferred stock, warrants and debt securities
convertible into common stock and depositary receipts for such securities. The
Portfolio will not invest more than 5% of its net assets in convertible debt
securities rated at the time of purchase by a national ratings agency below
investment grade, i.e., BBB or better by Moody's Investors Service or Baa by
Standard & Poor's Ratings Group. See "Risks of Medium and Lower Rated Debt
Securities" in the Prospectus.
The Portfolio may invest in the securities of companies domiciled in any
European country, including but not limited to Austria, Belgium, Denmark,
Finland, France, Germany, Italy, Ireland, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. The Portfolio may invest up
to 10% of its net assets in securities of countries with principal executive
offices located in Eastern European countries and which trade on recognized
European exchanges.
Other Investment Practices. Refer to the Appendix for information about the
Portfolio's possible use of forward foreign currency contracts, options and
futures, repurchase agreements, illiquid investments, restricted securities,
and its ability to lend securities.
Growth Shares Portfolio seeks appreciation of capital through investments in
common stocks, together with preferred stocks, bonds, and debentures which are
convertible into common stocks. Current income will be incidental to the
Portfolio's primary objective. In selecting securities for investment, Pioneer
attempts to identify companies that have better-than-average earnings growth
potential and those industries that stand to enjoy the greatest benefit from
the expected economic environment. The Portfolio seeks to purchase the
securities of companies that are thought to be best situated in those industry
groupings. The Portfolio invests in companies in a variety of industries in an
attempt to reduce overall exposure to investment and market risks.
The Portfolio may invest up to 25% of its net assets in non-U.S. securities.
For a discussion of international investing, please see "Risks of International
Investments." The Portfolio may invest up to 5% of its net assets in REITs. See
"Risks Associated with Real Estate Investment Trusts." The Portfolio may invest
up to 5% of the Portfolio's net assets in lower rated debt securities or
unrated debt securities of comparable quality. See "Risks of Medium and Lower
Rated Debt Securities."
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements, illiquid investments,
restricted securities, when-issued securities, forward foreign currency
exchange contracts, and its ability to lend securities.
Growth and Income Portfolio seeks reasonable income and growth of capital by
investing in a broad list of carefully selected, reasonably priced securities.
Most of the Portfolio's assets are invested in common stocks and other equity
securities such as preferred stocks and securities convertible into common
stock, but the Portfolio may also invest in debt securities and cash equivalent
investments.
The largest portion of the Portfolio's assets is invested in securities that
have paid dividends within the preceding twelve months, but some non-income
producing securities are held for anticipated increases in value. The Portfolio
is managed in accordance with Pioneer's value investment philosophy as
described above for International Growth Portfolio.
The Portfolio may invest in non-U.S. securities. While there is no requirement
to do so, the Portfolio intends to limit its investments in foreign securities
to no more than 10% of its net assets. For a discussion of international
investing, please see "Risks of International Investments." The Portfolio may
invest up to 5% of its net assets in REITs. See "Risks Associated with Real
Estate Investment Trusts." The Portfolio may invest up to 5% of the Portfolio's
net assets in debt securities, including convertible securities, which are
rated less than investment grade or the equivalent. See " Risks of Medium and
Lower Rated Debt Securities."
Other Investment Practices. Refer to the Appendix for information on the
Portfolio's possible use of repurchase agreements, illiquid investments,
restricted securities, writing (selling) covered call options, forward foreign
currency exchange contracts, and its ability to lend securities.
III. RISK CONSIDERATIONS
Risks of International Investments
The information contained in these paragraphs is of particular importance to
Emerging Markets Portfolio and Europe Portfolio; however, Growth Shares and
Growth and Income Portfolios may also make non-U.S. investments. Pioneer limits
the amount of Growth Shares Portfolio's net assets that may be invested in
non-U.S. securities to 25%. Pioneer limits the amount of Growth and Income
Portfolio's net assets that may be invested in non-U.S. securities to 10%.
Investing outside the U.S. involves different opportunities and different risks
from U.S. investments. Pioneer believes that it may be possible to obtain
significant returns from a portfolio of non-U.S. investments, or a combination
of non-U.S. investments and U.S. investments, and to achieve increased
diversification in comparison to a portfolio invested solely in U.S.
securities. By including international investments in your investment
portfolio, you may gain increased diversification by combining securities from
various countries and geographic areas that offer different investment
opportunities and are affected by different economic trends. At the same time,
these opportunities and trends involve risks that may not be encountered in
U.S. investments.
4
<PAGE>
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.
Risks of Emerging Market Investments
The information contained in these paragraphs is of particular importance to
Emerging Markets Portfolio; however, Europe Portfolio may invest up to 10% of
its net assets in securities of issuers from Eastern European countries certain
of which may be considered emerging markets.
Investments in emerging markets are subject to risks in addition to those
described in "Risks of International Investments." The political and economic
structures in many emerging countries may experience significant evolution and
rapid development, and such countries may lack the social, political and
economic stability characteristic of more developed countries. Unanticipated
political or social developments may affect the values of a Portfolio's
investments and the availability to a Portfolio of additional investments in
such countries. Securities of issuers located in these countries tend to have
volatile prices and may offer significant potential for loss as well as gain.
The small size and limited history of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries
make a Portfolio's investments in such countries less liquid and more volatile
than investments in countries with more developed securities markets, such as
the U.S., Japan and most Western European countries.
Economies in individual emerging countries may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency valuation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging countries
have experienced substantial, and in some cases extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had, and may continue to have, very negative effects on the economies and
securities markets of certain emerging countries.
Economies in emerging countries generally depend heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been, and may continue to be,
affected adversely by economic conditions in the countries with which they
trade.
In addition, the value of securities denominated or quoted in international
currencies may also be adversely affected by fluctuations in the relative rates
of exchange between the currencies of different nations and by exchange control
regulations. A Portfolio's investment performance may be negatively affected by
a devaluation of a currency in which the Portfolio's investments are
denominated or quoted. Further, a Portfolio's investment performance may be
significantly affected, either positively or negatively, by currency exchange
rates because the U.S. dollar value of securities denominated or quoted in
another currency will increase or decrease in response to changes in the value
of such currency in relation to the U.S. dollar.
Foreign Currencies. The value of Emerging Markets Portfolio's and Europe
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 Growth Shares
and Growth and Income 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.
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.
Currency Management. The relative performance of foreign currencies can be an
important factor in the performance of Emerging Markets Portfolio, and Europe
Portfolio each of which invests the predominant portion of its assets outside
the United States. The performance of Growth Shares and Growth and Income
Portfolios may also be affected by the relative performance of foreign
currencies, but to a lesser extent. Pioneer may manage Emerging Markets,
Europe, Growth Shares and Growth and Income 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, Emerging Markets, Europe, Growth
Shares and Growth and Income Portfo-
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lios may enter into forward foreign currency exchange contracts (agreements to
exchange one currency for another at a future date at a specified rate) 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 quoted or denominated in foreign currencies. Other currency
management strategies allow the Portfolios to hedge portfolio securities, to
shift investment exposure from one currency to another, or to attempt to profit
from anticipated declines in the value of a foreign currency relative to the
U.S. dollar. Subject to compliance with tax requirements, there is no overall
limitation on the amount of Emerging Markets Portfolio's assets that may be
committed to currency management strategies. Growth Shares and Growth and
Income Portfolios may engage in currency management strategies only to the
extent that they invest in non-U.S. securities.
Risks of Medium and Lower Rated Debt Securities
All the 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 S&P or "Baa" by
Moody's), Pioneer will consider whatever action is appropriate, consistent with
the Portfolio's investment objective and policies.
Emerging Markets may invest up to 10% of its net assets in non-convertible debt
securities rated below investment grade or unrated securities of comparable
quality. Europe, Growth Shares and Growth and Income Portfolios may invest up
to 5% of their net assets in lower rated debt securities. 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 Real Estate Investment Trusts
Growth Shares Portfolio and Growth and Income Portfolio may invest up to 5% of
their net assets in shares of real estate investment trusts (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. 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). Each 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 Investment Company
Act of 1940, as amended (1940 Act). REITs whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes, may be impacted 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. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's 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.
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.
IV. THE FUND AND THE PIONEER ORGANIZATION
The Fund
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 super-
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vises 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 Fund continuously offers two classes of shares designated as Class I and
Class II shares. This prospectus offers Class II shares. Information with
regard to Class I shares is available in a separate prospectus. The Fund has
adopted a distribution plan with respect to the Fund's Class II shares.
Distribution Plan. The Fund has adopted a Plan of Distribution for Class II
shares in accordance with Rule 12b-1 under the 1940 Act pursuant to which the
Class II shares of the Fund will pay a distribution fee at the annual rate of
0.25% of the Fund's average daily net assets. The fee paid under the
distribution plan is intended to be used by PFD to compensate certain
distributors of Variable Contracts and administrators of Qualified Plans for
their distribution services to the Portfolios and personal and/or account
maintenance services provided to contract holders and plan participants.
The Pioneer Organization. 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 02109. PGI is the parent
company of Pioneer and a number of different companies located in the U.S. and
several other countries. These companies provide a variety of financial
services and products. Each Portfolio employs various PGI companies to perform
certain activities required for its operation. In an effort to avoid conflicts
of interest with the Fund, the Fund and Pioneer have adopted a Code of Ethics
that is designed to maintain a high standard of personal conduct by directing
that all personnel defer to the interests of the Fund and its shareholders in
making personal securities transactions.
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 14%
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 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, 1997,
Pioneer advised mutual funds with a total value of over $19 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 02109, distributes shares of
the Portfolios and shares of Pioneer's retail mutual funds.
Mr. David Tripple, President and Chief Investment Officer of Pioneer and
Executive Vice President of the Fund, has general responsibility for Pioneer's
investment operations. Mr. Tripple chairs special committees which review the
research and portfolio operations for the Portfolios. Each committee is
responsible for focusing on select investment categories including domestic
equities, international equities, domestic fixed-income and international
fixed-income. Mr. Tripple joined Pioneer in 1974. Ms. Theresa Hamacher, Senior
Vice President of PMC, oversees U.S. equity research and portfolio management.
Research and management of the Emerging Markets, International Growth and
Europe Portfolios is the responsibility of a team of portfolio managers and
analysts focusing on non-U.S. securities. Members of the team meet regularly to
discuss holdings, prospective investments and portfolio composition. Dr. Norman
Kurland, a Senior Vice President of Pioneer, is the senior member of the team.
Dr. Kurland joined Pioneer in 1990.
The Portfolio Managers responsible for day-to-day management of the Portfolios
are:
Emerging Markets Portfolio: Mark Madden, Vice President of Pioneer. Mr. Madden
joined Pioneer in 1990 and has 13 years of investment experience.
Europe Portfolio: Patrick M. Smith, Vice President of Pioneer. Mr. Smith joined
Pioneer in 1992 and has 12 years of investment experience.
Growth Shares Portfolio: Jeffrey B. Poppenhagen, Vice President of Pioneer. Mr.
Poppenhagen joined Pioneer in 1996 and has ten years of investment experience.
Growth and Income Portfolio: John A. Carey, Vice President of Pioneer. Mr.
Carey joined Pioneer in 1979.
Each Portfolio has an investment objective and policies similar to those of an
existing Pioneer retail mutual fund. Emerging Markets Portfolio is most similar
to Pioneer Emerging Markets Fund, Europe Portfolio to Pioneer Europe Fund,
Growth Shares Portfolio to Pioneer Growth Shares and Growth and Income
Portfolio to Pioneer Fund. Performance of these Portfolios is not expected to
be the same as the performance of the corresponding retail mutual fund due in
part to dissimilarities in their investments. Various insurance costs will also
affect the performance of investments in the Portfolios, as measured for the
Accumulation Units of your Variable Contract.
7
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Certain information technology experts currently predict the
possibility of a widespread failure of computer systems and certain other
equipment which will be triggered on or after certain dates -- primarily January
1, 2000 -- due to a systemic inability to process date-related information. This
scenario, commonly known as the "Year 2000 Problem," could have an adverse
impact on individuals and businesses including the Fund and other mutual funds
and financial organizations. Pioneer and its affiliates are taking steps
believed to be adequate to address the Year 2000 Problem with respect to the
systems and equipment controlled by the Fund's investment adviser, broker-dealer
and transfer agent. In addition, other entities providing services to the Fund
and its shareholders are being asked to provide assurances that they have
undertaken similar measures with respect to their systems and equipment.
Although Pioneer is not expecting any adverse impact to it or its clients from
the Year 2000 Problem, it cannot provide complete assurances that its efforts or
the efforts of its key vendors will be successful.
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, any Pioneer mutual fund or other funds for which Pioneer
or any other affiliate or subsidiary 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 Emerging
Markets Portfolio. A high rate of portfolio turnover involves correspondingly
greater transaction costs which must be borne by the Portfolio and its
shareholders. Because a higher turnover rate increases transaction costs,
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:
<TABLE>
<CAPTION>
Management fee as a percentage
of Portfolio's average daily
Portfolio net assets
<S> <C>
Emerging Markets Portfolio 1.15%
Europe Portfolio 1.00%
Growth Shares Portfolio 0.70%
Growth and Income Portfolio 0.65%
</TABLE>
See "Expense Information" in the Prospectus and "Investment Adviser" in the
Statement of Additional Information.
Pioneer has agreed not to impose all or 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.
<TABLE>
<CAPTION>
Maximum Portfolio
Expenses as a
Percentage of Portfolio's
Portfolio average daily net assets
<S> <C>
Emerging Markets Portfolio 1.62%
Europe Portfolio 1.52%
Growth Shares Portfolio 1.25%
Growth and Income Portfolio 1.25%
</TABLE>
Under the terms of its management contract 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 jurisdictions, including the preparation of
Prospectuses and Statements of Additional Information for filing with
regulatory agencies; (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;
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<PAGE>
(i) compensation of those Trustees of the Trust who are not affiliated with or
interested persons of Pioneer, the Fund (other than as Trustees), PGI or PFD;
(j) the cost of preparing and printing share certificates; and (k) interest on
borrowed money, if any. In addition to the expenses described above, each
Portfolio shall pay all brokers' and underwriting commissions chargeable to the
Portfolio in connection with securities transactions to which the Portfolio is
a party.
VI. PERFORMANCE
Each Portfolio's performance may be quoted in advertising in terms of yield and
total return if accompanied by performance for your insurance company's
separate account. Performance for each class of shares is based on historical
results and is not intended to indicate future performance. For additional
performance information, contact your insurance company for a free annual
report.
For Growth and Income Portfolio, yield is a way of showing the rate of income
each class of shares the Portfolio earns on its investments as a percentage of
the Portfolio's share price. To calculate yield for each class of shares, the
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 each class entitled to receive dividends and
expresses the result as an annualized percentage rate based on the Class share
price at the end of the 30-day period.
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 for each class of shares is based on the overall
dollar or percentage change in value of a hypothetical investment in the
Portfolio, including changes in share price and assuming each Portfolio's
dividends and capital gain distributions are reinvested in the same class of
shares at net asset value. A cumulative total return reflects the performance
of a class of shares for a Portfolio 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 class of 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 each class of the Portfolios include the
effect of deducting each Portfolio's expenses attributable to the class, 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 class of
a 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 intends to qualify each year as a regulated investment company under
Subchapter M of the Code. 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 as required under the Code.
Each Portfolio intends to pay out all of its net investment income and net
realized capital gains for each year. Emerging Markets, Europe and Growth
Shares Portfolios distribute their dividends, if any, each year. Growth and
Income Portfolio distributes its dividends, if any, quarterly. Normally, net
realized capital gains, if any, are distributed each year for the Portfolios.
Dividends from income may also be paid at such other times as may be necessary
for the Portfolios to avoid federal income or excise tax. 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, the Portfolio's share
price declines 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 require-
9
<PAGE>
ments, which are in addition to the diversification requirements imposed on the
Portfolios by the 1940 Act 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 for each class refers to the worth
of one share. A Portfolio's NAV per share of each class of shares is computed
by adding the value of the Portfolio's investments, cash and other assets,
deducting liabilities attributable to that class and dividing the result by the
number of shares of that class outstanding. Each Portfolio is open for business
each day the New York Stock Exchange (the NYSE) is open. The price of one share
of each class of a Portfolio is its NAV which is normally calculated daily as
of the close of regular trading on the NYSE (normally 4:00 p.m., Eastern time).
The investments of each 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. 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.
All assets of the Portfolios for which there is no other readily available
valuation method are valued at their fair value as determined in good faith by
the trustees.
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 interests of Variable Contracts and Qualified Plans investing in the Fund
could conflict due to differences of tax treatment and other considerations.
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 in good order
as described in the prospectus of the insurance company's separate account 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
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<PAGE>
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 may invest in short-term investments consisting of: corporate
commercial paper and other short-term commercial obligations, in each case
rated or issued by companies with similar securities outstanding that are rated
Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
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.
Emerging Markets Portfolio may also invest in short-term investments of both
U.S. and non-U.S. issuers. Europe Portfolio may invest in short-term
investments of both U.S. and European issuers as well as obligations of
international organizations designated or supported by multiple foreign
governmental entities to promote economic reconstruction or development. 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 may lend securities to
broker-dealers and institutional investors, provided that the value of
securities loaned by a Portfolio may not exceed 331/3% 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 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% of its net assets in
illiquid investments which includes securities that are not readily marketable
and repurchase agreements maturing in more than 7 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. Each Portfolio has the ability to hold all
or a portion of its assets in non-U.S. currencies and purchase or sell forward
currency exchange contracts to facilitate settlement of non-U.S. securities
transactions or to protect against changes in currency exchange rates. A
Portfolio might sell a non-U.S. currency on either a spot (i.e., cash) or
forward basis to hedge against an anticipated decline in the U.S. dollar value
of securities that it owns or securities that it intends to sell or has
contracted to sell or to preserve the U.S. dollar value of dividends, interest
or other amounts it expects to receive. Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged foreign currency,
it could also limit any potential gain which might result from an increase in
the value of the
11
<PAGE>
currency. 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 or has contracted 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.
If a Portfolio enters into a forward contract to buy foreign currency, the
Portfolio will be required to place cash or high grade liquid securities in a
segregated account of the Portfolio maintained by the Portfolio's custodian in
an amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. See "Risk Considerations -- Currency
Management."
Options and Futures Contracts provide a way for Emerging Markets, Europe,
Growth Shares and Growth and Income Portfolios to manage their exposure to
changing interest rates, security prices, and currency exchange rates. Some
options and futures strategies, including selling futures, buying puts and
writing calls, tend to hedge a Portfolio's investments against price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other or with forward contracts in order to adjust the risk
and return characteristics of a Portfolio's overall strategy. A Portfolio may
invest in options and futures based on any type of security, index or currency,
including options and futures traded on non-U.S. exchanges and options not
traded on exchanges.
Options and futures can be volatile investments and involve certain risks. If
Pioneer 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. Emerging Markets, International Growth, Europe, 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), European Depositary Receipts (EDRs), Global Depositary
Receipts (GDRs) and other similar instruments convertible into securities of
eligible issuers.
Generally, ADRs in registered form are designed for use in U.S. securities
markets, and EDRs, GDRs and other similar global instruments in bearer form are
designed for use in non-U.S. securities markets.
ADRs are quoted 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
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 equity securities of non-U.S. issuers, a Portfolio will avoid
currency risks during the settlement period for either purchases or sales. EDRs
and GDRs are not necessarily quoted in the same currency as the underlying
securities which they represent.
Emerging Markets Portfolio may also invest in Russian Depositary Trust
Certificates (RDCs). RDCs are offered through a unit trust with one or more
sub-trusts in which each RDC represents a fractional undivided beneficial
interest in a specific sub-trust. Each sub-trust holds as its only assets the
shares of a single Russian issuer. RDCs are generally not denominated in the
same currency as the underlying security that they represent. Voting rights for
an RDC holder of any Russian company are not direct and the trust votes in
accordance with the wishes of the majority of the RDC holders of such company.
RDCs are subject to the risks inherent in a direct investment in any Russian
issuer's shares, including the possibility of adverse changes in the Russian
government and Russian securities regulations, and certain RDC-specific risks
such as custodial, title and registration risk and the volatility of the
Russian secondary securities market. RDCs are considered to be Rule 144A
securities under the Securities Act of 1933.
For purposes of a Portfolio's investment policies, investments in ADRs, EDRs,
GDRs, RDCs and similar instruments will be deemed to be investments in the
underlying equity securities of the foreign issuers. A Portfolio may acquire
depositary receipts from banks that do not have a contractual relationship with
the issuer of the security underlying the depositary receipt to issue and
secure such depositary receipt. To the extent a Portfolio invests in such
unsponsored depositary receipts there may be an increased possibility that the
Portfolio may not become aware of events affecting the underlying security and
thus the value of the related depositary receipt. In addition, certain benefits
(i.e., rights offerings) which may be associated with the security underlying
the depositary receipt may not inure to the benefit of the holder of such
depositary receipt.
Warrants. Each Portfolio 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.
When Issued Securities. Growth Shares Portfolio may purchase and sell
securities on a "when issued" and "delayed delivery" basis. These transactions
are subject to market fluctuation; the value at the time of delivery may be
more or less than the purchase price. Since the Portfolio will rely on the
buyer or seller, as the case may be, to consummate the transactions, failure by
the other party to complete the trans-
12
<PAGE>
action may result in the Portfolio missing the opportunity of obtaining a price
or yield considered to be advantageous. No interest accrues to the Portfolio
prior to delivery. When the Portfolio is the buyer in such a transaction it
will maintain, in a segregated account with its custodian, cash, U.S.
government securities, or high-grade, liquid debt obligations having an
aggregate value equal to the amount of such purchase commitments until payment
is made. The Portfolio will make commitments to purchase securities on such
basis only with the intention of actually acquiring these securities, but the
Portfolio may sell such securities prior to the settlement date if such sales
are considered advisable. To the extent the Portfolio engages in "when issued"
and "delayed delivery" transactions, it will do so for the purpose of acquiring
securities for the Portfolio consistent with the Portfolio's investment
objective and policies not for the purpose of investment leverage.
Brady Bonds. Emerging Markets Portfolio may invest in Brady Bonds and other
sovereign debt securities of countries that have restructured or are in the
process of restructuring sovereign debt pursuant to the "Brady Plan." Brady
Bonds are debt securities issued under the framework of the Brady Plan as a
mechanism for debtor nations to restructure their outstanding external
indebtedness (generally, commercial bank debt). In restructuring its external
debt under the Brady Plan framework, a debtor nation negotiates with its
existing bank lenders as well as multilateral institutions such as the World
Bank and the International Monetary Fund. The Brady Plan framework, as it has
developed, contemplates the exchange of commercial bank debt for newly issued
bonds (Brady Bonds). Brady Bonds may be fully or partially collateralized or
uncollateralized, are issued in various currencies (but primarily the dollar)
and are actively traded in over-the-counter secondary markets. Incomplete
collateralization of interest or principal payment obligations results in
increased credit risk. Dollar-denominated collateralized Brady Bonds, which may
be fixed-rate bonds or floating-rate bonds, are generally collateralized by
U.S. Treasury zero coupon bonds having the same maturity as the Brady Bonds.
Brady Bonds may involve a high degree of risk, may be in default or present the
risk of default. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ.
13
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
(REVISED OCTOBER 1, 1998)
PIONEER VARIABLE CONTRACTS TRUST
(CONSISTING OF 12 PORTFOLIOS)
EMERGING MARKETS PORTFOLIO
INTERNATIONAL GROWTH PORTFOLIO
EUROPE PORTFOLIO
CAPITAL GROWTH PORTFOLIO
GROWTH SHARES PORTFOLIO
REAL ESTATE GROWTH PORTFOLIO
GROWTH AND INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
BALANCED PORTFOLIO
SWISS FRANC BOND PORTFOLIO
AMERICA INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Class I Prospectus (the "Prospectus")
dated May 1, 1998, as amended and/or supplemented from time to time, or the
Class II Prospectus (the "Prospectus") dated October 1, 1998, of Pioneer
Variable Contracts Trust (the "Fund"). A copy of the Prospectus can be obtained
free of charge from your insurance company. The most recent Annual Report to
shareholders is attached to this Statement of Additional Information and is
hereby incorporated in this Statement of Additional Information by reference.
TABLE OF CONTENTS
PAGE
1. Investment Policies and Restrictions.................. 2
2. Management of the Fund................................ 22
3. Investment Adviser.................................... 26
4. Principal Underwriter................................. 28
5. Custodian............................................. 29
6. Independent Public Accountant......................... 29
7. Portfolio Transactions................................ 30
8. Tax Status............................................ 32
9. Description of Shares................................. 35
10. Certain Liabilities................................... 36
11. Determination of Net Asset Value...................... 36
12. Investment Results.................................... 38
13. Financial Statements.................................. 42
APPENDIX A - Description of Short-Term Debt
and Corporate Bond Ratings................... 44
APPENDIX B - Performance Statistics............... 47
APPENDIX C - Other Pioneer Information............ 67
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES AND RESTRICTIONS
The Fund consists of separate portfolios, each of which is an
investment vehicle for variable annuity and variable life insurance contracts
(the "Variable Contracts") offered by the separate accounts (the "Accounts") of
various insurance companies ("Participating Insurance Companies"). The
portfolios also may be offered to certain qualified pension and retirement plans
(the "Qualified Plans"). The Fund currently consists of the following 12
distinct portfolios: Emerging Markets Portfolio, International Growth Portfolio,
Europe Portfolio, Capital Growth Portfolio, Growth Shares Portfolio, Real Estate
Growth Portfolio, Growth and Income Portfolio, Equity-Income Portfolio, Balanced
Portfolio, Swiss Franc Bond Portfolio, America Income Portfolio and Money Market
Portfolio (each a "Portfolio"). Your Variable Contract or qualified plan may not
offer all Portfolios of the Fund. The terms and conditions of the Variable
Contracts and any limitations upon the Portfolios in which the Accounts may be
invested are set forth in a separate prospectus and statement of additional
information relating to the Variable Contracts. The terms and conditions of a
Qualified Plan and any limitations upon the Portfolios in which such Plan may be
invested are set forth in such Plan's governing documents. The Fund reserves the
right to limit the types of Accounts and the types of Qualified Plans that may
invest in any Portfolio.
Qualified Plans and Participating Insurance Companies are the record
holders and beneficial owners of shares of beneficial interest in each Portfolio
of the Fund. In accordance with the limitations set forth in their Variable
Contracts, contract holders may direct through their Participating Insurance
Companies the allocation of amounts available for investment among the Fund's
Portfolios. Similarly, in accordance with any limitations set forth in their
Qualified Plans, Qualified Plan participants may direct through their Qualified
Plan administrators the allocation of amounts available for investment among the
Fund's Portfolios. Instructions for any such allocation, or for the purchase or
redemption of shares of a Portfolio, must be made by the investor's
Participating Insurance Company or Qualified Plan administrator, as the case may
be, as the record holder of the Portfolio's shares. The rights of Participating
Insurance Companies and Qualified Plans as record holders of shares of a
Portfolio are different from the rights of contract holders and Qualified Plan
participants. The term "shareholder" in this Statement of Additional Information
refers only to Participating Insurance Companies and Qualified Plans, and not to
contract holders or Qualified Plan participants.
The Fund's Prospectus identifies the investment objective and the
principal investment policies of each Portfolio and the risk factors associated
with the Portfolio's investments. Whenever an investment policy or restriction
states a maximum percentage of a Portfolio's assets may be invested in any
security or presents a policy regarding quality standards, this standard or
other restriction shall be determined immediately after and as a result of the
Portfolio's investment. Accordingly, any later increase or decrease resulting
from a change in values, net assets or other circumstances will not be
considered in determining whether the investment complies with the Portfolio's
investment objectives and policies. Other investment policies of the Portfolios
and associated risk factors are set forth below. Capitalized terms not otherwise
defined herein have the meaning given to them in the Prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus.
EMERGING MARKETS AND ASSOCIATED RISK
Emerging Markets and, to a lesser degree, International Growth, may
invest in securities of issuers in emerging countries.
EMERGING COUNTRIES. Investing in securities of issuers in emerging
countries may entail greater risks than investing in securities of issuers in
developed countries. These risks include (i) less social, political and economic
stability; (ii) the small current size of the markets for such securities and
the currently low or nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national policies which
may restrict a Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; and (v) the absence of developed structures governing private
or foreign investment or allowing for judicial redress for injury to private
property.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, a Portfolio
could lose its entire investment in any such country.
In addition, even though opportunities for investment may exist in
emerging markets, any change in the leadership or policies of the governments of
those countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by a Portfolio.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by securities
purchased by a Portfolio will not also be expropriated, nationalized, or
otherwise confiscated. If such confiscation were to occur, a Portfolio could
lose a substantial portion of its investments in such countries. The Portfolio's
investments would similarly be adversely affected by exchange control regulation
in any of those countries.
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which
a Portfolio may invest may have vocal minorities that advocate radical religious
or revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for widespread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of a Portfolio's investment in
those countries.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Portfolio. As illustrations,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. A Portfolio could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by a Portfolio will not be
registered with the SEC and such issuers thereof will not be subject to the
SEC's reporting requirements. Thus, there will be less available information
concerning foreign issuers of securities held by a Portfolio than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, the Portfolio's investment adviser, Pioneering Management Corporation
("Pioneer"), will take appropriate steps to evaluate the proposed investment,
which may include on-site inspection of the issuer, interviews with its
management and consultations with accountants, bankers and other specialists.
There is substantially less publicly available information about foreign
companies than there are reports and ratings published about U.S. companies and
the U.S. Government. In addition, where public information is available, it may
be less reliable than such information regarding U.S. issuers.
CURRENCY FLUCTUATIONS. Because a Portfolio, under normal circumstances,
will invest a substantial portion of its total assets in the securities which
are denominated or quoted in foreign currencies, the strength or weakness of the
U.S. dollar against such currencies will account for part of a Portfolio's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Portfolio's holdings of securities denominated in such currency and, therefore,
will cause an overall decline in the Portfolio's net asset value and any net
investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Portfolio.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the U.S., and other economic and financial conditions affecting the world
economy.
Although a Portfolio values its assets daily in terms of U.S. dollars,
the Portfolios do not intend to convert holdings of foreign currencies into U.S.
dollars on a daily basis. A Portfolio may do so from time to time, and investors
should be aware of the costs of currency conversion. Although currency dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many emerging country
issuers may be less liquid and their prices more volatile than securities of
comparable U.S. issuers. In addition, foreign securities exchanges and brokers
are generally subject to less governmental supervision and regulation than in
the U.S., and foreign securities exchange transactions are usually subject to
fixed commissions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a
Portfolio are uninvested and no return is earned thereon. The inability of a
Portfolio to make intended security purchases due to settlement problems could
cause the Portfolio to miss attractive investment opportunities. Inability to
dispose of a portfolio security due to settlement problems either could result
in losses to a Portfolio due to subsequent declines in value of the portfolio
security or, if a Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser. Pioneer will consider such
difficulties when determining the allocation of a Portfolio's assets, although
Pioneer does not believe that such difficulties will have a material adverse
effect on a Portfolio's portfolio trading activities.
NON-U.S. WITHHOLDING TAXES. The Portfolio's investment income or, in
some cases, capital gains from foreign investments may be subject to foreign
withholding or other taxes, thereby reducing the Portfolio's net investment
income and/or net realized capital gains. See "Tax Status."
LOWER RATED DEBT SECURITIES
Emerging Markets Portfolio may invest up to 10% and Europe Portfolio,
Growth Shares Portfolio, Real Estate Growth Portfolio, Growth and Income
Portfolio and Equity-Income Portfolio may each invest up to 5% of their
respective net assets in debt securities which are rated in the lowest rating
categories by Standard & Poor's Ratings Group ("Standard & Poor's") or by
Moody's Investors Service, Inc. ("Moody's") (I.E., ratings of BB or lower by
Standard & Poor's or Ba or lower by Moody's) or, if unrated by such rating
organizations, determined to be of comparable quality by Pioneering Management
Corporation (Pioneer), each Portfolio's investment adviser. International Growth
and Swiss Franc Bond Portfolios may not purchase such 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. In addition, each Portfolio other than
America Income and Money Market Portfolios may invest in medium rated debt
securities (I.E., securities rated BBB by Standard & Poor's or Baa by Moody's,
or unrated securities determined by Pioneer to be of comparable quality).
Bonds rated BB or Ba or below or comparable unrated securities are
commonly referred to as "junk bonds" and are considered speculative and may be
questionable as to principal and interest payments. In some cases, such bonds
may be highly speculative, have poor prospects for reaching investment standing
and be in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment grade
bonds (I.E., bonds rated BBB or better by Standard & Poor's or Baa or better by
Moody's or, if unrated by such rating organizations, determined to be of
comparable quality by Pioneer). See Appendix A to this Statement of Additional
Information for a description of the ratings issued by Standard & Poor's and
Moody's.
The amount of junk bond securities outstanding has proliferated in
conjunction with the increase in merger and acquisition and leveraged buyout
activity. An economic downturn could severely affect the ability of highly
leveraged issuers to service their debt obligations or to repay their
obligations upon maturity. Factors having an adverse impact on the market value
of lower rated securities will have an adverse effect on a Portfolio's net asset
value to the extent that it invests in such securities. In addition, a Portfolio
may incur additional expenses to the extent it is required to seek recovery upon
a default in payment of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on a
Portfolio's ability to dispose of a particular security when necessary to meet
its liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result, a
Portfolio could find it more difficult to sell these securities or may be able
to sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices used in calculating the
Portfolio's net asset value.
Certain proposed and recently enacted federal laws including the
required divestiture by federally insured savings and loan associations of their
investments in junk bonds and proposals designed to limit the use, or tax and
other advantages, of junk bond securities could adversely affect a Portfolio's
net asset value and investment practices. Such proposals could also adversely
affect the secondary market for junk bond securities, the financial condition of
issuers of these securities and the value of outstanding junk bond securities.
The form of such proposed legislation and the possibility of such legislation
being passed are uncertain.
Since investors generally perceive that there are greater risks
associated with the medium to lower rated debt securities of the type in which
each Portfolio other than America Income and Money Market Portfolios may invest
a portion of its assets, the yields and prices of such securities may tend to
fluctuate more than those for higher rated securities. In the lower quality
segments of the debt securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the debt securities market,
resulting in greater yield and price volatility.
The prices of all debt securities generally fluctuate in response to
the general level of interest rates. Another factor which causes fluctuations in
the prices of debt securities is the supply and demand for similarly rated
securities. Fluctuations in the prices of portfolio securities subsequent to
their acquisition will not affect any cash income from such securities but will
be reflected in a Portfolio's net asset value.
Medium to lower rated and comparable unrated debt securities tend to
offer higher yields than higher rated securities with the same maturities
because the historical financial condition of the issuers of such securities may
not have been as strong as that of other issuers. Since medium to lower rated
securities generally involve greater risks of loss of income and principal than
higher rated securities, investors should consider carefully the relative risks
associated with investment in securities which carry medium to lower ratings and
in comparable unrated securities. In addition to the risk of default, there are
the related costs of recovery on defaulted issues. Pioneer will attempt to
reduce these risks through portfolio diversification and by analysis of each
issuer and its ability to make timely payments of income and principal, as well
as broad economic trends and corporate developments.
CERTIFICATES OF DEPOSIT
Swiss Franc Bond Portfolio may invest in investment grade certificates
of deposit of domestic banks and savings and loan associations and foreign
banks, without regard to the size of the issuing institution. Money Market
Portfolio may invest in certificates of deposit of large domestic banks and
savings and loan associations (i.e., banks which at the time of their most
recent annual financial statements show total assets in excess of $1 billion),
including foreign branches of such domestic banks, and of smaller banks as
described below. Money Market Portfolio will not invest in certificates of
deposit of foreign banks.
Investment in certificates of deposit issued by foreign banks and
foreign branches of domestic banks involves investment risks that are different
in some respects from those associated with investment in certificates of
deposit issued by domestic banks, including the possible imposition of
withholding taxes on interest income, the possible adoption of foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such certificates of deposit, or other adverse political or
economic developments. In addition, it might be more difficult to obtain and
enforce a judgment against a foreign bank or a foreign branch of a domestic
bank.
Although Money Market Portfolio recognizes that the size of a bank is
important, this fact alone is not necessarily indicative of its
creditworthiness. Accordingly, Money Market Portfolio may invest in certificates
of deposit issued by banks and savings and loan associations which had at the
time of their most recent annual financial statements total assets of less than
$1 billion, provided that (i) the principal amounts of such certificates of
deposit are insured by an agency of the U.S. Government, (ii) at no time will
the Portfolio hold more than $100,000 principal amount of certificates of
deposit of any one such bank and (iii) at the time of acquisition, no more than
10% of the Portfolio's assets (taken at current value) are invested in
certificates of deposit of such banks having total assets not in excess of $1
billion.
ADDITIONAL INFORMATION REGARDING GNMA CERTIFICATES
As discussed in the Prospectus, America Income Portfolio's investments
in U.S. Government securities may include mortgage participation certificates
("GNMA Certificates") guaranteed by the Government National Mortgage Association
("GNMA"). Real Estate Growth Portfolio and Balanced Portfolio also may invest in
GNMA Certificates. GNMA Certificates evidence part ownership of a pool of
mortgage loans. Because prepayment rates of individual mortgage pools will vary
widely, it is not possible to predict with certainty the average life of a
particular issue of GNMA Certificates. However, statistics published by the
Farmers' Home Administration ("FHA") are normally used as an indicator of the
expected average life of GNMA Certificates. The actual life of a particular
issue of GNMA Certificates, however, will depend on the coupon rate of the
underlying mortgages, with higher interest rate mortgages being more prone to
prepayment or refinancing.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the Veterans Administration-guaranteed or FHA-insured
mortgages underlying the GNMA Certificates, but only by the amount of the fees
paid to GNMA and the issuer. For the most common type of mortgage pool,
containing single-family dwelling mortgages, GNMA receives an annual fee of
6/100 of 1% of the outstanding principal for providing its guarantee, and the
issuer is paid an annual fee of 44/100 of 1% for assembling the mortgage pool
and for passing through monthly payments of interest and principal to GNMA
Certificate holders.
The coupon rate by itself, however, does not indicate the yield that
will be earned on GNMA Certificates for the reasons given in the section
"Investment Objective and Policies" in the Prospectus. In quoting yields for
GNMA Certificates, the customary practice is to assume that the GNMA
Certificates will have a 12-year life. Compared on this basis, GNMA Certificates
have historically yielded roughly 25/100 of 1% more than U.S. Government and
U.S. Government agency bonds. As the life of individual pools may vary widely,
however, the actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a 12-year life.
Since the inception of the GNMA mortgage-backed securities program in
1970, the amount of GNMA Certificates outstanding has grown rapidly. The size of
the market and the active participation in the secondary market by securities
dealers and many types of investors make the GNMA Certificates a highly liquid
instrument. Prices of GNMA Certificates are readily available from securities
dealers and depend on, among other things, the level of market interest rates,
the GNMA Certificate's coupon rate and the prepayment experience of the pools of
mortgages backing each GNMA Certificate.
COVERED CALL AND PUT OPTIONS
Emerging Markets and Growth and Income Portfolios may write (sell)
covered call options on certain portfolio securities. Europe Portfolio may write
(sell) covered call and put options on certain portfolio securities. For Growth
and Income Portfolio, options may not be written on more than 25% of the
aggregate market value of any single portfolio security (determined each time a
call is sold as of the date of such sale). As a writer of a call option, the
Portfolio receives a premium less commission, and, in exchange, foregoes the
opportunity to profit from increases in the market value of the security
covering the call above the sum of the premium and the exercise price of the
option during the life of the option. The purchaser of such a call has the
option of purchasing the security from the Portfolio at the option price during
the life of the option. Portfolio securities on which options may be written are
purchased solely on the basis of investment considerations consistent with the
Portfolio's investment objectives. All call options written by a Portfolio are
covered. A Portfolio may cover a call option by owning the securities subject to
the option so long as the option is outstanding or using the other methods
described below. In addition, a written call option may be covered by purchasing
an offsetting option or any other option which, by virtue of its exercise price
or otherwise, covers the Portfolio's's net exposure on its written option
position. The security covering the call is maintained in a segregated account
of the Portfolio's custodian. A Portfolio does not consider a security covered
by a call option to be "pledged" as that term is used in the Portfolio's policy
which limits the pledging or mortgaging of its assets.
A Portfolio will purchase a call option only when entering into a
"closing purchase transaction," i.e., a purchase of a call option on the same
security with the same exercise price and expiration date as a "covered" call
already written by the Portfolio. There is no assurance that the Portfolio will
be able to effect such closing purchase transactions at a favorable price; if
the Portfolio cannot enter into such a transaction it may be required to hold a
security that it might otherwise have sold. Portfolio turnover may increase
through the exercise of options if the market price of the underlying securities
appreciates and the Portfolio has not entered into a closing purchase
transaction. The commission on the purchase or sale of a call option is higher
in relation to the premium than the commission in relation to the price on
purchase or sale of the underlying security.
Europe Portfolio may write covered put options on securities in which
it may invest. Put options are "covered" by the Portfolio when it has
established a segregated account of cash or liquid, high-grade debt obligations
sufficient to satisfy the Portfolio's obligation to purchase the underlying
securities. By writing a put option, the Portfolio assumes the risk that it may
be required to purchase the underlying security for an exercise price higher
than its then current market value, resulting in a capital loss unless the
security subsequently appreciates in value.
SECURITIES INDEX OPTIONS
Emerging Markets Portfolio, International Growth Portfolio, Europe
Portfolio, Capital Growth Portfolio, Real Estate Growth Portfolio, Equity-Income
Portfolio and Swiss Franc Bond Portfolio may invest in call and put options on
securities indices for the purpose of hedging against the risk of unfavorable
price movements adversely affecting the value of the applicable Portfolio's
securities or securities the Portfolio intends to buy. The Portfolios will not
invest in securities index options for speculative purposes.
Options on stock indices are traded only on national securities
exchanges and over-the-counter, both in the United States and in foreign
countries. A securities index fluctuates with changes in the market values of
the securities included in the index. For example, some stock index options are
based on a broad market index such as the S&P 500 or the Value Line Composite
Index in the U.S., the Nikkei in Japan or the FTSE 100 in the United Kingdom.
Index options may also be based on a narrower market index, such as the S&P 100
or on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index.
A Portfolio may purchase put options in order to hedge against an
anticipated decline in securities prices that might adversely affect the value
of securities held by the Portfolio. If a Portfolio purchases a put option on a
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the level of the securities
index below the exercise price. Such payments would tend to offset a decline in
the value of securities held by the Portfolio. However, if the level of the
securities index increases and remains above the exercise price while the put
option is outstanding, the Portfolio will not be able to profitably exercise the
option and will lose the amount of the premium and any transaction costs. Such
loss may be partially offset by an increase in the value of the securities held
by the Portfolio.
A Portfolio may purchase call options on securities indices in order to
lock in a favorable price on securities that it intends to buy in the future. If
a Portfolio purchases a call option on a securities index, the amount of the
payment it receives upon exercising the option depends on the extent of any
increase in the level of the securities index above the exercise price. Such
payments would in effect allow a Portfolio to benefit from securities market
appreciation even though it may not have had sufficient cash to purchase the
underlying securities. Such payments may offset increases in the price of
securities that the Portfolio intends to purchase. If, however, the level of the
securities index declines and remains below the exercise price while the call
option is outstanding, the Portfolio will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Portfolio pays to
buy additional securities for its portfolio.
A Portfolio may sell any securities index option it has purchased or
write a similar offsetting securities index option in order to close out a
position in a securities index option which it has purchased. These closing sale
transactions enable a Portfolio to immediately realize gains or minimize losses
on its options positions. However, there is no assurance that a liquid secondary
market on an options exchange will exist for any particular option, or at any
particular time, and for some options no secondary market may exist. In
addition, securities index prices may be distorted by interruptions in the
trading of securities of certain companies or of issuers in certain industries,
or by restrictions that may be imposed by an exchange on opening or closing
transactions, or both, which would disrupt trading in options on such indices
and preclude a Portfolio from closing out its options positions. If a Portfolio
is unable to effect a closing sale transaction with respect to options that it
has purchased, it would have to exercise the options in order to realize any
profit.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that can not
be reflected in the options markets. The purchase of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions.
In addition to the risks of imperfect correlation between securities
held by a Portfolio and the index underlying the option, the purchase of
securities index options involves the risk that the premium and transaction
costs paid by a Portfolio in purchasing an option will be lost. This could occur
as a result of unanticipated movements in prices of the securities comprising
the securities index on which the option is based.
FORWARD FOREIGN CURRENCY TRANSACTIONS
Emerging Markets Portfolio, International Growth Portfolio, Europe
Portfolio, Swiss Franc Bond Portfolio, Capital Growth Portfolio, Growth Shares
Portfolio, Real Estate Growth Portfolio, Growth and Income Portfolio, and
Balanced Portfolio each may enter into foreign currency transactions on a spot
(I.E., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. Each of these Portfolios also has
authority to purchase and sell forward foreign currency exchange contracts
involving currencies of the different countries in which it will invest as a
hedge against possible variations in the foreign exchange rate between these
currencies and the U.S. dollar. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. A Portfolio may close out a forward
position in a currency by selling the forward contract or entering into an
offsetting forward contract.
Each Portfolio's transactions in forward foreign currency contracts
will be limited to hedging either specific transactions or portfolio positions,
except that, as described below, Swiss Franc Bond Portfolio may also enter into
such contracts in order to link the value of an investment in a "non-Swiss franc
security" (as defined in the Prospectus) to the performance of the Swiss franc.
Transaction hedging is the purchase or sale of forward foreign currency
contracts with respect to specific receivables or payables of a Portfolio
accruing in connection with the purchase and sale of its portfolio securities
denominated in foreign currencies. Portfolio hedging is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in such foreign currencies. There is no guarantee that a Portfolio will
be engaged in hedging activities when adverse exchange rate movements occur. A
Portfolio may not necessarily, and Swiss Franc Bond Portfolio will not, attempt
to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by Pioneer.
A Portfolio may engage in cross-hedging by using forward contracts in
one currency to hedge against fluctuations in the value of securities
denominated in a different currency, if Pioneer determines that there is a
pattern of correlation between the two currencies. Cross-hedging may also
include entering into a forward transaction involving two foreign currencies,
using one foreign currency as a proxy for the U.S. dollar to hedge against
variations in the other foreign currency, if Pioneer determines that there is a
pattern of correlation between the proxy currency and the U.S.
dollar.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise. Moreover, it may not
be possible for a Portfolio to hedge against a devaluation that is so generally
anticipated that the Portfolio is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
Swiss Franc Bond Portfolio may combine forward contracts to purchase
Swiss francs with investments in securities denominated in another currency in
an attempt to construct a combined investment position whose overall performance
will be similar to that of a security denominated in Swiss francs. For example,
the Portfolio could purchase a dollar-denominated security and at the same time
enter into a forward contract to exchange dollars for Swiss francs at a future
date. If the amount of dollars to be exchanged is properly matched with the
anticipated value of the dollar-denominated security, the Portfolio should be
able to "lock in" the Swiss franc value of the security, and the Portfolio's
overall investment return from the combined position should be similar to the
return from purchasing a Swiss franc-denominated instrument. This is commonly
referred to as a "synthetic" investment position.
Synthetic investment positions may offer greater liquidity than actual
purchases of Swiss franc-denominated securities because of the broad variety of
highly liquid short-term instruments available in the United States and other
countries (other than Switzerland). However, the execution of a synthetic
investment strategy may not be successful. It is impossible to forecast with
absolute precision what the market value of a particular security will be at any
given time. If the value of a non-Swiss franc security is not exactly matched
with Swiss Franc Bond Portfolio's obligation under the forward currency exchange
contract on the contract's maturity date, the Portfolio may be exposed to some
risk of loss from fluctuation in the exchange rate between the Swiss franc and
the non-Swiss franc currency. Although Pioneer will attempt to match such
investments, there can be no assurance that Pioneer will be successful in doing
so.
If a Portfolio enters into a forward contract to purchase foreign
currency, its custodian bank will segregate cash or liquid, high grade debt
securities in a separate account of the Portfolio in an amount equal to the
value of the Portfolio's total assets committed to the consummation of such
forward contract. Those assets will be valued at market daily and if the value
of the assets in the separate account declines, additional cash or securities
will be placed in the accounts so that the value of the account will equal the
amount of the Portfolio's commitment with respect to such contracts.
The cost to a Portfolio of engaging in foreign currency transactions
varies with such factors as the currency involved, the size of the contract, the
length of the contract period and the market conditions then prevailing. Since
transactions in foreign currency and forward contracts are usually conducted on
a principal basis, no fees or commissions are involved.
OPTIONS ON FOREIGN CURRENCIES
Emerging Markets Portfolio, International Growth Portfolio, Europe
Portfolio, Capital Growth Portfolio, Growth Shares Portfolio, Real Estate Growth
Portfolio, Growth and Income Portfolio, Balanced Portfolio and Swiss Franc Bond
Portfolio each may purchase options on foreign currencies for hedging purposes
in a manner similar to that of transactions in forward contracts. For example, a
decline in the U.S. dollar value of a foreign currency in which portfolio
securities are quoted or denominated will reduce the U.S. dollar value of such
securities, even if their value in the foreign currency remains constant. In an
attempt to protect against such decreases in the value of portfolio securities,
a Portfolio may purchase put options on the foreign currency. If the value of
the currency declines, the Portfolio will have the right to sell such currency
for a fixed amount of U.S. dollars which exceeds the market value of such
currency. This would result in a gain that may offset, in whole or in part, the
negative effect of currency depreciation on the value of the Portfolio's
securities quoted or denominated in that currency.
Conversely, if a rise in the U.S. dollar value of a currency is
projected for those securities to be acquired, thereby increasing the cost of
such securities, a Portfolio may purchase call options on such currency. If the
value of such currency increased, the purchase of such call options would enable
the Portfolio to purchase currency for a fixed amount of U.S. dollars which is
less than the market value of such currency. Such a purchase would result in a
gain that may offset, at least partially, the effect of any currency related
increase in the price of securities the Portfolio intends to acquire. As in the
case of other types of options transactions, however, the benefit a Portfolio
derives from purchasing foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, if currency exchange
rates do not move in the direction or to the extent anticipated, a Portfolio
could sustain losses on transactions in foreign currency options which would
deprive it of a portion or all of the benefits of advantageous changes in such
rates.
Europe Portfolio may also write options on foreign currencies for
hedging purposes. For example, if the Portfolio anticipated a decline in the
dollar value of foreign currency denominated securities because of declining
exchange rates, it could, instead of purchasing a put option, write a covered
call option on the relevant currency. If the expected decline occurs, the option
will most likely not be exercised, and the decrease in value of portfolio
securities will be offset by the amount of the premium received by the
Portfolio.
Similarly, the Portfolio could write a put option on the relevant
currency, instead of purchasing a call option, to hedge against an anticipated
increase in the dollar cost of securities to be acquired. If exchange rates move
in the manner projected, the put option will expire unexercised and allow the
Portfolio to offset such increased cost up to the amount of the premium.
However, as in the case of other types of options transactions, the writing of a
foreign currency option will constitute only a partial hedge up to the amount of
the premium and only if the exchanfe rates move in the expected direction. If
unanticipated exchange rate fluctuations occur, the option may be exercised and
the Portfolio would be required to purchase or sell the underlying currency at a
loss which, which could be significant may not be fully offset by the amount of
the premium. As a result of writing options on foreign currencies, the Portfolio
also may be required to forego all or a portion of the benefits which might
otherwise have been obtained from favorable movements in currency exchange
rates.
A call option written on foreign currency by the Portfolio is "covered"
if the Portfolio owns the underlying foreign currency subject to the call, or if
it has an absolute and immediate right to acquire that foreign currency without
additional cash consideration. A call option is also covered if the Portfolio
holds a call on the same foreign currency for the same principal amount as the
call written where the exercise price of the call held is (a) equal to or less
than the exercise price of the call written or (b) greater than the exercise
price of the call written if the amount of the difference is maintained by the
Portfolio in cash or liquid, securities in a segregated account with its
custodian.
A Portfolio may close out its position in a currency option by either
selling the option it has purchased or entering into an offsetting option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in securities prices or currency exchange
rates, Emerging Markets Portfolio, International Growth Portfolio, Europe
Portfolio, Capital Growth Portfolio, Real Estate Growth Portfolio and Swiss
Franc Bond Portfolio may purchase and sell various kinds of futures contracts,
and purchase and write (sell) call and put options on such futures contracts.
Growth Shares Portfolio, Growth and Income Portfolio, and Balanced Portfolio may
only purchase and sell futures contracts that relate to foreign currencies and
related options. Each Portfolio may also enter into closing purchase and sale
transactions with respect to such futures contracts and options. Futures
contracts may be based on various securities (such as U.S. Government
securities), securities indices, foreign currencies and other financial
instruments and indices. All futures contracts entered into by the Portfolios
are traded on U.S. exchanges or boards of trade that are licensed and regulated
by the Commodity Futures Trading Commission (the "CFTC") or on foreign
exchanges.
FUTURES CONTRACTS. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, a
Portfolio can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, a Portfolio, through the purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases. Similarly, a
Portfolio can sell futures contracts on a specified currency to protect against
a decline in the value of such currency and a decline in the value of its
portfolio securities which are quoted or denominated in such currency. A
Portfolio can purchase futures contracts on foreign currency to establish the
price in U.S. dollars of a security quoted or denominated in such currency that
the Portfolio has acquired or expects to acquire.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures contracts on securities or currency
will usually be liquidated in this manner, a Portfolio may instead make, or
take, delivery of the underlying securities or currency whenever it appears
economically advantageous to do so. A clearing corporation associated with the
exchange on which futures on securities or currency are traded guarantees that,
if still open, the sale or purchase will be performed on the settlement date.
Each Portfolio will be required, in connection with transactions in
futures contracts and the writing of options on futures, to make margin
deposits, which will be held by the Portfolio's custodian for the benefit of the
futures commission merchant through whom the Portfolio engages in such futures
contracts and options transactions. In the case of futures contracts or options
requiring a Portfolio to purchase securities, the Portfolio must place cash or
liquid, high grade debt securities in a segregated account maintained by the
custodian and marked to market daily to cover such futures contracts and
options.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to
establish with more certainty the effective price, rate of return and currency
exchange rate on portfolio securities and securities that a Portfolio owns or
proposes to acquire. A Portfolio may, for example, take a "short" position in
the futures market by selling futures contracts in order to hedge against an
anticipated rise in interest rates or a decline in market prices or foreign
currency rates that would adversely affect the value of securities held by the
Portfolio. Such futures contracts may include contracts for the future delivery
of securities held by the Portfolio or securities with characteristics similar
to those securities held by the Portfolio. Similarly, a Portfolio may sell
futures contracts in currency in which its portfolio securities are quoted or
denominated, or in one currency to hedge against fluctuations in the value of
securities quoted or denominated in a different currency if there is an
established historical pattern of correlation between the two currencies. If, in
the opinion of Pioneer, there is a sufficient degree of correlation between
price trends for the securities held by the Portfolio and futures contracts
based on other financial instruments, securities indices or other indices, the
Portfolio may also enter into such futures contracts as part of its hedging
strategy. Although under some circumstances prices of securities held by a
Portfolio may be more or less volatile than prices of such futures contracts,
Pioneer will attempt to estimate the extent of this volatility difference based
on historical patterns and compensate for any such differential by having the
Portfolio enter into a greater or lesser number of futures contracts or by
attempting to achieve only a partial hedge against price changes affecting the
Portfolio's securities portfolio. When hedging of this character is successful,
any depreciation in the value of securities held by a Portfolio will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of securities held
by a Portfolio would be substantially offset by a decline in the value of the
futures position.
On other occasions, a Portfolio may take a "long" position by
purchasing futures contracts. This would be done, for example, when the
Portfolio anticipates the subsequent purchase of particular securities when it
has the necessary cash, but expects the prices or currency exchange rates then
available in the applicable market to be less favorable than prices or rates
that are currently available.
OPTIONS ON FUTURES CONTRACTS. Emerging Markets Portfolio, International
Growth Portfolio, Europe Portfolio, Capital Growth Portfolio, Growth Shares
Portfolio, Real Estate Growth Portfolio, Growth and Income Portfolio, Balanced
Portfolio and Swiss Franc Bond Portfolio may each purchase and write options on
futures contracts for hedging purposes. The acquisition of put and call options
on futures contracts will give a Portfolio the right (but not the obligation)
for a specified price to sell or to purchase, respectively, the underlying
futures contract at any time during the option period. As the purchaser of an
option on a futures contract, a Portfolio obtains the benefit of the futures
position if prices move in a favorable direction but limits its risk of loss in
the event of an unfavorable price movement to the loss of the premium and
transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of a Portfolio's assets. By
writing a call option, a Portfolio becomes obligated (if the option is
exercised), in exchange for the premium, to sell a futures contract, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Portfolio intends to purchase.
However, by writing a put option, the Portfolio becomes obligated (if the option
is exercised) to purchase a futures contract which may have a value lower than
the exercise price. Thus, the loss that a Portfolio may incur by writing options
on futures is potentially unlimited and may exceed the amount of the premium
received. A Portfolio will incur transaction costs in connection with the
writing of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option of the same series.
There is no guarantee that such closing transactions can be effected. A
Portfolio's ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid market.
OTHER CONSIDERATIONS. As noted above, Emerging Markets Portfolio,
International Growth Portfolio, Europe Portfolio, Capital Growth Portfolio,
Growth Shares Portfolio, Real Estate Growth Portfolio, Growth and Income
Portfolio, Balanced Portfolio and Swiss Franc Bond Portfolio may each engage in
futures and related options transactions for hedging purposes. CFTC regulations
permit principals of an investment company registered under the 1940 Act to
engage in such transactions for bona fide hedging (as defined in such
regulations) and certain other limited purposes without registering as commodity
pool operators. Each Portfolio will determine that the price fluctuations in the
futures contracts and options on futures contracts used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, each Portfolio's
futures transactions will be entered into for traditional hedging
purposes--i.e., futures contracts will be sold to protect against a decline in
the price of securities (or the currency in which they are quoted or
denominated) that the Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities (or the
currency in which they are quoted or denominated) it intends to purchase. As
evidence of this hedging intent, each Portfolio expects that on 75% or more of
the occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Portfolio will have purchased, or will be in
the process of purchasing, equivalent amounts of related securities or assets
quoted or denominated in the related currency in the cash market at the time
when the futures or option position is closed out. However, in particular cases,
when it is economically advantageous for a Portfolio to do so, a long futures
position may be terminated or an option may expire without the corresponding
purchase of securities or other assets.
As an alternative to literal compliance with the bona fide hedging
definition, a CFTC regulation permits a Portfolio to elect to comply with a
different test under which the sum of the amounts of initial margin deposits on
the Portfolio's existing futures contracts and premiums paid for options on
futures entered into for the purpose of seeking to increase total return (net of
the amount the positions were "in the money" at the time of purchase) may not
exceed 5% of the market value of the Portfolio's net assets. A Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification
as a regulated investment company for federal income tax purposes.
Transaction costs associated with futures contracts and related options
include brokerage costs, required margin deposits and, in the case of contracts
and options obligating a Portfolio to purchase securities or currencies, the
requirement that the Portfolio segregate assets to cover such contracts and
options.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other risks.
Thus, while a Portfolio may benefit from the use of futures and options on
futures, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for the Portfolio than
if it had not entered into any futures contracts or options transactions. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and a Portfolio may be exposed to risk of loss.
Perfect correlation between a Portfolio's futures positions and
portfolio positions will be difficult to achieve because the only futures
contracts available to hedge a Portfolio's portfolio are various futures on U.S.
Government securities and foreign currencies, futures on a municipal securities
index and stock index futures. In addition, it is not possible to hedge fully or
perfectly against the effect of currency fluctuations on the value of foreign
securities because currency movements affect the value of different securities
in differing degrees.
RESTRICTED AND ILLIQUID SECURITIES
Each Portfolio, other than America Income Portfolio and Money Market
Portfolio, may invest up to 5% of its net assets in "restricted securities"
(I.E., securities that would be required to be registered prior to distribution
to the public), excluding restricted securities eligible for resale under Rule
144A under the Securities Act of 1933, as amended (the "1933 Act"), and, for the
Portfolios that allow non-U.S. investments, non-U.S. securities which are
offered or sold outside the United States. In addition, each Portfolio other
than Money Market Portfolio may invest up to 15% of its net assets in illiquid
investments, which includes securities that are not readily marketable and
repurchase agreements maturing in more than seven days. Money Market Portfolio
may invest up to 10% of its net assets in such investments. Generally, a
security may be considered illiquid if a Portfolio is unable to dispose of such
security within seven days at approximately the price at which it values such
security. Securities may also be considered illiquid as a result of certain
legal or contractual restrictions on resale. The sale of illiquid securities, if
they can be sold at all, generally will require more time and result in higher
brokerage charges and other selling expenses than will the sale of liquid
securities, such as securities eligible for trading on U.S. exchanges or in the
over-the-counter markets. Moreover, restricted securities (I.E., securities that
would be required to be registered prior to distribution to the general public),
such as securities eligible for resale pursuant to Rule 144A ("144A
securities"), which may be illiquid for purposes of this limitation, often sell,
if at all, at a price lower than similar securities that are not subject to
restrictions on resale.
With respect to liquidity determinations generally, the Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including Rule 144A securities, are liquid or illiquid. The Board
has delegated the function of making day-to-day determinations of liquidity for
each Portfolio to Pioneer, pursuant to guidelines reviewed by the Trustees.
Pioneer takes into account a number of factors in reaching liquidity decisions.
These factors may include, but are not limited to: (i) the frequency of trading
in the security; (ii) the number of dealers who make quotes for the security;
(iii) the number of dealers who have undertaken to make a market in the
security; (iv) the number of other potential purchasers; and (v) the nature of
the security and how trading is effected (E.G., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). Pioneer will
monitor the liquidity of securities held by the Portfolio and report
periodically on such decisions to the Trustees.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with "primary
dealers" in U.S. Government securities and banks which furnish collateral at
least equal in value or market price to the amount of their repurchase
obligation. Each Portfolio that may invest in foreign securities may also enter
into repurchase agreements involving certain foreign government securities. The
primary risk is that, if the seller defaults, a Portfolio might suffer a loss to
the extent that the proceeds from the sale of the underlying securities and
other collateral held by the Portfolio in connection with the related repurchase
agreement are less than the repurchase price. Another risk is that, in the event
of bankruptcy of the seller, a Portfolio could be delayed in or prohibited from
disposing of the underlying securities and other collateral held by the
Portfolio in connection with the related repurchase agreement pending court
proceedings. In evaluating whether to enter into a repurchase agreement for a
Portfolio, Pioneer will carefully consider the creditworthiness of the seller
pursuant to procedures reviewed and approved by the Trustees.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio other than America Income Portfolio and Money Market
Portfolio may lend portfolio securities to member firms of the New York Stock
Exchange, under agreements which would require that the loans be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury Bills
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. A Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned as well as
the benefit of an increase or detriment of a decrease in the market value of the
securities loaned and would also receive compensation based on investment of the
collateral. A Portfolio would not, however, have the right to vote any
securities having voting rights during the existence of the loan, but would call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of consent on a material matter
affecting the investment.
As with other extensions of credit there are risks of delay in recovery
or even loss of rights in the collateral should the borrower of the securities
fail financially. A Portfolio will lend portfolio securities only to firms which
have been approved in advance by the Board of Trustees, which will monitor the
creditworthiness of any such firms. At no time would the value of the securities
loaned by a Portfolio exceed 33 1/3% of the value of its total assets.
OTHER INVESTMENT COMPANIES
With the exception of the Money Market Portfolio, which may not
purchase securities of other investment companies or investment trusts, unless
they are acquired as part of a merger, consolidation or acquisition of assets,
the Portfolios may not, under the 1940 Act, acquire the securities of other
domestic or foreign investment companies or investment funds if, as a result,
(i) more than 10% of a Portfolio's total assets would be invested in securities
of other investment companies, (ii) such purchase would result in more than 3%
of the total outstanding voting securities of any one investment company being
held by the Portfolio, or (iii) more than 5% of the Portfolio's total assets
would be invested in any one investment company. These limitations do not apply
to the purchase of shares of any investment company in connection with a merger,
consolidation, reorganization or acquisition of substantially all the assets of
another investment company. A Portfolio, as a shareholder of the securities of
other investment companies, will bear its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses are in
addition to the direct expenses of a Portfolio's own operations.
WARRANTS
Each Portfolio (with the exception of America Income and Money Market
Portfolios) may invest in warrants, which are securities permitting, but not
obligating, their holder to subscribe for other securities. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. As a result, an investment in
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a 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 its expiration date. Although each Portfolio
does not have a formal percentage limitation on such investments, it is not
expected that Pioneer will invest more than 5% of a Portfolio's net assets in
such securities.
REAL ESTATE INVESTMENT TRUSTS
Real Estate Growth Portfolio may invest without limitation in shares of
real estate investment trusts ("REITs"). Capital Growth Portfolio, Growth Shares
Portfolio, Growth and Income Portfolio, Equity-Income Portfolio and Balanced
Portfolio may each invest up to 5% of its total assets 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 regulated
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 Code. Each 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. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's 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.
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.
MORTGAGE-BACKED SECURITIES
Real Estate Growth, Balanced and America Income Portfolios may invest
in mortgage-backed 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. In addition to the risks described in the
Prospectus, 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. In an environment of rapidly rising
interest rates, the Fund may encounter difficulty disposing of instruments that
are sensitive to changes in interest rates.
INVESTMENT RESTRICTIONS
The Fund, on behalf of each Portfolio, has adopted certain fundamental
investment restrictions which may not be changed without the affirmative vote of
the record holders of a "majority" (as defined in the 1940 Act) of the
Portfolio's outstanding voting securities. As used in the Prospectus and this
Statement of Additional Information, such approval means the approval of the
lesser of (i) the recordholders of 67% or more of the shares of a Portfolio
represented at a meeting if the recordholders of more than 50% of the
outstanding shares of the Portfolios are present in person or by proxy, or (ii)
the holders of more than 50% of the Portfolio's outstanding shares.
RESTRICTIONS THAT APPLY TO EMERGING MARKETS PORTFOLIO, INTERNATIONAL GROWTH
PORTFOLIO, EUROPE PORTFOLIO, CAPITAL GROWTH PORTFOLIO, GROWTH SHARES PORTFOLIO,
REAL ESTATE GROWTH PORTFOLIO, GROWTH AND INCOME PORTFOLIO, EQUITY-INCOME
PORTFOLIO, BALANCED PORTFOLIO AND SWISS FRANC BOND PORTFOLIO:
Each Portfolio may not:
(1) Issue senior securities, except as permitted by paragraphs (2), (6)
and (7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts, repurchase agreements and
reverse repurchase agreements entered into in accordance with the Portfolio's
investment policy, and the pledge, mortgage or hypothecation of the Portfolio's
assets within the meaning of paragraph (3) below are not deemed to be senior
securities.
(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes and except pursuant to reverse repurchase
agreements and (for Emerging Markets and Europe Portfolios only) to meet
redemptions, and (for Swiss Franc Bond Portfolio only) forward roll
transactions, and then only in amounts not to exceed 33 1/3% of the Portfolio's
total assets (including the amount borrowed) taken at market value. The
Portfolio will not use leverage to attempt to increase income. The Portfolio
will not purchase securities while outstanding borrowings (including reverse
repurchase agreements) exceed 5% of the Portfolio's total assets.
(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Portfolio's total
assets taken at market value.
(4) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Portfolio may be deemed to be
an underwriter for purposes of the 1933 Act .
(5) Purchase or sell real estate, except that the Portfolio may (i)
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities that are
secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Portfolio as a result of the ownership of securities.
(6) Make loans, except that the Portfolio may lend portfolio securities
in accordance with the Portfolio's investment policies and may purchase or
invest in repurchase agreements, bank certificates of deposit, a portion of an
issue of publicly distributed bonds, bank loan participation agreements,
bankers' acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.
(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward foreign
currency exchange contracts, forward commitments, securities index put or call
warrants, interest rate swaps, caps and floors and repurchase agreements entered
into in accordance with the Fund's investment policies.
(8) (This restriction No. 8 does not apply to Real Estate Growth
Portfolio) With respect to 75% of its total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies or instrumentalities), if
(a) such purchase would cause more than 5% of the Portfolio's
total assets, taken at market value, to be invested in the securities
of such issuer, or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Portfolio.
It is the fundamental policy of each Portfolio other than Real Estate
Growth Portfolio not to concentrate its investments in securities of companies
in any particular industry. Following the current opinion of the staff of the
SEC, investments are concentrated in a particular industry if such investments
aggregate 25% or more of the Portfolio's total assets. The foregoing industry
concentration policy does not apply to investments in U.S. Government
securities.
Real Estate Growth Portfolio will invest 25% or more of its total
assets in securities issued by companies in the real estate industry.
As a matter of nonfundamental investment policy and in connection with
the offering of its shares in various states and foreign countries, the Fund, on
behalf of each Portfolio, has agreed not to:
(a) Purchase securities on margin or make short sales unless by virtue
of its ownership of other securities, the Portfolio has the right to obtain,
without payment of additional consideration, securities equivalent in kind and
amount to the securities sold and, if the right is conditional, the sale is made
upon the same conditions, except that the Portfolio may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities and in connection with transactions involving forward foreign
currency exchange transactions, options, futures contracts and options on
futures contracts.
(b) Purchase any security which is illiquid, if more than 15% of the
net assets of the Portfolio, taken at market value, would be invested in such
securities. Each Portfolio may not invest in repurchase agreements maturing in
more than seven days. Each Portfolio currently intends to limit its investments
in illiquid securities to illiquid Rule 144A securities.
RESTRICTIONS THAT APPLY TO AMERICA INCOME PORTFOLIO
America Income Portfolio may not:
(1) borrow money, except from banks to meet redemptions in amounts not
exceeding 33 1/3% (taken at the lower of cost or current value) of its total
assets (including the amount borrowed). The Portfolio does not intend to borrow
money during the coming year, and will do so only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Portfolio will not
purchase securities while any borrowings are outstanding;
(2) purchase securities on margin;
(3) make loans to any person, except by (a) the purchase of a debt
obligation in which the Portfolio is permitted to invest and (b) engaging in
repurchase agreements;
(4) act as an underwriter, except as it may be deemed to be an
underwriter in a sale of restricted securities; or
(5) issue senior securities, except as permitted by restrictions nos. 2
and 4 above, and, for purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts and repurchase agreements
entered into in accordance with the Portfolio's investment policies.
The Fund, on behalf of America Income Portfolio, has agreed to adopt
certain additional investment restrictions which are not fundamental and may be
changed by a vote of the Fund's Board of Trustees without shareholder approval.
Pursuant to these additional restrictions, the Portfolio may not:
(a) make short sales of securities, unless by virtue of its ownership
of other securities, the Portfolio has the right to obtain securities equivalent
in kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same terms and conditions, except that the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities;
(b) invest in any security, including any repurchase agreement maturing
in more than seven days, which is illiquid, if more than 15% of the net assets
of the Portfolio, taken at market value, would be invested in such securities;
(c) pledge, mortgage or hypothecate its portfolio securities if at the
time of such action the value of the securities so pledged, mortgaged or
hypothecated would exceed 10% of the value of the Portfolio;
(d) purchase or sell real estate except that the Portfolio may (i)
acquire or lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest in
securities that are secured by real estate or interests therein, (iv) purchase
and sell mortgage-related securities and real estate limited partnerships and
(v) hold and sell real estate acquired by the Portfolio as a result of the
ownership or securities; and
(e) invest in assets, except in U.S. Government securities and in
when-issued commitments and repurchase agreements with respect to these
securities;
<PAGE>
RESTRICTIONS THAT APPLY TO MONEY MARKET PORTFOLIO
Money Market Portfolio may not:
(1) except with respect to investments in obligations of (a) the U.S.
Government, its agencies, authorities or instrumentalities and (b) domestic
banks, purchase any security if, as a result (i) more than 5% of the assets of
the Portfolio would be invested in the securities of any one issuer, or (ii)
more than 25% of its assets would be invested in a particular industry;
(2) borrow money, except from banks to meet redemptions in amounts not
exceeding 33 1/3% (taken at the lower of cost or current value) of its total
assets (including the amount borrowed). The Portfolio does not intend to borrow
money during the coming year, and will do so only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Portfolio will not
purchase securities while any borrowings are outstanding;
(3) make short sales of securities;
(4) purchase securities on margin;
(5) write, purchase or otherwise invest in any put, call, straddle or
spread option or buy or sell real estate, commodities or commodity futures
contracts or invest in oil, gas or mineral exploration or development programs;
(6) make loans to any person, except by (a) the purchase of a debt
obligation in which the Portfolio is permitted to invest and (b) engaging in
repurchase agreements;
(7) knowingly purchase any security that is subject to legal or
contractual restrictions on resale or for which there is no readily available
market;
(8) purchase the securities of other investment companies or investment
trusts, unless they are acquired as part of a merger, consolidation or
acquisition of assets;
(9) purchase or retain the securities of any issuer if any officer or
Trustee of the Fund or the Portfolio or its investment adviser is an officer or
director of such issuer and beneficially owns more than 1/2 of 1% of the
securities of such issuer and all of the officers and the Trustees of the Fund
and the Portfolio's investment adviser together own more than 5% of the
securities of such issuer;
(10) act as an underwriter, except as it may be deemed to be an
underwriter in a sale of restricted securities;
(11) invest in companies for the purpose of exercising control or
management; or
(12) issue senior securities.
In addition, in order to comply with certain nonfundamental policies of
the Portfolio, the Portfolio will not (i) pledge, mortgage or hypothecate its
portfolio securities if at the time of such action the value of the securities
so pledged, mortgaged or hypothecated would exceed 10% of the value of the
Portfolio, or (ii) will not commit more than 10% of its assets to illiquid
investments, such as repurchase agreements that mature in more than seven days.
The term "person" as used in Investment Restriction No. 6 includes institutions
as well as individuals. Policies in this paragraph may be changed by the
Trustees without shareholder approval or notification.
CERTAIN ADDITIONAL NON-FUNDAMENTAL RESTRICTIONS THAT APPLY TO THE PORTFOLIOS
Except with respect to the 300% asset coverage required with respect to
borrowings by each Portfolio, if a percentage restriction on investment or
utilization of assets as set forth above is adhered to at the time an investment
is made, a later change in percentage resulting from changes in the values of
the Portfolio's assets will not be considered a violation of the restriction.
2. MANAGEMENT OF THE FUND
The Fund's Board of Trustees provides broad supervision over the
affairs of the Fund. The officers of the Fund are responsible for the Fund's
operations. The Trustees and executive officers of the Fund are listed below,
together with their principal occupations during the past five years. An
asterisk indicates those Trustees who are interested persons of the Fund within
the meaning of the 1940 Act.
JOHN F. COGAN, JR.*, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE, DOB:
JUNE 1926
President, Chief Executive Officer and a Director of The Pioneer Group,
Inc. ("PGI"); Chairman and a Director of Pioneer and Pioneer Funds Distributor,
Inc. ("PFD"); Director of Pioneering Services Corporation ("PSC"), Pioneer
Capital Corporation ("PCC"); Pioneer Real Estate Advisors, Inc., Pioneer Forest,
Inc., Pioneer Explorer, Inc., Pioneer Management (Ireland) Ltd. ("PMIL") and
Closed Joint Stock Company "Forest-Starma"; President and Director of Pioneer
Metals and Technology, Inc. ("PMT"), Pioneer International Corp. ("PIntl"),
Pioneer First Russia, Inc. ("First Russia") and Pioneer Omega, Inc. ("Omega");
Chairman of the Board and Director of Pioneer Goldfields Limited ("PGL") and
Teberebie Goldfields Limited; Chairman of the Supervisory Board of Pioneer Fonds
Marketing, GmbH, Pioneer First Polish Investment Fund Joint Stock Company, S.A.
and Pioneer Czech Investment Company, A.S.; Chairman, President and Trustee of
all of the Pioneer mutual funds; Director of Pioneer Global Equity Fund Plc,
Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer European Equity
Fund Plc, Pioneer Central & Eastern Europe Fund Plc and Pioneer US Real Estate
Fund Plc; and Partner, Hale and Dorr LLP (counsel to PGI and the Fund).
RICHARD H. EGDAHL, M.D. TRUSTEE, DOB: DECEMBER 1926
Boston University Health Policy Institute, 53 Bay State Road, Boston, MA 02215
Alexander Graham Bell Professor of Health Care Entrepreneurship, Boston
University; Professor of Management, Boston University School of Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery, Boston University School of Medicine; University Professor, Boston
University; Director, Boston University Health Policy Institute and Boston
University Program for Health Care Entrepreneurship; Director, CORE (management
of workers' compensation and disability costs - NASDAQ); Director, WellSpace
(provider of complementary health care); Trustee, Boston Medical Center;
Honorary Trustee, Franciscan Children's Hospital; and Trustee of all of the
Pioneer mutual funds.
MARGUERITE A. PIRET, TRUSTEE, DOB: MAY 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm);
Trustee of Boston Medical Center; Member of the Board of Governors of the
Investment Company Institute; and Trustee of all of the Pioneer mutual funds.
DAVID D. TRIPPLE*, TRUSTEE AND EXECUTIVE VICE PRESIDENT, DOB: FEBRUARY 1944
Executive Vice President and a Director of PGI; President, Chief
Investment Officer and a Director of Pioneer; Director of PFD, PCC, PIntl, First
Russia, Omega, Pioneer SBIC Corporation ("Pioneer SBIC"), PMIL, Pioneer Global
Equity Fund Plc, Pioneer Global Bond Fund Plc, Pioneer DM Cashfonds Plc, Pioneer
European Equity Fund Plc, Pioneer Central and Eastern Europe Fund Plc and
Pioneer US Real Estate Fund Plc; and Executive Vice President and Trustee of all
of the Pioneer mutual funds.
STEPHEN K. WEST, TRUSTEE, DOB: SEPTEMBER 1928
125 Broad Street, New York, NY 10004
Of Counsel to Sullivan & Cromwell (law firm); Trustee, The Winthrop
Focus Funds (mutual funds); and Trustee of all of the Pioneer mutual funds.
STEPHEN G. KASNET, VICE PRESIDENT, DOB: MAY 1945
Trustee and Vice President of Pioneer Real Estate Shares; Vice President
of PGI and President of Pioneer Real Estate Advisor, Inc. since 1995; and
Managing Director, Winthrop Financial Associates and First Winthrop Corp. from
1991 to 1995.
WILLIAM H. KEOUGH, TREASURER, DOB: APRIL 1937
Senior Vice President, Chief Financial Officer and Treasurer of PGI;
Treasurer of PFD, Pioneer, PSC, PCC, PIC, PIntl, PMT, PGL, First Russia, Omega
and Pioneer SBIC Corporation; Treasurer and Director of PPC; and Treasurer of
all of the Pioneer mutual funds.
JOSEPH P. BARRI, SECRETARY, DOB: AUGUST 1946
Secretary of PGI, Pioneer, PPC, PIC, PIntl, PMT, First Russia, Omega
and PCC; Clerk of PFD and PSC; Partner, Hale and Dorr LLP (counsel to the Fund);
and Secretary of all of the Pioneer mutual funds.
ERIC W. RECKARD, ASSISTANT TREASURER, DOB: JUNE 1956
Manager of Business Planning and Internal Audit of PMC since September
1996; Manager of Fund Accounting of Pioneer since May 1994; Manager of Auditing,
Compliance and Business Analysis for PGI prior to May 1994; and Assistant
Treasurer of all of the Pioneer mutual funds.
ROBERT P. NAULT, ASSISTANT SECRETARY, DOB: MARCH 1964
General Counsel and Assistant Secretary of PGI since 1995; Assistant
Secretary of Pioneer, PIntl, PGL, First Russia, Omega and all of the Pioneer
mutual funds; Assistant Clerk of PFD and PSC; and formerly of Hale and Dorr LLP
(counsel to the Fund) where he most recently served as junior partner.
SALVATORE P. PRAMAS, SENIOR VICE PRESIDENT, DOB: APRIL 1963
Vice President of Pioneer.
SHERMAN B. RUSS, SENIOR VICE PRESIDENT, DOB: JULY 1937
Senior Vice President of Pioneer; Vice President of Pioneer Bond Fund,
Pioneer Money Market Trust, Pioneer America Income Trust and Pioneer Interest
Shares.
ROBERT W. BENSON, VICE PRESIDENT, DOB: APRIL 1947
Vice President of Pioneer; Vice President of Pioneer Real Estate
Shares.
JOHN A. CAREY, VICE PRESIDENT, DOB: MAY 1949
Vice President of Pioneer, Pioneer Equity-Income Fund and Pioneer Fund.
WILLIAM C. FIELD, VICE PRESIDENT, DOB: SEPTEMBER 1964
Vice President of Pioneer and Pioneer Balanced Fund. Research Analyst
since 1991 and served as an assistant portfolio manager for certain
institutional accounts since January 1996.
NORMAN KURLAND, VICE PRESIDENT, DOB: NOVEMBER 1949
Senior Vice President of Pioneer since 1993; Vice President of PMC from
1990 to 1993; Vice President of Pioneer Europe Fund, Pioneer Emerging Markets
Fund, Pioneer India Fund, Pioneer International Growth Fund and Pioneer World
Equity Fund.
MARK MADDEN, VICE PRESIDENT, DOB: APRIL 1957
Vice President of Pioneer, Vice President of Pioneer Emerging Markets
Fund.
JEFFREY B. POPPENHAGEN, VICE PRESIDENT, DOB: MARCH 1962
Vice President of Pioneer and Pioneer Growth Shares, since February
1996; formerly a portfolio manager for a number of equity portfolios.
PATRICK SMITH, VICE PRESIDENT, DOB: MARCH 1962
Vice President of Pioneer, Pioneer Europe Fund and Pioneer World Equity
Fund.
J. RODMAN WRIGHT, VICE PRESIDENT, DOB: JANUARY 1961
Vice President of Pioneer and Pioneer Capital Growth Fund, since
January 1997 and former analyst and assistant portfolio manager of the Fund;
formerly an analyst and a co-portfolio manager, focusing on small capitalization
securities, with another investment firm from November 1989 to July 1994.
The Fund's Agreement and Declaration of Trust (the "Declaration")
provides that the recordholders of two-thirds of its outstanding shares may vote
to remove a Trustee of the Fund at any special meeting of shareholders. The
business address of all officers is 60 State Street, Boston, Massachusetts
02109.
All of the outstanding capital stock of PMC, PFD and PSC is directly or
indirectly owned by PGI, a Delaware corporation. All of the outstanding capital
stock of PFD is owned by PMC. The table below lists all the Pioneer funds
currently offered to the public (other than the Portfolios) and the investment
adviser and principal underwriter for each fund.
INVESTMENT PRINCIPAL
FUND NAME ADVISER UNDERWRITER
Pioneer Fund Pioneer PFD
Pioneer II Pioneer PFD
Pioneer Mid-Cap Fund Pioneer PFD
Pioneer Growth Shares Pioneer PFD
Pioneer Micro-Cap Fund Pioneer PFD
Pioneer Small Company Fund Pioneer PFD
Pioneer Independence Fund Pioneer Note 1
Pioneer Capital Growth Fund Pioneer PFD
Pioneer Equity-Income Fund Pioneer PFD
Pioneer Gold Shares Pioneer PFD
Pioneer Real Estate Shares Pioneer PFD
Pioneer Balanced Fund Pioneer PFD
Pioneer Europe Fund Pioneer PFD
Pioneer World Equity Fund Pioneer PFD
Pioneer International Growth Fund Pioneer PFD
Pioneer Emerging Markets Fund Pioneer PFD
Pioneer India Fund Pioneer PFD
Pioneer Bond Fund Pioneer PFD
Pioneer America Income Trust Pioneer PFD
Pioneer Short-Term Income Trust Pioneer PFD
Pioneer Tax-Free Income Fund Pioneer PFD
Pioneer Intermediate Tax-Free Fund Pioneer PFD
Pioneer Cash Reserves Fund Pioneer PFD
Pioneer Interest Shares Pioneer Note 2
- --------------------------
Note 1 This fund is available to the general public only through Pioneer
Independence Plans, a systematic investment plan, sponsored by PFD.
Note 2 This fund is a closed-end investment company.
Pioneer, the investment adviser to each Portfolio, also manages the
investments of certain institutional private accounts. To the knowledge of the
Fund, no officer or Trustee of the Fund owned 5% or more of the issued and
outstanding shares of PGI as of June 30, 1998, except Mr. Cogan who then owned
approximately 14% of such shares. As of June 30, 1998, the officers and Trustees
of the Fund held in the aggregate less than 1% of the outstanding shares of each
Portfolio.
As of June 30, 1998, the following record holder owned substantially
all the shares of each Portfolio: Allmerica Financial Life Insurance and Annuity
Company, 440 Lincoln Street, Worcester, MA 01653.
COMPENSATION OF OFFICERS AND TRUSTEES
The Fund pays no salaries or compensation to any of its officers. The
Fund pays an annual trustee's fee to each Trustee who is not affiliated with
PGI, PMC, PFD or PSC consisting of two components: (a) a base fee of $500 and
(b) a variable fee, calculated on the basis of the average net assets of the
Fund. In addition, the Fund pays a per meeting fee of $100 to each Trustee who
is not affiliated with PGI, Pioneer, PFD or PSC and pays an annual Trustee's fee
of $500 plus expenses to each Trustee affiliated with PGI, Pioneer, PFD and PSC.
The Fund also pays an annual committee participation fee to each Trustee who
serves as a member of any committees established to act on behalf of one or more
of the Pioneer mutual funds. Committee fees are allocated to the Fund on the
basis of the Fund's average net assets. Each Trustee who is a member of the
Audit Committee for the Pioneer mutual funds receives an annual fee equal to 10%
of the aggregate annual trustee's fee, except the Committee Chairperson who
receives an annual trustee's fee equal to 20% of the aggregate annual trustee's
fee. Members of the Pricing Committee for the Pioneer mutual funds, as well as
any other committee which renders material functional services to the Board of
Trustees for the Pioneer mutual funds, receive an annual fee equal to 5% of the
annual trustee's fee, except the Committee Chairperson who receives an annual
trustee's fee equal to 10% of the annual trustee's fee. Each Trustee who is not
affiliated with PGI, Pioneer, PFD or PSC also receives $375 per meeting for
attendance at meetings of the Non-Interested Trustees Committee, except for the
Committee Chairperson who receives an additional $375 per meeting. Any such fees
paid to affiliates or interested persons of PGI, Pioneer, PFD or PSC are
reimbursed to the Fund under its Management Contract.
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Fund:
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM PIONEER
AGGREGATE ACCRUED AS FAMILY OF FUNDS
COMPENSATION PART OF (INCLUDING
NAME OF TRUSTEE FROM THE FUND* FUND'S EXPENSES FUND)**
John F. Cogan, Jr. $ 500 $0 $12,000
Richard H. Egdahl, M.D. $2,000 0 $62,000
Marguerite A. Piret $2,000 0 $80,000
David D. Tripple $ 500 0 $12,000
Stephen K. West $2,000 0 $63,800
------ - -------
TOTAL $7,000 $0 $229,800
====== ========
* For the fiscal year ended December 31, 1997.
** For the calendar year ended December 31, 1997.
3. INVESTMENT ADVISER
As stated in the Prospectus, Pioneer, 60 State Street, Boston,
Massachusetts 02109, serves as the investment adviser to each Portfolio. Each of
the Fund's management contracts is renewable annually by the vote of a majority
of the Board of Trustees of the Fund (including a majority of the Board of
Trustees who are not parties to the contract or interested persons of any such
parties) cast in person at a meeting called for the purpose of voting on such
renewal. Each contract terminates if assigned and may be terminated with respect
to one or more Portfolios without penalty by either party or a majority of the
affected Portfolio's outstanding voting securities and the giving of 60 days'
written notice.
As compensation for the management services and expenses incurred,
Pioneer is entitled to management fees at the annual rate of the applicable
Portfolio's average daily net assets set forth below.
MANAGEMENT FEE AS A
PERCENTAGE OF PORTFOLIO'S
PORTFOLIO AVERAGE DAILY NET ASSETS
Emerging Markets Portfolio 1.15%
International Growth Portfolio 1.00%
Europe Portfolio 1.00%
Real Estate Growth Portfolio 1.00%
Growth Shares Portfolio 0.70%
Capital Growth Portfolio 0.65%
Growth and Income Portfolio 0.65%
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%
The above management fees are normally computed daily and paid monthly
in arrears. Pioneer has voluntarily agreed not to impose a portion of its
management fee and to make other arrangements, if necessary, to limit certain
other expenses of the Portfolios to the extent necessary to reduce expenses to a
specified percentage of average daily net assets, as indicated below. As of the
date of this Statement of Additional Information, expense limitations are in
effect for Emerging Markets Portfolio, International Growth Portfolio, Europe
Portfolio, Growth Shares Portfolio, Real Estate Growth Portfolio, Growth and
Income Portfolio, Swiss Franc Bond Portfolio, America Income Portfolio and Money
Market Portfolio. Pioneer is waiving all or a portion of its management fees for
International Growth Portfolio, Real Estate Growth Portfolio and Swiss Franc
Bond Portfolio. Other Expenses may be reduced, as necessary for International
Growth Portfolio and Swiss Franc Bond Portfolio. Any such arrangements may be
revised or terminated by Pioneer at any time without notice.
PERCENTAGE OF PORTFOLIO'S
PORTFOLIO AVERAGE DAILY NET ASSETS
Emerging Markets Portfolio
International Growth Portfolio 1.50%
Europe Portfolio
Growth Shares Portfolio 1.25%
Growth and Income Portfolio 1.25%
Real Estate Growth Portfolio 1.25%
Swiss Franc Bond Portfolio 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
For the fiscal years ended December 31, 1995, 1996 and 1997 the
Portfolios incurred or would have incurred the following management fees had the
expense limitation agreements described above (if applicable) not been in place:
1995 1996 1997
---- ------ ----
Emerging Markets Portfolio N/A N/A N/A
International Growth Portfolio $ 8,341 $ 128,708 $399,296
Europe Portfolio N/A N/A N/A
Capital Growth Portfolio $ 17,739 $ 178,068 $498,117
Growth and Income Portfolio N/A N/A $ 1,791
Real Estate Growth Portfolio $ 1,879 $ 29,633 $253,190
Growth Shares Portfolio N/A N/A $ 1,995
Equity-Income Portfolio $ 10,878 $ 161,879 $536,869
Balanced Portfolio $ 3,924 $ 52,926 $187,536
America Income Portfolio $ 3,861 $ 23,307 $ 49,978
Swiss Franc Bond Portfolio $ 127 $ 33,183 $114,187
Money Market Portfolio $ 4,972 $ 42,001 $ 62,428
REAL ESTATE GROWTH PORTFOLIO SUBADVISER. Boston Financial Securities,
Inc. ("BFS"), 101 Arch Street, Boston, Massachusetts 02110, serves as the Real
Estate Growth Portfolio's subadviser. The subadvisory agreement among the
Portfolio, Pioneer and BFS is renewable annually by the vote of a majority of
the Board of Trustees of the Portfolio (including a majority of the Board of
Trustees who are not parties to the contract or interested persons of any such
parties) cast in person at a meeting called for the purpose of voting on such
renewal. This contract terminates if assigned and may be terminated without
penalty by any party by vote of its Board of Directors or Trustees, as the case
may be, or a majority of its outstanding voting securities and the giving of 60
days' written notice.
As compensation for its subadvisory services, Pioneeer pays BFS a
subadvisory fee equal to 0.30% per annum of the Real Estate Growth Portfolio's
average daily net assets. The fee is normally computed daily and paid monthly.
The subadvisory fee payable by PMC to BFS will be reduced proportionally to the
extent that the management fee paid by the Portfolio to PMC is reduced under
Pioneer's voluntary expense limitation agreement or to the extent that Pioneer,
after written notice to BFS, elects to utilize a portion of the management fees
paid to Pioneer by the Portfolio to make payments to third parties.
As of December 31, 1997, the following individuals owned beneficially
more than 10% of the outstanding common stock of BFS: Randolph G. Hawthorne
(11.45%), Fred N. Pratt, Jr. (13.42%), William B. Haynsworth (11.53%). The
address for each of these individuals is BFS, 101 Arch Street, Boston,
Massachusetts 02110.
4. PRINCIPAL UNDERWRITER
Pioneer Funds Distributor, Inc. (PFD) , 60 State Street, Boston,
Massachusetts 02109, serves as the principal underwriter for the Fund in
connection with the continuous offering of shares of the Portfolios. The Fund
will not generally issue shares for consideration other than cash. At the Fund's
sole discretion, however, it may issue shares for consideration other than cash
in connection with an acquisition of portfolio securities pursuant to a purchase
of assets, merger or other reorganization.
The redemption price of shares of beneficial interest of a Portfolio
may, at Pioneer's discretion, be paid in cash or portfolio securities. The Fund
has, however, elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which each Portfolio is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the Portfolio's net asset value during any 90-day
period for any one shareholder. Should the amount of redemptions by any
shareholder exceed such limitation, the Fund will have the option of redeeming
the excess in cash or portfolio securities. In the latter case, the securities
are taken at their value employed in determining the Portfolio's net asset
value. A shareholder whose shares are redeemed in-kind may incur brokerage
charges in selling the securities received in-kind. The selection of such
securities will be made in such manner as the Board deems fair and reasonable.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act with respect to its Class II shares pursuant to which the
Class II shares of the Fund will pay a distribution fee at the annual rate of up
to 0.25% of the Fund's average daily net assets. The distribution fee is
intended to compensate PFD for its Class II distribution services to the Fund.
The Fund has not adopted a plan of distribution with respect to its Class I
shares.
In accordance with the terms of the plan of distribution, PFD provides
to the Fund for review by the Trustees a quarterly written report of the amounts
expended and the purpose for which such expenditures were made. In the Trustees'
quarterly review of the plan of distribution, they will consider the continued
appropriateness and the level of reimbursement or compensation the plan of
distribution provides.
No interested person of the Fund, nor any Trustee of the Fund who is
not an interested person of the Fund, has any direct or indirect financial
interest in the operation of the plan of distribution except to the extent that
PFD and certain of its employees may be deemed to have such an interest as a
result of receiving a portion of the amounts expended under the plan of
distribution by the Fund and except to the extent certain officers may have an
interest in PFD's ultimate parent, PGI.
The plan of distribution was adopted by a majority vote of the Board of
Trustees, including all of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the 1940 Act (none of
whom has or have any direct or indirect financial interest in the operation of
the plan of distribution), cast in person at a meeting called for the purpose of
voting on the plan of distribution. In approving the plan of distribution, the
Trustees identified and considered a number of potential benefits which the it
may provide. The Board of Trustees believes that there is a reasonable
likelihood that the plan of distribution will benefit the Fund and its current
and future shareholders. Under its terms, the plan of distribution remains in
effect from year to year provided such continuance is approved annually by vote
of the Trustees in the manner described above. The plan of distribution may not
be amended to increase materially the annual percentage limitation of average
net assets which may be spent for the services described therein without
approval of the shareholders of the class affected thereby, and material
amendments of the plan of distribution must also be approved by the Trustees in
the manner described above. The plan of distribtuion may be terminated at any
time, without payment of any penalty, by vote of the majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operations of the plan of distribution, or by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of the respective Class of the Fund. The plan of distribution will automatically
terminate in the event of its assignment (as defined in the 1940 Act).
5. CUSTODIAN
Brown Brothers Harriman & Co. 40 Water Street, Boston, Massachusetts
02109 is the custodian (the "Custodian") of each Portfolio's assets. The
Custodian's responsibilities include safekeeping and controlling each
Portfolio's cash and securities in the United States as well as in foreign
countries, handling the receipt and delivery of securities, and collecting
interest and dividends on the Portfolio's investments. The Custodian fulfills
its function in foreign countries through a network of subcustodian banks
located around the world (the "Subcustodians"). The Custodian also provides fund
accounting, bookkeeping and pricing assistance to the Portfolios and assistance
in arranging for forward currency exchange contracts as described above under
"Investment Policies and Restrictions."
The Custodian does not determine the investment policies of any
Portfolio or decide which securities it will buy or sell. Each Portfolio may
invest in securities issued by the Custodian or any of the Subcustodians,
deposit cash in the Custodian or any Subcustodian and deal with the Custodian or
any of the Subcustodians as a principal in securities transactions. Portfolio
securities may be deposited into the Federal Reserve-Treasury Department Book
Entry System or the Depository Trust Company in the United States or in
recognized central depositories in foreign countries. The Trustees periodically
review and approve the continuations of its international subcustodian
arrangements.
6. INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP, 225 Franklin Street, Boston, MA 02110, is the
Fund's independent public accountant, providing audit services, tax return
review, and assistance and consultation with respect to the preparation of
filings with the SEC.
7. PORTFOLIO TRANSACTIONS
MONEY MARKET PORTFOLIO
Pioneer intends to fully manage Money Market Portfolio by buying and
selling securities, as well as holding securities to maturity. In managing
Pioneer Money Market Portfolio, Pioneer seeks to take advantage of market
developments and yield disparities, which may include use of the following
strategies:
(1) shortening the average maturity of the Portfolio in anticipation
of a rise in interest rates so as to minimize depreciation of principal;
(2) lengthening the average maturity of the Portfolio in anticipation
of a decline in interest rates so as to maximize yield;
(3) selling one type of debt security and buying another when
disparities arise in the relative values of each; and
(4) changing from one debt security to an essentially similar debt
security when their respective yields appear distorted due to market factors.
ALL PORTFOLIOS
All orders for the purchase or sale of portfolio securities are placed
on behalf of a Portfolio by Pioneer pursuant to authority contained in the
Management Contracts. The primary consideration in placing portfolio security
transactions is execution at the most favorable prices. In selecting
broker-dealers, Pioneer will consider various relevant factors relating to best
execution, including, but not limited to, the size and type of the transaction;
the nature and character of the markets for the security to be purchased or
sold; the execution efficiency, settlement capability, and financial condition
of the broker-dealer; the broker-dealer's execution services rendered on a
continuing basis; and the reasonableness of any broker-dealer spreads. Most
transactions in foreign equity securities are executed by broker-dealers in
foreign countries in which commission rates are fixed and, therefore, are not
negotiable (as such rates are in the United States) and are generally higher
than in the United States. In addition, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers.
The cost of securities purchased from underwriters includes an
underwriter's commission or concession, and the prices at which securities are
purchased and sold from and to dealers include a dealer's mark-up or mark-down.
Pioneer attempts to negotiate with underwriters to decrease the commission or
concession for the benefit of the Portfolios. Pioneer normally seeks to deal
directly with the primary market makers unless, in its opinion, better prices
are available elsewhere.
Pioneer may select broker-dealers which provide brokerage and/or
research services to the Portfolios and/or other investment companies or other
accounts managed by Pioneer. In addition, if PMC determines in good faith that
the amount of commissions charged by a broker-dealer is reasonable in relation
to the value of the brokerage and research services provided by such
broker-dealer, a Portfolio may pay commissions to such broker-dealer in an
amount greater than the amount another firm may charge. Such services may
include advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; providing stock price quotation services;
furnishing analyses, manuals and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, performance of
accounts; comparative fund statistics and credit rating service information and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). Pioneer maintains a listing of
broker-dealers who provide such services on a regular basis. However, because it
is anticipated that many transactions on behalf of the Portfolios and other
investment companies or accounts managed by Pioneer are placed with
broker-dealers (including broker-dealers on the listing) without regard to the
furnishing of such services, it is not possible to estimate the proportion of
such transactions directed to such dealers solely because such services were
provided. Management believes that no exact dollar value can be calculated for
such services.
The research received from broker-dealers may be useful to Pioneer in
rendering investment management services to a Portfolio as well as to other
investment companies or accounts managed by Pioneer, although not all of such
research may be useful to the Portfolio. Conversely, such information provided
by brokers or dealers who have executed transaction orders on behalf of such
other accounts may be useful to Pioneer in carrying out its obligations to a
Portfolio. The receipt of such research has not reduced Pioneer's normal
independent research activities; however, it enables Pioneer to avoid the
additional expenses which might otherwise be incurred if it were to attempt to
develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of other investment companies or accounts managed by Pioneer. This policy
does not imply a commitment to execute all portfolio transactions through all
broker-dealers that sell shares of such investment companies and accounts
In addition to serving as investment adviser to the Portfolios, Pioneer
acts as investment adviser to other Pioneer mutual funds and certain private
accounts with investment objectives similar to those of the Portfolios. As such,
securities may meet investment objectives of a Portfolio, such other funds and
such private accounts. In such cases, the decision to recommend purchases for
one Portfolio, fund or account rather than another is based on a number of
factors. The determining factors in most cases are the amount of securities of
the issuer then outstanding, the value of those securities and the market for
them. Other factors considered in the investment recommendations include other
investments which each Portfolio, fund or account presently has in a particular
industry or country and the availability of investment funds in each Portfolio,
fund or account.
It is possible that, at times, identical securities will be held by
more than one Portfolio, fund and/or account. However, positions in the same
issue may vary and the length of time that any Portfolio, fund or account may
choose to hold its investment in the same issue may likewise vary. To the extent
that a Portfolio, another fund in the Pioneer group or a private account managed
by Pioneer may not be able to acquire as large a position in such security as it
desires, it may have to pay a higher price for the security. Similarly, a
Portfolio may not be able to obtain as large an execution of an order to sell or
as high a price for any particular portfolio security if Pioneer decides to sell
on behalf of another account the same portfolio security at the same time. On
the other hand, if the same securities are bought or sold at the same time by
more than one Portfolio or account, the resulting participation in volume
transactions could produce better executions for a Portfolio or the account. In
the event that more than one account purchases or sells the same security on a
given date, the purchases and sales will normally be made as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each.
The Trustees periodically review Pioneer's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Portfolios.
For the fiscal periods ended December 31, 1996 and December 31, 1997,
the Portfolios paid or owed aggregate brokerage commissions as follows:
AGGREGATE BROKERAGE COMMISSIONS
1996 1997
---- ----
Emerging Markets Portfolio N/A N/A
International Growth Portfolio $104,003 $420,962
Europe Portfolio N/A N/A
Capital Growth Portfolio $112,179 $213,767
Growth Shares Portfolio N/A $ 3, 795
Real Estate Growth Portfolio $ 22,788 $ 76,336
Growth & Income Portfolio N/A $ 2,460
Equity-Income Portfolio $ 45,921 $ 84,245
Balanced Portfolio $16, 275 $ 35,766
America Income Portfolio $ 0 $ 0
Swiss Franc Bond Portfolio $ 0 $ 0
Money Market Portfolio $ 0 $ 0
Differences in brokerage commissions reflected above were due to
increased Portfolio activity and changes in net assets as a result of
shareholder transactions throughout the respective periods.
8. TAX STATUS
Each Portfolio is treated as a separate entity for federal income tax
purposes. It is each Portfolio's policy to meet the requirements of Subchapter M
of the Code for qualification as a regulated investment company. These
requirements relate to the sources of a Portfolio's income, the diversification
of its assets and the distribution of its income to shareholders. If a Portfolio
meets all such requirements and distributes to its shareholders, in accordance
with the Code's timing requirements, all investment company taxable income and
net capital gain, if any, which it earns, the Portfolio will be relieved of the
necessity of paying federal income tax.
In order to qualify as a regulated investment company under Subchapter
M, a Portfolio must, among other things, derive at least 90% of its annual gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% income test"), and satisfy certain annual
distribution and quarterly diversification requirements. For purposes of the 90%
income test, income a Portfolio earns from equity interests in certain entities
that are not treated as corporations (E.G., are treated as partnerships or
trusts) for U.S. tax purposes will generally have the same character for the
Portfolio as in the hands of such entities; consequently, a Portfolio may be
required to limit its equity investments in such entities that earn fee income,
rental income, or other nonqualifying income.
As noted in the Prospectus, each Portfolio must, and intends to, comply
with the diversification requirements imposed by Section 817(h) of the Code and
the regulations thereunder. These requirements, which are in addition to the
diversification requirements imposed on a Portfolio by the 1940 Act and
Subchapter M of the Code, place certain limitations on the assets of each
separate account. Section 817(h) and these regulations treat the assets of the
Portfolios as assets of the related separate accounts and, among other things,
limit the extent to which the assets of a Portfolio may be represented by any
one, two, three or four investments. Specifically, the regulations provide that,
except as permitted by the "safe harbor" described below, as of the end of each
calendar quarter or within 30 days thereafter no more than 55% of the total
assets of a Portfolio may be represented by any one investment, no more than 70%
by any two investments, no more than 80% by any three investments and no more
than 90% by any four investments. For this purpose, all securities of the same
issuer are considered a single investment, and each U.S. Government agency and
instrumentality is considered a separate issuer. Section 817(h) provides, as a
safe harbor, that a separate account will be treated as being adequately
diversified if the diversification requirements under Subchapter M are satisfied
and no more than 55% of the value of the account's total assets are cash and
cash items (including receivables), U.S. Government securities and securities of
other regulated investment companies. Failure by a Portfolio to both qualify as
a regulated investment company and satisfy the Section 817(h) requirements would
generally result in adverse treatment of the variable contract holders,
differing from the treatment described in the applicable variable contract
prospectus, by causing the contracts to lose their favorable tax status and
requiring a contract holder to include in ordinary income any income accrued
under the contracts for the current and all prior taxable years. Any such
failure may also result in adverse tax consequences for the insurance company
issuing the contracts.
Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess of net long-term
capital loss, and certain net foreign exchange gains, are treated as ordinary
income, whether received in cash or reinvested in additional shares. Dividends
from net long-term capital gain in excess of net short-term capital loss ("net
capital gain"), if any, whether received in cash or reinvested in additional
shares, are treated as capital gains for federal income tax purposes without
regard to the length of time shares of the Portfolio have been held.
Any dividend declared by a Portfolio in October, November or December
as of a record date in such a month and paid during the following January will
be treated for federal income tax purposes as received by shareholders on
December 31 of the calendar year in which it is declared.
Foreign exchange gains and losses realized by a Portfolio in connection
with certain transactions involving foreign currency-denominated debt
securities, certain options and futures contracts relating to foreign currency,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Under future regulations, any such transactions
that are not directly related to a Portfolio's investments in stock or
securities (or its options or futures contracts with respect to stock or
securities) may need to be limited in order to enable the Portfolio to satisfy
the 90% income test If the net foreign exchange loss for a year were to exceed a
Portfolio's investment company taxable income (computed without regard to such
loss), the resulting ordinary loss for such year would not be deductible by the
Portfolio or its shareholders in future years.
If a Portfolio acquires any equity interest (under proposed
regulations, generally including not only stock but also an option to acquire
stock such as is inherent in a convertible bond) in certain foreign corporations
that receive at least 75% of their annual gross income from passive sources
(such as interest, dividends, certain rents, royalties, or capital gains) or
hold at least 50% of their assets in investments producing such passive income
("passive foreign investment companies"), the Portfolio could be subject to
federal income tax and additional interest charges on "excess distributions"
received from such companies or gain from the sale of stock in such companies,
even if all income or gain actually received by the Portfolio is timely
distributed to its shareholders. The Portfolio would not be able to pass through
to its shareholders any credit or deduction for such a tax. An election may
generally be available that would ameliorate these adverse tax consequences, but
any such election could require the applicable Portfolio to recognize taxable
income or gain (subject to tax distribution requirements) without the concurrent
receipt of cash. These investments could also result in the treatment of
associated capital gains as ordinary income. A Portfolio may limit and/or manage
its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
Emerging Markets Portfolio, Europe Portfolio, Growth Shares Portfolio,
Real Estate Growth Portfolio, Growth and Income Portfolio and Equity-Income
Portfolio may invest in debt obligations that are in the lowest rating
categories or are unrated, including debt obligations of issuers not currently
paying interest or who are in default. International Growth Portfolio may hold
such securities only as a result of credit quality downgrades. Investments in
debt obligations that are at risk of or in default present special tax issues
for the Portfolios. Tax rules are not entirely clear about issues such as when a
Portfolio may cease to accrue interest, original issue discount, or market
discount, when and to what extent deductions may be taken for bad debts or
worthless securities, how payments received on obligations in default should be
allocated between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by a Portfolio, in the event it invests in such securities, in order
to seek to ensure that it distributes sufficient income to preserve its status
as a regulated investment company and does not become subject to federal income
tax.
If a Portfolio invests in certain pay-in-kind securities ("PIKs"), zero
coupon securities, deferred interest securities or, in general, any other
securities with original issue discount (or with market discount if a Portfolio
elects to include market discount in income currently), the Portfolio must
accrue income on such investments for each taxable year, which generally will be
prior to the receipt of the corresponding cash payments. However, the Portfolio
must distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income tax. Therefore, the
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash, or may have to leverage itself by borrowing the
cash, to satisfy distribution requirements.
For federal income tax purposes, each Portfolio is permitted to carry
forward a net capital loss for any year to offset its own capital gains, if any,
during the eight years following the year of the loss. To the extent subsequent
capital gains are offset by such losses, they would not result in federal income
tax liability to the Portfolio and therefore are not expected to be distributed
as such to shareholders. At December 31, 1997, America Income Portfolio had
aggregate capital loss carryforwards of $67,031 which will expire in 2004 if not
utilized and Swiss Franc Bond Portfolio had aggregate capital loss carryforwards
of $5,280 which will expire in 2005 if not utilized. As of December 31, 1997,
International Growth Portfolio, Capital Growth Portfolio, Growth Shares
Portfolio, Real Estate Growth Portfolio, Growth and Income Portfolio,
Equity-Income Portfolio, Balanced Portfolio, and Money Market Portfolio had no
capital loss carryforwards.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any particular
transaction in Portfolio shares is properly treated as a sale for tax purposes,
as the following discussion assumes. Any loss realized by a shareholder upon the
redemption, exchange or other disposition of shares with a tax holding period of
six months or less will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain with respect to
such shares. Losses on redemptions or other dispositions of shares may be
disallowed under "wash sale" rules in the event of other investments in the same
Portfolio (including those made pursuant to reinvestment of dividends and/or
capital gain distributions) within a period of 61 days beginning 30 days before
and ending 30 days after a redemption or other disposition of shares. In such a
case, the disallowed portion of any loss would be included in the federal tax
basis of the shares acquired in the other investments.
Options written or purchased and futures contracts entered into by a
Portfolio on certain securities, indices and foreign currencies, as well as
certain foreign currency forward contracts, may cause the Portfolio to recognize
gains or losses from marking-to-market at the end of its taxable year even
though such options may not have lapsed, been closed out, or exercised or such
futures or forward contracts may not have been performed or closed out. The tax
rules applicable to these contracts may affect the characterization as long-term
or short-term of some capital gains and losses realized by the Portfolios.
Certain options, futures and forward contracts relating to foreign currency may
be subject to Section 988, as described above, and may accordingly produce
ordinary income or loss. Additionally, the Fund may be required to recognize
gain if an option, futures contract or other transaction that is not subject to
the mark to market rules is treated as a "constructive sale" of an "appreciated
financial position" held by the Fund under Section 1259 of the Code. Any net
mark to market gains and/or gains from constructive sales may also have to be
distributed to satisfy the distribution requirements referred to above even
though no corresponding cash amounts may concurrently be received, possibly
requiring the disposition of portfolio securities or borrowing to obtain the
necessary cash. Losses on certain options, futures or forward contracts and/or
offsetting positions (portfolio securities or other positions with respect to
which a Portfolio's risk of loss is substantially diminished by one or more
options, futures or forward contracts) may also be deferred under the tax
straddle rules of the Code, which may also affect the characterization of
capital gains or losses from straddle positions and certain successor positions
as long-term or short-term. Certain tax elections may be available that would
enable a Portfolio to ameliorate some adverse effects of the tax rules described
in this paragraph. The tax rules applicable to options, futures or forward
contracts and straddles may affect the amount, timing and character of a
Portfolio's income and losses and hence of its distributions to shareholders.
Each Portfolio that may invest in foreign countries may be subject to
withholding and other taxes imposed by foreign countries, including taxes on
interest, dividends and capital gains, with respect to its investments in those
countries. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes in some cases. The Portfolios do not expect to pass through
to their shareholders their pro rata shares of qualified foreign taxes paid by
the Portfolios.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions, is accorded to accounts held
by trustees of qualified pension or retirement plans. These shareholders should
consult their tax advisers for more information.
If, as anticipated, each Portfolio continues to qualify as a regulated
investment company under the Code, it will not be required to pay any
Massachusetts income, corporate excise or franchise taxes or any Delaware
corporation income tax.
The description of certain federal tax provisions above relates solely
to U.S. federal income tax law as it applies to the Portfolios and to certain
aspects of their distributions. It does not address special tax rules applicable
to certain classes of investors, such as tax-exempt entities and insurance
companies. Shareholders should consult their own tax advisers on these matters
and on state, local and other applicable tax laws.
9. DESCRIPTION OF SHARES
The Fund's Declaration of Trust permits the Board of Trustees to
authorize the issuance of an unlimited number of full and fractional shares of
beneficial interest (without par value) which may be divided into such separate
series as the Trustees may establish. Currently, the Fund consists of 12
Portfolios. The Trustees may establish additional portfolios of shares in the
future, and may divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests. The
Declaration of Trust further authorizes the Trustees to classify or reclassify
any series of the shares into one or more classes. Pursuant thereto, the
Trustees have authorized the issuance of two classes of shares of the Fund,
Class I and Class II shares. Each share of a class of a Portfolio represents an
equal proportionate interest in the Portfolio allocable to that class. The
shares of each class of a Portfolio participate equally in the earnings,
dividends and assets of the Portfolio, and are entitled to vote separately to
approve investment advisory agreements or changes in investment restrictions,
but shareholders of all Portfolios vote together in the election and selection
of Trustees and accountants. Upon liquidation of a Portfolio, shareholders of
each class of the Portfolio are entitled to share pro rata in the Portfolio's
net assets available allocable to such class for distribution to shareholders.
Shareholders are entitled to one vote for each share held and may vote
in the election of Trustees and on other matters submitted to meetings of
shareholders. Although Trustees are not elected annually by the shareholders,
shareholders have, under certain circumstances, the right to remove one or more
Trustees. No amendment adversely affecting the rights of shareholders may be
made to the Fund's Declaration of Trust without the affirmative vote of a
majority of its shares. Shares have no preemptive or conversion rights. Shares
are fully paid and non-assessable by the Fund, except as stated below.
The rights, if any, of Variable Contract holders to vote the shares of
a Portfolio are governed by the relevant Variable Contract. For information on
such voting rights, see the prospectus describing such Variable Contract.
10. CERTAIN LIABILITIES
As a Delaware business trust, the Fund's operations are governed by its
Declaration of Trust dated September 16, 1994, as amended January 25, 1995. A
copy of the Fund's Certificate of Trust, also dated September 16, 1994, as
amended February 3, 1995, is on file with the Office of the Secretary of State
of the State of Delaware. Generally, Delaware business trust shareholders are
not personally liable for obligations of a Delaware business trust under
Delaware law. The Delaware Business Trust Act (the "Delaware Act") provides that
a shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. The Fund's Declaration of Trust expressly provides that the Fund
has been organized under the Delaware Act and that the Declaration of Trust is
to be governed by Delaware law. It is nevertheless possible that a Delaware
business trust, such as the Fund, might become a party to an action in another
state whose courts refused to apply Delaware law, in which case the Fund's
shareholders could be subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an
express disclaimer of shareholder liability for acts or obligations of the Fund
and provides that notice of such disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the Fund or its Trustees,
(ii) provides for the indemnification out of Fund or Portfolio property of any
shareholders held personally liable for any obligations of the Fund or of such
Portfolio and (iii) provides that the Fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the Fund and satisfy any judgment thereon. Thus, the risk of a Fund shareholder
incurring financial loss beyond his or her investment because of shareholder
liability with respect to a Portfolio is limited to circumstances in which all
of the following factors are present: (1) a court refused to apply Delaware law;
(2) the liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the Portfolio itself would be unable to meet
its obligations. In the light of Delaware law, the nature of the Fund's business
and the nature of its assets, the risk of personal liability to a Fund
shareholder is remote.
The Declaration of Trust further provides that the Fund shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Fund. The Declaration of Trust does not authorize the Fund or any
Portfolio to indemnify any Trustee or officer against any liability to which he
or she would otherwise be subject by reason of or for willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's duties.
11. DETERMINATION OF NET ASSET VALUE
The net asset value per share of each class of a Portfolio is
determined as of the close of regular trading (currently 4:00 p.m., Eastern
time) on each day on which the New York Stock Exchange (the "Exchange") is open
for trading. As of the date of this Statement of Additional Information, the
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of each class of a Portfolio is also determined on
any other day in which the level of trading in its portfolio securities is
sufficiently high so that the current net asset value per share might be
materially affected by changes in the value of its portfolio securities. No
Portfolio is required to determine its net asset value per share on any day in
which no purchase orders for the shares of the Portfolio become effective and no
shares of the Portfolio are tendered for redemption.
The net asset value per share of each class of a Portfolio is computed
by taking the value of all of the Portfolio's assets attributable to a class
less the Portfolio's liabilities attributable to that class, and dividing it by
the number of outstanding shares for the class. For purposes of determining net
asset value, expenses of each class of a Portfolio are accrued daily.
MONEY MARKET PORTFOLIO
Except as set forth in the following paragraph, Money Market
Portfolio's investments are valued on each business day on the basis of
amortized cost, if the Board of Trustees determines in good faith that the
method approximates fair value. This technique involves valuing an instrument at
its cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price such Portfolio would receive
if it sold the investment. During periods of declining interest rates, the yield
on shares of Money Market Portfolio computed as described below may tend to be
higher than a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio investments. Thus, if the use of amortized cost
by Money Market Portfolio resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Portfolio would be able to obtain
a somewhat higher yield than would result from investment in a fund utilizing
solely market values. The converse would apply in a period of rising interest
rates.
In determining Money Market Portfolio's net asset value, "when-issued"
securities will be valued at the value of the security at the time the
commitment to purchase is entered into.
The valuation of Money Market Portfolio's investments based upon their
amortized cost and the concomitant maintenance of the Portfolio's per share net
asset value of $1.00 is permitted in accordance with Rule 2a-7 under the 1940
Act, pursuant to which the Portfolio must adhere to certain conditions which are
described in detail in the Prospectus. Money Market Portfolio must maintain a
dollar-weighted average portfolio maturity of 90 days or less. The maturities of
variable rate demand instruments held by the Portfolio will be deemed to be the
longer of the demand period or the period remaining until the next interest rate
adjustment, although stated maturities may be in excess of one year. The
Trustees have established procedures designed to stabilize, to the extent
reasonably possible, the price per share of each class of Money Market Portfolio
for the purpose of maintaining sales and redemptions at a single value. Such
procedures will include review of the Portfolio's holdings by the Trustees, at
such intervals as they may deem appropriate, to determine whether the
Portfolio's net asset value per class calculated by using available market
quotations deviates from $1.00 per share and, if so, whether such deviation may
result in material dilution or is otherwise unfair to existing shareholders. In
the event the Trustees determine that such a deviation exists, they have agreed
to take such corrective action as they regard as necessary and appropriate,
including: (i) the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity; (ii)
withholding dividends; (iii) redeeming shares in kind; or (iv) establishing a
net asset value per share by using available market quotations. It is the
intention of the Fund to maintain Money Market Portfolio's per-share net asset
value at $1.00 but there can be no assurance of this.
<PAGE>
ALL OTHER PORTFOLIOS
Securities which have not traded on the date of valuation or securities
for which sales prices are not generally reported are valued at the mean between
the last bid and asked prices. Securities for which no market quotations are
readily available (including those the trading of which has been suspended) will
be valued at fair value as determined in good faith by the Trust's Board of
Trustees, although the actual computations may be made by persons acting
pursuant to the direction of the Board.
12. INVESTMENT RESULTS
Each Portfolio's average annual total return quotations and yield
quotations for each class as they may appear in the Prospectus, this Statement
of Additional Information or in advertising are calculated by standard methods
prescribed by the SEC.
QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in
reports to shareholders, the past performance of a Portfolio may be illustrated
and/or compared with that of other mutual funds with similar investment
objectives, and to other relevant indices. In addition, the performance of a
Portfolio may be compared to alternative investment or savings vehicles and/or
to indices or indicators of economic activity, e.g., inflation or interest
rates. Performance rankings and listings reported in newspapers or national
business and financial publications, such as Barron's, Business Week, Consumers
Digest, Consumer Reports, Financial World, Forbes, Fortune, Investors Business
Daily, Kiplinger's Personal Finance Magazine, Money Magazine, New York Times,
Personal Investor, Smart Money, USA Today, U.S. News and World Report, The Wall
Street Journal, and Worth may also be cited (if the Portfolio is listed in such
publications) or used for comparisons, as well as performance listings and
rankings from various other sources including CDA/Weisenberger Investment
Companies Service, Donoghue's Mutual Fund Almanac, Investment Company Data,
Inc., Ibbotson Associates, Johnson's Charts, Kanon Block Carre and Co., Lipper
Analytical Services, Micropal, Inc., Morningstar, Inc., Schabacker Investment
Management and Towers Data Systems, Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements, in sales
literature or in reports to Fund shareholders.
In presenting investment results, the Fund may also include references
to certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest; and (c) his need to analyze his time frame for future capital needs
to determine how long to invest. The investor controls these three factors, all
of which affect the use of investments in building assets.
One of the primary methods used to measure the performance of a class
of a Portfolio is "total return." Total return will normally represent the
percentage change in value of an account, or of a hypothetical investment in a
class of a Portfolio, over any period up to the lifetime of that class of the
Portfolio. Total return calculations will usually assume the reinvestment of all
dividends and capital gains distributions and will be expressed as a percentage
increase or decrease from an initial value, for the entire period or for one or
more specified periods within the entire period. Total return percentages for
periods of less than one year will not be annualized; total return percentages
for periods longer than one year will usually be accompanied by total return
percentages for each year within the period and/or by the average annual
compounded total return for the period. The income and capital components of a
given return may be separated and portrayed in a variety of ways in order to
illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result.
The Fund may also present, from time to time, historical information
depicting the value of a hypothetical account in a class of a Portfolio since
the inception of that class of the Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS
Average annual total return quotations for each class of shares of the
Portfolios are computed by finding the average annual compounded rates of return
that would cause a hypothetical investment in the class made on the first day of
a designated period (assuming all dividends and distributions are reinvested) to
equal the ending redeemable value of such hypothetical investment on the last
day of the designated period in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1000 initial payment made at the beginning
of the designated period (or fractional
portion thereof)
For purposes of the above computation, it is assumed that all dividends and
distributions made by a Portfolio are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to the class's mean
account size.
STANDARDIZED YIELD QUOTATIONS
The yield of a Portfolio is computed by dividing the Portfolio's net
investment income per share during a base period of 30 days, or one month, by
the maximum offering price per share of the Portfolio on the last day of such
base period in accordance with the following formula:
a-b
YIELD = 2[ ( ------ +1)6-1]
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
For purposes of calculating interest earned on debt obligations as provided in
item "a" above:
(i) The yield to maturity of each obligation held by the
Portfolio is computed based on the market value of the obligation (including
actual accrued interest, if any) at the close of business each day during the
30-day base period, or, with respect to obligations purchased during the month,
the purchase price (plus actual accrued interest, if any) on settlement date,
and with respect to obligations sold during the month the sale price (plus
actual accrued interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then divided
by 360 and the resulting quotient is multiplied by the market value of the
obligation (including actual accrued interest, if any) to determine the interest
income on the obligation for each day. The yield to maturity calculation has
been made on each obligation during the 30-day base period.
(iii) Interest earned on all debt obligations during the 30-day
or one month period is then totaled.
(iv) The maturity of an obligation with a call provision(s) is
the next call date on which the obligation reasonably may be expected to be
called or, if none, the maturity date.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), each Portfolio accounts for
gain or loss attributable to actual monthly pay downs as an increase or decrease
to interest income during the period. In addition, a Portfolio may elect (i) to
amortize the discount or premium on a remaining on a security, based on the cost
of the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the remaining discount
or premium on a security.
For purposes of computing a Portfolio's yield, interest income is
recognized by accruing 1/360 of the stated interest rate of each obligation held
by the Portfolio each day that the obligation is held by the Portfolio.
YIELD QUOTATIONS FOR MONEY MARKET PORTFOLIO
Money Market Portfolio's yield quotations are computed as follows: the
net change, exclusive of capital changes (i.e., realized gains and losses from
the sale of securities and unrealized appreciation and depreciation), in the
value of a hypothetical pre-existing account having a balance of one share of
the Portfolio at the beginning of the seven-day base period is determined by
subtracting a hypothetical charge reflecting expense deductions from the
hypothetical account, and dividing the net change in value by the value of the
share at the beginning of the base period. This base period return is then
multiplied by 365/7 with the resulting yield figure carried to the nearest 100th
of 1%. The determination of net change in account value reflects the value of
additional shares purchased with dividends from the original share, dividends
declared on both the original share and any such additional shares, and all fees
that are charged to the Portfolio, in proportion to the length of the base
period and the Portfolio's average account size (with respect to any fees that
vary with the size of an account).
Money Market Portfolio may also advertise quotations of effective
yield. Effective yield is computed by compounding the unannualized base period
return determined as in the preceding paragraph by adding 1 to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result, according to the following formula:
Effective Yield = (base period return +1) 365/7 - 1
The Portfolios' average annual total returns for the year ended
December 31, 1997 and for the periods from commencement of operations to
December 31, 1997 are as follows:
Average Annual Total Return (%)
One Year Five Years Ten Years Commencement
Emerging Markets Class I *(1) N/A N/A N/A N/A
International Growth (2) 4.87 N/A N/A 8.38
Europe Class I *(1) N/A N/A N/A N/A
Capital Growth (2) 24.69 N/A N/A 20.04
Growth Shares Class I *(3) N/A N/A N/A 2.27
Real Estate Growth (2) 21.16 N/A N/A 25.90
Growth and Income Class I *(3) N/A N/A N/A 5.43
Equity-Income (2) 35.23 N/A N/A 25.95
Balanced (2) 17.62 N/A N/A 18.61
America Income (2) 8.44 N/A N/A 5.39
Swiss Franc Bond (4) -6.86 N/A N/A -8.05
* Class II shares first offered October 1, 1998
(1) Commencement of operations, October 1, 1998
(2) Commencement of operations, March 31, 1995.
(3) Commencement of operations, October 31, 1997.
(4) Commencement of operations, November 1, 1995.
13. FINANCIAL STATEMENTS
The Fund's Annual Report, filed with the SEC on March 6, 1998 (Accession
No. 0000930709-98-000006), is incorporated by reference into this Statement of
Additional Information. The financial statements in the Fund's Annual Report,
including the financial highlights, for the period ended December 31, 1997,
included or incorporated by reference into the Prospectus and this Statement of
Additional Information, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect to the financial
statements, and are included in reliance upon the authority of Arthur Andersen
LLP as experts in accounting and auditing in giving their report.
<PAGE>
APPENDIX A
DESCRIPTION OF SHORT-TERM DEBT AND CORPORATE BOND RATINGS1
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM PRIME RATING SYSTEM -
TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries. High rates of
return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection. Broad margins in earnings coverage of fixed
financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank's ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank's rating or Moody's Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody's ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor's
home country and either the issuer's home country or the country where an
issuer's branch is located are not incorporated into Moody's short-term debt
ratings.
If an issuer represents to Moody's that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
MOODY'S CORPORATE BOND RATINGS
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
PLUS (+) OR MINUS (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
R: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
<PAGE>
APPENDIX B
PIONEER VARIABLE CONTRACTS TRUST
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION INTERNATIONAL GROWTH CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 1.002063 9,979.412 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/95 $10,000.00 $ 1.093958 9,979.412 $10,917.06 $10,000.00
12/31/96 10,000.00 1.170756 9,979.412 11,683.46 10,000.00
12/31/97 10,000.00 1.210842 9,979.412 12,083.49 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION CAPITAL GROWTH CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 1.000038 9,999.620 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/95 $10,000.00 $ 1.158080 9,999.620 $11,580.36 $10,000.00
12/31/96 10,000.00 1.313525 9,999.620 13,134.75 10,000.00
12/31/97 10,000.00 1 .615324 9,999.620 16,152.63 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION GROWTH SHARES CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
10/31/97 $10,000.00 $1.00000 10,000.00 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum Death
Investment Benefit
12/31/97 $10,000.00 $1.020297 10,000.00 $10,202.97 $10,000.00
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at investment date, but do not account for
additional costs of investing.
PIONEER VISION REAL ESTATE GROWTH CLASS I AUV
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 1.000227 9,997.731 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/95 $10,000.00 $ 1.156319 9,997.731 $11,560.57 $10,000.00
12/31/96 10,000.00 1.547672 9,997.731 15,473.21 10,000.00
12/31/97 10,000.00 1.849418 9,997.731 18,489.98 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION GROWTH AND INCOME CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
10/31/97 $10,000.00 $ 1.00000 10,000.00 $10,000.00
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/97 $10,000.00 $ 1.052518 10,000.00 $10,525.18 $10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION EQUITY INCOME CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 1.000037 9,999.630 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum Death
Investment Benefit
12/31/95 $10,000.00 $ 1.222215 9,999.630 $12,221.70 $10,000.00
12/31/96 10,000.00 1.388129 9,999.630 13,880.78 10,000.00
12/31/97 10,000.00 1.851384 9,999.630 18,513.15 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION BALANCED CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 0.975073 10,255.642 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum Death
Investment Benefit
12/31/95 $10,000.00 $ 1.164800 10,255.642 $11,945.77 $10,000.00
12/31/96 10,000.00 1.312218 10,255.642 13,457.64 10,000.00
12/31/97 10,000.00 1.516084 10,255.642 15,548.41 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION SWISS FRANC CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
11/1/95 $10,000.00 $ 1.000000 10,000.000 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/95 $10,000.00 $ 1.001476 10,000.000 $10,014.76 $10,000.00
12/31/96 10,000.00 0.880598 10,000.000 8,805.98 10,000.00
12/31/97 10,000.00 0.808274 10,000.000 8,082.74 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION AMERICA INCOME CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 0.996465 10,035.475 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum
Investment Death Benefit
12/31/95 $10,000.00 $ 1.043081 10,035.475 $10,467.81 $10,000.00
12/31/96 10,000.00 1.041725 10,035.475 10,454.21 10,000.00
12/31/97 10,000.00 1.114134 10,035.475 11,180.86 10,000.00
</TABLE>
<PAGE>
INVESTMENT ILLUSTRATIONS
TO 12/31/97
Note: Illustrations show the value of units held based on $10,000 total value at
investment date, but do not account for additional costs of investing.
PIONEER VISION MONEY MARKET CLASS I AUV
<TABLE>
<S> <C> <C> <C> <C> <C>
Date Initial Investment Unit Value Units Purchased Initial Total Value
3/1/95 $10,000.00 $ 1.000076 9,999.240 $10,000
Date Cumulative Unit Value Units Held Total Value Guaranteed Minimum Death
Investment Benefit
12/31/95 $10,000.00 $ 1.031243 9,999.240 $10,311.65 $10,000.00
12/31/96 10,000.00 1.062621 9,999.240 10,625.40 10,000.00
12/31/97 10,000.00 1.096575 9,999.240 10,964.92 10,000.00
</TABLE>
<PAGE>
COMPARATIVE PERFORMANCE
INDEX DESCRIPTIONS
The following securities indices are well known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may also be used, if appropriate. The
indices are not available for direct investment. The data presented are not
meant to be indicative of the performance of the Fund, do not reflect past
performance and do not guarantee future results.
S&P 500
This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P 500 includes 500 of
the largest stocks (in terms of stock market value) in the U.S.
DOW JONES INDUSTRIAL AVERAGE
This is a total return index based on the performance of stocks of 30 blue chip
companies widely held by individuals and institutional investors. The 30 stocks
represent about a fifth of the $8 trillion-plus market value of all U.S. stocks
and about a fourth of the value of stocks listed on the New York Stock Exchange
(NYSE).
U.S. SMALL STOCK INDEX
This index is a market value weighted index of the ninth and tenth deciles of
the NYSE, plus stocks listed on the American Stock Exchange and over the counter
with the same or less capitalization as the upper bound of the NYSE ninth
decile.
U.S. INFLATION
THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S.
Department of Labor, Bureau of Labor Statistics, Washington, DC.
S&P/BARRA INDEXES
The S&P/BARRA GROWTH AND VALUE INDEXES are constructed by dividing the stocks in
the S&P 500 according to price-to-book ratios. The GROWTH INDEX contains stocks
with higher price-to-book ratios, and the VALUE INDEX contains stocks with lower
price-to-book ratios. Both indexes are market capitalization weighted.
MERRILL LYNCH MICRO-CAP INDEX
The MERRILL LYNCH MICRO-CAP INDEX represents the performance of 2,036 stocks
ranging in market capitalization from $50 million to $220 million. Index returns
are calculated monthly.
LONG-TERM U.S. GOVERNMENT BONDS
The total returns on long-term government bonds after 1977 are constructed with
data from The Wall Street Journal and are calculated as the change in the flat
price or and-interest price. From 1926 to 1976, data are obtained from the
government bond file at the Center for Research in Security Prices (CRSP),
Graduate School of Business, University of Chicago. Each year, a one-bond
portfolio with a term of approximately 20 years and a reasonably current coupon
was used and whose returns did not reflect potential tax benefits, impaired
negotiability or special redemption or call privileges. Where callable bonds had
to be used, the term of the bond was assumed to be a simple average of the
maturity and first call dates minus the current date. The bond was "held" for
the calendar year and returns were computed.
INTERMEDIATE-TERM U.S. GOVERNMENT BONDS
Total returns of intermediate-term government bonds after 1987 are calculated
from The Wall Street Journal prices, using the change in flat price. Returns
from 1934 to 1986 are obtained from the CRSP government bond file.
Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than five years, and this bond is
"held" for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934 to 1942, almost all bonds
with maturities near five years were partially or fully tax-exempt and were
selected using the rules described above. Personal tax rates were generally low
in that period, so that yields on tax-exempt bonds were similar to yields on
taxable bonds. From 1926 to 1933, there are few bonds suitable for construction
of a series with a five-year maturity. For this period, five-year bond yield
estimates are used.
MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI")
MSCI's international indices are based on the share prices of approximately
1,700 companies listed on stock exchanges in the 22 countries that make up the
MSCI World Index. MSCI's emerging market indices are comprised of approximately
1000 stocks from 26 countries.
Countries in the MSCI EAFE INDEX are: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.
Countries in the MSCI EMERGING MARKETS FREE INDEX are: Argentina, Brazil, Chile,
China Free, Czech Republic, Colombia, Greece, Hungary, India, Indonesia Free,
Israel, Jordan, Korea (at 50%), Malaysia Free, Mexico Free, Pakistan, Peru,
Philippines Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan (at 50%),
Thailand Free, Turkey and Venezuela.
6-MONTH CDS
Data sources include the Federal Reserve Bulletin and The Wall Street Journal.
LONG-TERM U.S. CORPORATE BONDS
Since 1969, corporate bond total returns are represented by the Salomon Brothers
Long-Term High-Grade Corporate Bond Index. As most large corporate bond
transactions take place over the counter, a major dealer is the natural source
of these data. The index includes nearly all Aaa- and Aa-rated bonds with at
least 10 years to maturity. If a bond is downgraded during a particular month,
its return for the month is included in the index before removing the bond from
future portfolios.
From 1926 to 1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946 to 1968,
Ibbotson and Sinquefield backdated the Salomon Brothers' index, using Salomon
Brothers' monthly yield data with a methodology similar to that used by Salomon
Brothers for 1969 to 1995. Capital appreciation returns were calculated from
yields assuming (at the beginning of each monthly holding period) a 20-year
maturity, a bond price equal to par, and a coupon equal to the
beginning-of-period yield. For the period 1926 to 1945, Standard & Poor's
monthly high-grade corporate composite yield data were used, assuming a 4%
coupon and a 20-year maturity. The conventional present-value formula for bond
price for the beginning and end-of-month prices was used. (This formula is
presented in Ross, Stephen A., and Westerfield, Randolph W. Corporate Finance,
Times Mirror/Mosby, St. Louis, 1990, p. 97 ["Level-Coupon Bonds"].) The monthly
income return was assumed to be one-twelfth the coupon.
U.S. (30-DAY) TREASURY BILLS
For the U.S. TREASURY BILL INDEX, data from The Wall Street Journal are used
after 1977; the CRSP government bond file is the source until 1976. Each month a
one-bill portfolio containing the shortest-term bill having not less than one
month to maturity is constructed. (The bill's original term to maturity is not
relevant.) To measure holding period returns for the one-bill portfolio, the
bill is priced as of the last trading day of the previous month-end and as of
the last trading day of the current month.
NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS ("NAREIT")
EQUITY REIT INDEX
All of the data are based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMEX and NASDAQ. The data are
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighting at the beginning of the period.
Only those REITs listed for the entire period are used in the total return
calculation. Dividends are included in the month based upon their payment date.
There is no smoothing of income.
Liquidating dividends, whether full or partial, are treated as income.
RUSSELL U.S. EQUITY INDEXES
The RUSSELL 3000(R) INDEX (the "Russell 3000") is comprised of the 3,000 largest
U.S. companies as determined by market capitalization representing approximately
98% of the U.S. equity market. The average market capitalization is
approximately $2.8 billion. The RUSSELL 2500TM INDEX measures performance of the
2,500 smallest companies in the Russell 3000. The average market capitalization
is approximately $733.4 million, and the largest company in the index has an
approximate market capitalization of $2.9 billion. The RUSSELL 2000(R) INDEX
measures performance of the 2,000 smallest stocks in the Russell 3000; the
largest company in the index has a market capitalization of approximately $1.1
billion. The RUSSELL 1000(R) INDEX (the "Russell 1000") measures the performance
of the 1,000 largest companies in the Russell 3000. The average market
capitalization is approximately $7.6 billion. The smallest company in the index
has an approximate market capitalization of $1.1 billion. The RUSSELL MIDCAPTM
INDEX measures performance of the 800 smallest companies in the Russell 1000.
The largest company in the index has an approximate market capitalization of
$8.0 billion.
The Russell indexes are reconstituted annually as of July 1, based on May 31
market capitalization rankings.
WILSHIRE REAL ESTATE SECURITIES INDEX
The WILSHIRE REAL ESTATE SECURITIES INDEX is a market capitalization weighted
index of 120 publicly traded real estate securities, such as REITs, real estate
operating companies ("REOCs") and partnerships.
The index contains performance data on five major categories of property:
office, retail, industrial, apartment and miscellaneous. The companies in the
index are 91.66% equity and hybrid REITs and 8.33% REOCs.
STANDARD & POOR'S MIDCAP 400 INDEX
The S&P 400 is a market-capitalization-weighted index. The performance data for
the index were calculated by taking the stocks presently in the index and
tracking them backward in time as long as there were prices reported. No attempt
was made to determine what stocks "might have been" in the S&P 400 five or ten
years ago had it existed. Dividends are reinvested on a monthly basis prior to
June 30, 1991, and are reinvested daily thereafter.
LIPPER BALANCED FUNDS INDEX
This index represents equally weighted performance, adjusted for capital gains
distributions and income dividends, of approximately 30 of the largest funds
with a primary objective of conserving principal by maintaining at all times a
balanced portfolio of stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%.
BANK SAVINGS ACCOUNT
Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963 to 1987; and The Wall Street Journal thereafter.
Sources: Ibbotson Associates, Towers Data Systems, Lipper Analytical Services,
Inc. Merrill Lynch and PGI
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DOW S&P/ S&P/
S&P JONES U.S. SMALL BARRA BARRA MERRILL LYNCH
500 INDUSTRIAL STOCK U.S. 500 500 MICRO-CAP
AVERAGE INDEX INFLATION GROWTH VALUE INDEX
- ----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 11.62 N/A 0.28 -1.49 N/A N/A N/A
Dec 1927 37.49 N/A 22.10 -2.08 N/A N/A N/A
Dec 1928 43.61 55.38 39.69 -0.97 N/A N/A N/A
Dec 1929 -8.42 -13.64 -51.36 0.20 N/A N/A N/A
Dec 1930 -24.90 -30.22 -38.15 -6.03 N/A N/A N/A
Dec 1931 -43.34 -49.02 -49.75 -9.52 N/A N/A N/A
Dec 1932 -8.19 -16.88 -5.39 -10.30 N/A N/A N/A
Dec 1933 53.99 73.72 142.87 0.51 N/A N/A N/A
Dec 1934 -1.44 8.08 24.22 2.03 N/A N/A N/A
Dec 1935 47.67 43.77 40.19 2.99 N/A N/A N/A
Dec 1936 33.92 30.23 64.80 1.21 N/A N/A N/A
Dec 1937 -35.03 -28.88 -58.01 3.10 N/A N/A N/A
Dec 1938 31.12 33.16 32.80 -2.78 N/A N/A N/A
Dec 1939 -0.41 1.31 0.35 -0.48 N/A N/A N/A
Dec 1940 -9.78 -7.96 -5.16 0.96 N/A N/A N/A
Dec 1941 -11.59 -9.88 -9.00 9.72 N/A N/A N/A
Dec 1942 20.34 14.13 44.51 9.29 N/A N/A N/A
Dec 1943 25.90 19.06 88.37 3.16 N/A N/A N/A
Dec 1944 19.75 17.19 53.72 2.11 N/A N/A N/A
Dec 1945 36.44 31.60 73.61 2.25 N/A N/A N/A
Dec 1946 -8.07 -4.40 -11.63 18.16 N/A N/A N/A
Dec 1947 5.71 7.61 0.92 9.01 N/A N/A N/A
Dec 1948 5.50 4.27 -2.11 2.71 N/A N/A N/A
Dec 1949 18.79 20.92 19.75 -1.80 N/A N/A N/A
Dec 1950 31.71 26.40 38.75 5.79 N/A N/A N/A
Dec 1951 24.02 21.77 7.80 5.87 N/A N/A N/A
Dec 1952 18.37 14.58 3.03 0.88 N/A N/A N/A
Dec 1953 -0.99 2.02 -6.49 0.62 N/A N/A N/A
Dec 1954 52.62 51.25 60.58 -0.50 N/A N/A N/A
Dec 1955 31.56 26.58 20.44 0.37 N/A N/A N/A
Dec 1956 6.56 7.10 4.28 2.86 N/A N/A N/A
Dec 1957 -10.78 -8.63 -14.57 3.02 N/A N/A N/A
Dec 1958 43.36 39.31 64.89 1.76 N/A N/A N/A
Dec 1959 11.96 20.21 16.40 1.50 N/A N/A N/A
Dec 1960 0.47 -6.14 -3.29 1.48 N/A N/A N/A
Dec 1961 26.89 22.60 32.09 0.67 N/A N/A N/A
Dec 1962 -8.73 -7.43 -11.90 1.22 N/A N/A N/A
Dec 1963 22.80 20.83 23.57 1.65 N/A N/A N/A
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
DOW S&P/ S&P/
S&P JONES U.S. SMALL BARRA 500 BARRA MERRILL LYNCH
500 INDUSTRIAL STOCK U.S. GROWTH 500 MICRO-CAP
AVERAGE INDEX INFLATION VALUE INDEX
- ----------------------------------------------------------------------------------------------------------------------
Dec 1964 16.48 18.85 23.52 1.19 N/A N/A N/A
Dec 1965 12.45 14.39 41.75 1.92 N/A N/A N/A
Dec 1966 -10.06 -15.78 -7.01 3.35 N/A N/A N/A
Dec 1967 23.98 19.16 83.57 3.04 N/A N/A N/A
Dec 1968 11.06 7.93 35.97 4.72 N/A N/A N/A
Dec 1969 -8.50 -11.78 -25.05 6.11 N/A N/A N/A
Dec 1970 4.01 9.21 -17.43 5.49 N/A N/A N/A
Dec 1971 14.31 9.83 16.50 3.36 N/A N/A N/A
Dec 1972 18.98 18.48 4.43 3.41 N/A N/A N/A
Dec 1973 -14.66 -13.28 -30.90 8.80 N/A N/A N/A
Dec 1974 -26.47 -23.58 -19.95 12.20 N/A N/A N/A
Dec 1975 37.20 44.75 52.82 7.01 31.72 43.38 N/A
Dec 1976 23.84 22.82 57.38 4.81 13.84 34.93 N/A
Dec 1977 -7.18 -12.84 25.38 6.77 -11.82 -2.57 N/A
Dec 1978 6.56 2.79 23.46 9.03 6.78 6.16 27.76
Dec 1979 18.44 10.55 43.46 13.31 15.72 21.16 43.18
Dec 1980 32.42 22.17 39.88 12.40 39.40 23.59 32.32
Dec 1981 -4.91 -3.57 13.88 8.94 -9.81 0.02 9.18
Dec 1982 21.41 27.11 28.01 3.87 22.03 21.04 33.62
Dec 1983 22.51 25.97 39.67 3.80 16.24 28.89 42.44
Dec 1984 6.27 1.31 -6.67 3.95 2.33 10.52 -14.97
Dec 1985 32.16 33.55 24.66 3.77 33.31 29.68 22.89
Dec 1986 18.47 27.10 6.85 1.13 14.50 21.67 3.45
Dec 1987 5.23 5.48 -9.30 4.41 6.50 3.68 -13.84
Dec 1988 16.81 16.14 22.87 4.42 11.95 21.67 22.76
Dec 1989 31.49 32.19 10.18 4.65 36.40 26.13 8.06
Dec 1990 -3.17 -0.56 -21.56 6.11 0.20 -6.85 -29.55
Dec 1991 30.55 24.19 44.63 3.06 38.37 22.56 57.44
Dec 1992 7.67 7.41 23.35 2.90 5.07 10.53 36.62
Dec 1993 9.99 16.94 20.98 2.75 1.68 18.60 31.32
Dec 1994 1.31 5.06 3.11 2.67 3.13 -0.64 1.81
Dec 1995 37.43 36.84 34.46 2.54 38.13 36.99 30.70
Dec 1996 23.07 28.84 17.62 3.32 23.96 21.99 13.88
Dec 1997 33.36 24.88 22.78 1.92 36.52 29.98 24.61
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LONG- INTERMEDIATE- MSCI LONG-
TERM TERM U.S. EAFE 6- TERM U.S. U.S.
U.S. GOV'T GOVERNMENT (Net of MONTH CORPORATE T-BILL
BONDS BONDS Taxes) CDS BONDS (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A
Dec 1926 7.77 5.38 N/A N/A 7.37 3.27
Dec 1927 8.93 4.52 N/A N/A 7.44 3.12
Dec 1928 0.10 0.92 N/A N/A 2.84 3.56
Dec 1929 3.42 6.01 N/A N/A 3.27 4.75
Dec 1930 4.66 6.72 N/A N/A 7.98 2.41
Dec 1931 -5.31 -2.32 N/A N/A -1.85 1.07
Dec 1932 16.84 8.81 N/A N/A 10.82 0.96
Dec 1933 -0.07 1.83 N/A N/A 10.38 0.30
Dec 1934 10.03 9.00 N/A N/A 13.84 0.16
Dec 1935 4.98 7.01 N/A N/A 9.61 0.17
Dec 1936 7.52 3.06 N/A N/A 6.74 0.18
Dec 1937 0.23 1.56 N/A N/A 2.75 0.31
Dec 1938 5.53 6.23 N/A N/A 6.13 -0.02
Dec 1939 5.94 4.52 N/A N/A 3.97 0.02
Dec 1940 6.09 2.96 N/A N/A 3.39 0.00
Dec 1941 0.93 0.50 N/A N/A 2.73 0.06
Dec 1942 3.22 1.94 N/A N/A 2.60 0.27
Dec 1943 2.08 2.81 N/A N/A 2.83 0.35
Dec 1944 2.81 1.80 N/A N/A 4.73 0.33
Dec 1945 10.73 2.22 N/A N/A 4.08 0.33
Dec 1946 -0.10 1.00 N/A N/A 1.72 0.35
Dec 1947 -2.62 0.91 N/A N/A -2.34 0.50
Dec 1948 3.40 1.85 N/A N/A 4.14 0.81
Dec 1949 6.45 2.32 N/A N/A 3.31 1.10
Dec 1950 0.06 0.70 N/A N/A 2.12 1.20
Dec 1951 -3.93 0.36 N/A N/A -2.69 1.49
Dec 1952 1.16 1.63 N/A N/A 3.52 1.66
Dec 1953 3.64 3.23 N/A N/A 3.41 1.82
Dec 1954 7.19 2.68 N/A N/A 5.39 0.86
Dec 1955 -1.29 -0.65 N/A N/A 0.48 1.57
Dec 1956 -5.59 -0.42 N/A N/A -6.81 2.46
Dec 1957 7.46 7.84 N/A N/A 8.71 3.14
Dec 1958 -6.09 -1.29 N/A N/A -2.22 1.54
Dec 1959 -2.26 -0.39 N/A N/A -0.97 2.95
Dec 1960 13.78 11.76 N/A N/A 9.07 2.66
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LONG- INTERMEDIATE- MSCI LONG-
TERM TERM U.S. EAFE 6- TERM U.S. U.S.
U.S. GOV'T GOVERNMENT (Net of MONTH CORPORATE T-BILL
BONDS BONDS Taxes) CDS BONDS (30-Day)
- ------------------------------------------------------------------------------------------------------
Dec 1961 0.97 1.85 N/A N/A 4.82 2.13
Dec 1962 6.89 5.56 N/A N/A 7.95 2.73
Dec 1963 1.21 1.64 N/A N/A 2.19 3.12
Dec 1964 3.51 4.04 N/A 4.17 4.77 3.54
Dec 1965 0.71 1.02 N/A 4.68 -0.46 3.93
Dec 1966 3.65 4.69 N/A 5.76 0.20 4.76
Dec 1967 -9.18 1.01 N/A 5.47 -4.95 4.21
Dec 1968 -0.26 4.54 N/A 6.45 2.57 5.21
Dec 1969 -5.07 -0.74 N/A 8.70 -8.09 6.58
Dec 1970 12.11 16.86 -11.66 7.06 18.37 6.52
Dec 1971 13.23 8.72 29.59 5.36 11.01 4.39
Dec 1972 5.69 5.16 36.35 5.39 7.26 3.84
Dec 1973 -1.11 4.61 -14.92 8.60 1.14 6.93
Dec 1974 4.35 5.69 -23.16 10.20 -3.06 8.00
Dec 1975 9.20 7.83 35.39 6.51 14.64 5.80
Dec 1976 16.75 12.87 2.54 5.22 18.65 5.08
Dec 1977 -0.69 1.41 18.06 6.11 1.71 5.12
Dec 1978 -1.18 3.49 32.62 10.21 -0.07 7.18
Dec 1979 -1.23 4.09 4.75 11.90 -4.18 10.38
Dec 1980 -3.95 3.91 22.58 12.33 -2.76 11.24
Dec 1981 1.86 9.45 -2.28 15.50 -1.24 14.71
Dec 1982 40.36 29.10 -1.86 12.18 42.56 10.54
Dec 1983 0.65 7.41 23.69 9.65 6.26 8.80
Dec 1984 15.48 14.02 7.38 10.65 16.86 9.85
Dec 1985 30.97 20.33 56.16 7.82 30.09 7.72
Dec 1986 24.53 15.14 69.44 6.30 19.85 6.16
Dec 1987 -2.71 2.90 24.63 6.59 -0.27 5.47
Dec 1988 9.67 6.10 28.27 8.15 10.70 6.35
Dec 1989 18.11 13.29 10.54 8.27 16.23 8.37
Dec 1990 6.18 9.73 -23.45 7.85 6.78 7.81
Dec 1991 19.30 15.46 12.13 4.95 19.89 5.60
Dec 1992 8.05 7.19 -12.17 3.27 9.39 3.51
Dec 1993 18.24 11.24 32.56 2.88 13.19 2.90
Dec 1994 -7.77 -5.14 7.78 5.40 -5.76 3.90
Dec 1995 31.67 16.80 11.21 5.21 27.20 5.60
Dec 1996 -0.93 2.10 6.05 5.21 1.40 5.21
Dec 1997 15.85 8.38 1.78 5.71 12.95 5.26
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT LIPPER MSCI
EQUITY RUSSELL WILSHIRE BALANCED EMERGING BANK
REIT 2000 REAL ESTATE S&P FUND MARKETS SAVINGS
INDEX INDEX SECURITIES 400 INDEX FREE INDEX ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
Dec 1925 N/A N/A N/A N/A N/A N/A N/A
Dec 1926 N/A N/A N/A N/A N/A N/A N/A
Dec 1927 N/A N/A N/A N/A N/A N/A N/A
Dec 1928 N/A N/A N/A N/A N/A N/A N/A
Dec 1929 N/A N/A N/A N/A N/A N/A N/A
Dec 1930 N/A N/A N/A N/A N/A N/A 5.30
Dec 1931 N/A N/A N/A N/A N/A N/A 5.10
Dec 1932 N/A N/A N/A N/A N/A N/A 4.10
Dec 1933 N/A N/A N/A N/A N/A N/A 3.40
Dec 1934 N/A N/A N/A N/A N/A N/A 3.50
Dec 1935 N/A N/A N/A N/A N/A N/A 3.10
Dec 1936 N/A N/A N/A N/A N/A N/A 3.20
Dec 1937 N/A N/A N/A N/A N/A N/A 3.50
Dec 1938 N/A N/A N/A N/A N/A N/A 3.50
Dec 1939 N/A N/A N/A N/A N/A N/A 3.40
Dec 1940 N/A N/A N/A N/A N/A N/A 3.30
Dec 1941 N/A N/A N/A N/A N/A N/A 3.10
Dec 1942 N/A N/A N/A N/A N/A N/A 3.00
Dec 1943 N/A N/A N/A N/A N/A N/A 2.90
Dec 1944 N/A N/A N/A N/A N/A N/A 2.80
Dec 1945 N/A N/A N/A N/A N/A N/A 2.50
Dec 1946 N/A N/A N/A N/A N/A N/A 2.20
Dec 1947 N/A N/A N/A N/A N/A N/A 2.30
Dec 1948 N/A N/A N/A N/A N/A N/A 2.30
Dec 1949 N/A N/A N/A N/A N/A N/A 2.40
Dec 1950 N/A N/A N/A N/A N/A N/A 2.50
Dec 1951 N/A N/A N/A N/A N/A N/A 2.60
Dec 1952 N/A N/A N/A N/A N/A N/A 2.70
Dec 1953 N/A N/A N/A N/A N/A N/A 2.80
Dec 1954 N/A N/A N/A N/A N/A N/A 2.90
Dec 1955 N/A N/A N/A N/A N/A N/A 2.90
Dec 1956 N/A N/A N/A N/A N/A N/A 3.00
Dec 1957 N/A N/A N/A N/A N/A N/A 3.30
Dec 1958 N/A N/A N/A N/A N/A N/A 3.38
Dec 1959 N/A N/A N/A N/A N/A N/A 3.53
Dec 1960 N/A N/A N/A N/A 5.77 N/A 3.86
Dec 1961 N/A N/A N/A N/A 20.59 N/A 3.90
</TABLE>
<PAGE>
PERFORMANCE STATISTICS - TOTAL RETURN PERCENT
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
NAREIT LIPPER MSCI
EQUITY RUSSELL WILSHIRE BALANCED EMERGING BANK
REIT 2000 REAL ESTATE S&P FUND MARKETS SAVINGS
INDEX INDEX SECURITIES 400 INDEX FREE INDEX ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------
Dec 1962 N/A N/A N/A N/A -6.80 N/A 4.08
Dec 1963 N/A N/A N/A N/A 13.10 N/A 4.17
Dec 1964 N/A N/A N/A N/A 12.36 N/A 4.19
Dec 1965 N/A N/A N/A N/A 9.80 N/A 4.23
Dec 1966 N/A N/A N/A N/A -5.86 N/A 4.45
Dec 1967 N/A N/A N/A N/A 15.09 N/A 4.67
Dec 1968 N/A N/A N/A N/A 13.97 N/A 4.68
Dec 1969 N/A N/A N/A N/A -9.01 N/A 4.80
Dec 1970 N/A N/A N/A N/A 5.62 N/A 5.14
Dec 1971 N/A N/A N/A N/A 13.90 N/A 5.30
Dec 1972 8.01 N/A N/A N/A 11.13 N/A 5.37
Dec 1973 -15.52 N/A N/A N/A -12.24 N/A 5.51
Dec 1974 -21.40 N/A N/A N/A -18.71 N/A 5.96
Dec 1975 19.30 N/A N/A N/A 27.10 N/A 6.21
Dec 1976 47.59 N/A N/A N/A 26.03 N/A 6.23
Dec 1977 22.42 N/A N/A N/A -0.72 N/A 6.39
Dec 1978 10.34 N/A 13.04 N/A 4.80 N/A 6.56
Dec 1979 35.86 43.09 70.81 N/A 14.67 N/A 7.29
Dec 1980 24.37 38.58 22.08 N/A 19.70 N/A 8.78
Dec 1981 6.00 2.03 7.18 N/A 1.86 N/A 10.71
Dec 1982 21.60 24.95 24.47 22.68 30.63 N/A 11.19
Dec 1983 30.64 29.13 27.61 26.10 17.44 N/A 9.71
Dec 1984 20.93 -7.30 20.64 1.18 7.46 N/A 9.92
Dec 1985 19.10 31.05 22.20 35.58 29.83 N/A 9.02
Dec 1986 19.16 5.68 20.30 16.21 18.43 N/A 7.84
Dec 1987 -3.64 -8.77 -7.86 -2.03 4.13 N/A 6.92
Dec 1988 13.49 24.89 24.18 20.87 11.18 40.43 7.20
Dec 1989 8.84 16.24 2.37 35.54 19.70 64.96 7.91
Dec 1990 -15.35 -19.51 -33.46 -5.12 0.66 -10.55 7.80
Dec 1991 35.70 46.05 20.03 50.10 25.83 59.91 4.61
Dec 1992 14.59 18.41 7.36 11.91 7.46 11.40 2.89
Dec 1993 19.65 18.91 15.24 13.96 11.95 74.83 2.73
Dec 1994 3.17 -1.82 1.64 -3.57 -2.05 -7.32 4.96
Dec 1995 15.27 28.44 13.65 30.94 24.89 -5.21 5.24
Dec 1996 35.26 16.53 36.87 19.20 13.01 6.03 4.95
Dec 1997 20.29 22.36 19.80 32.26 20.05 -11.59 5.17
</TABLE>
<PAGE>
APPENDIX C
OTHER PIONEER INFORMATION
The Pioneer group of mutual funds was established in 1928 with the creation of
Pioneer Fund. Pioneer is one of the oldest and most experienced money managers
in the United States.
As of December 31, 1997, Pioneer employed a professional investment staff of 58,
with a combined average of 12 years' experience in the financial services
industry.
Total assets of all Pioneer mutual funds at December 31, 1997, were
approximately $19.8 billion representing 1,177,148 shareholder accounts
consisting of 791,468 non-retirement accounts and 385,680 retirement accounts.
- --------
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Fund's fiscal year-end.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
The financial statements of the Registrant are incorporated by
reference frolm the Annual Report to Shareholders for the for
the fiscal year ended December 31, 1997 (filed with the
Securities and Exchange Commission on March 6, 1998, Accession
No. 0000930709-98-000006).
(b) Exhibits:
1.1 Amended Agreement and Declaration of Trust of the
Registrant.*
1.2 Amended Certificate of Trust of the
Registrant.*
1.3 Amendment to the Amended Agreement and
Declaration of Trust of the
Registrant.*
1.4 Form of Amendment to the Amended Agreement and
Declaration of Trust of the Registrant+
2. Amended By-Laws of the Registrant.*
3. None.
4. None.
5.1 Management Contract between the Registrant, on
behalf of each of its series other than Real Estate
Growth Portfolio and Swiss Franc Bond Portfolio,
and Pioneering Management Corporation.*
5.2 Interim Management Contract between the Registrant,
on behalf of Real Estate Growth Portfolio, and
Pioneering Management Corporation.*
5.3 Management Contract between the Registrant, on
behalf of Real Estate Growth Portfolio, and
Pioneering Management Corporation.*
5.4 Form of Management Contract between the Registrant,
on behalf of Swiss Franc Bond Portfolio, and
Pioneering Management Corporation.*
5.5 Subadvisory Agreement among Pioneering Management
Corporation, Boston Financial Securities, Inc. and
the Registrant on behalf of Real Estate Growth
Portfolio.*
5.6 Form of Management Contract between the Registrant,
on behalf of Growth Shares Portfolio, and
Pioneering Management Corporation.*
5.7 Form of Management Contract between the Registrant,
on behalf of Growth and Income Portfolio, and
Pioneering Management Corporation.*
5.8 Form of Management Contract between the Registrant,
on behalf of Emerging Markets Portfolio, and
Pioneering Management Corporation.+
5.9 Form of Management Contract between the Registrant,
on behalf of Europe Portfolio, and Pioneering
Management Corporation.+
6. Underwriting Agreement between the Registrant and
Pioneer Funds Distributor, Inc.*
7. None.
8. Custody Agreement between the Registrant and Brown
Brothers Harriman & Co.*
9. Form of Investment Company Service Agreement
between the Registrant and Pioneering Services
Corporation.*
10. None
11. Consent of Independent Public Accountants.+
12. None.
13. Share Purchase Agreement.*
14. None.
15. Form of Distribution Plan relating to Class II
shares.+
16. None.
17. Financial Data Schedules.+
18. Form of Multiple Class Plan pursuant to Rule 18f-3
relating to Class II shares.+
19. Powers of Attorney.*
- --------------
* Previously filed. Incorporated by reference from exhibits filed with
previous amendments to the Registrant's Registration Statement.
+ Filed herewith.
Item 25. Persons Controlled By or Under
Common Control With Registrant.
No person is controlled by the Registrant. A common control
relationship could exist from a management perspective because the Chairman and
President of the Registrant owns approximately 14% of the outstanding shares of
The Pioneer Group, Inc. (PGI), the parent company of the Registrant's investment
adviser, and certain Trustees or officers of the Registrant (i) hold similar
positions with other investment companies advised by PGI and (ii) are directors
or officers of PGI and/or its direct or indirect subsidiaries. The following
lists all U.S. and the principal non-U.S. subsidiaries of PGI and those
registered investment companies with a common or similar Board of Trustees
advised by PGI.
<TABLE>
<S> <C> <C> <C>
Owned By Percent of Shares State/Country of
Company Incorporation
Pioneering Management Corp. (PMC) PGI 100% DE
Pioneer Funds Distributor, Inc. (PFD) PMC 100% MA
Pioneer Explorer, Inc. (PEI) PMC 100% DE
Pioneer Fonds Marketing GmbH (GmbH) PFD 100% Germany
Pioneer Forest, Inc. (PFI) PGI 100% DE
CJSC "Forest-Starma" (Forest-Starma) PFI 95% Russia
Pioneer Metals and Technology, Inc. (PMT) PGI 100% DE
Pioneer Capital Corp. (PCC) PGI 100% DE
Pioneer SBIC Corp. PCC 100% MA
Pioneer Real Estate Advisors, Inc. (PREA) PGI 100% DE
Pioneer Management (Ireland) Ltd. (PMIL) PGI 100% Ireland
Pioneer Plans Corporation (PPC) PGI 100% DE
PIOGlobal Corp. (PIOGlobal) PGI 100% DE
Pioneer Investments Corp. (PIC) PGI 100% MA
Pioneer Goldfields Holdings, Inc. (PGH) PGI 100% DE
Pioneer Goldfields Ltd. (PGL) PGH 100% Guernsey
Teberebie Goldfields Ltd. (TGL) PGL 90% Ghana
Pioneer Omega, Inc. (Omega) PGI 100% DE
Pioneer First Russia, Inc. (First Russia) Omega 81.65% DE
Pioneering Services Corp. (PSC) PGI 100% MA
Pioneer International Corp. (PIntl) PGI 100% DE
Pioneer First Polish Investment
Fund JSC, S.A. (First Polish) PIntl 100% Poland
Pioneer Czech Investment Company, A.S.
(Pioneer Czech) PIntl 100% Czech Republic
</TABLE>
Registered investment companies that are parties to management contracts with
PMC:
Funds Business Trust
Pioneer International Growth Fund MA
Pioneer World Equity Fund DE
Pioneer Europe Fund MA
Pioneer Emerging Markets Fund DE
Pioneer India Fund DE
Pioneer Growth Trust MA
Pioneer Capital Growth Fund DE
Pioneer Equity-Income Fund DE
Pioneer Gold Shares DE
Pioneer Mid-Cap Fund DE
Pioneer Growth Shares DE
Pioneer Small Company Fund DE
Pioneer Fund DE
Pioneer II DE
Pioneer Real Estate Shares DE
Pioneer Independence Fund DE
Pioneer Short-Term Income Trust MA
Pioneer America Income Trust MA
Pioneer Bond Fund MA
Pioneer Balanced Fund DE
Pioneer Intermediate Tax-Free Fund MA
Pioneer Tax-Free Income Fund DE
Pioneer Money Market Trust DE
Pioneer Variable Contracts Trust DE
Pioneer Interest Shares DE
Pioneer Micro-Cap Fund DE
The following table lists John F. Cogan, Jr.'s positions with the
investment companies, PGI and principal direct or indirect PGI subsidiaries
referenced above and the Registrant's counsel.
Trustee/
Entity Chairman President Director Other
Pioneer mutual funds
X X X
PGL
X X X
PGI
X X X
PPC
X X
PIC
X X
PIntl
X X
PMT
X X
Omega
X X
PIOGlobal
X X
First Russia
X X
PCC
X
PSC
X
PMIL
X
PEI
X
PFI
X
PREA
X
Forest-Starma
X
PMC
X X
PFD
X X
TGL
X X
First Polish
Chairman of
Supervisory Board
GmbH Chairman of
Supervisory Board
Pioneer Czech Chairman of
Supervisory Board
Hale and Dorr LLP Partner
Item 26. Number of Holders of Securities.
As of June 30, 1998, the number of record holders of securities of each
series of the Registrant were as follows:
Number of
Title of Class Record Holders
International Growth Portfolio 2
Capital Growth Portfolio 2
Growth Shares Portfolio 2
Real Estate Growth Portfolio 2
Growth and Income Portfolio 2
Equity-Income Portfolio 2
Balanced Portfolio 2
Swiss Franc Bond Portfolio 2
America Income Portfolio 2
Money Market Portfolio 2
Item 27. Indemnification.
Except for the Agreement and Declaration of Trust dated September 16,
1994, as amended January 25, 1995 (the "Declaration"), establishing the
Registrant as a business trust under Delaware law, there is no contract,
arrangement or statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified. The Declaration
provides that no Trustee or officer will be indemnified against any liability to
which the Registrant would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be available to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
The business and other connections of the officers and directors of the
Registrant's investment manager, Pioneering Management Corporation, are listed
on the Form ADV of Pioneering Management Corporation as currently on file with
the Commission (File No. 801-8255). The business and other connections of the
officers and directors of Real Estate Growth Portfolio's subadviser, Boston
Financial Securities Inc., are listed on the Form ADV of Boston Financial
Securities, Inc. as currently on file with the Commission (File No. 801-3170).
The following sections of both such Form ADVs are incorporated herein by
reference:
(a) Items 1 and 2 of Part 2;
(b) Section 6, Business Background, of Schedule
D.
Item 29. Principal Underwriter
(a) See Item 25 above.
(b) Directors and Officers of PFD:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John F. Cogan, Jr. Director and Chairman Chairman of the
Board, President
and Trustee
Robert L. Butler Director and President None
David D. Tripple Director Executive Vice
President and
Trustee
Steven M. Graziano Senior Vice President None
Stephen W. Long Senior Vice President None
Barry G. Knight Vice President None
William A. Misata Vice President None
Anne W. Patenaude Vice President None
Elizabeth B. Bennett Vice President None
Gail A. Smyth Vice President None
Constance D. Spiros Vice President None
Marcy L. Supovitz Vice President None
Mary Kleeman Vice President None
Steven R. Berke Assistant Vice President None
Steven H. Forss Assistant Vice President None
Mary Sue Hoban Assistant Vice President None
Debra A. Levine Assistant Vice President None
Junior Roy McFarland Assistant Vice President None
Marie E. Moynihan Assistant Vice President None
William H. Keough Treasurer Treasurer
Roy P. Rossi Assistant Treasurer None
Joseph P. Barri Clerk Secretary
Robert P. Nault Assistant Clerk Assistant Secretary
The principal business address of each of these individuals is 60 State Street,
Boston, Massachusetts 02109-1820.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts and records are maintained at the Registrant's
office at 60 State Street, Boston, Massachusetts; contact the Treasurer.
Item 31. Management Services
The Registrant is not a party to any management-related
service contract, except as described in the Prospectus and the Statement of
Additional Information.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file an additional
post-effective amendment, using financial statements for Emerging Markets
Portfolio and Europe Portfolio which need not be certified, within four to six
months from the later of the effective date of this Registration Statement or
the commencement of operations.
(c) The Registrant undertakes to deliver, or cause to be
delivered, with the Registrant's prospectus to each person to whom such
prospectus is sent or given a copy of the Registrant's report to shareholders
furnished pursuant to and meeting the requirements of Rule 30d-1 under the
Investment Company Act of 1940, as amended, from which the specified information
is incorporated by reference, unless such person currently holds securities of
the Registrant and otherwise has received a copy of such report, in which case
the Registrant shall state in its prospectus that it will furnish, without
charge, a copy of such report on request, and the name, address and telephone
number of the person to whom such a request should be directed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 8 (the
"Amendment") to the Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts, on the 16th day of July, 1998.
PIONEER VARIABLE CONTRACTS TRUST
By: /s/John F. Cogan, Jr.
--------------------------
John F. Cogan, Jr.
Chairman of the Board
and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 to the Registrant's Registration Statement on
Form N-1A has been signed below by the following persons in the capacities and
on the date indicated:
Signature Title Date
/s/John F. Cogan, Jr. ) July 16, 1998
- ------------------------- )
John F. Cogan, Jr. Chairman of the Board )
and President )
(Principal Executive )
Officer) )
)
)
/s/William H. Keough )
- -------------------------- )
William H. Keough Treasurer (Principal )
Financial and Accounting)
Officer) )
)
Trustees: )
)
)
)
/s/John F. Cogan, Jr.
- ------------------------- )
John F. Cogan, Jr. )
Richard H. Egdahl, M.D.* )
Richard H. Egdahl, M.D. )
)
)
Marguerite A. Piret* )
Marguerite A. Piret )
)
)
David D. Tripple* )
David D. Tripple )
)
)
Stephen K. West* )
Stephen K. West )
*By: /s/John F. Cogan, Jr. Dated: July 16, 1998
--------------------------------
John F. Cogan, Jr.
Attorney-in-fact
<PAGE>
Exhibit Index
Exhibit
Number Document Title
1.4 Form of Amendment to the Amended Agreement and Declaration of Trust.
5.8 Form of Management Contract between the Registrant, on behalf of Emerging
Markets Portfolio, and Pioneering Management Corporation.
5.9 Form of Management Contract between the Registrant, on behalf of Europe
Portfolio, and Pioneering Management Corporation.
11. Consent of Independent Public Accountants.
15. Form of Distribution Plan relating to Class II shares.
18. Form of Multiple Class Plan pursuant to Rule 18f-3
27. Financial Data Schedules
Declaration of Trust of
Pioneer Variable Contracts Trust
The undersigned, being at least a majority of the Trustees of Pioneer
Variable Contracts Trust, a Delaware business trust (the "Trust") do hereby
amend the Agreement and Declaration of Trust dated September 16, 1994, as
amended as of August 5, 1997 (the "Declaration") as follows, such amendments to
become effective on the date hereof:
Pursuant to Article IX, Section 8 of the Declaration, the following are
added to the list of the series of the Trust set forth at the end of the second
sentence of Article 5, Section 1:
"Emerging Markets Portfolio; and
Europe Portfolio."
Pursuant to Article V, Section 1 of the Declaration, the shares of
beneficial interest of each series of the trust (the "Shares") are are divided
into two classes of Shares as follows:
1. The two classes of Shares established and designated hereby
are "Class I shares" and "Class II shares" respectively.
2. Class I Shares and Class II Shares shall each be entitled to
all of the rights and preferences accorded to Shares under the
Declaration.
3. The purchase price of Class I Shares and Class II Shares, the
method of determining the net asset value of Class I Shares
and Class II Shares, the expenses to be borne by Class I
shares and Class II shares and the relative dividend rights of
holders of Class I Shares and Class II Shares shall be
established by the Trustees of the Trust in accordance with
the provisions of the Declaration and shall be set forth in
the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 and/or the Investment Company Act of
1940, as amended and as in effect at the time of issuing such
Shares.
4. The Trustees, acting in their sole discretion, may determine
that any Shares of a series of the Trust issued are Class I
Shares, Class II Shares, or Shares of any other class of any
series of the Trust hereinafter established and designated by
the Trustees.
<PAGE>
IN WITNESS WHEREOF, the undersigned being all the Trustees of the Trust
have executed this instrument as of July 1, 1998.
John F. Cogan, Jr. David D. Tripple
as trustee and not individually as trustee and not individually
Richard H. Egdahl, M.D. Stephen K. West
as trustee and not individually as trustee and not individually
Marguerite A. Piret
as trustee and not individually
FORM OF
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 1st day of July, 1998 between Pioneer
Variable Contracts Trust, a Delaware business trust (the "Trust"), on behalf of
Emerging Markets Portfolio (the "Portfolio"), and Pioneering Management
Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") for the purpose of registering its shares for public offering under
the Securities Act of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Trust's Board of
Trustees and officers, to manage the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Trust, on behalf of the Portfolio, and the Manager do
hereby agree as follows:
1. (a) The Manager will regularly provide the Portfolio with investment
research, advice and supervision and will furnish continuously an
investment program for the Portfolio, consistent with the investment
objectives and policies of the Portfolio. The Manager will determine
from time to time what securities shall be purchased for the Portfolio,
what securities shall be held or sold by the Portfolio and what portion
of the Portfolio's assets shall be held uninvested as cash, subject
always to the provisions of the Trust's Certificate of Trust, Agreement
and Declaration of Trust, By-Laws and its registration statements under
the 1940 Act and under the 1933 Act covering the Trust's shares, as
filed with the Securities and Exchange Commission, and to the
investment objectives, policies and restrictions of the Portfolio, as
each of the same shall be from time to time in effect, and subject,
further, to such policies and instructions as the Board of Trustees of
the Trust may from time to time establish. To carry out such
determinations, the Manager will exercise full discretion and act for
the Portfolio in the same manner and with the same force and effect as
the Portfolio itself might or could do with respect to purchases, sales
or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(b) The Manager will, to the extent reasonably required in the conduct
of the business of the Portfolio and upon the Trust's request, furnish
to the Portfolio research, statistical and advisory reports upon the
industries, businesses, corporations or securities as to which such
requests shall be made, whether or not the Portfolio shall at the time
have any investment in such industries, businesses, corporations or
securities. The Manager will use its best efforts in the preparation of
such reports and will endeavor to consult the persons and sources
believed by it to have information available with respect to such
industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to the
Portfolio's securities transactions required by sub-paragraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act
(other than those records being maintained by the custodian or transfer
agent appointed by the Trust) and preserve such records for the periods
prescribed therefor by Rule 31a-2 under the 1940 Act. The Manager will
also provide to the Board of Trustees such periodic and special reports
as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Trust office space in the offices of the
Manager or in such other place as may be agreed upon from time to time,
and all necessary office facilities, equipment and personnel for
managing the Portfolio's affairs and investments, and shall arrange, if
desired by the Trust, for members of the Manager's organization to
serve as officers or agents of the Trust.
(b) The Manager shall pay directly or reimburse the Trust for: (i) the
compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and
all officers of the Trust as such; and (ii) all expenses not
hereinafter specifically assumed by the Trust where such expenses are
incurred by the Manager or by the Trust in connection with the
management of the affairs of, and the investment and reinvestment of
the assets of, the Portfolio.
(c) The Trust, on behalf of the Portfolio, shall assume and shall pay:
(i) charges and expenses for fund accounting, pricing and appraisal
services and related overhead, including, to the extent such services
are performed by personnel of the Manager, or its affiliates, office
space and facilities and personnel compensation, training and benefits;
(ii) the charges and expenses of auditors; (iii) the charges and
expenses of any custodian, transfer agent, plan agent, dividend
disbursing agent and registrar appointed by the Trust with respect to
the Trust; (iv) issue and transfer taxes chargeable to the Trust in
connection with securities transactions to which the Trust is a party;
(v) insurance premiums, interest charges, dues and fees for membership
in trade associations and all taxes and corporate fees payable by the
Trust to federal, state or other governmental agencies; (vi) fees and
expenses involved in registering and maintaining registrations of the
Trust and/or its shares with the Commission, state or blue sky
securities agencies and foreign countries, including the preparation of
Prospectuses and Statements of Additional Information for filing with
the Commission; (vii) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and distributing prospectuses,
notices, proxy statements and all reports to shareholders and to
governmental agencies; (viii) charges and expenses of legal counsel to
the Trust and the Trustees; (ix) any distribution fees paid by the
Portfolio in accordance with Rule 12b-1 promulgated by the Commission
pursuant to the 1940 Act; (x) compensation of those Trustees of the
Trust who are not affiliated with or interested persons of the Manager,
the Trust (other than as Trustees), The Pioneer Group, Inc. or Pioneer
Funds Distributor, Inc.; (xi) the cost of preparing and printing share
certificates; and (xii) interest on borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above, the
Trust, on behalf of the Portfolio, shall pay all brokers' and
underwriting commissions chargeable to the Trust in connection with
securities transactions to which the Portfolio is a party.
3. (a) The Trust, on behalf of the Portfolio, shall pay to the Manager, as
compensation for the Manager's services and expenses assumed hereunder,
a fee at the annual rate of 1.15% of the Portfolio's average daily net
assets. Management fees payable hereunder shall be computed daily and
paid monthly in arrears. In the event of termination of this Agreement,
the fee provided in this Section shall be computed on the basis of the
period ending on the last business day on which this Agreement is in
effect subject to a pro rata adjustment based on the number of days
elapsed in the current month as a percentage of the total number of
days in such month.
(b) If the operating expenses of the Portfolio in any year exceed the
limits set by state securities laws or regulations in states in which
shares of the Portfolio are sold, the amount payable to the Manager
under subsection (a) above will be reduced (but not below $0), and the
Manager shall make other arrangements concerning expenses but, in each
instance, only as and to the extent required by such laws or
regulations. If amounts have already been advanced to the Manager under
this Agreement, the Manager will return such amounts to the Trust to
the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable
hereunder (in advance of the time such fee or a portion thereof would
otherwise accrue) and/or undertake to pay or reimburse the Portfolio
for all or a portion of its expenses not otherwise required to be borne
or reimbursed by the Manager. Any such fee reduction or undertaking may
be discontinued or modified by the Manager at any time.
4. It is understood that the Manager may employ one or more sub-investment
advisers (each a "Subadviser") to provide investment advisory services to the
Portfolio by entering into a written agreement with each such Subadviser;
provided, that any such agreement first shall be approved by the vote of a
majority of the Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, the Manager or
any such Subadviser, at a meeting of Trustees called for the purpose of voting
on such approval and by the affirmative vote of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio. The authority
given to the Manager in Sections 1 through 6 hereof may be delegated by it under
any such agreement; provided, that any Subadviser shall be subject to the same
restrictions and limitations on investments and brokerage discretion as the
Manager. The Trust agrees that the Manager shall not be accountable to the
Portfolio or the Portfolio's shareholders for any loss or other liability
relating to specific investments directed by any Subadviser, even though the
Manager retains the right to reverse any such investment, because, in the event
a Subadviser is retained, the Trust and the Manager will rely almost exclusively
on the expertise of such Subadviser for the selection and monitoring of specific
investments.
5. The Manager will not be liable for any error of judgment or mistake of
law or for any loss sustained by reason of the adoption of any investment policy
or the purchase, sale, or retention of any security on the recommendation of the
Manager, whether or not such recommendation shall have been based upon its own
investigation and research or upon investigation and research made by any other
individual, firm or corporation, but nothing contained herein will be construed
to protect the Manager against any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, Trustees, or employees from buying,
selling or trading in any securities for its or their own accounts or
other accounts. The Manager may act as an investment advisor to any
other person, firm or corporation, and may perform management and any
other services for any other person, association, corporation, firm or
other entity pursuant to any contract or otherwise, and take any action
or do any thing in connection therewith or related thereto; and no such
performance of management or other services or taking of any such
action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Manager to
or with the Trust or deemed to violate or give rise to any duty or
obligation of the Manager to the Trust except as otherwise imposed by
law. The Trust recognizes that the Manager, in effecting transactions
for its various accounts, may not always be able to take or liquidate
investment positions in the same security at the same time and at the
same price.
(b) In connection with purchases or sales of securities for the account
of the Trust, neither the Manager nor any of its Trustees, officers or
employees will act as a principal or agent or receive any commission
except as permitted by the 1940 Act. The Manager shall arrange for the
placing of all orders for the purchase and sale of securities for the
Portfolio's account with brokers or dealers selected by the Manager. In
the selection of such brokers or dealers and the placing of such
orders, the Manager is directed at all times to seek for the Portfolio
the most favorable execution and net price available except as
described herein. It is also understood that it is desirable for the
Portfolio that the Manager have access to supplemental investment and
market research and security and economic analyses provided by brokers
who may execute brokerage transactions at a higher cost to the
Portfolio than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to place orders for the purchase
and sale of securities for the Portfolio with such brokers, subject to
review by the Trust's Trustees from time to time with respect to the
extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to the Manager in
connection with its or its affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased in
order to obtain the best execution and lower brokerage commissions, if
any. In such event, allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, will be made by
the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to such
clients.
7. This Agreement shall become effective on the date hereof and shall
remain in force until June 30, 1999 and from year to year thereafter, but only
so long as its continuance is approved annually by a vote of the Trustees of the
Trust voting in person, including a majority of its Trustees who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
such parties, at a meeting of Trustees called for the purpose of voting on such
approval or by a vote of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio, subject to the right of the Trust and
the Manager to terminate this contract as provided in Section 8 hereof.
8. Either party hereto may, without penalty, terminate this Agreement by
vote of its Board of Trustees or Directors, as the case may be, or by vote of a
"majority of its outstanding voting securities" (as defined in the 1940 Act) and
the giving of 60 days' written notice to the other party.
9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Trust agrees that in the event that neither the Manager nor any of
its affiliates acts as an investment adviser to the Portfolio, the name of the
Trust will be changed to one that does not contain the name "Pioneer" or
otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Trust for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Trust, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Trust or any series thereof.
12. This Agreement states the entire agreement of the parties hereto, and
is intended to be the complete and exclusive statement of the terms hereof. It
may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
14. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers and their seal to be hereto affixed as of the
day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
on behalf of Emerging Markets Portfolio
By:________________________ ________________________
Joseph P. Barri By:
Secretary Its:
ATTEST: PIONEERING MANAGEMENT
CORPORATION
By:________________________ ________________________
Joseph P. Barri By:
Secretary Its:
FORM OF
MANAGEMENT CONTRACT
THIS AGREEMENT dated this 1st day of July, 1998 between Pioneer
Variable Contracts Trust, a Delaware business trust (the "Trust"), on behalf of
Europe Portfolio (the "Portfolio"), and Pioneering Management Corporation, a
Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") for the purpose of registering its shares for public offering under
the Securities Act of 1933, as amended (the "1933 Act"),
WHEREAS, the parties hereto deem it mutually advantageous that the
Manager should be engaged, subject to the supervision of the Trust's Board of
Trustees and officers, to manage the Trust.
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Trust, on behalf of the Portfolio, and the Manager do
hereby agree as follows:
1. (a) The Manager will regularly provide the Portfolio with investment
research, advice and supervision and will furnish continuously an
investment program for the Portfolio, consistent with the investment
objectives and policies of the Portfolio. The Manager will determine
from time to time what securities shall be purchased for the Portfolio,
what securities shall be held or sold by the Portfolio and what portion
of the Portfolio's assets shall be held uninvested as cash, subject
always to the provisions of the Trust's Certificate of Trust, Agreement
and Declaration of Trust, By-Laws and its registration statements under
the 1940 Act and under the 1933 Act covering the Trust's shares, as
filed with the Securities and Exchange Commission, and to the
investment objectives, policies and restrictions of the Portfolio, as
each of the same shall be from time to time in effect, and subject,
further, to such policies and instructions as the Board of Trustees of
the Trust may from time to time establish. To carry out such
determinations, the Manager will exercise full discretion and act for
the Portfolio in the same manner and with the same force and effect as
the Portfolio itself might or could do with respect to purchases, sales
or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions.
(b) The Manager will, to the extent reasonably required in the conduct
of the business of the Portfolio and upon the Trust's request, furnish
to the Portfolio research, statistical and advisory reports upon the
industries, businesses, corporations or securities as to which such
requests shall be made, whether or not the Portfolio shall at the time
have any investment in such industries, businesses, corporations or
securities. The Manager will use its best efforts in the preparation of
such reports and will endeavor to consult the persons and sources
believed by it to have information available with respect to such
industries, businesses, corporations or entities.
(c) The Manager will maintain all books and records with respect to the
Portfolio's securities transactions required by sub-paragraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act
(other than those records being maintained by the custodian or transfer
agent appointed by the Trust) and preserve such records for the periods
prescribed therefor by Rule 31a-2 under the 1940 Act. The Manager will
also provide to the Board of Trustees such periodic and special reports
as the Board may reasonably request.
2. (a) Except as otherwise provided herein, the Manager, at its own
expense, shall furnish to the Trust office space in the offices of the
Manager or in such other place as may be agreed upon from time to time,
and all necessary office facilities, equipment and personnel for
managing the Portfolio's affairs and investments, and shall arrange, if
desired by the Trust, for members of the Manager's organization to
serve as officers or agents of the Trust.
(b) The Manager shall pay directly or reimburse the Trust for: (i) the
compensation (if any) of the Trustees who are affiliated with, or
"interested persons" (as defined in the 1940 Act) of, the Manager and
all officers of the Trust as such; and (ii) all expenses not
hereinafter specifically assumed by the Trust where such expenses are
incurred by the Manager or by the Trust in connection with the
management of the affairs of, and the investment and reinvestment of
the assets of, the Portfolio.
(c) The Trust, on behalf of the Portfolio, shall assume and shall pay:
(i) charges and expenses for fund accounting, pricing and appraisal
services and related overhead, including, to the extent such services
are performed by personnel of the Manager, or its affiliates, office
space and facilities and personnel compensation, training and benefits;
(ii) the charges and expenses of auditors; (iii) the charges and
expenses of any custodian, transfer agent, plan agent, dividend
disbursing agent and registrar appointed by the Trust with respect to
the Trust; (iv) issue and transfer taxes chargeable to the Trust in
connection with securities transactions to which the Trust is a party;
(v) insurance premiums, interest charges, dues and fees for membership
in trade associations and all taxes and corporate fees payable by the
Trust to federal, state or other governmental agencies; (vi) fees and
expenses involved in registering and maintaining registrations of the
Trust and/or its shares with the Commission, state or blue sky
securities agencies and foreign countries, including the preparation of
Prospectuses and Statements of Additional Information for filing with
the Commission; (vii) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and distributing prospectuses,
notices, proxy statements and all reports to shareholders and to
governmental agencies; (viii) charges and expenses of legal counsel to
the Trust and the Trustees; (ix) any distribution fees paid by the
Portfolio in accordance with Rule 12b-1 promulgated by the Commission
pursuant to the 1940 Act; (x) compensation of those Trustees of the
Trust who are not affiliated with or interested persons of the Manager,
the Trust (other than as Trustees), The Pioneer Group, Inc. or Pioneer
Funds Distributor, Inc.; (xi) the cost of preparing and printing share
certificates; and (xii) interest on borrowed money, if any.
(d) In addition to the expenses described in Section 2(c) above, the
Trust, on behalf of the Portfolio, shall pay all brokers' and
underwriting commissions chargeable to the Trust in connection with
securities transactions to which the Portfolio is a party.
3. (a) The Trust, on behalf of the Portfolio, shall pay to the Manager, as
compensation for the Manager's services and expenses assumed hereunder,
a fee at the annual rate of 1.00% of the Portfolio's average daily net
assets. Management fees payable hereunder shall be computed daily and
paid monthly in arrears. In the event of termination of this Agreement,
the fee provided in this Section shall be computed on the basis of the
period ending on the last business day on which this Agreement is in
effect subject to a pro rata adjustment based on the number of days
elapsed in the current month as a percentage of the total number of
days in such month.
(b) If the operating expenses of the Portfolio in any year exceed the
limits set by state securities laws or regulations in states in which
shares of the Portfolio are sold, the amount payable to the Manager
under subsection (a) above will be reduced (but not below $0), and the
Manager shall make other arrangements concerning expenses but, in each
instance, only as and to the extent required by such laws or
regulations. If amounts have already been advanced to the Manager under
this Agreement, the Manager will return such amounts to the Trust to
the extent required by the preceding sentence.
(c) In addition to the foregoing, the Manager may from time to time
agree not to impose all or a portion of its fee otherwise payable
hereunder (in advance of the time such fee or a portion thereof would
otherwise accrue) and/or undertake to pay or reimburse the Portfolio
for all or a portion of its expenses not otherwise required to be borne
or reimbursed by the Manager. Any such fee reduction or undertaking may
be discontinued or modified by the Manager at any time.
4. It is understood that the Manager may employ one or more sub-investment
advisers (each a "Subadviser") to provide investment advisory services to the
Portfolio by entering into a written agreement with each such Subadviser;
provided, that any such agreement first shall be approved by the vote of a
majority of the Trustees, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, the Manager or
any such Subadviser, at a meeting of Trustees called for the purpose of voting
on such approval and by the affirmative vote of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio. The authority
given to the Manager in Sections 1 through 6 hereof may be delegated by it under
any such agreement; provided, that any Subadviser shall be subject to the same
restrictions and limitations on investments and brokerage discretion as the
Manager. The Trust agrees that the Manager shall not be accountable to the
Portfolio or the Portfolio's shareholders for any loss or other liability
relating to specific investments directed by any Subadviser, even though the
Manager retains the right to reverse any such investment, because, in the event
a Subadviser is retained, the Trust and the Manager will rely almost exclusively
on the expertise of such Subadviser for the selection and monitoring of specific
investments.
5. The Manager will not be liable for any error of judgment or mistake of
law or for any loss sustained by reason of the adoption of any investment policy
or the purchase, sale, or retention of any security on the recommendation of the
Manager, whether or not such recommendation shall have been based upon its own
investigation and research or upon investigation and research made by any other
individual, firm or corporation, but nothing contained herein will be construed
to protect the Manager against any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement.
6. (a) Nothing in this Agreement will in any way limit or restrict the
Manager or any of its officers, Trustees, or employees from buying,
selling or trading in any securities for its or their own accounts or
other accounts. The Manager may act as an investment advisor to any
other person, firm or corporation, and may perform management and any
other services for any other person, association, corporation, firm or
other entity pursuant to any contract or otherwise, and take any action
or do any thing in connection therewith or related thereto; and no such
performance of management or other services or taking of any such
action or doing of any such thing shall be in any manner restricted or
otherwise affected by any aspect of any relationship of the Manager to
or with the Trust or deemed to violate or give rise to any duty or
obligation of the Manager to the Trust except as otherwise imposed by
law. The Trust recognizes that the Manager, in effecting transactions
for its various accounts, may not always be able to take or liquidate
investment positions in the same security at the same time and at the
same price.
(b) In connection with purchases or sales of securities for the account
of the Trust, neither the Manager nor any of its Trustees, officers or
employees will act as a principal or agent or receive any commission
except as permitted by the 1940 Act. The Manager shall arrange for the
placing of all orders for the purchase and sale of securities for the
Portfolio's account with brokers or dealers selected by the Manager. In
the selection of such brokers or dealers and the placing of such
orders, the Manager is directed at all times to seek for the Portfolio
the most favorable execution and net price available except as
described herein. It is also understood that it is desirable for the
Portfolio that the Manager have access to supplemental investment and
market research and security and economic analyses provided by brokers
who may execute brokerage transactions at a higher cost to the
Portfolio than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to place orders for the purchase
and sale of securities for the Portfolio with such brokers, subject to
review by the Trust's Trustees from time to time with respect to the
extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to the Manager in
connection with its or its affiliates' services to other clients.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased in
order to obtain the best execution and lower brokerage commissions, if
any. In such event, allocation of the securities so purchased or sold,
as well as the expenses incurred in the transaction, will be made by
the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to such
clients.
7. This Agreement shall become effective on the date hereof and shall
remain in force until June 30, 1999 and from year to year thereafter, but only
so long as its continuance is approved annually by a vote of the Trustees of the
Trust voting in person, including a majority of its Trustees who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
such parties, at a meeting of Trustees called for the purpose of voting on such
approval or by a vote of a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of the Portfolio, subject to the right of the Trust and
the Manager to terminate this contract as provided in Section 8 hereof.
8. Either party hereto may, without penalty, terminate this Agreement by
vote of its Board of Trustees or Directors, as the case may be, or by vote of a
"majority of its outstanding voting securities" (as defined in the 1940 Act) and
the giving of 60 days' written notice to the other party.
9. This Agreement shall automatically terminate in the event of its
assignment. For purposes of this Agreement, the term "assignment" shall have the
meaning given it by Section 2(a)(4) of the 1940 Act.
10. The Trust agrees that in the event that neither the Manager nor any of
its affiliates acts as an investment adviser to the Portfolio, the name of the
Trust will be changed to one that does not contain the name "Pioneer" or
otherwise suggest an affiliation with the Manager.
11. The Manager is an independent contractor and not an employee of the
Trust for any purpose. If any occasion should arise in which the Manager gives
any advice to its clients concerning the shares of the Trust, the Manager will
act solely as investment counsel for such clients and not in any way on behalf
of the Trust or any series thereof.
12. This Agreement states the entire agreement of the parties hereto, and
is intended to be the complete and exclusive statement of the terms hereof. It
may not be added to or changed orally, and may not be modified or rescinded
except by a writing signed by the parties hereto and in accordance with the 1940
Act, when applicable.
13. This Agreement and all performance hereunder shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.
14. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers and their seal to be hereto affixed as of the
day and year first above written.
ATTEST: PIONEER VARIABLE CONTRACTS TRUST
on behalf of Europe Portfolio
By:________________________ ________________________
Joseph P. Barri By:
Secretary Its:
ATTEST: PIONEERING MANAGEMENT CORPORATION
By:________________________ _______________________
Joseph P. Barri By:
Secretary Its:
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 2, 1998 (and to all references to our firm) included in or made a
part of Post-Effective Amendment No.8 and Amendment No. 9 to Registration
Statement File Nos. 33-84546 and 811-8786, respectively.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 15, 1998
PIONEER VARIABLE CONTRACTS TRUST
CLASS II SHARES DISTRIBUTION PLAN
CLASS II SHARES DISTRIBUTION PLAN, dated as of July __, 1998 of PIONEER
VARIABLE CONTRACTS TRUST, a Delaware business trust (the "Trust"), on behalf of
each series of the Trust listed in SCHEDULE A hereto (each, a "Series").
WITNESSETH
WHEREAS, the Trust is engaged in business as an open-end, diversified,
management investment company and is registered under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act");
WHEREAS, the Trust intends to distribute shares of beneficial interest
(the "Class II Shares") of the Trust in accordance with Rule 12b-1 promulgated
by the Securities and Exchange Commission under the 1940 Act ("Rule 12b-1"), and
desires to adopt this Class II Shares distribution plan (the "Class II Plan") as
a plan of distribution pursuant to such Rule;
WHEREAS, the Trust desires that Pioneer Funds Distributor, Inc., a
Massachusetts corporation ("PFD"), provide certain distribution services for the
Trust's Class II Shares in connection with the Class II Plan;
WHEREAS, the Trust has entered into an underwriting agreement (in a
form approved by the Trust's Board of Trustees in a manner specified in such
Rule 12b-1) with PFD (the "Underwriting Agreement");
WHEREAS, the Trust also recognizes and agrees that (a) PFD may retain
the services of firms or individuals to act as dealers or wholesalers
(collectively, the "Dealers") of the Class II Shares in connection with the
offering of Class II Shares, (b) PFD may compensate insurance companies and
distributors of variable contracts and administrators of qualified pension and
retirement plans ("Administrators") for distribution and account maintenance
services that include the Class II shares as a funding vehicle under variable
contracts, other insurance products and qualified pension and retirement plans,
(c) PFD may compensate any Dealer or Administrator that sells Class II Shares in
the manner and at the rate or rates to be set forth in an agreement between PFD
and such Dealer or Administrator and (d) PFD may make such payments to Dealers
or Administrators for distribution services out of the fee paid to PFD
hereunder, any deferred sales charges imposed by PFD in connection with the
repurchase of Class II shares, its profits or any other source available to it;
WHEREAS, the Trust recognizes and agrees that PFD may impose certain
deferred sales charges in connection with the repurchase of Class II Shares by
the Trust, and PFD may retain (or receive from the Trust, as the case may be)
all such deferred sales charges; and
WHEREAS, the Board of Trustees of the Trust, in considering whether the
Trust should adopt and implement this Class II Plan, has evaluated such
information as it deemed necessary to an informed determination whether this
Class II Plan should be adopted and implemented and has considered such
pertinent factors as it deemed necessary to form the basis for a decision to use
assets of the Trust for such purposes, and has determined that there is a
reasonable likelihood that the adoption and implementation of this Class II Plan
will benefit the Trust and its Class II shareholders;
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this
Class II Plan for each Series as a plan of distribution of such Series' Class II
Shares in accordance with Rule 12b-1, on the following terms and conditions:
1. (a) The Trust, on behalf of each Series, is authorized to
compensate PFD for (1) distribution services and (2) personal
and account maintenance services performed and expenses
incurred by PFD in connection with each Series' Class II
Shares. Such compensation shall be calculated and accrued
daily and paid monthly or at such other intervals as the Board
of Trustees may determine.
(b) The amount of compensation paid during any one
year for distribution services with respect to Class II Shares
and personal and account maintenance services and expenses
with respect to Class II Shares shall be .25% of the Trust's
average daily net assets attributable to Class II Shares for
such year.
(c) Distribution services and expenses for which PFD
may be compensated pursuant to this Plan include, but are not
limited to: compensation to and expenses (including allocable
overhead, travel and telephone expenses) of (i) insurance
companies that offer Class II shares pursuant to variable
contracts and other insurance products, or other broker-dealer
affiliates, (ii) Dealers, brokers and other dealers who are
members of the National Association of Securities Dealers,
Inc. ("NASD") or their officers, sales representatives and
employees, (iii) PFD and any of its affiliates and any of
their respective officers, sales representatives and
employees, (iv) banks and their officers, sales
representatives and employees, who engage in or support
distribution of the Trust's Class II Shares, (v)
administrators of qualified pension and retirement plans;
printing of reports and prospectuses for other than existing
shareholders; and preparation, printing and distribution of
sales literature and advertising materials.
(d) Personal and account maintenance services and
expenses for which PFD or any of its affiliates, insurance
companies, banks, Dealers or Administrators may be compensated
pursuant to this Plan include, but are not limited to:
payments made to or on account of PFD or any of its
affiliates, banks, administrators of qualified pension and
retirement plans, other brokers and dealers who are members of
the NASD, insurance companies, or their officers, sales
representatives and employees, who respond to inquiries of,
and furnish assistance to, shareholders regarding their
ownership of Class II Shares or their accounts or who provide
similar services not otherwise provided by or on behalf of the
Trust. As partial consideration for personal services and/or
account maintenance services provided by PFD to the Class II
Shares, PFD shall be entitled to be paid any fees payable
under this clause (d) with respect to Class II Shares for
which no dealer of record exists, where less than all
consideration has been paid to a dealer of record or where
qualification standards have not been met.
(e) PFD may impose certain deferred sales charges in
connection with the repurchase of Class II Shares by the Trust
and PFD may retain (or receive from the Trust as the case may
be) all such deferred sales charges.
(f) Appropriate adjustments to payments made pursuant
to clause (b) of this paragraph 1 shall be made whenever
necessary to ensure that no payment is made by the Trust in
excess of the applicable maximum cap imposed on asset based,
front-end and deferred sales charges by the NASD's Conduct
Rule 2830.
2. The Trust understands that agreements between PFD and Dealers or
Administrators may provide for payment of fees to Dealers or Administrators in
connection with the sale of Class II Shares and the provision of services to
shareholders of the Trust. Nothing in this Class II Plan shall be construed as
requiring the Trust to make any payment to any Dealer or Administrator or to
have any obligations to any Dealer or Administrator in connection with services
as a dealer of the Class II Shares. PFD shall agree and undertake that any
agreement entered into between PFD and any Dealer or Administrator shall provide
that such Dealer or Administrator shall look solely to PFD for compensation for
its services thereunder and that in no event shall such Dealer or Administrator
seeks any payment from the Trust or a Series.
3. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to its Declaration of Trust, as it may be amended or
restated from time to time, or By-Laws or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Trust's Board of Trustees of the responsibility for and control of
the conduct of the affairs of the Trust.
4. This Class II Plan shall become effective upon approval by (i) a
"majority of the outstanding voting securities" of Class II of the Trust, (ii) a
vote of the Board of Trustees, and (iii) a vote of a majority of the Trustees
who are not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Class II Plan or in any agreements
related to the Class II Plan (the "Qualified Trustees"), such votes with respect
to (ii) and (iii) above to be cast in person at a meeting called for the purpose
of voting on this Class II Plan.
5. This Class II Plan will remain in effect indefinitely, provided that
such continuance is "specifically approved at least annually" by a vote of both
a majority of the Trustees of the Trust and a majority of the Qualified
Trustees. If such annual approval is not obtained, this Class II Plan shall
expire on July __, 1999.
6. This Class II Plan may be amended at any time by the Board of
Trustees, provided that this Class II Plan may not be amended to increase
materially the limitations on the annual percentage of average net assets which
may be expended hereunder without the approval of holders of a "majority of the
outstanding voting securities" of Class II of the Trust and may not be
materially amended in any case without a vote of a majority of both the Trustees
and the Qualified Trustees. This Class II Plan may be terminated at any time by
a vote of a majority of the Qualified Trustees or by a vote of the holders of a
"majority of the outstanding voting securities" of Class II of the Trust.
7. The Trust and PFD shall provide to the Trust's Board of Trustees,
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts expended under this Class II Plan and the purposes for which such
expenditures were made.
8. While this Class II Plan is in effect, the selection and nomination
of Qualified Trustees shall be committed to the discretion of the Trustees who
are not "interested persons" of the Trust.
9. For the purposes of this Class II Plan, the terms "assignment,"
"interested persons," "majority of the outstanding voting securities" and
"specifically approved at least annually" are used as defined in the 1940 Act.
10. The Trust shall preserve copies of this Class II Plan, and each
agreement related hereto and each report referred to in Paragraph 7 hereof
(collectively, the "Records"), for a period of not less than six (6) years from
the end of the fiscal year in which such Records were made and, for a period of
two (2) years, each of such Records shall be kept in an easily accessible place.
11. This Class II Plan shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the 1940
Act.
12. If any provision of this Class II Plan shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Class II Plan shall not be affected thereby.
<PAGE>
SCHEDULE A
The following series of the Trust have adopted this Class II Shares
Distribution Plan as of the following date(s):
- -------------------------------------- --------------------------------
SERIES DATE
- -------------------------------------- --------------------------------
- -------------------------------------- --------------------------------
Emerging Markets Portfolio July 1, 1998
- -------------------------------------- --------------------------------
- -------------------------------------- --------------------------------
Europe Portfolio July 1, 1998
- -------------------------------------- --------------------------------
- -------------------------------------- --------------------------------
Growth Shares Portfolio July 1, 1998
- -------------------------------------- --------------------------------
- -------------------------------------- --------------------------------
Growth and Income Portfolio July 1, 1998
- -------------------------------------- --------------------------------
PIONEER VARIABLE CONTRACTS TRUST
MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
Class I Shares and Class II Shares
July 1, 1998
The series of Pioneer Variable Contracts Trust (the "Trust") listed on
SCHEDULE A hereto (each, a "Series") will have of two classes of shares, Class I
and Class II shares. Within each Series, Class I and Class II shares shall have
the same relative rights and privileges and shall be subject to the same sales
charges, fees and expenses, except as set forth below. The Board of Trustees of
the Trust, on behalf of an applicable Series, may determine in the future that
other distribution arrangements, allocations of expenses (whether ordinary or
extraordinary) or services to be provided to a class of shares are appropriate
and amend this Plan accordingly without the approval of shareholders of any
class. Except as set forth in the Series' prospectuses, shares may be exchanged
only for shares of the same class of another Series.
ARTICLE I. CLASS I SHARES
Class I Shares are sold at net asset value per share without the
imposition of an initial sales charge. Class I Shares are not subject to a
contingent deferred sales charge ("CDSC") upon redemption regardless of the
length of the period of time such shares are held. Class I Shares shall be
entitled to the shareholder services set forth from time to time in the Series'
prospectus with respect to Class I Shares. Class I Shares are not subject to
fees payable under a distribution or other plan adopted pursuant to Rule 12b-1.
The Class I Shareholders of the Trust have exclusive voting rights, if any, with
respect to the Trust's possible future adoption of a Class I Rule 12b-1
Distribution Plan. Transfer agency fees are allocated to Class I Shares on a per
account basis except to the extent, if any, such an allocation would cause the
Trust or the Series to fail to satisfy any requirement necessary to obtain or
rely on a private letter ruling from the Internal Revenue Service ("IRS")
relating to the issuance of multiple classes of shares. Class I shares shall
bear the costs and expenses associated with conducting a shareholder meeting for
matters relating to Class I shares.
ARTICLE II. CLASS II SHARES
Class II Shares are sold at net asset value per share without the imposition of
an initial sales charge. Class II Shares are not subject to a CDSC upon
redemption regardless of the length of the period of time such shares are held.
Class II Shares shall be entitled to the shareholder services set forth from
time to time in the Series' prospectus with respect to Class II Shares. Class II
Shares are subject to fees calculated as a stated percentage of the net assets
attributable to Class II shares under the Class II Rule 12b-1 Distribution Plan
as set forth in such Distribution Plan. The Class II Shareholders of the
applicable Series have exclusive voting rights, if any, with respect to the
Trust's Class II Rule 12b-1 Distribution Plan. Transfer agency fees are
allocated to Class II Shares on a per account basis except to the extent, if
any, such an allocation would cause the Trust or the Series to fail to satisfy
any requirement necessary to obtain or rely on a private letter ruling from the
IRS relating to the issuance of multiple classes of shares. Class II shares
shall bear the costs and expenses associated with conducting a shareholder
meeting for matters relating to Class II shares.
ARTICLE III. APPROVAL BY BOARD OF TRUSTEES
This Plan shall not take effect until it has been approved by the vote
of a majority (or whatever greater percentage may, from time to time, be
required under Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "Act")) of (a) all of the Trustees of the Trust, on behalf of each series,
and (b) those of the Trustees who are not "interested persons" of the Trust, as
such term may be from time to time defined under the Act.
ARTICLE IV. AMENDMENTS
No material amendment to the Plan shall be effective unless it is
approved by the Board of Trustees in the same manner as is provided for approval
of this Plan in Article III.
<PAGE>
SCHEDULE A
The following series of the Trust have adopted this Multiple Class Plan
Pursuant to Rule 18f-3 as of the follwong date(s):
SERIES DATE
- ------------------------------------ --------------------------------
Emerging Markets Portfolio July 1, 1998
- ------------------------------------ --------------------------------
- ------------------------------------ --------------------------------
Europe Portfolio July 1, 1998
- ------------------------------------ --------------------------------
- ------------------------------------ --------------------------------
Growth Shares Portfolio July 1, 1998
- ------------------------------------ --------------------------------
- ------------------------------------ --------------------------------
Growth and Income Portfolio July 1, 1998
- ------------------------------------ --------------------------------
- ------------------------------------ --------------------------------
<PAGE>
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