File No. 33-84546
File No. 811-08786
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Pioneer Variable Contracts Trust
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
PIONEER VARIABLE CONTRACTS TRUST
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
60 State Street
Boston, Massachusetts 02109
1-800-622-3265
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR APRIL 13, 2004
This is the formal agenda for your portfolio's special shareholder meeting.
It tells you the matters you will be asked to vote on and the time and place of
the meeting, in case you want to attend in person.
To the shareholders of Pioneer Real Estate Shares VCT Portfolio:
A special meeting of shareholders of your portfolio will be held at the
offices of Hale and Dorr LLP, 60 State Street, 26th Floor, Boston, Massachusetts
on April 13, 2004 at 2:00 p.m., Boston time, to consider the following:
1. A proposal to approve the Management Contract between Pioneer Investment
Management, Inc. ("Pioneer") and Pioneer Real Estate Shares VCT Portfolio
(the "Portfolio") as set forth in Exhibit A and as further described in
the attached proxy statement. The proposal will not result in a change in
Pioneer's fee under the Management Contract and will allow the
Independent Trustees to permit currently unanticipated expenses that the
fund may incur in the future to be paid by the fund rather than Pioneer;
2. A proposal to approve a sub-advisory agreement between Pioneer, your
portfolio's investment adviser, and AEW Management and Advisors, L.P.
("AEW");
3. (a) - (i). Proposals to approve amendments to your portfolio's
fundamental investment restrictions, as described in the attached proxy
statement
4. A proposal to approve a policy allowing Pioneer and the Board of Trustees
of your portfolio to appoint or terminate sub-advisers and to approve
amendments to sub-advisory agreements without shareholder approval; and
5. To consider any other business that may properly come before the meeting.
To the owners of variable annuity or life insurance contracts:
You are being asked to vote on the proposals listed above on the enclosed
voting instruction card. Your vote will instruct the insurance company that
issued your contract how to vote the shares of the portfolio attributable to
your contract at the special meeting of shareholders.
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF ALL THE PROPOSALS. APPROVAL OF
THE PROPOSALS WILL NOT INCREASE THE MANAGEMENT FEE RATES PAYABLE BY THE
PORTFOLIO.
15006-00-0204
Shareholders of record as of the close of business on February 10, 2004 are
entitled to vote at the meeting and any related follow-up meetings.
By Order of the Board of Trustees,
Dorothy E. Bourassa, Secretary
Boston, Massachusetts
March 10, 2004
-----------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY OR, IF YOU ARE A CONTRACT OWNER, THE ENCLOSED VOTING INSTRUCTION
CARD.
PROXY STATEMENT OF
PIONEER VARIABLE CONTRACTS TRUST
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
60 State Street
Boston, Massachusetts 02109
1-800-622-3265
SPECIAL MEETING OF SHAREHOLDERS
This proxy statement contains the information you should know before voting
on the proposals summarized below.
The portfolio will furnish without charge a copy of its most recent annual
report and semiannual report to any shareholder or contract owner upon request.
Shareholders and contract owners who want to obtain a copy of the reports should
contact their insurance providers, direct all written requests to the attention
of the portfolio at the address listed above, or should call Pioneer Investment
Management Shareholder Services, Inc., the portfolio's transfer agent, at
1-800-622-3265.
INTRODUCTION
This proxy statement is being used by the board of trustees of Pioneer
Variable Contracts Trust on behalf of Pioneer Real Estate Shares VCT Portfolio
(the "portfolio") to solicit proxies to be voted at a special meeting of
shareholders. This meeting will be held at the offices of Hale and Dorr LLP, 60
State Street, 26th Floor, Boston, Massachusetts 02109 at 2:00 p.m., Boston time,
on Tuesday, April 13, 2004, and at any adjournments of the meeting to a later
date, for the purposes as set forth in the accompanying notice of special
meeting of shareholders.
This proxy statement and the enclosed proxy card are being mailed to
shareholders on or about March 10, 2004. The annual report for the year ended
December 31, 2003 has previously been mailed to shareholders. Additional copies
of this report also are available without charge by calling or writing the
portfolio at the number and address above.
WHO IS ELIGIBLE TO VOTE
If you are the owner of a variable annuity or variable life insurance contract:
If you are the owner of a variable annuity or variable life insurance
contract (a "contract owner"), the insurance company that issued your contract
is the record owner of portfolio shares. By completing and returning the
enclosed voting instruction card, you will instruct the insurance company how to
vote the shares of the portfolio attributable to your contract.
If you hold shares of a portfolio directly:
Shareholders of record of the portfolio as of the close of business on
February 10, 2004 (the "record date") are entitled to vote on all of the
portfolio's business at the special shareholder meeting and any adjournments
thereof. Each share is entitled to one vote.
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Shares represented by properly executed proxies, unless revoked before or at the
meeting, will be voted according to shareholders' instructions. If you sign a
proxy, but do not fill in a vote, your shares will be voted in favor of each of
the proposals. If any other business comes before the special shareholder
meeting, your shares will be voted at the discretion of the persons named as
proxies.
PROPOSAL 1
APPROVAL OF AMENDMENTS TO THE MANAGEMENT CONTRACT
Summary
Pioneer has served as the portfolio's investment adviser since its
inception. Pioneer also serves as the investment adviser for each of the other
Pioneer Funds and for other institutional accounts. Pioneer, a registered
investment adviser under the Investment Advisers Act of 1940, as amended, is an
indirect, wholly owned subsidiary of UniCredito Italiano S.p.A. ("UniCredito"),
a publicly traded company. Pioneer is located at 60 State Street, Boston,
Massachusetts 02109.
At a meeting of the board of trustees held on December 1, 2003, the
trustees, including all of the Trustees who are not "interested persons" of the
portfolio or Pioneer (the "Independent Trustees"), present at such meeting
unanimously approved and voted to recommend that the shareholders of the
portfolio approve a proposal to adopt an amendment to the management contract
with Pioneer (the "amendment"). The amendment (i) would authorize the board of
trustees to determine that certain categories of expenses that may arise in the
future are appropriately paid by the portfolio rather than Pioneer and (ii)
clarify the responsibility of Pioneer for errors of any sub-adviser. This
amendment would bring the management contract in line with the management
contracts adopted in the past year by other Pioneer funds, including other
portfolios of the Trust. The provision of the management contract relating to
expenses, as proposed to be amended, is attached as Exhibit A. The proposal will
not result in a change in Pioneer's fee under the Management Contract and will
allow the Independent Trustees to permit currently unanticipated expenses that
the fund may incur in the future to be paid by the fund rather than Pioneer.
The portfolio's existing management contract with Pioneer is referred to
below as the "existing contract."
Except for the modification to the expense provision discussed below, the
terms of the existing contract are unchanged. Pursuant to the existing contract,
Pioneer serves as investment adviser to the portfolio and is responsible for the
overall management of the portfolio's business affairs subject only to the
authority of the board of trustees. Pioneer is authorized to buy and sell
securities for the account of the portfolio and to designate brokers to carry
out such transactions. Pioneer may not make any purchase the cost of which
exceeds funds currently available for the portfolio and may not make any
purchase which would violate any fundamental policy or restriction in the
portfolio's prospectus or statement of additional information as in effect from
time to time.
Existing contract
The shareholders of the portfolio last approved the portfolio's existing
contract on September 11, 2000. The existing contract was approved by the board
of trustees, with
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its renewal most recently approved at a meeting held on December 1, 2003, at
which meeting the board of trustees also approved the amendment, subject to
shareholder approval. The existing contract is renewable annually by the vote of
a majority of the portfolio's board, including a majority of the trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), of the portfolio, Pioneer or Pioneer Funds
Distributor, Inc. ("PFD"), cast in person at a meeting called for the purpose of
voting on such renewal. The existing contract, dated October 24, 2000,
terminates if assigned (as defined in the 1940 Act) and may be terminated
without penalty by either party by vote of its board or a majority of the
portfolio's outstanding voting securities and upon 60 days' written notice.
Amendment
The amendment only affects the provisions of the management contract
relating to portfolio expenses and the responsibility of Pioneer for actions of
sub-advisers. Under the existing contract, Pioneer pays all expenses incurred by
Pioneer or the portfolio in connection with the management of the affairs of,
and the investment and reinvestment of the assets of, the portfolio, unless such
expenses are assumed by the portfolio under the terms of the existing contract.
The existing contract provides that the portfolio assumes the following
expenses: (a) charges and expenses for portfolio 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 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 portfolio and/or its shares
with federal regulatory agencies, state or blue sky securities agencies and
foreign jurisdictions, including the preparation of prospectuses and statements
of additional information for filing with such regulatory authorities; (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 portfolio and the trustees; (i) any distribution fees paid by the
portfolio in accordance with Rule 12b-1 under the 1940 Act; (j) compensation of
those trustees of the portfolio who are not affiliated with or interested
persons of Pioneer, the portfolio (other than as trustees), Pioneer Investment
Management USA Inc. ("PIM-USA") or PFD; (k) the cost of preparing and printing
share certificates; and (l) interest on borrowed money, if any. In addition, the
portfolio pays all brokers' and underwriting commissions chargeable to the
portfolio in connection with its securities transactions.
The amendment would maintain the same basic arrangement with respect to the
portfolio's expenses. However, a new category of assumed expenses would be
added. This category would include any other expense that the portfolio, Pioneer
or any other agent of the portfolio may incur (A) as a result of a change in the
law or regulations, (B) as a
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result of a mandate from the board of trustees with associated costs of a
character generally assumed by similarly structured investment companies or (C)
that is similar to the expenses listed in the existing contract. Whether the
portfolio assumes expenses that fall into this category in the future would be
determined by the board of trustees (including a majority of the Independent
Trustees) and not Pioneer. The intention of this additional category is to allow
the board of trustees some flexibility to allocate to the portfolio expenses
that may be incurred, and would otherwise be paid by Pioneer, that arise out of
changed circumstances or board mandates or are of the same character as the
expenses currently allocated to the portfolio. Since the board of trustees has
no current plans to cause the portfolio to assume additional expenses pursuant
to this new category or to cause the portfolio to pay any expenses that are
currently paid by Pioneer, adoption of the amendment is not expected to have any
immediate effect on the portfolio's expenses as a result of this provision.
However, this provision may in the future result in the portfolio incurring
additional expenses, which could adversely affect the portfolio's performance.
Under the existing contract, Pioneer is authorized to retain sub-advisers.
The amendment would also revise the existing contract to clarify Pioneer's
liability in the event of an error in managing the portfolio by a sub-adviser.
The existing contract includes a provision that provides that Pioneer would not
have any liability for the acts of a sub-adviser. The amendment would narrow the
limitation on Pioneer's liability. Pioneer would not be accountable to the
portfolio or the portfolio's shareholders for any loss or other liability
relating to any investment decision made by any sub-adviser even though Pioneer
retains the right to reverse any such investment. However, the amendment would
clarify that this provision does not limit Pioneer's other responsibilities and
liability under the existing contract, including, its responsibility to
supervise the sub-adviser's compliance with the portfolio's investment policies
and restrictions. Pioneer, if it fails to satisfy the standard of care under the
Management Contract, may be responsible for losses incurred by the portfolio due
to Pioneer's failure to supervise the subadviser.
Other provisions under the existing contract and amended contract
Except as noted above, the amendment does not alter the existing contract.
The following is a description of certain provisions of the existing contract
that will remain in effect after the amendment.
Standard of care. Under the contract, Pioneer "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 [Pioneer] . . . ." Pioneer, however, shall not
be protected against liability by reason of its ". . . 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 the contract.
Pioneer's authority. The contract provides that Pioneer shall have full
discretion to act for the portfolio in connection with purchase and sale
transactions subject only to the declaration of trust, by-laws, currently
effective registration statements under the 1940 Act and the Securities Act of
1933, as amended, investment objective, policies and restrictions of the
portfolio in effect from time to time, and specific policies and instructions
established from time to time by the trustees.
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Portfolio trading. The contract expressly permits Pioneer to engage in such
activity.
Management fees. The contract provides that the portfolio shall pay to
Pioneer a fee for managing the portfolio and to cover the cost of providing
certain services to the portfolio. Pioneer's annual fee is equal to 0.80% of the
portfolio's average daily net assets. For the fiscal year ended December 31,
2003, the portfolio paid Pioneer $490,974 in management fees.
Expense limitation. The contract provides that Pioneer may from time to
time agree not to impose all or a portion of its fee or otherwise take action to
reduce expenses of the portfolio. Any such fee limitation or expense reduction
is voluntary and may be discontinued or modified by Pioneer at any time.
Other provisions. The contract includes provisions that provide that: (i)
the law of The Commonwealth of Massachusetts shall be the governing law of the
contract; (ii) Pioneer is an independent contractor and not an employee of the
portfolio; (iii) the contract is the entire agreement between the parties with
respect to the matters described therein; (iv) the contract may be executed
using counterpart signature pages; (v) invalid or unenforceable provisions of
the contract are severable and do not render the entire agreement invalid or
unenforceable; and (vi) subject to obtaining best execution, Pioneer may
consider the portfolio when selecting brokers and dealers to execute the
portfolio's securities transactions.
Miscellaneous
If approved, the amendment will become effective on April 15, 2004 (or if
approved after that date, as soon as practicable after that approval), and will
continue in effect until December 31, 2005. Thereafter, the contract will
continue from year to year subject to annual approval by the board of trustees
in the same manner as the existing contract. The contract terminates if assigned
(as defined in the 1940 Act) and may terminate without penalty by either party,
by vote of its board or by a vote of a majority of the outstanding voting
securities of the portfolio and upon 60 days' written notice.
Additional information pertaining to Pioneer
For additional information concerning the management, ownership structure,
affiliations, brokerage policies and certain other matters pertaining to
Pioneer, see Exhibit B.
Mr. John F. Cogan, Jr. and Mr. Osbert M. Hood are trustees and officers of
the Trust as well as directors of Pioneer. Mr. Vincent Nave, Mr. Luis I.
Presutti, Ms. Dorothy E. Bourassa and Mr. Christopher J. Kelley are officers of
both the Trust and Pioneer. Mr. Gary Sullivan and Ms. Katherine Sullivan are
officers of the Trust and employees of Pioneer.
As of December 31, 2003, no trustee or officer of the Trust beneficially
owned any securities issued by Pioneer, UniCredito or any other entity in a
control relationship to Pioneer. During the calendar year 2003, none of the
trustees or officers of the Trust had any direct or indirect interest (the value
of which exceeded $60,000), whether by contract, arrangement or otherwise, in
Pioneer, UniCredito, or any other entity in a control relationship to Pioneer.
During the calendar year 2003, none of the trustees or officers of the Trust had
an interest in a transaction or a series of transactions, or in a proposed
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transaction, in which the aggregate amount involved exceeded $60,000 and to
which Pioneer, UniCredito or any other entity in a control relationship to
Pioneer was a part.
Similar funds
Pioneer serves as the investment adviser to the portfolio and to another
Pioneer fund, Pioneer Real Estate Shares. Pioneer Real Estate Shares pays
Pioneer a management fee equal on an annual basis to 0.80% of the fund's average
daily net assets and, as of December 31, 2003, had net assets of $118,450,676.
Factors considered by the trustees
The board of trustees approved the amendment in order to provide the board
of trustees with greater flexibility to determine if an expense which is
currently not contemplated, such as additional costs arising out of a regulatory
change, should be allocated to the portfolio or Pioneer. The board of trustees
recognized that without the additional flexibility circumstances could arise in
the future where Pioneer was being forced to incur expenses that other
investment advisers were not bearing or the board might hesitate to mandate that
Pioneer take certain actions if the board of trustees determined that it was
inequitable for Pioneer to bear the costs associated with such mandate. The
trustees considered the proposed amendment to be preferable to a more
significant change to the expense provisions of the management contract that
would result in the fund bearing all of its own expenses except as otherwise
expressly assumed by Pioneer. The trustees considered the nature of the expenses
as appropriate portfolio expenses and the relevant practices of other funds in
the industry. Since Pioneer proposed appointing a sub-adviser, the board of
trustees also considered it appropriate to clarify the provision relating to
Pioneer's responsibility for the actions of sub-advisers. In approving the
amendment, the Independent Trustees met independently from the Interested
Trustees and any officers of Pioneer or its affiliates. The Independent Trustees
also relied upon the assistance of counsel to the Independent Trustees and
counsel to the Trust. In considering the amendment, the trustees did not
identify any single factor as all-important or controlling. The following
discussion summarizes the material factors considered by the trustees in
approving the amendments to the management contract.
In evaluating the amendment and considering the annual continuation of the
existing contract, the Independent Trustees reviewed materials furnished by
Pioneer, including information regarding Pioneer, UniCredito, their respective
affiliates and their personnel, operations and financial condition. The
Independent Trustees discussed with representatives of Pioneer the portfolio's'
operations and Pioneer's ability to provide advisory and other services to the
portfolio. The Independent Trustees also reviewed, among other things:
o the investment performance of the portfolio for the one-, three- and
five-year periods ended September 30, 2003;
o the fee charged by Pioneer for investment advisory and administrative
services, as well as other compensation received by PFD and Pioneer
Investment Management Shareholder Services, Inc. ("PIMSS");
o the portfolio's projected total operating expenses;
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o the investment performance, fees and total expenses of investment companies
with similar objectives and strategies managed by other investment advisers;
o the experience of the investment advisory and other personnel providing
services to the funds and the historical quality of the services provided by
Pioneer; and
o the profitability to Pioneer of managing the funds.
The Independent Trustees considered the following as relevant to their
recommendations that the shareholders approve the amendment: (i) the favorable
history, reputation, qualification and background of Pioneer and UniCredito
Italiano, as well as the qualifications of their personnel and their respective
financial conditions; (ii) that the fee and expense ratio of the portfolio are
reasonable given the quality of services expected to be provided and are
comparable to the fees and expense ratios of similar investment companies; (iii)
the relative performance of the portfolio since commencement of operations to
comparable investment companies and unmanaged indexes; (iv) the equitable
considerations in allocating expenses between Pioneer and the portfolio arising
out of changes in regulatory requirements or additional mandates from the
Independent Trustees that were not contemplated when the fee under the
management contract was set; (v) the adoption of the amendment is not expected
to have any immediate effect on the fund's expenses; and (vi) the Independent
Trustees retain control of the allocation of those expenses between Pioneer and
the fund. The Independent Trustees deemed each of these factors to be relevant
to their consideration of the amendment.
Based upon all of the above considerations, the trustees determined that
the assumption of certain portfolio expenses would be equitable and fair to the
shareholders of the portfolio and that their adoption will make it more likely
that the objectives of continued levels of good service and investment
performance currently and in the future will be achieved.
Trustees' recommendation
Based on their evaluation of the materials presented and assisted by the
advice of independent counsel, the trustees who were present at the in person
meeting on December 1, 2003, including all of the trustees who are not
"interested persons" of the funds or Pioneer, unanimously concluded that the
amendment was fair and reasonable and in the best interests of the fund
portfolio's shareholders and by a vote cast at the meeting, approved and voted
to recommend to the shareholders of the portfolio that they approve the proposal
to adopt the amendment.
Required vote
Adoption of Proposal 1 requires the approval of a majority of the
outstanding voting securities of the portfolio, which under the 1940 Act, means
the affirmative vote of the lesser of (i) 67% or more of the shares of the
portfolio represented at the meeting, if at least 50% of all outstanding shares
of the portfolio are represented at the meeting, or (ii) 50% or more of the
outstanding shares of the portfolio entitled to vote at the meeting (a "1940 Act
Majority Vote").
If Proposal 1 is not approved by shareholders, the existing contract will
continue in effect.
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Recommendation
For the reasons set forth above, the trustees of your portfolio unanimously
recommend that shareholders vote in favor of the amendment.
PROPOSAL 2
APPROVAL OF A SUB-ADVISORY AGREEMENT
Summary
Pioneer has served as the portfolio 's investment adviser since the
portfolio's inception in 1993. Subject to shareholder approval, Pioneer intends
to retain the services of AEW Management and Advisors, L.P. ("AEW") as the
sub-adviser to your portfolio.
AEW, a Delaware limited partnership is an investment adviser registered
with the Securities and Exchange Commission ("SEC"). AEW and its affiliates
provide real estate investment advice to public, corporate, union and government
pension plans and endowments. As of December 31, 2003, AEW and its affiliates
had $8.0 billion of net assets under management. AEW specializes in designing
and executing real estate investment strategies focused in three areas: direct
investments in real estate, real estate-related securities, such as real estate
investment trusts ("REITs"), and high-return debt and equity investments in real
estate projects. AEW is a wholly owned subsidiary of CDC IXIS Asset Management
North America, L.P., formerly Nvest Companies, L.P., a firm with 12 U.S.
investment management affiliates having an aggregate of $135 billion in assets
under management. CDC IXIS Asset Management North America, L.P. is a subsidiary
of CDC IXIS Asset Management, the investment management arm of France's Caisse
des depots Group, a quasi-governmental entity. AEW is located at World Trade
Center East, Two Seaport Lane, Boston, Massachusetts 02210.
At a meeting of the board of trustees of the trust held on December 1,
2003, the trustees, including all of the trustees who are not "interested
persons" of the trust, that is, persons not affiliated with Pioneer, AEW or
UniCredito, unanimously approved as in the best interest of shareholders, and
voted to recommend that the shareholders of the portfolio approve, a proposal to
adopt a sub-advisory agreement (the "proposed sub-advisory agreement") between
Pioneer and AEW with respect to the management of the portfolio.
Your board of trustees and Pioneer recommend the retention of AEW as a
sub-adviser to the portfolio. While Pioneer has the necessary expertise to
manage a real estate portfolio and has directly or through sub-advisers managed
the portfolio since 1993, Pioneer and the trustees believe that in light of the
unique characteristics of the real estate market, shareholders of the portfolio
will benefit from the services of an investment manager focused exclusively on
real estate investments.
The appointment of a sub-adviser will not affect the portfolio's investment
objectives or principal investment policies or restrictions. Pioneer and AEW
both pursue value-based investment styles. Consequently, it is anticipated that
the appointment of AEW as sub-adviser will not materially alter the portfolio's
investment style, although some changes in investment approach and portfolio
characteristics are likely to result from new
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day-to-day management. While AEW would manage the portfolio's day-to-day
investment portfolio, Pioneer would continue to be responsible for the overall
management of the portfolio's affairs and for supervising the services rendered
by AEW.
Shareholders of your portfolio are being asked to approve the proposed
sub-advisory agreement with AEW.
Terms of the proposed sub-advisory agreement
The following summary of the material terms of the proposed sub-advisory
agreement. This summary is qualified by reference to the form of proposed
sub-advisory agreement attached to this proxy statement as Exhibit C.
Sub-advisory services. AEW will provide sub-advisory services to your
portfolio pursuant to the proposed sub-advisory agreement. Pursuant to the terms
of the portfolio's sub-advisory agreement, AEW will act as investment
sub-adviser with respect to such portion of the portfolio's assets as Pioneer
designates from time to time. In such capacity, AEW shall, subject to the
supervision of Pioneer and the board of trustees, regularly provide the
portfolio with investment research, advice and supervision and will furnish
continuously an investment program for the portfolio, consistent with the
portfolio's investment objectives and policies. AEW shall determine, from time
to time, what securities will be purchased for the portfolio, what securities
will be held or sold by the portfolio and what portion of the portfolio's assets
will be held uninvested in cash.
Sub-advisory fees. For its services, AEW is entitled to a sub-advisory fee
from Pioneer at annual rate of 0.40% of the first $100 million of the combined
average daily net assets of the portfolio and another real estate fund managed
by Pioneer and 0.30% of the combined average daily net assets of the portfolio
and another real estate fund managed by Pioneer in excess of $100 million. As of
December 31, 2003, the combined assets of the portfolio and the other such fund
were $190,234,643. The fee will be paid monthly in arrears. Your portfolio has
no responsibility to pay any fee to AEW. The portfolio pays Pioneer a management
fee of up to 0.80% of the portfolio's average daily net assets.
Standard of care. Under the proposed sub-advisory agreement, AEW shall not
be liable to Pioneer, the portfolio, or any affiliated persons or controlling
persons thereof for any losses, claims, damages, liabilities or litigation
incurred or suffered by such parties as a result of any error of judgment or
mistake of law by AEW with respect to the portfolio. However, nothing in the
proposed sub-advisory agreement shall operate or purport to operate in any way
to exculpate, waive or limit the liability of AEW for, and AEW shall indemnify
and hold harmless Pioneer, the portfolio, and any affiliated persons or
controlling persons thereof against, any and all losses, claims, damages,
liabilities or litigation by reason of or arising out of: (a) AEW being in
violation of any applicable federal or state law, rule or regulation or any
investment policy or restriction set forth in the Trust's registration statement
or any written guidelines or instruction provided in writing by the board of
trustees or Pioneer, (b) the portfolio's failure to satisfy the diversification
or source of income requirements of Subchapter L or M of the Code by reason of
any action or omission of AEW, unless acting at the direction of Pioneer, (c)
AEW's willful misfeasance, bad faith or gross negligence generally in the
performance of its duties
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hereunder or its reckless disregard of its obligations and duties under the
proposed sub-advisory agreement or (d) the portfolio being in violation of any
applicable federal or state law, rule or regulation or any investment policy or
restriction set forth in the Trust's registration statement or any written
guidelines or instruction provided in writing by the board of trustees or
Pioneer, by reason of any action or omission of AEW.
Other provisions. The proposed sub-advisory agreement includes provisions
that provide that: (i) the law of The Commonwealth of Massachusetts shall be the
governing law of the agreement; (ii) AEW is an independent contractor and not an
employee of Pioneer or the portfolio; and (iii) the agreement may be executed
using counterpart signature pages.
Directors and Officers of AEW:
Title Address
-------------------------- ------------------------
Pamela J. Herbst President, Director World Trade Center East
and Assistant Clerk Two Seaport Lane
Boston, MA 02210-2021
James J. Finnegan Vice President, Director World Trade Center East
Two Seaport Lane
Boston, MA 02210-2021
Jeffrey D. Furber Director and Clerk World Trade Center East
Two Seaport Lane
Boston, MA 02210-2021
The portfolio's portfolio transaction policy
All orders for the purchase or sale of portfolio securities are placed on
behalf of the portfolio by AEW subject to Pioneer's supervision pursuant to
authority contained in the existing management contract and proposed
sub-advisory agreement. In executing portfolio transactions and selecting
broker-dealers or futures commodity merchants, AEW is required to seek best
execution on behalf of the portfolio. In assessing the best execution available
for any transaction, AEW considers all factors it deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker-dealer or futures commodity
merchant, and the reasonableness of the commission, if any (all for the specific
transaction and on a continuing basis). In evaluating the best execution
available, and in selecting the broker-dealer or futures commodity merchant to
execute a particular transaction, AEW may also consider the brokerage and
research services (as those terms are used in Section 28(e) of the Securities
Exchange Act of 1934) provided to the portfolio and/or other accounts over which
AEW or its affiliates exercise investment discretion. AEW is authorized to pay a
broker-dealer or futures commodity merchant which provides such brokerage and
research services a commission for executing a portfolio transaction for the
portfolio that is in excess of the amount of commission another broker-dealer or
futures commodity merchant would have charged for effecting that transaction if,
but only if, AEW determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer or futures commodity merchant
10
viewed in terms of that particular transaction or in terms of all of the
accounts over which investment discretion is so exercised. It is understood that
AEW Securities Incorporated, an affiliate of AEW, may be used as broker for
securities transactions, but that no formula has been adopted for allocation of
the fund's investment transaction business.
On occasions when AEW deems the purchase or sale of a security or futures
contract to be in the best interest of the portfolio as well as its other
clients, to the extent permitted by applicable law and regulations, AEW may, but
shall be under no obligation to, aggregate the securities or futures contracts
to be sold or purchased in order to obtain the best execution. In such event,
allocation of the securities or futures contracts so purchased or sold, as well
as the expenses incurred in the transaction, will be made by AEW in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the portfolio and to such other clients.
Similar funds managed by AEW
AEW serves as the investment adviser to the following funds with investment
objectives similar to your portfolio's objectives.
Management fee rate
Net assets of for similar fund
similar fund as of as a percentage of
Similar fund December 31, 2003 average daily net assets
- -------------------------- -------------------- -------------------------
CDC AEW Real Estate Fund $72.737mm 0.80%
AEW has not waived, reduced or otherwise agreed to reduce its compensation
under its contract with any of the funds listed above.
Miscellaneous
If approved by shareholders of your portfolio, the proposed sub-advisory
agreement will become effective on or after April 15, 2004 and will continue in
effect until December 31, 2005 and thereafter will continue from year to year
subject to annual approval by the board of trustees. The proposed sub-advisory
agreement terminates if assigned (as defined in the 1940 Act) and may be
terminated without penalty by either party upon not less than 30 days' written
notice and may also be terminated by vote of the trust's board of trustees or by
vote of a majority of the outstanding voting securities of the portfolio.
Factors considered by the trustees
The trustees of your trust determined that the terms of the proposed
sub-advisory agreement are fair and reasonable and that approval of the proposed
sub-advisory agreement on behalf of the portfolio is in the best interest of the
portfolio and its shareholders.
In evaluating the proposed sub-advisory agreement, the trustees reviewed
materials furnished by AEW, including information regarding AEW, its personnel,
operations and financial condition and the services to be provided by Pioneer
and AEW.
The trustees specifically considered the following as relevant to their
recommendations: (1) the potential benefits to the portfolio that may be
realized from a
11
sub-adviser which focuses exclusively on real estate investments; (2) the
favorable history, reputation, qualification and background of AEW, as well as
the qualifications of its personnel and its financial condition; (3) the fact
that Pioneer will pay the compensation of AEW and the management fee paid by the
portfolio will not be affected by this arrangement; (4) that the use of a
sub-adviser is not expected to adversely affect the portfolio's expenses; (5)
the performance of other real estate portfolios managed by AEW; (6) the
compensation to be retained by Pioneer in light of its continuing service to the
portfolio; and (7) Pioneer's experience and expertise in supervising
sub-advisers. The first four factors were given the most weight by the Trustees.
The first few factors were given the most weight by the trustees. In considering
factor number 4 above, the trustees based their conclusion on the fact that
AEW's proposed management style would be substantially similar to that currently
used by Pioneer in managing the fund.
Trustees' recommendation
At an in person meeting of the board of trustees for the portfolio held on
December 1, 2003, the trustees, including all of the trustees who are not
"interested persons" of AEW, the portfolio, Pioneer or UniCredito, unanimously
approved as in the best interest of shareholders and voted to recommend that the
shareholders of the portfolio approve, a proposal to adopt a sub-advisory
agreement with AEW. Based on their evaluation of the materials presented and
assisted by the advice of independent counsel, the trustees at the meeting,
including all the trustees who are not "interested persons" of AEW, the
portfolio, Pioneer or UniCredito, unanimously concluded that the terms of the
proposed sub-advisory agreement are reasonable, fair and in the best interest of
the portfolio and its shareholders and that the fees provided therein are fair
and reasonable in light of the usual and customary charges made by others for
services of the same nature and quality. The trustees, by a unanimous vote cast
at the meetings, approved and voted to recommend to the shareholders of the
portfolio that they approve the proposed sub-advisory agreement.
Required vote
Approval of the proposed sub-advisory agreement requires the affirmative
1940 Act Majority Vote (as defined in Proposal 1 above) of the portfolio's
outstanding shares.
If the shareholders of your portfolio do not approve the proposed
sub-advisory agreement, Pioneer would continue to manage the portfolio pursuant
to the terms of the existing management contract. The trustees of the portfolio
would consider what further action to take consistent with their fiduciary
duties to the portfolio, including Pioneer continuing to manage the portfolio
without using the services of a sub-adviser.
Recommendation
For the reasons set forth above, the trustees of the trust unanimously
recommend that shareholders vote in favor of the proposed sub-advisory
agreement.
12
PROPOSALS 3(A) THROUGH 3(I)
ELIMINATION OR AMENDMENT OF VARIOUS INVESTMENT RESTRICTIONS
General
Pioneer and your board of trustees recommend that the changes discussed
below be made to modernize your portfolio's fundamental investment restrictions.
We are asking you to vote on these changes because the restrictions described
below are fundamental and may be changed only with shareholder approval.
The 1940 Act requires mutual funds to adopt fundamental investment
restrictions covering certain types of investment practices. Your portfolio,
however, is also subject to a number of other fundamental restrictions that are
not required by the 1940 Act or any other current laws or are more restrictive
than required by such laws. One of the investment restrictions that the trustees
propose to modify was adopted to reflect certain regulatory, business or
industry conditions that are no longer in effect, especially the state
securities laws formerly imposed by state securities regulations. The
fundamental restrictions on borrowing and senior securities would be liberalized
to the extent permitted under the 1940 Act. The fundamental restrictions on
issuing senior securities and investments in real estate would be clarified.
Pioneer and the board of trustees expect that you will benefit from these
proposed changes to the portfolio's investment restrictions in several ways. The
portfolio would have the same degree of flexibility to respond to new
developments and changing trends in the marketplace that other comparable funds
typically have. Pioneer believes that this added flexibility will make your
portfolio more competitive among its peer group of funds. The proposed changes
to the portfolio's investment restrictions are also designed to produce a
clearer and more concise set of restrictions. These revised restrictions
parallel the investment restrictions of other funds managed by Pioneer, which
will facilitate Pioneer's compliance efforts.
Proposed amendment to investment restrictions
The table below sets forth the portfolio's current fundamental restrictions
in the left-hand column and the proposed amended restrictions in the right-hand
column. The current restrictions are presented in the same order as they are
listed in the trust's statement of additional information. The amended
restrictions, if approved, will be revised in an amended statement of additional
information. Pioneer does not anticipate that the approval of these changes will
result in any material modification of the portfolio's operations at the present
time.
13
Proposal Current Restriction Amended Restriction
- ------------------- ------------------------------------------- -------------------------------------------
3(a) The portfolio may not issue senior The portfolio may not issue senior
Senior securities securities, except as permitted by securities, except to the extent permitted
paragraphs (2), (6) and (7) below. by applicable law, as amended and
(Borrowing, Loans and Commodities). interpreted or modified from time to
For purposes of this restriction, the time by any regulatory authority having
issuance of shares of beneficial interest jurisdiction. Senior securities that the
in multiple classes or series, the fund (portfolio) may issue in accordance
purchase or sale of options, futures with the 1940 Act include borrowing,
contracts and options on futures futures, when-issued and delayed
contracts, forward commitments, delivery securities and forward foreign
forward foreign exchange contracts, currency exchange transactions.
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 (Pledging
Securities) are not deemed to be senior
securities.
Explanation: The 1940 Act generally prohibits a mutual fund from issuing
senior securities except in connection with borrowing permitted under the 1940
Act. The SEC's staff has taken the position that certain types of investment
techniques fall within the 1940 Act's definition of senior security but are not
prohibited if the fund takes certain measures to prevent the technique or
investment from having a leveraging effect on the fund. For example, a fund may
write a call option on a security only if the option is covered, that is, the
fund owns or has the right to acquire the security underlying the option. The
proposed revisions to the portfolio's investment restriction on senior
securities are intended to clarify that the portfolio is only restricted from
issuing senior securities to the extent required by the rules and interpretive
positions of the SEC. The current restriction cross-references other portfolio
investment restrictions, which poses the risk that future investment products or
techniques may fall within the 1940 Act's definition of a senior security but
would be exempt from treatment as senior securities pursuant to interpretive
positions of the SEC. Under the current restriction, the portfolio would not be
permitted to engage in any investment technique or product that may be deemed in
the future to involve the issuance of a senior security without shareholder
approval, while competitive funds may be able to engage in such activities
without the delay and cost of shareholder action. In addition, the revised
restriction is drafted in a clearer, more readily understandable manner.
14
Proposal Current Restriction Amended Restriction
- ----------- -------------------------------------------- -------------------------------------------
3(b) The portfolio many not borrow money, The portfolio may not borrow money,
Borrowing except from banks as a temporary except (i) on a temporary basis and (ii)
measure for extraordinary emergency to the extent permitted by applicable
purposes and except pursuant to reverse law, as amended and interpreted or
repurchase agreements, and then only in modified from time to time by any
amounts not to exceed 331/3% of the regulatory authority having jurisdiction.
portfolio's total assets (including the Under current regulatory requirements,
amount borrowed) taken at market the portfolio may: (a) borrow from
value. The portfolio will not use leverage banks or through reverse repurchase
to attempt to increase income. The agreements in an amount up to 331/3%
portfolio will not purchase securities of the portfolio's total assets (including
while outstanding borrowings (including the amount borrowed); (b) borrow up to
reverse repurchase agreements) exceed an additional 5% of the portfolio's
5% of the portfolio's total assets. assets for temporary purposes; (c)
obtain such short-term credits as are
necessary for the clearance of portfolio
transactions; (d) purchase securities
on margin to the extent permitted by
applicable law; and (e) engage in
transactions in mortgage dollar rolls that
are accounted for as financings.
Explanation: This amendment would promote uniformity among Pioneer funds.
These changes afford the fund the maximum flexibility to borrow money permitted
under the 1940 Act if the board and Pioneer determine that such borrowing is in
the best interests of the fund (portfolio) and is consistent with both the
portfolio's investment objectives and with the requirements of the 1940 Act. The
proposal does not reflect a change in the portfolio's anticipated borrowing
activity. An additional 5% authority for temporary purposes is proposed to be
added to conform to the percentage limitation included in the 1940 Act. The
authority to obtain short-term credits would help to facilitate the clearance of
portfolio transactions and, to the extent determined advisable for portfolio
management reasons, reduce the cash position the fund needs to maintain. Margin
purchases would also be permitted to the extent allowed by law. The 1940 Act
allows the SEC the authority to adopt regulations restricting the use of margin
by investment companies. While no such regulations have been adopted, the SEC
has indicated that it considers margin transactions to involve the issuance of
senior securities, which is restricted under the 1940 Act. Mortgage dollar rolls
are transactions in which the portfolio sells mortgage-backed securities to a
dealer and simultaneously agrees to purchase similar securities in the future at
a predetermined price.
15
Proposal Current Restriction Amended Restriction
- ------------- ---------------------------------------------- --------------------------------------------
3(c) The portfolio may not purchase or sell The portfolio may not invest in real
Real estate real estate, except that the portfolio may estate, except (a) that the portfolio may
(i) lease office space for its own use, (ii) invest in securities of issuers that invest
invest in securities of issuers that invest in real estate or interests therein,
in real estate or interests therein, (iii) securities of real estate investment
invest in securities that are secured by trusts, mortgage-backed securities and
real estate or interests therein, (iv) other securities that represent a similar
purchase and sell mortgage-related indirect interest in real estate; and (b)
securities and (v) hold and sell real the portfolio may acquire real estate or
estate acquired by the portfolio as a interests therein through exercising
result of the ownership of securities. rights or remedies with regard to an
instrument or security.
Explanation: The 1940 Act requires that a fund adopt a fundamental policy
regarding whether the fund may invest in real estate. The purpose of this
requirement is to allow investors in the portfolio to clearly understand the
permitted scope of the portfolio's investments since an investment in real
estate involves significantly different investment experience than an investment
in securities. However, an investment in real estate related securities
primarily requires portfolio management expertise rather than a specific
expertise in real estate. The proposed sub-adviser employs portfolio managers
and analysts who specialize in such real estate related securities. The purpose
of the amendment is to more clearly express the intention that the portfolio
will not directly invest in real estate but may invest in issuers in real estate
related businesses, such as REITs, or in fixed income securities secured by real
estate. The proposed amendment will, therefore, clarify that the portfolio's
investments may include real estate related opportunities that are within the
scope of its investment objectives and policies. The revision would also clarify
that the portfolio could exercise its rights under a permitted instrument, such
as foreclosure under a bond secured by real estate, even if the exercise of
those rights results in the portfolio obtaining a direct interest in real
estate.
16
Proposal Current Restriction Amended Restriction
- --------- ------------------------------------------- ---------------------------------------------
3(d) The portfolio may not make loans, The portfolio may not make loans,
Loans except that the portfolio may lend except that the portfolio may (i) lend
portfolio securities in accordance with portfolio securities in accordance with
the portfolio's investment policies and the portfolio's investment policies, (ii)
may purchase or invest in repurchase enter into repurchase agreements, (iii)
agreements, bank certificates of deposit, purchase all or a portion of an issue of
a portion of an issue of publicly publicly distributed debt securities, bank
distributed bonds, bank loan loan participation interests, bank
participation agreements, bankers' certificates of deposit, bankers'
acceptances, debentures or other acceptances, debentures or other
securities, whether or not the purchase securities, whether or not the purchase
is made upon the original issuance of is made upon the original issuance of
the securities. the securities, (iv) participate in a credit
facility whereby the portfolio may directly
lend to and borrow money from other affiliated
funds to the extent permitted under the 1940
Act or an exemption therefrom, and (v) make
loans in any other manner consistent with
applicable law, as amended and interpreted or
modified from time to time by any regulatory
authority having jurisdiction.
Explanation: The 1940 Act requires that a fund adopt a fundamental policy
with respect to making loans. This amendment would promote uniformity among
Pioneer funds. These changes afford the portfolio the maximum flexibility to
make loans to the extent permitted under the 1940 Act. The proposal does not
reflect a change in the portfolio's activities. The change also would allow the
portfolio to take part in an inter-fund lending program, if such a program were
approved by the Board.
17
Proposal Current Restriction Amended Restriction
- ------------- -------------------------------------------- -----------------------------------------
3(e) The portfolio may not invest in The portfolio may not invest in
Commodities commodities or commodity contracts or commodities or commodity contracts,
in puts, calls, or combinations of both, except that the portfolio may invest in
except interest rate futures contracts, currency instruments and currency
options on securities, securities indices, contracts and financial instruments and
currency and other financial financial contracts that might be deemed
instruments, futures contracts on to be commodities and commodity
securities, securities indices, currency contracts in accordance with applicable
and other financial instruments and law. A futures contract, for example,
options on such futures contracts, may be deemed to be a commodity
forward foreign currency exchange contract.
contracts, forward commitments,
securities index put or call warrants,
interest rate swaps, caps and floors and
repurchase agreements entered into in
accordance with the portfolio's
investment policies.
Explanation: The 1940 Act requires that a fund adopt a fundamental policy
with respect to commodities. The original purpose of the restriction was to
clarify that the portfolio would not be investing in traditional commodity
contracts, such as wheat futures. This amendment would promote uniformity among
Pioneer funds. These changes afford the portfolio the maximum flexibility to
invest in commodities to the extent permitted under the 1940 Act to avoid
problems with respect to the portfolio taking advantage of new investment
products because these products may technically be commodities. By stating the
exception to the general prohibition on commodities as being applicable to
financial instruments rather than a specific list of financial instruments, the
goal is to prevent technical concerns from limiting the portfolio's investment
opportunities.
18
Proposal Current Restriction Amended Restriction
- ----------------- ------------------------------------------ -----------------------------------------
3(f) The portfolio may not with respect to The portfolio may not make any
Diversification 75% of its total assets, purchase investment inconsistent with its
securities of an issuer (other than the classification as a diversified open-end
U.S. government, its agencies or investment company (or series thereof)
instrumentalities), if under the 1940 Act. Currently,
(a) such purchase would cause more diversification means that, with respect
than 5% of the portfolio's total assets, to 75% of its total assets, the fund
taken at market value, to be invested in (portfolio) may not purchase securities
the securities of such issuer, or of an issuer (other than the U.S.
(b) such purchase would at the time government, its agencies or
result in more than 10% of the instrumentalities), if
outstanding voting securities of such (a) such purchase would cause more
issuer being held by the portfolio. 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.
Explanation: The portfolio is diversified. The 1940 Act requires that
"diversified" funds adopt a fundamental policy regarding this status. This
change is designed to promote uniformity among Pioneer funds and afford the
portfolio the maximum flexibility to comply with the requirements of the 1940
Act and interpretations thereof as they may change from time to time.
3(g) The portfolio may not act as an The portfolio may not act as an
Acting as underwriter, except to the extent that, in underwriter, except insofar as the fund
underwriter connection with the disposition of technically may be deemed to be an
portfolio securities, the portfolio may be underwriter in connection with the
deemed to be an underwriter for purchase or sale of its portfolio
purposes of the 1933 Act. securities.
Explanation: The 1940 Act requires that a fund adopt a fundamental policy
regarding underwriting securities issued by other persons The change is designed
to promote uniformity among Pioneer funds while complying with the requirements
of the 1940 Act.
19
Proposal Current Restriction Amended Restriction
- --------------- ------------------------------------------ ------------------------------------------
3(h) The portfolio will invest 25% or more of The portfolio will invest 25% or more of
Concentration its total assets in securities issued by its total assets in securities issued by
companies in the real estate industry. companies in the real estate industry.
(Fundamental) Except as noted in the previous
sentence, the portfolio may not
concentrate its investments in securities
of companies in any particular industry.
Explanation: The portfolio concentrates its investments in a single
industry. The 1940 Act requires that a fund adopt a fundamental policy regarding
concentration. This change is designed to afford the fund the maximum
flexibility to comply with the requirements of the 1940 Act and interpretations
thereof as they may change from time to time.
3(i) The portfolio may not pledge, mortgage, Eliminate restriction.
Pledging or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2)
above (Borrowing) 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.
Explanation: This policy was originally required by blue sky regulations,
but it is not required under the 1940 Act. It is not intended that the
elimination of this restriction will result in the portfolio guaranteeing the
obligations of any third party or the pledging of portfolio assets.
Trustees' recommendation
The trustees believe that the proposed amendments to the portfolio's
fundamental restrictions will more clearly reflect current regulatory practice
and will expand the investment opportunities available to the portfolio.
Accordingly, the trustees recommend that you approve the proposed changes as
described above.
Required vote
Approval of each of Proposals 3(a) through 3(i) requires the affirmative
1940 Act Majority Vote (as defined in Proposal 1 above) of the portfolio's
outstanding shares. If the required approval to change any restriction is not
obtained, the current investment restriction will continue in effect.
Recommendation
For the reasons set forth above, the trustees of your portfolio unanimously
recommend that shareholders vote for each proposal to amend the portfolio's
investment restrictions.
20
PROPOSAL 4
APPROVAL OF A POLICY ALLOWING PIONEER AND THE BOARD OF TRUSTEES
OF YOUR PORTFOLIO TO APPOINT OR TERMINATE SUB-ADVISERS
AND TO APPROVE AMENDMENTS TO SUB-ADVISORY AGREEMENTS
WITHOUT SHAREHOLDER APPROVAL
Summary
At the board of trustees' meeting held on December 1, 2003, the trustees,
including the independent trustees, approved, and recommended that shareholders
of the portfolio approve, a policy to permit Pioneer, subject to the approval of
the board of trustees, to appoint sub-advisers, to enter into sub-advisory
agreements and to amend or terminate existing sub-advisory agreements without
further shareholder approval (the "sub-adviser approval policy").
On May 6, 2002, your portfolio, along with other portfolios and Pioneer,
received an exemptive order of the SEC (the "exemptive order") for relief from
the provisions of Section 15(a) of the 1940 Act and Rule 18f-2 under the 1940
Act. The provisions of the 1940 Act require that shareholders of a mutual fund
approve a sub-advisory agreement with the sub-adviser and material amendments to
an existing sub-advisory agreement. The exemptive order provides that if
shareholders approve this proposal, Pioneer will be authorized, subject to
approval by the trust's board of trustees, to evaluate, select and retain new
sub-advisers for your portfolio or modify your portfolio's existing sub-advisory
agreement without obtaining further approval of the portfolio's shareholders
whenever Pioneer and the board of trustees believe such actions will benefit you
and the portfolio. The SEC has proposed a rule, which, if adopted, would provide
substantially the same relief from the 1940 Act as the exemptive order and is
likely to supersede the exemptive order. You are being asked to approve a
sub-adviser approval policy under both the exemptive order and the proposed
rule.
The adviser and the sub-adviser
As contemplated by Proposal 2, Pioneer proposes that AEW be appointed as
sub-adviser with respect to the portfolio beginning in 2004. Pioneer represents
that it has the experience and expertise to evaluate, select and supervise
sub-advisers which Pioneer believes can add value to shareholders' investments
in the portfolio.
Proposed sub-adviser approval policy. Approval of the sub-adviser approval
policy will not affect any of the requirements under the federal securities laws
that govern the portfolio, Pioneer, any proposed sub-adviser, including AEW, or
any proposed sub-advisory agreement, including the agreement with AEW in
Proposal 2 of this proxy statement, other than the requirement to have any
future sub-advisory agreement or amendment to the sub-advisory agreement
approved at a meeting of your portfolio's shareholders. The board of trustees,
including the independent trustees, will continue to evaluate and approve all
new sub-advisory agreements between Pioneer and any sub-adviser as well as all
changes to any sub-advisory agreements. In addition, the portfolio and Pioneer
will be subject to several conditions imposed by the SEC under either the
exemptive order or the proposed rule to ensure that the interests of the
portfolio's
21
shareholders are adequately protected whenever Pioneer acts under the
sub-adviser approval policy. Furthermore, following a change to your portfolio's
sub-advisory arrangements, the portfolio will provide you with an information
statement that contains substantially the same relevant information about the
sub-adviser, the sub-advisory agreement and the sub-advisory fee that the
portfolio would be required to send to you in a proxy statement. This
information statement will permit the portfolio's shareholders to determine if
they are satisfied with the sub-advisory arrangement. If not satisfied, the
shareholders would be able to exchange their shares for another portfolio or
redeem their shares. Exchanges and redemptions may be subject to transaction,
distribution or other fees and generally are not taxable transactions, but may
be subject to certain penalties under the Code.
Shareholder approval of this proposal will not result in an increase or
decrease in the total amount of investment advisory fees paid by the portfolio
to Pioneer. If the portfolio implements this policy, Pioneer, pursuant to its
management contract with the portfolio, will continue to provide, directly or
through sub-advisers, the same level of management and administrative services
to the portfolio as it has always provided.
The exemptive order and the proposed rule would apply to at least the
following situations: (1) the sub-adviser is removed for substandard
performance; (2) an individual acting as the portfolio's manager moves from
employment with the sub-adviser to another firm; (3) there is a change of
control of the sub-adviser; (4) Pioneer decides to diversify the portfolio's
management by adding another sub-adviser; (5) there is a change in investment
style of the portfolio; and (6) Pioneer and the sub-adviser negotiate a change
in the sub-advisory fee that Pioneer pays to the sub-adviser. Furthermore, where
there is a decrease in a sub-adviser's compensation paid by Pioneer, any
increase in the compensation available for retention by Pioneer would not be
deemed to be an increase in advisory compensation that requires a shareholder
meeting. The sub-adviser approval policy will not be used to approve any
sub-adviser that is affiliated with Pioneer as that term is used in the 1940 Act
or to materially amend any sub-advisory agreement with an affiliated
sub-adviser. Instead, a special shareholder meeting would be called to permit
shareholders to approve any sub-advisory arrangement with an affiliated
sub-adviser.
Reasons for Proposal
The trustees believe that it is in the best interest of the portfolio and
its shareholders to allow Pioneer to provide its investment advisory services to
the portfolio through one or more sub-advisers which have particular expertise
in the type of investments on which the portfolio focuses. In addition, the
trustees believe that providing Pioneer with maximum flexibility to select,
supervise and evaluate sub-advisers--without incurring the necessary delay or
expense of obtaining further shareholder approval--is in the best interest of
the portfolio's shareholders because it will allow the portfolio to operate more
efficiently. Currently, in order for Pioneer to appoint a sub-adviser or
materially modify a sub-advisory agreement, the portfolio must call and hold a
shareholder meeting of the portfolio, as it was required to do to consider the
appointment of AEW, create and distribute proxy materials, and solicit votes
from the portfolio's shareholders. This process is time-intensive, costly and
slow. Without the delay inherent in holding shareholder meetings,
22
the portfolio would be able to act more quickly to appoint a sub-adviser when
the trustees and Pioneer feel that the appointment would benefit the portfolio.
Also, the trustees believe that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Pioneer (subject to review by
the board of trustees) in light of Pioneer's expertise in investment management
and its ability to select the most appropriate sub-adviser(s). The trustees
believe that many investors choose to invest in the portfolio because of
Pioneer's investment management experience and expertise. Pioneer believes that
it can use this experience and expertise in evaluating and choosing sub-advisers
who can add the most value to your investment in the portfolio.
Finally, the trustees will provide sufficient oversight of the sub-adviser
approval policy to ensure that shareholders' interests are protected whenever
Pioneer selects a sub-adviser or modifies a sub-advisory agreement. The board,
including a majority of the independent trustees, will continue to evaluate and
approve all new sub-advisory agreements as well as any modification to existing
sub-advisory agreements. In their review, the trustees will analyze all factors
that they consider to be relevant to the determination, including the nature,
quality and scope of services provided by the sub-advisers. The trustees will
compare the investment performance of the assets managed by the sub-adviser with
other accounts with similar investment objectives managed by other advisers and
will review the sub-adviser's compliance with federal securities laws and
regulations. The sub-advisory agreement will be subject to all provisions of the
1940 Act, except for the specific provisions of the 1940 Act to which the
exemptive order or the proposed rule grants an exception.
Required vote
Approval of this proposal requires the affirmative 1940 Act Majority Vote
(as defined in Proposal 1 above) of the portfolio's outstanding shares. If the
portfolio's shareholders do not approve this proposal, the sub-adviser approval
policy will not be adopted and decisions regarding a proposed sub-adviser or a
material change to a sub-advisory agreement will continue to require shareholder
approval.
Recommendation
For the reasons set forth above, the trustees of your portfolio unanimously
recommend that shareholders vote in favor of the proposed policy allowing
Pioneer and the Board of Trustees of your portfolio to appoint or terminate
sub-advisers and to approve amendments to sub-advisory agreements without
shareholder approval.
23
INFORMATION CONCERNING THE MEETING
Outstanding shares and quorum
As of the record date, 1,672,989.386 and 2,194,459.380 shares of beneficial
interest of Class I and Class II of the portfolio were outstanding,
respectively. Only shareholders of record as of the record date are entitled to
notice of and to vote at the meeting. One-third of the outstanding shares of the
portfolio that are entitled to vote will be considered a quorum for the
transaction of business by the portfolio.
Ownership of shares of the portfolio
To the knowledge of the trust, as of February 29, 2004, the following
persons owned of record or beneficially 5% or more of the outstanding shares of
a class of the portfolio:
No. of Percentage of
Name and address shares owned class (%)
- --------------------------------- ----------------- --------------
Class I
Allmerica Financial Life Co.
Accumulation Account
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002 1,290,458.82 74.82
United of Omaha Life Ins. Co.
Attn: Product Accounting &
Reporting - 11th Floor
Mutual of Omaha Plaza
Omaha, NE 68175-0001 389,329.14 23.48
Class II
Allmerica Financial Life Co.
Accumulation Account
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002 1,870,142.98 83.17
First Allmerica Financial
Life Co.
Delaware Account
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002 211,625.56 9.41
Travelers Life & Annuity Company
PO Box 990027
Hartford, CT 06199-0027 133,929.12 5.96
Shareholder proposals
The portfolio is not required to hold annual meetings of shareholders and
does not currently intend to hold a meeting of shareholders in 2004. Any
shareholder proposal intended to be presented at the next meeting of
shareholders, whenever held, must be received at the trust's offices, 60 State
Street, Boston, Massachusetts 02109, at a reasonable time prior to the trustees'
solicitation of proxies for the meeting. The submission by a shareholder of a
proposal for inclusion in a proxy statement does not guarantee that it will be
included. Shareholder proposals are subject to certain regulations under the
federal securities laws.
24
Proxies, quorum and voting at the meeting
Any shareholder who has given his or her proxy to someone has the power to
revoke that proxy at any time prior to its exercise by executing a superseding
proxy or by submitting a notice of revocation to the secretary of the trust. In
addition, although mere attendance at the shareholder meeting will not revoke a
proxy, a shareholder present at the shareholder meeting may withdraw his or her
proxy and vote in person. All properly executed and unrevoked proxies received
in time for the shareholder meeting will be voted in accordance with the
instructions contained in the proxies. If no instruction is given, the persons
named as proxies will vote the shares represented thereby in favor of the
proposals described above and will use their best judgment in connection with
the transaction of such other business as may properly come before the
shareholder meeting or any adjournment thereof.
One-third of the outstanding shares of the portfolio that are entitled to
vote, present in person or represented by proxy, constitutes a quorum for the
transaction of business with respect to any proposal; however, since each
proposal must be approved by a 1940 Act Majority Vote, at least 50% of the
outstanding shares must be present in person or by proxy at the meeting to
approve any of the proposals. In the event that, at the time any session of the
shareholder meeting is called to order, a quorum is not present in person or by
proxy, the persons named as proxies may vote those proxies which have been
received to adjourn the shareholder meeting to a later date. In the event that a
quorum is present but sufficient votes in favor of any of the proposals have not
been received, the persons named as proxies may propose one or more adjournments
of the shareholder meeting to permit further solicitation of proxies with
respect to such proposal. Any such adjournment will require the affirmative vote
of more than one-half of the shares of the portfolio present in person or by
proxy at the session of the shareholder meeting to be adjourned. The persons
named as proxies will vote those proxies which they are entitled to vote in
favor of any such proposal in favor of such an adjournment and will vote those
proxies required to be voted against any such proposal against any such
adjournment. A shareholder vote may be taken on one or more of the proposals in
the proxy statement prior to such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate. Such vote will be
considered final regardless of whether the meeting is adjourned to permit
additional solicitation with respect to any other proposal.
Shares of your portfolio represented in person or by proxy, including
shares which abstain or do not vote with respect to a proposal, will be counted
for purposes of determining whether there is a quorum at the shareholder
meeting. Accordingly, an abstention from voting has the same effect as a vote
against a proposal. Similarly, if a broker or nominee holding shares in "street
name" indicates on the proxy card that it does not have discretionary authority
to vote on a proposal, those shares will not be considered present and entitled
to vote on that proposal. Thus, a "broker non-vote" has the same effect as a
vote against that proposal.
Voting by contract owners
Because the insurance company that issued your variable annuity or variable
life insurance contract is the owner of record of shares of the portfolio, your
vote will instruct the insurance company how to vote the shares of the portfolio
attributable to your contract.
25
The insurance company will vote all of the shares of the portfolio which it
holds that are not attributable to any contract in the same proportion as the
voting instructions received from its contract owners with respect to the
portfolio. The insurance company will also vote those shares for which no timely
voting instruction was received from the contract owner in the same proportion
as the voting instructions timely received from its other contract owners with
respect to the portfolio.
Other business
While the shareholder meeting has been called to transact any business that
may properly come before it, the only matters that the trustees intend to
present are those matters stated in the attached notice of special meeting of
shareholders. However, if any additional matters properly come before the
shareholder meeting, and on all matters incidental to the conduct of the
meeting, the persons named in the enclosed proxy intend to vote the proxy in
accordance with their judgment on such matters unless instructed to the
contrary.
Householding
If you have previously given the portfolio permission to do so, the
portfolio may send a single proxy statement to your residence for you and any
other member of your household who has an account with the portfolio. If you
wish to revoke your consent to this practice, you may do so by notifying your
Portfolio, by phone or in writing by using the telephone number and address on
page 1 of the proxy. The portfolio will begin mailing separate proxy statements,
prospectuses and shareholder reports to you within 30 days after receiving your
notice.
Method of solicitation and expenses
The cost of preparing, assembling and mailing this proxy statement and the
attached notice of special meeting of shareholders and the accompanying
proxy/voting instruction cards will be borne by Pioneer. In addition to
soliciting proxies by mail, Pioneer may, at its expense, have one or more of the
trust's officers, representatives or compensated third-party agents, including
Pioneer, PIMSS and PFD, and, with respect to contract owners, one or more
officers, agents or representatives of the insurance companies issuing the
contracts, aid in the solicitation of proxies by personal interview or telephone
and telegraph and may request brokerage houses and other custodians, nominees
and fiduciaries to forward proxy soliciting material to the beneficial owners of
the shares held of record by such persons.
The trust may also arrange to have votes recorded by telephone, the
Internet or other electronic means. The voting procedures used in connection
with such voting methods are designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their shares in accordance with
their instructions and to confirm that their instructions have been properly
recorded. If these procedures were subject to a successful legal challenge, such
votes would not be counted at the shareholder meeting. The trust is unaware of
any such challenge at this time. Shareholders would be called at the phone
number PIMSS has in its records for their accounts, and would be asked for their
Social Security number or other identifying information. The shareholders would
then be given
26
an opportunity to authorize proxies to vote their shares at the meeting in
accordance with their instructions. In the case of automated telephone and
Internet voting, shareholders would be required to provide their Social Security
number or other identifying information and will receive a confirmation of their
instructions.
Persons holding shares as nominees will be reimbursed by Pioneer, upon
request, for the reasonable expenses of mailing soliciting materials to the
principals of the accounts.
March 10, 2004
27
EXHIBIT A
PROPOSED AMENDMENTS TO THE MANAGEMENT CONTRACT
Section 6 of the Management Contract would be amended as follows (amended
text in italics and deleted text in brackets):
6. The Fund shall assume and shall pay: (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead,
including, to the extent such services are performed by personnel of the
Manager or its affiliates, office space and facilities, and personnel
compensation, training and benefits; (ii) the charges and expenses of
auditors; (iii) the charges and expenses of any custodian, transfer
agent, plan agent, dividend disbursing agent, registrar or any other
agent appointed by the Fund; (iv) issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is
a party; (v) insurance premiums, interest charges, dues and fees for
membership in trade associations and all taxes and corporate fees
payable by the Fund to federal, state or other governmental agencies;
(vi) fees and expenses involved in registering and maintaining
registrations of the Fund and/or its shares with federal regulatory
agencies, state or blue sky securities agencies and foreign
jurisdictions, including the preparation of prospectuses and statements
of additional information for filing with such regulatory authorities;
(vii) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies;
(viii) charges and expenses of legal counsel to the Fund and the
Trustees; (ix) any fees paid by the Fund in accordance with Rule 12b-1
promulgated by the Commission pursuant to the 1940 Act; (x) compensation
of those Trustees of the Trust who are not affiliated with, or
"interested persons" of, the Manager, the Fund (other than as Trustees),
Pioneer Investment Management USA Inc. or Pioneer Funds Distributor,
Inc.; (xi) the cost of preparing and printing share certificates; (xii)
interest on borrowed money, if any; and (xiii) any other expense that
the Fund, the Manager or any other agent of the Fund may incur (A) as a
result of a change in the law or regulations, (B) as a result of a
mandate from the Board of Trustees with associated costs of a character
generally assumed by similarly structured investment companies or (C)
that is similar to the expenses listed above, and that is approved by
the Board of Trustees (including a majority of the Independent Trustees)
as being an appropriate expense of the Fund.
Section 11 of the Management Contract would be amended as follows (amended
text in italics):
11. It is understood that the Manager may employ one or more sub-investment
advisers (each a "Subadviser") to provide investment advisory services
to the Fund by entering into a written agreement with each 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,
A-1
and otherwise approved in accordance with the requirements of the 1940
Act or an exemption therefrom. The authority given to the Manager in
Sections 1 through 13 hereof may be delegated by it under any such
agreement; provided, that any Subadviser shall be subject to the same
restrictions and limitations on investments and brokerage discretion as
the Manager. The Trust agrees that the Manager shall not be accountable
to the Fund or the Fund's shareholders for any loss or other liability
relating to any investment decision made by any Subadviser even though
the Manager retains the right to reverse any such investment; provided,
however, that the foregoing shall not in any way limit, or impose a
standard inconsistent with Section 17(i) of the 1940 Act with respect
to, the Manager's other responsibilities under this Agreement,
including, the supervision of the Subadviser's compliance with the
Fund's investment policies and restrictions.
A-2
EXHIBIT B
Additional Information Pertaining to Pioneer
Ownership of Pioneer. Pioneer is an indirect, wholly owned subsidiary of
UniCredito.
Services provided to the funds by affiliates of Pioneer. PIMSS serves as
the portfolio's transfer agent and shareholder servicing agent. Under the terms
of its contract with the portfolio, PIMSS' duties include: (i) processing sales,
redemptions and exchanges of shares of the portfolio; (ii) distributing
dividends and capital gains to shareholder accounts; and (iii) maintaining
certain account records and responding to routine shareholder inquires. For the
portfolio's most recent fiscal year, the fees paid to PIMSS were $2,765. PIMSS'
services to the portfolio will continue after the amendment to the existing
management contract is approved.
PFD, an indirect, wholly owned subsidiary of UniCredito, serves as the
portfolio's principal underwriter. PFD's address is 60 State Street, Boston,
Massachusetts 02109. The portfolio does not compensate PFD for its services as
principal underwriter. For the most recently completed fiscal year end, Pioneer
Real Estate Shares VCT Portfolio Class II paid $80,433.
PFD's services to the portfolio will continue after the amendment to the
existing management contract is approved.
The portfolio has entered into an administration agreement with Pioneer
pursuant to which certain accounting and legal services which are expenses
payable by the portfolio under the existing management contract are performed by
Pioneer and pursuant to which Pioneer is reimbursed for its costs of providing
such services. The fees paid to Pioneer for the portfolio's most recently
completed fiscal year were $37,500. Pioneer's services as administrator to the
portfolio will continue after the amendment to the existing management contract
is approved.
Portfolio Transaction Policies
All orders for the purchase or sale of portfolio securities are placed on
behalf of the portfolio by Pioneer pursuant to authority contained in the
portfolio's management contract. Pioneer seeks to obtain the best execution on
portfolio trades. The price of securities and any commission rate paid are
always factors, but frequently not the only factors, in judging best execution.
In selecting brokers or dealers, Pioneer considers various relevant factors,
including, but not limited to, the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability and financial condition of the
dealer; the dealer's execution services rendered on a continuing basis; and the
reasonableness of any dealer spreads. Transactions in non-U.S. equity securities
are executed by broker-dealers in non-U.S. countries in which commission rates
may not be negotiable (as such rates are in the U.S.).
Pioneer may select broker-dealers that provide brokerage and/or research
services to a portfolio and/or other investment companies or other accounts
managed by Pioneer.
B-1
In addition, consistent with Section 28(e) of the Securities Exchange Act of
1934, if Pioneer 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, the 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
quotation services, credit rating service information and comparative fund
statistics; furnishing analyses, electronic information services, manuals and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and performance of accounts and particular investment
decisions; 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 many transactions on behalf of a fund 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. Pioneer
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 the portfolio as well as other
investment companies or other accounts managed by Pioneer, although not all 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 the
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 the portfolio as well as shares of other investment companies managed by
Pioneer. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the portfolio. The
portfolio did not use any brokers affiliated with Pioneer during its most
recently completed fiscal year in connection with its portfolio transactions.
B-2
Directors and Principal Executive Officer of Pioneer
Pioneer's directors and principal executive officer are listed below,
together with their principal occupations. The address for each person in the
table below is 60 State Street, Boston, Massachusetts 02109.
Name Title Principal Occupation
- ----- ------------------------ ---------------------------------------
John F. Cogan, Jr. Director Deputy Chairman and a Director of
Pioneer Global Asset Management
S.p.A. ("PGAM"); Non-Executive
Chairman and a Director of PIM-
USA; Chairman and a Director of
Pioneer and the various Momentum
Funds; Director, Pioneer Alternative
Investments; Director and Chairman
of the Supervisory Board of Pioneer
Czech Investment Company, a.s.;
President of all of the Pioneer
Funds; and Of Counsel (since 2000),
Hale and Dorr LLP (counsel to
PIM-USA and the Pioneer Funds)
Osbert M. Hood President and Director President and Chief Executive
Officer, PIM-USA since May, 2003
(Director since January, 2001);
President and Director of Pioneer
since May, 2003; Chairman and
Director of PIMSS since May, 2003;
Executive Vice President of all of the
Pioneer Funds since June, 2003
B-3
EXHIBIT C
FORM OF PROPOSED SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of this __ day of ________, 2004 by
and between PIONEER INVESTMENT MANAGEMENT, INC., a Delaware corporation and a
member of the UniCredito Italiano banking group, register of banking groups with
its principal place of business at 60 State Street, Boston, Massachusetts 02109
(the "Adviser"), and AEW Management and Advisors, L.P., a Delaware limited
partnership with its principal place of business at World Trade Center East, Two
Seaport Lane, Boston, Massachusetts 02210 ("Sub-Adviser").
WITNESSETH
WHEREAS, the Adviser serves as investment manager to Pioneer Real Estate
Shares and Pioneer Real Estate Shares VCT Portfolio, as series of Pioneer
Variable Contracts Trust (each a "Fund" and, collectively, the "Funds"),
pursuant to Management Agreements between each Fund and the Adviser dated
October 24, 2000 (each a "Management Agreement" and, collectively, the
"Management Agreements");
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees of the Funds (the "Board") and pursuant to the provisions of the
Management Agreements, the Adviser has selected the Sub-Adviser to act as
investment sub-adviser of the Funds and to provide certain other services, as
more fully set forth below, and to perform such services under the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. The Sub-Adviser's Services.
A) Investment Services. The Sub-Adviser shall act as investment
sub-adviser with respect to the Funds. In such capacity, the
Sub-Adviser shall, subject to the supervision of the Adviser and
the Board, regularly provide each Fund with investment research,
advice and supervision and shall furnish continuously an investment
program for each Fund, consistent with the investment objectives
and policies of the Fund. The Sub-Adviser shall determine, from
time to time, what securities shall be purchased for a Fund, what
securities shall be held or sold by a Fund and what portion of a
Fund's assets shall be held uninvested in cash, subject always to
the provisions of the Fund's Certificate of Trust, Agreement and
Declaration of Trust, By-Laws and its registration statement on
Form N-1A (the "Registration Statement") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and under the
Securities Act of 1933, as amended (the "1933 Act"), covering the
Fund's shares, as filed with the U.S. Securities and Exchange
Commission (the "Commission"), and to the investment objectives,
policies and restrictions of the Fund, as each of the same shall be
from time to time in effect. To carry out such obligations, the
Sub-Adviser shall exercise full discretion and act for each Fund in
the
C-1
same manner and with the same force and effect as the Fund itself
might or could do with respect to purchases, sales or other
transactions, as well as with respect to all other such things
necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions. Notwithstanding the
foregoing, the Sub-Adviser shall, upon written instructions from
the Adviser, effect such portfolio transactions for each Fund as
the Adviser may from time to time direct. No reference in this
Agreement to the Sub-Adviser having full discretionary authority
over a Fund's investments shall in any way limit the right of the
Adviser, in its sole discretion, to establish or revise policies in
connection with the management of a Fund's assets or to otherwise
exercise its right to control the overall management of a Fund's
assets.
B) Compliance. The Sub-Adviser agrees to comply with the requirements
of the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers
Act"), the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Commodity Exchange Act and the
respective rules and regulations thereunder, as applicable, as well
as with all other applicable federal and state laws, rules,
regulations and case law that relate to the services and
relationships described hereunder and to the conduct of its
business as a registered investment adviser. The Sub-Adviser also
agrees to comply with the objectives, policies and restrictions set
forth in the Registration Statement, as amended or supplemented, of
each Fund, and with any policies, guidelines, instructions and
procedures approved by the Board or the Adviser and provided to the
Sub-Adviser. In selecting each Fund's portfolio securities and
performing the Sub-Adviser's obligations hereunder, the Sub-Adviser
shall cause the Fund to comply with the requirements of Subchapters
L and M of the Internal Revenue Code of 1986, as amended (the
"Code"), as applicable, for qualification as a regulated investment
company. The Sub-Adviser shall maintain compliance procedures for
the Funds that it reasonably believes are adequate to ensure the
Funds' compliance with the foregoing. The Sub-Adviser shall also
maintain compliance procedures that it reasonably believes are
adequate to ensure its compliance with the Advisers Act. No
supervisory activity undertaken by the Adviser shall limit the
Sub-Adviser's full responsibility for any of the foregoing.
C) Proxy Voting. The Board has the authority to determine how proxies
with respect to securities that are held by the Funds shall be
voted, and the Board has initially determined to delegate the
authority and responsibility to vote proxies for the Funds'
securities to the Adviser. So long as proxy voting authority for
the Funds has been delegated to the Adviser, the Sub-Adviser shall
provide such assistance to the Adviser with respect to the voting
of proxies for the Funds as the Adviser may from time to time
reasonably request, and the Sub-Adviser shall promptly forward to
the Adviser any information or documents necessary for the Adviser
to
C-2
exercise its proxy voting responsibilities. The Sub-Adviser shall
not vote proxies with respect to the securities held by the Funds
unless and until the Board or the Adviser delegates such authority
and responsibility to the Sub-Adviser or otherwise instructs the
Sub-Adviser to do so in writing, whereupon the Sub-Adviser shall
carry out such responsibility in accordance with any instructions
that the Board or the Adviser shall provide from time to time and
shall provide such reports and keep such records relating to proxy
voting as the Board or the Adviser may reasonably request or as may
be necessary for a Fund to comply with the 1940 Act and other
applicable law. Any such delegation of proxy voting responsibility
to the Sub-Adviser may be revoked or modified by the Board or the
Adviser at any time.
D) Recordkeeping. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to
the Funds, except as otherwise provided herein or as may be
reasonably necessary for the Sub-Adviser to supply to the Adviser,
the Funds or the Board the information required to be supplied
under this Agreement.
The Sub-Adviser shall maintain separate books and detailed
records of all matters pertaining to each Fund's assets advised by
the Sub-Adviser required by Rule 31a-1 under the 1940 Act (other
than those records being maintained by the Adviser, custodian or
transfer agent appointed by the Fund) relating to its
responsibilities provided hereunder with respect to the Fund, and
shall preserve such records for the periods and in a manner
prescribed therefore by Rule 31a-2 under the 1940 Act (the
"Fund's Books and Records"). The Funds' Books and Records shall
be available to the Adviser and the Board at any time upon
request, copies of which shall be delivered to the Funds upon the
termination of this Agreement and shall be available for
telecopying without delay during any day the Funds are open for
business.
E) Holdings Information and Pricing. The Sub-Adviser shall keep the
Funds and the Adviser informed of developments materially affecting
the Fund's holdings, and shall, on its own initiative, furnish the
Fund and the Adviser from time to time with whatever information
the Sub-Adviser believes is appropriate for this purpose. The
Sub-Adviser agrees to immediately notify the Adviser if the
Sub-Adviser believes that the market value of any security held by
a Fund is not an appropriate fair value and provide pricing
information to the Adviser and/or the Fund's pricing agent as may
be necessary to make determinations of the fair value of certain
portfolio securities when market quotations are not readily
available or such information is otherwise required in accordance
with the 1940 Act and the Fund's valuation procedures for the
purpose of calculating the Fund's net asset value in accordance
with procedures and methods established by the Board.
C-3
F) Cooperation with Agents of the Adviser and the Fund. The
Sub-Adviser agrees to cooperate with and provide reasonable
assistance to the Adviser, the Funds, the Funds' custodian and
foreign sub-custodians, the Funds' pricing agents and all other
agents and representatives of the Funds and the Adviser, provide
them with such information with respect to the Funds as they may
reasonably request from time to time in the performance of their
obligations, provide prompt responses to reasonable requests made
by such persons and establish appropriate interfaces with each so
as to promote the efficient exchange of information and compliance
with applicable laws and regulations.
2. Code of Ethics. The Sub-Adviser has adopted a written code of ethics
that it reasonably believes complies with the requirements of Rule
17j-1 under the 1940 Act, which it will provide to the Adviser and the
Funds. The Sub-Adviser shall ensure that its employees comply in all
respects with the Sub-Adviser's Code of Ethics, as in effect from time
to time. Upon request, the Sub-Adviser shall provide the Funds with a
(i) a copy of the Sub-Adviser's current Code of Ethics, as in effect
from time to time, and (ii) certification that it has adopted
procedures reasonably necessary to prevent Access Persons from engaging
in any conduct prohibited by the Sub-Adviser's Code of Ethics.
Annually, the Sub-Adviser shall furnish a written report, which
complies with the requirements of Rule 17j-1, concerning the
Sub-Adviser's Code of Ethics to the Funds and the Adviser. The
Sub-Adviser shall respond to requests for information from the Adviser
as to violations of the Code and the sanctions imposed by the
Sub-Adviser. The Sub-Adviser shall immediately notify the Adviser of
any material violation of the Code, whether or not such violation
relates to any security held by a Fund.
3. Information and Reporting. The Sub-Adviser shall keep each Fund and the
Adviser informed of developments relating to its duties as Sub-Adviser
of which the Sub-Adviser has, or should have, knowledge that materially
affect the Fund. In this regard, the Sub-Adviser shall provide the
Funds, the Adviser, and their respective officers with such periodic
reports concerning the obligations the Sub-Adviser has assumed under
this Agreement as the Funds and the Adviser may from time to time
reasonably request.
A) Notification of Breach / Compliance Reports. The Sub-Adviser shall
notify the Adviser immediately upon detection of (i) any failure to
manage a Fund in accordance with its investment objectives and
policies or any applicable law; or (ii) any breach of any of a
Fund's or the Adviser's policies, guidelines or procedures. In
addition, the Sub-Adviser shall provide a monthly certification
that each Fund is in compliance with its investment objectives and
policies, applicable law, including, but not limited to the 1940
Act and Subchapters L and M of the Code, and the Fund's and the
Adviser's policies, guidelines or procedures. The Sub-Adviser
acknowledges and agrees that the Adviser may, in its discretion,
provide such monthly compliance certifications to the Board. The
Sub-Adviser agrees to correct any such
C-4
failure promptly and to take any action that the Adviser may
reasonably request in connection with any such breach. The
Sub-Adviser shall also provide the officers of the Funds with
supporting certifications in connection with such certifications of
the Funds' financial statements and disclosure controls pursuant to
the Sarbanes-Oxley Act. The Sub-Adviser will promptly notify the
Adviser if (i) the Sub-Adviser is served or otherwise receives
notice of any action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court, public board, or body,
involving the affairs of a Fund (excluding class action suits in
which the Fund is a member of the plaintiff class by reason of the
Fund's ownership of shares in the defendant) or the compliance by
the Sub-Adviser with federal or state securities laws or (ii) the
controlling stockholder or executive committee of the Sub-Adviser
changes, there is otherwise an actual change in control (whether
through sale of all or substantially all the assets of the
Sub-Adviser or a material change in management of the Sub-Adviser)
or an "assignment" (as defined in the 1940 Act) has or is proposed
to occur.
B) Inspection. Upon request, with at least 24 hours advance notice,
the Sub-Adviser agrees to make its records and premises (including
the availability of the Sub-Adviser's employees for interviews) to
the extent that they relate to the conduct of services provided to
the Funds or the Sub-Adviser's conduct of its business as an
investment adviser available for compliance audits by the Adviser
or the Funds' employees, accountants or counsel; in this regard,
the Funds and the Adviser acknowledge that the Sub-Adviser shall
have no obligations to make available proprietary information
unrelated to the services provided to the Funds or any information
related to other clients of the Sub-Adviser, except to the extent
necessary for the Adviser to confirm the absence of any conflict of
interest and compliance with any laws, rules or regulations in the
management of the Funds.
C) Board and Filings Information. The Sub-Adviser will provide the
Adviser with any information reasonably requested regarding its
management of the Funds required for any meeting of the Board, or
for any shareholder report, amended registration statement, proxy
statement, or prospectus supplement to be filed by a Fund with the
Commission. The Sub-Adviser will make its officers and employees
available to meet with the Board from time to time on due notice to
review the investments of a Fund in light of current and
prospective economic and market conditions and shall furnish to the
Board such information as may reasonably be necessary in order for
the Board to evaluate this Agreement or any proposed amendments
thereto.
D) Transaction Information. The Sub-Adviser shall furnish to the
Adviser such information concerning portfolio transactions as may
be necessary to enable the Adviser to perform such compliance
testing on each Fund and the Sub-Adviser's services as the Adviser
may, in its sole discretion, determine to be appropriate. The
provision of such information by the Sub-
C-5
Adviser in no way relieves the Sub-Adviser of its own
responsibilities for ensuring each Fund's compliance, as and to the
extent herein provided.
4. Brokerage
A) Principal and Agency Transactions. In connection with purchases or
sales of securities for the account of a Fund, neither the
Sub-Adviser nor any of its directors, officers, employees or
affiliated persons will act as a principal or agent or receive any
commission except as permitted by the 1940 Act.
B) Placement of Orders. The Sub-Adviser shall arrange for the placing
of all orders for the purchase and sale of securities for each
Fund's account with brokers or dealers selected by the Sub-Adviser.
In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser is directed at all times to seek for the
Funds the most favorable execution and net price available under
the circumstances except as described herein. It is also understood
that it is desirable for each Fund that the Sub-Adviser 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 Funds than may result when
allocating brokerage to other brokers, as consistent with Section
28(e) of the 1934 Act and any Commission staff interpretations
thereof. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Fund with such
brokers, subject to review by the Adviser and the Board 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 Sub-Adviser in connection with its or
its affiliates' services to other clients. In addition, subject to
the Sub-Adviser's obligation to seek the most favorable execution
and net price available under the circumstances, the Sub-Adviser
may consider the sale of the Funds' shares in selecting brokers and
dealers. The Sub-Adviser and not the Funds or the Adviser shall be
liable for any losses or costs resulting from the Sub-Adviser's
errors in placing trades on behalf of a Fund.
C) Aggregated Transactions. On occasions when the Sub-Adviser deems
the purchase or sale of a security to be in the best interest of a
Fund as well as other clients of the Sub-Adviser, the Sub-Adviser
may, to the extent permitted by applicable law and regulations,
aggregate the order for 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 or futures
contracts so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Sub-Adviser in the manner the
Sub-Adviser considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients.
D) Affiliated Brokers. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities
or other investments
C-6
for a Fund, subject to: (a) the requirement that the Sub-Adviser
seek to obtain best execution and price within the policy
guidelines determined by the Board and set forth in the Fund's
current prospectus and SAI; (b) the provisions of the Investment
Company Act, the Advisers Act and the rules of the Commission under
such Acts; (c) the provisions of the 1934 Act; and (d) other
provisions of applicable law. These brokerage services are not
within the scope of the duties of the Sub-Adviser under this
Agreement. Subject to the requirements of applicable law and any
procedures adopted by the Board, the Sub-Adviser or its affiliates
may receive brokerage commissions, fees or other remuneration from
the Fund for these services in addition to the Sub-Adviser's fees
for services under this Agreement.
E) Alternative Trading Arrangements. From time to time the Sub-Adviser
and the Adviser may agree that the Sub-Advisor will place some or
all of the trades for a Fund through the Adviser's trading desk. In
such event, the Adviser shall have complete authority to determine
the brokers or dealers through which any trade by a Fund is placed
through the Advisers trading desk and as to the timing and manner
of the execution of any such trade, although the Sub-Adviser may
give guidance. In such event, the Adviser shall be responsible for
obtaining best execution on behalf of the Fund on trades placed by
the Adviser and the Sub-Adviser shall remain responsible for all
other compliance issues in connection with the Fund's portfolio
transactions, including the appropriate and accurate placement of
orders on behalf of the Fund into the Adviser's trading system and
confirming the appropriate settlement of the transactions.
5. Custody. Nothing in this Agreement shall permit the Sub-Adviser to take
or receive physical possession of cash, securities or other investments
of a Fund.
6. Allocation of Charges and Expenses. The Sub-Adviser will bear its own
costs of providing services hereunder. Other than as herein
specifically indicated, the Sub-Adviser shall not be responsible for a
Fund's or the Adviser's expenses, including brokerage and other
expenses incurred in placing orders for the purchase and sale of
securities and other investment instruments. Specifically, the
Sub-Adviser will not be responsible for expenses of a Fund or the
Adviser, as the case may be, including, but not limited to, the
following: (i) charges and expenses for accounting, pricing and
appraisal services and related overhead, including, to the extent such
services are performed by personnel of the Sub-Adviser or its
affiliates, office space and facilities, and personnel compensation,
training and benefits; (ii) the charges and expenses of auditors; (iii)
the charges and expenses of any custodian, transfer agent, plan agent,
dividend disbursing agent and registrar appointed by the Fund; (iv)
underwriting commissions and issue and transfer taxes chargeable to the
Fund in connection with securities transactions to which the Fund is a
party; (v) insurance premiums, interest charges, dues and fees for
membership in trade associations and all taxes and corporate fees
payable by the Fund to federal, state or other governmental agencies;
(vi) fees and expenses involved in registering and maintaining
C-7
registrations of the Fund's shares with federal regulatory agencies,
state or blue sky securities agencies and foreign jurisdictions,
including the preparation of prospectuses and statements of additional
information for filing with such regulatory authorities; (vii) all
expenses of shareholders' and Board meetings and of preparing, printing
and distributing prospectuses, notices, proxy statements and all
reports to shareholders and to governmental agencies; (viii) charges
and expenses of legal counsel to the Fund and the Board; (ix) any
distribution fees paid by the Fund in accordance with Rule 12b-1
promulgated by the Commission pursuant to the 1940 Act; (x)
compensation and expenses of the Board; (xi) the cost of preparing and
printing share certificates; (xii) interest on borrowed money, if any;
and (xiii) any other expense that the Fund, the Adviser or any other
agent of the Fund may incur (A) as a result of a change in the law or
regulations, (B) as a result of a mandate from the Board with
associated costs of a character generally assumed by similarly
structured investment companies or (C) that is similar to the expenses
listed above, and that is approved by the Board (including a majority
of the Independent Trustees) as being an appropriate expense of the
Fund. The Fund or the Adviser, as the case may be, shall reimburse the
Sub-Adviser for any such expenses or other expenses of the Fund or the
Adviser, as may be reasonably incurred by such Sub-Adviser on behalf of
the Fund or the Adviser. The Sub-Adviser shall keep and supply to the
Fund and the Adviser adequate records of all such expenses.
7. Representations, Warranties and Covenants of the Sub-Adviser.
A) Properly Licensed. The Sub-Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for
the duration of this Agreement. The Sub-Adviser agrees to promptly
notify the Adviser of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an investment adviser to
an investment company. The Sub-Adviser is in compliance in all
material respects with all applicable federal and state law in
connection with its investment management operations.
B) ADV Disclosure. The Sub-Adviser has provided the Adviser with a
copy of its Form ADV as most recently filed with the SEC and will,
promptly after filing any amendment to its Form ADV with the SEC,
furnish a copy of such amendments to the Adviser. The information
contained in the Sub-Adviser's Form ADV is accurate and complete in
all material respects and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
C) Fund Disclosure Documents. The Sub-Adviser has reviewed and will in
the future review, the Registration Statement, and any amendments
or supplements thereto, the annual or semi-annual reports to
shareholders, other reports filed with the Commission and any
marketing material of a Fund (collectively the "Disclosure
Documents") and represents and warrants that with respect to
disclosure about the Sub-Adviser, the manner
C-8
in which the Sub-Adviser manages the Fund or information relating
directly or indirectly to the Sub-Adviser, such Disclosure
Documents contain or will contain, as of the date thereof, no
untrue statement of any material fact and does not omit any
statement of material fact which was required to be stated therein
or necessary to make the statements contained therein not
misleading.
D) No Statutory Disqualification As An Investment Adviser. The
Sub-Adviser is not prohibited by the Advisers Act or the 1940 Act
from performing the services contemplated by this Agreement, and to
the best knowledge of the Sub-Adviser, there is no proceeding or
investigation that is reasonably likely to result in the
Sub-Adviser being prohibited from performing the services
contemplated by this Agreement.
E) Insurance. The Sub-Adviser shall maintain errors and omissions and
fidelity insurance coverage in an amount agreed upon from time to
time by the Adviser and the Sub-adviser and from an insurance
provider that is in the business of regularly providing insurance
coverage to investment advisers. The Sub-Adviser shall provide
prior written notice to the Adviser (i) of any material changes in
its insurance policies or insurance coverage; or (ii) if any
material claims will be made on its insurance policies.
Furthermore, it shall upon request provide to the Adviser any
information it may reasonably require concerning the amount of or
scope of such insurance. The Sub-Adviser's insurance shall, at a
minimum, cover errors and omissions of the Sub-Adviser.
F) Competent Staff. The Sub-Adviser shall ensure that sufficient and
competent investment management, administrative and compliance
staff experienced in managing accounts similar to the Funds shall
have charge at all times of the conduct of, and shall maintain
close supervision of, the investment and management of the Funds.
For the avoidance of doubt, the Sub-Adviser shall ensure that any
affiliate or third party to whom its duties have been delegated,
shall comply with the foregoing.
G) No Detrimental Agreement. The Sub-Adviser represents and warrants
that it has no arrangement or understanding with any party, other
than the Funds, that would influence the decision of the
Sub-Adviser with respect to its selection of securities for a Fund,
and that all selections shall be done in accordance with what is in
the best interest of the Funds.
H) Conflicts. The Sub-Adviser shall act honestly, in good faith and in
the best interests of the Funds including requiring any of its
personnel with knowledge of the Funds' activities to place the
interest of the Funds first, ahead of their own interests, in all
personal trading scenarios that may involve a conflict of interest
with a Fund.
I) Representations. The representations and warranties in this Section
7 shall be deemed to be made on the date this Agreement is executed
and at the
C-9
time of delivery of the monthly compliance report required by
Section 3(a), whether or not specifically referenced in such
certificate.
8. Sub-Adviser's Compensation. The Adviser shall pay to the Sub-Adviser,
as compensation for the Sub-Adviser's services rendered hereunder, a
fee, computed daily at an annual rate of 0.40% of the first $100
million of the combined average daily net assets of the Funds and 0.30%
of the combined average daily net assets of the Funds in excess of $100
million. Such fee shall be computed daily and paid monthly in arrears
by the Adviser. The Funds shall have no responsibility for any fee
payable to the Sub-Adviser.
The method for determining net assets of each Fund for purposes
hereof shall be the same as the method for determining net assets for
purposes of establishing the offering and redemption prices of Fund
shares as described in the Fund's prospectus. 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.
9. Independent Contractor. In the performance of its duties hereunder, the
Sub-Adviser is and shall be an independent contractor and, unless
otherwise expressly provided herein or otherwise authorized in writing,
shall have no authority to act for or represent a Fund or the Adviser
in any way or otherwise be deemed to be an agent of a Fund or the
Adviser. If any occasion should arise in which the Sub-Adviser gives
any advice to its clients concerning the shares of a Fund, the
Sub-Adviser will act solely as investment counsel for such clients and
not in any way on behalf of the Fund.
10. Assignment and Amendments. This Agreement shall automatically
terminate, without the payment of any penalty, in the event of (i) its
assignment, including any change in control, as defined in the 1940
Act, of the Adviser or the Sub-Adviser, or (ii) in the event of the
termination of the Management Agreement; provided that such termination
shall not relieve the Adviser or the Sub-Adviser of any liability
incurred hereunder.
This Agreement 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.
11. Duration and Termination.
A) This Agreement shall become effective as of the date executed and
shall remain in full force and effect continually thereafter,
subject to renewal and unless terminated automatically as set forth
in Section 12 hereof or until terminated as follows:
1. The Adviser may at any time terminate this Agreement as to either
Fund by not more than sixty (60) days' nor less than thirty (30)
days' written
C-10
notice delivered or mailed by registered mail, postage prepaid, to
the Sub-Adviser. In addition, either Fund may cause this Agreement
to terminate with respect to such Fund either (i) by vote of the
Board or (ii) upon the affirmative vote of a majority of the
outstanding voting securities of the Fund; or
2. The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written
notice delivered or mailed by registered mail, postage prepaid, to
the Adviser; or
3. This Agreement shall automatically terminate on December 31st of
any year, beginning on December 31, 2005, in which its terms and
renewal shall not have been approved by (A) (i) a majority vote of
the Board or (ii) the affirmative vote of a majority of the
outstanding voting securities of a Fund; provided, however, that if
the continuance of this Agreement is submitted to the shareholders
of a Fund for their approval and such shareholders fail to approve
such continuance of this Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder as to the Fund in a
manner consistent with the 1940 Act and the rules and regulations
thereunder; and (B) a majority vote of the Trustees who are not
"interested persons" (as set forth in the 1940 Act, subject,
however, to such exemptions as may be granted by the Commission
under the 1940 Act or any interpretations of the staff of the
Commission) of the Fund, the Adviser or the Sub-Adviser, at a
meeting called for the purpose of voting on such approval.
B) For the purposes of this Agreement, "Affirmative vote of a majority
of the outstanding voting securities of the Fund" shall have the
meaning set forth in the 1940 Act, subject, however, to such
interpretations of the staff of the Commission.
Termination of this Agreement pursuant to this Section shall
be without payment of any penalty.
In the event of termination of this Agreement for any reason,
the Sub-Adviser shall, immediately upon notice of termination or on
such later date as may be specified in such notice, cease all
activity on behalf of the Fund and with respect to any of its
assets. In addition, the Sub-Adviser shall deliver the Fund's Books
and Records to the Adviser by such means and in accordance with
such schedule as the Adviser shall direct and shall otherwise
cooperate in the transition of portfolio asset management to any
successor of the Sub-Adviser, including the Adviser, for a period
up to thirty-days (30) from such termination.
12. Liability of the Sub-Adviser. The Sub-Adviser shall not be liable
to the Adviser Indemnitees (as defined below) for any losses,
claims, damages, liabilities or litigation (including legal and
other expenses) incurred or suffered by an Adviser Indemnitee as a
result of any error of judgment or
C-11
mistake of law by the Sub-Adviser with respect to a Fund, except
that nothing in this Agreement shall operate or purport to operate
in any way to exculpate, waive or limit the liability of the
Sub-Adviser for, and the Sub-Adviser shall indemnify and hold
harmless the Adviser, each Fund and all affiliated persons thereof
(within the meaning of Section 2(a)(3) of the 1940 Act) and all
controlling persons (as described in Section 15 of the 1933 Act)
(collectively, the "Adviser Indemnitees") against any and all
losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) by reason of or arising out
of: (a) the Sub-Adviser being in violation of any applicable
federal or state law, rule or regulation or any investment policy
or restriction set forth in the Fund's Registration Statement or
any written guidelines or instruction provided in writing by the
Board or the Adviser, (b) the Fund's failure to satisfy the
diversification or source of income requirements of Subchapter L or
M of the Code, to the extent applicable, by reason of any action or
omission of the Sub-Adviser, unless acting at the direction of the
Adviser, (c) the Sub-Adviser's willful misfeasance, bad faith or
gross negligence generally in the performance of its duties
hereunder or its reckless disregard of its obligations and duties
under this Agreement or (d) the Fund being in violation of any
applicable federal or state law, rule or regulation or any
investment policy or restriction set forth in the Fund's
Registration Statement or any written guidelines or instruction
provided in writing by the Board or the Adviser, by reason of any
action or omission of the Sub-Adviser.
13. Limitation of Liability. The parties to this Agreement acknowledge
and agree that no Trustee, officer or holder of shares of
beneficial interests of a Fund shall be liable for any litigation
arising hereunder, whether direct or indirect. Each Fund's
Certificate of Trust, as amended from time to time, is on file in
the Office of the Secretary of State of the State of Delaware. Such
Certificate of Trust and the Fund's Agreement and Declaration of
Trust describe in detail the respective responsibilities and
limitations on liability of the Trustees, officers, and holders of
shares of beneficial interest.
14. Jurisdiction. This Agreement shall be governed by and construed in
accordance with the substantive laws of The Commonwealth of
Massachusetts and the Sub-Adviser consents to the jurisdiction of
courts, both state or federal, in Boston, Massachusetts, with
respect to any dispute under this Agreement.
15. Paragraph Headings. The headings of paragraphs contained in this
Agreement are provided for convenience only. The form no part of
this Agreement and shall not affect its construction.
16. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
C-12
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be signed on their behalf by their duly authorized officers as of the date
first above written.
ATTEST: PIONEER INVESTMENT MANAGEMENT, INC.
By:
- ------------------------------ -------------------------------------------
Name:
Title:
ATTEST: AEW MANAGEMENT AND ADVISORS, L.P.
By:
- ------------------------------ -------------------------------------------
Name:
Title:
C-13
[logo] PIONEER
Investments(R)
P.O. Box 9126
Hingham, MA 02043-9126
[PIONEER REAL ESTATE [INSTRUCTION/PROXY] FOR SPECIAL THE MEETING OF SHAREHOLDERS
SHARES VCT PORTFOLIO] OF PIONEER VARIABLE CONTRACTS TRUST
FUND/INSURANCE COMPANY TO BE HELD APRIL 13, 2004
NAME PRINTS HERE
I (we), having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint John F.
Cogan, Jr., Dorothy E. Bourassa, John A. Carey and David C. Phelan, and each of
them, my (our) attorneys (with full power of substitution in them and each of
them) for and in my (our) name(s) to attend the Special Meeting of Shareholders
of my (our) fund to be held on April 13, 2004, at 2:00 p.m. (Boston time) at the
offices of Hale and Dorr LLP, counsel to the fund, 60 State Street, 26th Floor,
Boston, Massachusetts 02109, and any adjourned session or sessions thereof, and
there to vote and act upon the following matters (as more fully described in the
accompanying proxy statement) in respect of all shares of the fund which I (we)
will be entitled to vote or act upon, with all the powers I (we) would possess
if personally present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL.
[arrow] PLEASE RETURN YOUR SIGNED
[INSTRUCTION/PROXY CARD IN THE
ENCLOSED ENVELOPE.
Date _____________________, 2004
/ /
Signature(s) (SIGN IN BOX)
NOTE: In signing, please write name(s)
exactly as appearing hereon. When
signing as attorney, executor,
administrator or other fiduciary,
please give your full title as such.
Joint owners should each sign
personally.
[arrow] [arrow] [coding]
[arrow] PLEASE FILL IN BOX(ES) AS SHOWN USING BLACK OR [arrow]
BLUE INK OR NUMBER 2 PENCIL. [X]
PLEASE DO NOT USE FINE POINT PEN.
THIS [PROXY/INSTRUCTION CARD] IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OF YOUR FUND AND SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE
PROVIDED. THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF THE FOLLOWING:
FOR AGAINST ABSTAIN 1.
1. To approve amendments to the management [] [] []
contract between the Portfolio and Pioneer
Investment Management, Inc. ("Pioneer"),
the Portfolio's investment adviser, as described
in the proxy statement.
2. To approve a subadvisory agreement between [] [] [] 2.
Pioneer and AEW Management and Advisors,
L.P.
3(a-i) To approve amendments to your Portfolio's
fundamental investment restrictions on:
(a) Senior securities [] [] [] 3a.
(b) Borrowing [] [] [] 3b.
(c) Real estate [] [] [] 3c.
(d) Loans [] [] [] 3d.
(e) Commodities [] [] [] 3e.
(f) Diversification [] [] [] 3f.
(g) Acting as underwriter [] [] [] 3g.
(h) Concentration [] [] [] 3h.
(i) Pledging [] [] [] 3i.
4. To approve a policy allowing Pioneer and the [] [] [] 4.
Board of Trustees to appoint or terminate
subadvisers and to approve amendments to
subadvisory agreements without shareholder
approval.
[arrow] PLEASE SIGN, DATE AND RETURN THIS PROXY CARD. [coding] [arrow]
[logo] PIONEER
Investments(R)
DEALER ADVISORY
Pioneer Real Estate Shares VCT Portfolio
March 2004
APPROVAL OF THE This letter is to inform you that Pioneer Investment Management,
AEW MANAGEMENT Inc., the investment adviser for Pioneer Real Estate Shares VCT
AND ADVISORS, Portfolio, has proposed a sub-advisory agreement between it and
L.P. AS THE AEW Management and Advisors, L.P. The Portfolio's Trustees
PORTFOLIO'S approved the proposal on December 1, 2003. Shareowners of
INVESTMENT SUB- Pioneer Real Estate Shares VCT Portfolio MUST approve the sub-
ADVISER WILL advisory agreement in order for it to be effective. The
HAVE NO EFFECT Portfolio's Trustees believe the proposed change is in the best
ON THE interest of shareowners. While Pioneer has the necessary
PORTFOLIO'S expertise to manage a real estate portfolio and has directly or
MANAGEMENT FEE. through sub-advisers managed the Portfolio since 1995, Pioneer
and the Trustees believe that in light of the unique
characteristics of the real estate market, shareowners of the
Portfolio will benefit from the services of an investment
manager focused exclusively on real estate investments.
Shareowners are also being asked to vote on three other
proposals. We will be soliciting shareowners in March. We expect
the shareowner meeting to be in mid-April.
Please talk to your clients about the proposals that are being
considered. It is important to explain that the new sub-advisory
agreement DOES NOT AFFECT the Portfolio's management fee. You
can reassure them that Pioneer Real Estate Shares VCT Portfolio
has an independent Board of Trustees, charged with the
responsibility of making certain the Portfolio is operated in
the best interest of shareowners.
Your relationship with Pioneer shareowners is vitally important
to securing the required "yes" vote. It is our hope that you
will work with us and ask your clients to approve the proposals.
Thank you for your attention and assistance. We appreciate your
support and look forward to continued mutual success.
For more information on any Pioneer fund, including charges and expenses, please
call Pioneer for a prospectus at 1-800-225-6292.
Investors should read it carefully before investing or sending money.
(C) 2004 Pioneer Funds Distributor, Inc.
Underwriter of Pioneer mutual funds 15007-00-0304
Pioneer Investment Management, Inc. 60 State Street, Boston, MA 02109
[bullet] www.pioneerfunds.com
Member of the UniCredito Italiano Banking Group, Register of Banking Groups.
FOR BROKER/DEALER USE ONLY. NOT FOR USE WITH THE PUBLIC.