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[Pioneer logo]
PIONEER VISION (SM)
PIONEER VISION 2 (SM)
VARIABLE ANNUITY
Pioneer Variable Contracts Trust
International Growth Portfolio
Capital Growth Portfolio
Real Estate Growth Portfolio
Equity-Income Portfolio
Balanced Portfolio
Swiss Franc Bond Portfolio
America Income Portfolio
Money Market Portfolio
[triangular graphic: key, binoculars, compass etc.]
Semiannual Report
June 30, 1997
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TABLE OF CONTENTS
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Page
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Letter from the Chairman ..................... 1
Portfolio Management Discussions
International Growth Portfolio ............... 2
Capital Growth Portfolio ..................... 4
Real Estate Growth Portfolio .................. 5
Equity-Income Portfolio ..................... 6
Balanced Portfolio ........................... 7
Swiss Franc Bond Portfolio .................. 9
America Income Portfolio ..................... 10
Schedules of Investments and Financial Statements
International Growth Portfolio ............... 11
Capital Growth Portfolio ..................... 21
Real Estate Growth Portfolio .................. 29
Equity-Income Portfolio ..................... 34
Balanced Portfolio ........................... 41
Swiss Franc Bond Portfolio .................. 49
America Income Portfolio ..................... 55
Money Market Portfolio ........................ 60
Notes to Financial Statements .................. 65
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Dear Contract Owner,
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Welcome to the semiannual report for Pioneer Variable Contracts Trust, covering
the fast-paced six months ended June 30, 1997. I thank you for your interest,
and for the opportunity to comment briefly on today's investing environment.
Pioneer Variable Contracts Trust, the underlying funds for Pioneer Vision and
Pioneer Vision 2 variable annuities, currently offers investors a selection of
eight investment Portfolios designed to suit a variety of needs and goals. (In
the coming months, we will be expanding the list with Growth and Income
Portfolio and Growth Shares Portfolio, modeled after our Pioneer Fund and
Pioneer Growth Shares mutual funds, respectively.) The array of investment
options -- and the added tax and insurance benefits annuities offer -- continues
to have wide appeal. The Portfolios had a total of $288 million in net assets by
June 30.
Fast-Moving Financial Markets
So far, 1997 has been a huge year for U.S. stock market indexes. The trends that
fueled a record stock market in 1996 continued with only a few brief pauses.
Strong economic growth, seemingly without any rise in inflation, extended
investors' enthusiasm for stocks, particularly those of large, familiar
growth-oriented companies. Powered by unprecedented gains in this group, the Dow
Jones Industrial Average pushed past the 7000 mark to rise 20.11% over the past
six months, while the Standard & Poor's 500 Index returned 20.59%. Smaller
issues did not appreciate to the same degree, although the Nasdaq Composite
Index gained 11.70%. In all, it was an extraordinary period, given that U.S.
stocks have returned an average of 15.91% a year over the past 20 years.
International stock markets also moved at a snappy pace. The Morgan Stanley
Capital International (MSCI) EAFE Index of stocks in Europe, Australasia and the
Far East returned 11.21%. The U.S. dollar continued to appreciate versus most
foreign currencies, a vote of confidence regarding the progress and pace of the
U.S. economy. Interest rates here were about the same at the beginning and end
of the period, belying the shifts that occurred between. Even so, enthusiasm was
the watchword, and bond investors quickly shrugged off the Federal Reserve's
small (0.25 percentage point) increase in short-term interest rates on March 25.
Money Market Portfolio benefited when interest rates rose, since the Portfolio's
income and yield generally reflect trends in short-term interest rates. The
Portfolio generated a total of $0.0221 per share in dividends over the past six
months, and closed the period with a 7-day yield of 4.63%, 4.74% assuming the
compounding of dividends. As a result, the Portfolio provided a 2.23% total
return for the six months, reflecting its conservative nature and goal of
maintaining a stable $1 per share net asset value.
Looking Ahead
As time passes, it seems realistic to expect the stock market's unprecedented
surge to slow or even backtrack. When it does, many people will be reminded of
the value diversification brings to an investment plan. In the meantime,
fast-paced gains can leave a portfolio lopsided. This may be a good time for you
to speak with your investment professional about your financial progress and the
mix of your investments.
I encourage you to read on to learn more about your Portfolio's strategy and
results. (Keep in mind that all the performance presented in this report
reflects the investment Portfolio only; it does not reflect the effects of any
sales or surrender charges.) Please contact your investment professional if you
have any questions about your annuity or the Portfolios. Thank you for selecting
Pioneer for your investment needs.
Respectfully,
/s/ John F. Cogan, Jr.
John F. Cogan, Jr.,
Chairman and President
1
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International Growth Portfolio
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International Growth Portfolio had a strong first half of 1997. Positive factors
contributing to the Portfolio's performance included many rising stock markets,
which benefited from a benign inflation environment, low interest rates and
currencies that were weak relative to the U.S. dollar. Of particular note were
the emerging markets of Latin America. In Europe and Japan, the strong dollar
was positive for economic growth and corporate competitiveness, particularly for
larger companies dependent on exports. Your Portfolio's net asset value (NAV)
closed the six months at $13.50 per share, versus $11.83 on December 31, 1996.
The Portfolio paid $0.154 per share in short-term capital gains for the first
six months of 1997. With distributions reinvested, total return for the six
months was 15.76%, based on NAV.
A Value-Oriented Investment Style
International Growth Portfolio invests in numerous companies in both established
and emerging markets and includes a large number of securities, 212 as of June
30. We use a value style of investing, preferring to buy stocks that are
inexpensive relative to what we think the companies are worth. We employ both
bottom-up and top-down approaches in our search. Bottom-up means looking at
companies individually. Top-down refers to the research we do on a
country-by-country basis, evaluating economic and political conditions.
Strength in Latin America and Europe
A big reason for the Portfolio's strong performance was the allocation to the
emerging markets of Latin America. Across the region, inflation and interest
rates are under control, encouraging investment. And we are still finding good
value in many companies. Some of the Fund's better-performing holdings are
Brazilian utilities Telecomunicacoes Brasileiras and Centrais Electricas
Brasileiras.
Continental Europe was also a good place to be during the past six months, as
new money poured into European stock markets. European companies are helping
themselves by focusing on improved performance and delivering value to
stockholders. In Europe, Chargeurs, a French conglomerate, was a strong
performer.
Geographical Distribution
(Percentage of equity holdings as of June 30,1997)
[graphic:pie chart]
Europe 45%
Other 2%
Latin America 7%
Asia/Pacific Basin
Japan 15% (excluding Japan) 31%
Japanese and Asian Emerging Markets
We are seeing signs of improvement in Japan, although it is still troubled by
political shifts and concerns about its financial system. However, careful stock
selection brought some strong performers, including Nichiei Co. and Shohkoh
Fund, two financial services firms offering smaller loans. In general, many of
the emerging markets of Asia were again hindered by weak currencies, slowing
economic growth, weaker corporate earnings growth and slowing exports. Sales
slumps in electronics and technology, combined with increased competition from
Mexico, further weakened stock prices in many Asian emerging markets.
Nevertheless, we believe holdings there present compelling values, partly
because they have lagged stocks based in other locales.
2
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International Growth Portfolio
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A Look Ahead
We think moderate inflation, low interest rates and reasonable corporate
earnings growth will continue in the established markets of Europe and Japan. We
also see valuations in the emerging markets of Asia and Latin America as
remaining compelling. And because of low global interest rates, there will
likely continue to be a steady flow of funds into many overseas markets. Because
we don't limit our search for stocks to one part of the world, we have the
freedom to invest where we find the strongest value. Keep a long-term
perspective, and we are confident we can offer solid long-term performance.
Respectfully,
/s/ Norman Kurland
Norman Kurland,
Portfolio Manager
- ---------
The Portfolio's investment adviser, Pioneering Management Corporation, reduced
its management fee and certain other expenses, otherwise returns would have been
lower. Past performance does not guarantee future results. Return and principal
value fluctuate so that your investment, when redeemed, may be worth more or
less than original cost. Performance does not reflect insurance fees or sales
charges.
3
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Capital Growth Portfolio
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There was impressive performance in the overall U.S. stock market, and Capital
Growth Portfolio completed the first half of 1997 with strong results. On June
30, 1997, the Portfolio's net asset value (NAV) was $14.94, versus $13.05 on
December 31, 1996. The Portfolio paid a total of $0.114 in capital gains
distributions per share for the first six months of 1997. Combined, the price
change and distributions provided a 15.35% total return for the period, based on
NAV.
While the Portfolio rewarded shareowners over the period, its performance lagged
the 20.59% return of the Standard & Poor's 500 Index, a broad measure of large
U.S. stocks. The main reason for the difference in return was that investors
continued to favor large stocks of familiar companies that showed momentum in
price appreciation. We found many of these stocks to be too expensive to fit our
"aggressive value" style of investing. We prefer stocks that are inexpensive
relative to the companies' fundamental characteristics, such as cash flow,
quality of management and earnings growth. We believe these stocks not only
offer exceptional growth potential, they often fare better in a market downturn
than their high-priced counterparts.
Opportunities Come One Stock at a Time
In addition to our "aggressive value" style, we use a bottom-up, company by
company research process to find stocks for the Portfolio. We don't invest by
sector, as the types of opportunities we search for usually reveal themselves on
an individual basis. We look for undervalued companies experiencing business
turnarounds or restructurings, and those that are ripe for takeover. Rather than
attempting to "time the market," we keep Portfolio assets fully invested.
Over the six months ended June 30, the Portfolio was invested across many
industries. Like many technology holdings, Vishay Intertechnology, a
manufacturer of electronic components such as capacitors and resistors,
performed well. Witco, a specialty chemical firm, benefited from new management
and a reorganization. The stock rose 33% since we added it early in the period.
Another strong contributor was retailer Fingerhut Companies, whose stock also
rose, riding a wave of consumer confidence that translated into retail sales. We
sold some of the Portfolio's holdings in clothing manufacturer Oshkosh B' Gosh
when the company offered to buy back stock for several dollars more per share
than its then trading price.
Sector Distribution
(Percentage of equity holdings as of June 30, 1997)
[GRAPHIC:PIE CHART]
Technology 20%
Transportation 1%
Consumer Durables 3% Consumer
Non-Durables 18%
Energy 4%
Utilities 6% Basic
Financial 7% Industries 16%
Capital Goods 10% Services 15%
Looking Ahead
Larger household names have led the stock market so far in 1997. However, we
think the stock market will broaden in the near term, and that investors' search
for more compelling values will lead them to smaller, lesser-known issues. This
should work to the benefit of the stocks in your Portfolio. We will continue
with our "aggressive value" style and bottom-up approach, as we believe they can
help us generate significant long-term results.
Respectfully,
/s/ J. Rodman Wright
J. Rodman Wright,
Portfolio Manager
- ---------
Past performance does not guarantee future results. Return and principal value
fluctuate so that your investment, when redeemed, may be worth more or less than
original cost. Performance does not reflect insurance fees or sales charges.
4
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Real Estate Growth Portfolio
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Pioneer Real Estate Growth Portfolio rewarded shareowners with positive results
for the six months ended June 30, 1997. After starting the year on the heels of
December's rally, the market for real estate investment trusts (REITs) slowed.
Investors were drawn to other sectors of the U.S. stock market, especially to
large, familiar, growth-oriented companies featuring fast-paced gains. On June
30, 1997, the Portfolio's net asset value (NAV) stood at $15.09, versus $14.46
six months earlier. The Portfolio paid a total of $0.25 in income dividends and
$0.027 in capital gains distributions per share for the first six months of
1997. The price change and reinvested distributions combined to provide a 6.30%
total return for the six months, based on NAV.
Portfolio Selection
We look for REITs and real estate-related companies that exhibit good growth
potential, as well as attractive dividend yields. We examine earnings growth,
cash flow and the quality of management. We look for companies with fixed-rate
debt, so rising interest rates normally won't change the financial status of
most of the Portfolio's holdings. With the added support of Boston Financial
Securities (the Portfolio's subadviser), we also take into consideration broader
factors related to real estate, such as employment growth and population trends.
The Portfolio is geographically diversified across the United States, although
currently holdings in the Pacific and South Atlantic regions comprise over half
the Portfolio, areas showing strengthening economies and increased rents and
occupancy rates.
Like many REIT investors, we are becoming more concerned with the specific
strengths of individual companies, rather than sectors as in the past. This is
where our research can give your Portfolio an edge. We have gotten good results
from a number of holdings. Specifically, Catellus Development, a land
development and industrial properties firm, has benefited from California's
strengthening economy. Hotels were a strong segment as well. In this area, our
holdings include Host Marriott Services and Felcor Suite Hotels. Golf REITs were
positive contributors over the six months. The competition for golfers' money
has resulted in better courses -- and higher greens fees -- in both resort and
public courses. Here, we hold National Golf Properties, which owns and leases
resort and "middle America" courses.
Looking Ahead
We believe the market for REIT stocks will improve going forward. Over the past
few years, REITs have come on strong toward the end of the calendar year, as
their higher yields and lower prices have presented more value, particularly
compared to the higher prices and lower yields offered by many other stocks. Of
course, we cannot predict market performance, but we believe investors will
again find value in REITs as other stocks become more expensive and their yields
shrink.
REITs bring diversification to your asset allocation strategy, which can help
minimize the impact that a market downturn could have on your Portfolio. And the
income stream the Portfolio provides acts as a cushion for returns when prices
decline. We will continue to look at real estate investments individually,
searching for good values. Our process of in-depth analysis, combined with the
research capabilities of Boston Financial Securities, has helped us reward
shareowners with strong results, and we are confident in our ability to do so
going forward.
Respectfully,
/s/ Robert W. Benson
Robert W. Benson,
Portfolio Manager
- ---------
The Portfolio's investment adviser, Pioneering Management Corporation, reduced
its management fee and certain other expenses, otherwise returns would have been
lower. Past performance does not guarantee future results. Return and principal
value fluctuate so that your investment, when redeemed, may be worth more or
less than original cost. Performance does not reflect insurance fees or sales
charges.
5
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Equity-Income Portfolio
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The U.S. stock market produced impressive returns in the first half of 1997, and
Equity-Income Portfolio generated a 18.44% total return based on net asset value
(NAV) for the six months ended June 30, 1997. The NAV rose from $13.73 per share
on December 31, 1996, to $16.05 on June 30, and the Portfolio paid a total of
$0.19 per share in income dividends and $0.012 in long-term capital gains
distributions. The Portfolio's results are particularly gratifying since the
utility sector -- which accounts for about 25% of the Portfolio as part of our
strategy to generate strong income dividends -- again lagged the rest of the
market. Investors continued to focus on strong earnings growth, leading them to
favor sectors such as technology and pharmaceuticals. Fortunately the Portfolio
has some exposure there, and also in financial services, which was robust.
Active, Diverse Portfolio
The Portfolio was fully invested throughout the period in stocks we believe
offer good value, prospects for income and growth potential. We bought and sold
a variety of holdings over the past six months, even though the total sector
representations were much the same at the beginning and end of the period. We
continue to like a variety of energy companies, and new holding Exxon
exemplifies the industry's success in recent years, even with the somewhat
directionless oil prices. Exxon has a balanced mix of exploration and
production, refining and marketing, and chemicals, exceedingly capable
management and very strong finances.
Insurance is another area where we found good values including life insurers
American National Insurance, AmerUS Life Holdings and Hartford Life. Existing
holdings Chubb, Safeco and St. Paul give the Portfolio a significant position in
property and casualty insurers. We also increased holdings in chemical
companies. We like these for their long-term growth potential as basic
commodities required by much of the world as economic growth accelerates. Dow
Chemical and Nalco Chemical are two new holdings in this category.
Sector Distribution
(Percentage of equity holdings as of June 30, 1997)
[GRAPHIC: PIE CHART]
Utilities 26%
Capital Goods 1%
Consumer Durables 5% Financial 20%
Technology 6%
Consumer Energy 12%
Non-Durables 8%
Services 12%
Basic
Industries 10%
Looking Ahead
In general, we are optimistic about the economy and the stock market. Many of
the concerns that have periodically troubled investors over the past few years
have proved exaggerated. The U.S. economy has continued to expand, while
interest rates and inflation have stayed under control. The international scene
has remained generally peaceful. As always, we only watch that broader picture
out of the corner of our eye. Our main focus is the companies whose stocks are
in the Portfolio, along with those we think could be likely candidates. We are
pleased with the values we have been able to identify, and we look forward to
reporting to you again.
Respectfully,
/s/ John A. Carey
John A. Carey,
Portfolio Manager
- ---------
Past performance does not guarantee future results. Return and principal value
fluctuate so that your investment, when redeemed, may be worth more or less than
the original cost. Performance does not reflect insurance fees or sales charges.
6
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Balanced Portfolio
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Balanced Portfolio rewarded shareowners with strong results for the first six
months of 1997. The Portfolio's stock emphasis -- 59% on June 30 -- helped it
participate in the stock market's rise, while its bond component -- 30% on June
30 -- contributed to an attractive income stream. On June 30, 1997, the
Portfolio's net asset value (NAV) stood at $14.18 versus $13.19 on December 31,
1996. The Portfolio paid a total of $0.18 in income dividends and $0.137 in
capital gains distributions per share for the six months. Combined, this
translated into a 9.95% total return for the period. By comparison, over the
past six months the Standard & Poor's 500 Index returned 20.59%. The Lehman
Brothers Government/Corporate Bond Index was up 5.88%. Portfolio returns
predictably landed between these two indexes.
Larger Stocks Best Performers
The Portfolio's dual emphasis on growth and income gives us flexibility to
choose from a variety of stocks, both those that pursue growth and those that
pay dividends. While stock holdings represent firms of many sizes and in many
stages of growth, the Portfolio's holdings in large companies turned in top
results. Financial and technology stocks were particularly strong. Notable were
Compaq Computer, up 30.6% since it was added to the Portfolio, and Washington
Mutual, up 24.5%. Demand was weak for stocks of smaller companies, and we took
advantage of opportunities to buy good-quality stocks at relatively low prices.
One new holding in this category is Clayton Homes, a manufacturer of
prefabricated housing. Even though smaller stocks currently are not in vogue, we
believe the Portfolio's acquisitions have good long-term prospects.
Real estate investment trusts (REITs) comprised 3.1% of the Portfolio as of June
30. REITs provide a generous amount of income, and their prices tend to move
independently of the overall stock market. Recently, that has meant lagging
other stocks, but we are confident REITs will show renewed life as the year
progresses.
Bonds Advance
Quality is important for this Portfolio, and the average quality of its bond
holdings was A on June 30. Treasury securities and corporate bonds both make
important contributions to the income stream. Because they are "liquid" -- have
a ready market of buyers and sellers -- we also use Treasurys to manage the bond
portfolio's duration. (Duration measures sensitivity to interest rates, with the
bond portion of the Portfolio likely to change in value by one percentage point
for every percentage point change in interest rates, up or down. The greater the
duration, the greater the risk.) Overall, bond holdings had a conservative
duration of 4.4 years on June 30.
Sector Distribution
(Percentage of long-term holdings as of June 30, 1997)
[GRAPHIC:PIE CHART]
Financial 34%
Other 3%
Transportation 2%
Technology 24%
Capital Goods 3%
Consumer Non-Durables 4%
Basic Industries 4%
Utilities 6%
Services 9%
Government
Securities 11%
7
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Balanced Portfolio
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Looking Forward
Balanced Portfolio offers shareowners important advantages: the potential for
both growth and regular income, along with instant diversification among stocks
and bonds. We will continue to keep the needs of the conservative investor in
mind while seeking to provide competitive returns. Because we use a value
strategy for stocks and focus on quality for bonds, the Portfolio isn't likely
to move as quickly as more aggressive investments -- either up or down. For
patient investors, we think this is a recipe for long-term success.
Respectfully,
/s/ William C. Field
William C. Field,
Portfolio Manager
- ---------
Past performance does not guarantee future results. Return and principal
fluctuate so that your investment, when redeemed, may be worth more or less than
the original cost. Performance does not reflect insurance fees or sales charges.
8
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Swiss Franc Bond Portfolio
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Over the six months ended June 30, 1997, the U.S. dollar continued to strengthen
against most major foreign currencies, and the Swiss franc was no exception. At
the beginning of the period, the franc:dollar exchange rate was fr1.3415:$1. By
June 30, it was fr1.4618:$1. This change was reflected in Swiss Franc Bond
Portfolio's performance. The Portfolio's net asset value (NAV) was $13.42 per
share on December 30, 1996; it was $12.60 on June 30, 1997. The change resulted
in a six-month total return of -6.11% at NAV.
A Specialty Portfolio
Swiss Franc Bond Portfolio is designed to provide income by investing in debt
obligations denominated in Swiss francs. This means that the Portfolio's
performance will reflect both the strength of the U.S. dollar in relation to the
Swiss franc and the value of the underlying investments.
Quality is a vital consideration, and holdings continued to have an average
credit rating of AA+. As of June 30, the Portfolio held bonds from 20 of the
highest-quality corporate and sovereign debt issuers in the world. And the
Portfolio is always 100% exposed to the Swiss franc. The Portfolio's
conservative nature is also reflected in its concentration in short-term issues.
At the close of the period, securities in the Portfolio had an average maturity
of 3.4 years.
Looking Ahead
By design, the Portfolio offers an opportunity for investors seeking to take
advantage of the relationship between the strength of the Swiss franc and the
U.S. dollar. As the period ended, the franc had begun to show strength against
the German deutschemark, which we take as a sign that the franc's fortunes may
begin to improve. In any case, our strategy continues to center on high quality
and diversification as we look for Swiss franc-denominated bonds.
Respectfully,
/s/ Salvatore Pramas
Salvatore Pramas,
Portfolio Manager
- ---------
The Portfolio's investment adviser, Pioneering Management Corporation, reduced
its management fee and certain other expenses; otherwise, returns would have
been lower. Past performance does not guarantee future results. Return and
principal fluctuate so that your investment, when redeemed, may be worth more or
less than the original cost. Performance does not reflect insurance fees or
sales charges.
9
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America Income Portfolio
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Over the first six months of 1997, investor expectations shaped the bond market
- -- almost more than actual events. Concern about the pace of economic growth,
inflation, changes in interest rates and the volatility in the stock market kept
many bond investors on their toes. Throughout the period, however, inflation
remained contained despite continued economic expansion, and interest rates
generally were low.
The economy showed substantial growth in the first quarter of 1997, and the
Federal Reserve increased short-term interest rates one-quarter of a percentage
point (0.25%) on March 25. The rate hike didn't have a significant or lasting
effect. Because investors acted in advance of the Fed's much-discussed move,
bond prices had already moved down, sending yields up. Bond prices resumed their
ascent in April, finishing higher in June. As the period closed, the Fed was
continuing its "wait and see" attitude.
Against this backdrop, America Income Portfolio continued to provide current
income from a portfolio of securities issued by the U.S. government and its
agencies. The Portfolio paid a total of $0.27 per share in dividends for the
first six months of 1997. On June 30, 1997, the Portfolio's net asset value
(NAV) stood at $9.74 per share versus $9.78 on December 31, 1996. Assuming
reinvestment of the dividends, the Portfolio provided a positive total return of
2.38% for the six months, based on NAV.
Portfolio Makeup: High-Quality Securities
As of June 30, 85% of Portfolio holdings were in U.S. Treasury and agency
securities, with Government National Mortgage Association (GNMA) pass-throughs
comprising the remaining 15%. Treasury securities continued to pay an attractive
level of income, and their ready liquidity gave us a flexible, convenient way to
adjust the Portfolio. GNMA pass-throughs offered a slightly higher income
stream. At mid-year, the average effective maturity of issues in the portfolio
was 6.57 years. We adjusted the Portfolio's maturity as interest rates inched up
and down over the period. As of June 30, the Portfolio's largest allocations
were to bonds in the two-to-five year range (34%) and seven-to-10 year range
(23%). Lately, we have been increasing the Portfolio's maturity to take a
more-aggressive stance, as we think interest rates will probably be stable or
falling in the near term.
Going Forward
Currently, we have a positive outlook for bonds, so we are increasing the
Portfolio's duration. The economy and markets seem to be moving forward with an
"all news is good news" attitude. There are indications that inflation will
likely remain contained, with interest rates staying near their current range.
This would be good for almost all bond investors. We believe the Portfolio's
emphasis on high-quality, U.S. government securities can help us continue to
reward investors with solid returns.
Respectfully,
/s/ Sherman B. Russ
Sherman B. Russ,
Portfolio Manager
- ---------
The Portfolio's investment adviser, Pioneering Management Corporation, reduced
its management fee and certain other expenses; otherwise, returns would have
been lower. Past performance does not guarantee future results. Return and
principal fluctuate so that your investment, when redeemed, may be worth more or
less than the original cost. Performance does not reflect insurance fees or
sales charges.
10
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
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<TABLE>
<CAPTION>
Principal
Amount Value
- ------------ ------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 93.5%
CONVERTIBLE CORPORATE BOND - 0.2%
$ 73,000 Qingling Motors, 3.5% 1/22/02 $ 71,741
------------
TOTAL CONVERTIBLE CORPORATE BOND (Cost $73,960) $ 71,741
------------
Shares
-----------
PREFERRED STOCKS - 4.7%
1,130 Bau Holdings AG $ 61,367
3,700 Centrais Electricas Brasileiras S/A (Sponsored A.D.R.) 113,313
2,400,000 Petroleo Brasileiro S/A 666,605
1,990 SAP AG (Non-voting) 413,062
160 Suedzucker AG (Non-voting) 85,780
3,800 Telebras (Sponsored A.D.R.) 576,650
------------
TOTAL PREFERRED STOCKS (Cost $1,438,655) $ 1,916,777
------------
COMMON STOCKS - 88.6%
BASIC INDUSTRIES - 7.7%
Containers - 0.5%
9,600 NV Koninklijke KNP BT $ 218,615
------------
Iron & Steel - 4.0%
4,650 Boehler-Uddeholm AG $ 360,594
3,000 Koninklijke Hoogovens 167,202
2,580 Pohang Iron & Steel Ltd. 264,241
12,000 Pohang Iron & Steel Ltd. (Sponsored A.D.R.) 384,000
6,000 Rautaruukki Oy (K Shares) 62,972
20,100 Usinor Sacilor 362,550
------------
$ 1,601,559
------------
Metals & Mining - 2.7%
7,500 Broken Hill Proprietary Co. $ 110,481
30,000 Hays Plc 285,262
2,500 Kloof Gold Mining Co., Ltd. 14,878
125,000 M.I.M. Holdings Ltd. 185,241
157,700 Orogen Mining Ltd.* 451,900
500 Schoeller-Bleckmann Oilfield Equipment AG* 40,596
300 Vaal Reefs Exploration & Mining Co., Ltd. 14,481
------------
$ 1,102,839
------------
Paper Products - 0.3%
7,000 Valmet Corp. $ 119,839
------------
Basic - Other - 0.2%
40,000 Hicom Holdings Bhd. $ 75,753
------------
TOTAL BASIC INDUSTRIES $ 3,118,605
------------
CAPITAL GOODS - 7.1%
Construction, Building Materials & Engineering - 5.4%
24,000 Ashtead Group $ 110,508
9,000 Bouygues Offshore SA (Sponsored A.D.R.) 112,500
160 Bucher Holding AG 166,495
67,000 Cemex, SA (Class B) 327,097
1,050 Felten & Guillaume Energietechnik AG 95,849
20,000 Gujarat Ambuja Cements Ltd. 232,500
2,900 Lafarge SA 180,365
8,000 Larsen & Toubro (G.D.R.)* 138,000
16,000 Leighton Holdings Ltd. 78,040
1,700 L.G. Construction Ltd. 28,525
2,500 Nobel Biocare 35,227
925 Plettac AG 212,686
800 Portland Valderrivas SA 65,422
9,000 Sho-Bond Corp. 234,786
4,200 Siam Cement Public Co., Ltd. 72,958
740 Zardaya-Otis SA 97,378
------------
$ 2,188,336
------------
Machinery - 1.1%
535 GEA AG $ 210,748
66,000 PT United Tractors 244,243
------------
$ 454,991
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------- -------------
<S> <C> <C>
Producer Goods - 0.6%
2,000 Hoya Corp. $ 88,994
2,000 Sidel, SA 154,849
------------
$ 243,843
------------
TOTAL CAPITAL GOODS $ 2,887,170
------------
CONSUMER DURABLES - 2.5%
Motor Vehicles - 2.0%
59,000 Cowie Group Plc $ 350,758
28,000 First Tractor Co., Ltd.* 18,432
750 KTM Motorradholding AG* 51,372
39,000 Magneti Marelli SpA 65,845
3,400 Sylea 325,148
------------
$ 811,555
------------
Office Furnishings - 0.5%
4,300 Samas-Groep NV $ 184,890
------------
TOTAL CONSUMER DURABLES $ 996,445
------------
CONSUMER NON-DURABLES - 12.3%
Agriculture & Food Manufacturing - 1.2%
13,400 Louis Dreyfus Citrus* $ 500,502
------------
Cosmetics - 0.9%
68,200 McBride Plc $ 153,890
100,000 Sa Sa International Holdings Ltd.* 32,592
11,000 Shiseido Co., Ltd. 181,390
------------
$ 367,872
------------
Retail Food - 2.3%
8,000 Circle K Japan Co., Ltd. $ 459,277
3,100 Delhaize-Le Lion, SA 162,795
5,000 Hellenic Bottling Co. 184,811
4,500 Kwik Save Group Plc 22,818
750 Selecta Group* 113,986
------------
$ 943,687
------------
General Retail - 6.1%
2,000 Autobacs Seven Co., Ltd. $ 158,443
6,115 Cifra, SA de CV (Series A) 11,295
50,000 Cifra, SA de CV (Series C) 79,899
5,000 Cortefiel SA 218,188
250 Forbo Holdings AG 107,825
1,050,000 Giordano International Ltd. 718,315
5,000 Makro Atacadista SA (G.D.R.)* 62,500
143,000 PT Matahari Putra Prima 288,117
6,300 Nintendo Corp., Ltd. 527,680
900 Raison Tehtaatoy (V Shares) 61,874
43,800 Siam Makro Public Co., Ltd. 120,582
41,000 Storehouse Plc 128,701
------------
$ 2,483,419
------------
Textiles - 1.8%
7,900 Fila Holdings (A.D.R.) $ 263,662
15 Hugo Boss AG 17,460
9,200 Marzotto & Figli SpA 76,987
2,200 Shin Won Corp. 39,640
7,000 Xebio Co., Ltd. 172,229
50,000 Wing Tai Holdings 144,086
------------
$ 714,064
------------
TOTAL CONSUMER NON-DURABLES $ 5,009,544
------------
ENERGY - 0.9%
Oil & Gas - 0.9%
250 Elf Gabon $ 59,302
7,000 Repsol SA 295,962
------------
TOTAL ENERGY $ 355,264
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------- -------------
<S> <C> <C>
FINANCIAL - 17.7%
Commercial Banks - 8.4%
20,000 Banca Popolare Di Milano $ 119,831
4,500 Banco Wiese Ltd. (Sponsored A.D.R.) 29,250
16,000 CIDEA SA* 68,814
2,150 Credit National 122,158
1,400 Credit Suisse Group 179,708
21,168 Daegu Bank 177,926
36,000 Dah Sing Financial 199,347
1,600 DePfa Bank Plc 92,018
16,600 Development Bank of Singapore Ltd. 208,995
15,000 Equitable Banking Corp. 54,311
246,800 First Bangkok City Bank Public Co., Ltd. 198,569
12,810 Hanil Bank 72,128
8,400 HSBC Holdings Plc 160,536
29,600 Industrial Credit & Investment Corp. of India Ltd. (G.D.R.)* 425,500
126 Julius Baer Holding AG 192,791
9,548 Kookmin Bank 181,165
2,863 Kookmin Bank (G.D.R.) 62,270
13,000 Krung Thai Bank Public Co., Ltd. 13,610
13,200 Overseas-Chinese Banking Corp., Ltd. 136,644
33,000 PT Bank of Bira (Local Shares) 48,509
5,500 PT Bank of Bira (Foreign Shares) 8,085
174,000 PT Pan Indonesian Bank 98,376
9,690 Shinhan Bank 146,245
93,500 Siam City Bank Public Co., Ltd. 55,288
23,000 Sumitomo Trust & Banking 246,826
5,592,000 Yapi ve Kredi Bankasi AS* 128,010
------------
$ 3,426,910
------------
Financial Services - 1.5%
28,000 National Finance & Securities Co., Ltd. $ 17,643
1,900 Shohkoh Fund 575,230
------------
$ 592,873
------------
Misc. Finance - 1.7%
20,000 Finance One Public Co., Ltd.* $ 2,598
42,000 Hong Leong Finance Ltd. 119,270
5,000 Nichiei Co., Ltd. 580,203
------------
$ 702,071
------------
Investments - 0.5%
60,000 Dhana Siam Finance & Securities Public Co., Ltd. $ 31,989
24,000 Jardine Matheson Holdings Ltd. 170,400
------------
$ 202,389
------------
Insurance - 3.2%
2,800 Assurances Generales de France $ 89,479
1,500 Catalana Occidente SA* 74,720
46,200 Malaysian Assurance Alliance Bhd. 269,073
9,000 Norwich Union Plc* 47,885
44,000 Reinsurance Australia Corp. 133,404
13,300 Skandinaviska Forsakrings AB 490,014
30,000 Yasuda Fire & Marine 201,544
------------
$ 1,306,119
------------
Real Estate - 2.4%
38,000 Cheung Kong Holdings Ltd. $ 375,227
290,000 China Resources Bejing Land Ltd.* 215,236
40,000 DBS Land Ltd. 126,460
11,800 Property Perfect Public Co., Ltd.* 4,575
310,000 Tai Cheung Holdings Ltd. 246,086
------------
$ 967,584
------------
TOTAL FINANCIAL $ 7,197,946
------------
SERVICES - 9.3%
Commercial - 0.4%
44,200 Loxley Public Co., Ltd. $ 78,837
14,500 PT Tigaraksa Satria 17,812
66,000 PT Wicaksana Overseas International 80,736
------------
$ 177,385
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------- -------------
<S> <C> <C>
Broadcasting & Media - 2.1%
2,800 Benesse Corp. $ 156,349
15,200 Central European Media Enterprises Ltd. * 395,200
3,350 Television Francaise 299,275
------------
$ 850,824
------------
Health & Personal Care - 0.1%
17,400 Care First Group $ 34,191
600 Nu Skin Asia Pacific Inc.* 15,900
------------
$ 50,091
------------
Hotel & Restaurants - 0.2%
16,500 Overseas Union Enterprise Ltd. $ 76,170
------------
Pharmaceuticals - 3.7%
18,667 Astra AB $ 347,489
116,000 Medeva Plc 495,487
125 Novartis AG 199,733
8 Roche Holdings AG 72,321
7,000 Takeda Chemical Industries 196,658
17,000 PT Tempo Scan Pacific 38,096
2,500 Teva Pharmaceutical Industries Ltd. (Sponsored A.D.R.) 161,875
------------
$ 1,511,659
------------
Publishing - 1.8%
4,300,000 Dogan Sirketler Grubu Holdings AS* $ 110,015
38,000 First Pacific Corp. 48,559
6,000 Nycomed ASA 88,413
24,900 Schibsted ASA 492,619
------------
$ 739,606
------------
Misc. Services - 1.0%
1,000 Falck AS $ 52,712
4,000 ISS International Service System AS (Class B) 143,376
5,100 Proseguir 62,301
30 SDS Society Generale De Surveillance Hldg 64,079
9,000 Taiwan Secom* 39,820
1,150 Vedior NV* 30,407
------------
$ 392,695
------------
TOTAL SERVICES $ 3,798,430
------------
Technology - 11.1%
Business Machines - 1.5%
13,000 Canon, Inc. $ 353,880
9,585 Esselte AB (Series B) 225,515
3,000 Intentia Inernational AB (B Shares)* 32,771
------------
$ 612,166
------------
Electronics - 8.3%
15,200 Advanced Information Service Public Co. Ltd. (Foreign Shares) $ 133,199
25,000 Advanced Information Service Public Co. Ltd. (Local Shares) 219,077
56,000 ASM Pacific Technology Ltd. 39,033
950 Austria Micro Systeme International AG 80,564
58,800 Delta Electronics 360,233
34,000 Elec & Eltek Ltd. 190,400
34,500 K.R. Precision Plc 248,817
5,500 Mabuchi Motor Co. 319,112
5,000 Merkantildata ASA 100,284
2,300 Philips Electronics NV 164,746
3,000 Rohm Co. Ltd. 308,860
5,200 Samsung Display Devices Co. 287,950
46,200 Siliconware Precision Industries Co. Ltd.* 156,216
5,000 Sony Corp. 435,807
27,250 Tatung Co., Ltd. 52,932
2,000 TDK Corp. 146,752
2,000 TT Group Plc 12,323
29,500 United Communications 122,392
------------
$ 3,378,697
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------- -------------
<S> <C> <C>
Telephone Networks - 0.9%
5,100 Nokia AB $ 380,968
------------
Computer Services - 0.4%
330 Beta Systems Software AG* $ 38,979
4,500 Shinawatra Computer Co. 31,233
23,000 Venture Manufacturing Ltd. 74,967
------------
$ 145,179
------------
TOTAL TECHNOLOGY $ 4,517,010
------------
TRANSPORTATION - 1.7%
Air Transport - 0.6%
30,000 Mitsubishi Heavy $ 230,075
------------
Railroad & Bus - 0.5%
18,000 Stagecoach Holdings Plc $ 190,042
------------
Ships & Shipping - 0.4%
18,500 Great Eastern Shipping Co. (G.D.R.)* $ 145,687
------------
Trucks Trans/Storage - 0.2%
320 MAN AG $ 98,532
------------
TOTAL TRANSPORTATION $ 664,336
------------
UTILITIES - 15.8%
Electric Utility - 5.9%
18,500 Electricidade de Portugal SA* $ 339,536
9,675 Iberdrola SA 122,128
2,500 Korea Electric Power Corp. 74,606
81,750 Scottish Power Plc 532,294
11,700 Shandong Huaneng Power Co., Ltd. (Sponsored A.D.R.) 125,775
910 SK Telecom 678,286
22,835 SK Telecom (A.D.R.) 229,778
2,100,000 Telecomunicacoes Brasileiras SA 284,812
------------
$ 2,387,215
------------
Telecommunications - 9.9%
24 DDI Corp. $ 177,150
8,300 ECI Telecommunications Ltd. 246,925
1,000 Ericsson LM Series B 39,364
5,700 Grupo Iusacell SA (Series L) (Sponsored A.D.R.)* 104,738
10,500 Hellenic Telecommunications Organization SA 246,506
58,000 Jasmine International Public Co., Ltd. 53,974
3,000 Kon PTT Nederland 117,683
1,000 Mobilcom AG* 67,661
1,300 Philippine Long Distance Telephone (A.D.R.) 83,525
74,000 Stet Societa Finanziaria Telefonica SpA 430,967
11,200 Tadiran Ltd. (A.D.R.) 320,600
900 Telecel-Comunicacaoes Pessoais SA* 74,663
2,900 Telecom Argentina Stet-France SA (Sponsored A.D.R.) 152,250
104,000 Telecom Italia Mobile SpA 336,490
64,140 Telecom Italia SpA 206,769
3,950 Telefonica de Argentina SA (Class B) (Sponsored A.D.R.) 136,769
19,300 Telefonica de Espana 557,978
4,100 Telefonica del Peru SA (Class B) (Sponsored A.D.R.) 107,113
1,200 Telefonos de Mexico (Sponsored A.D.R.) 57,300
101,500 Vodafone Group Plc 494,401
------------
$ 4,012,826
------------
TOTAL UTILITIES $ 6,400,041
------------
MISCELLANEOUS - 2.5%
Conglomerates & Holdings - 2.5%
34,100 Benpres Holdings Corp. (G.D.R.)* $ 243,815
2,700 Chargeurs International SA* 155,567
3,400,000 Net Holdings AS 167,110
400 Viag AG 181,881
48,517 Wassall Plc 249,655
------------
TOTAL MISCELLANEOUS $ 998,028
------------
TOTAL COMMON STOCKS (Cost $32,217,946) $35,942,819
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------ ------------
<S> <C> <C>
WARRANT - 0.0%
24,857 PT Panin Bank, 6/26/02* $ 1,278
------------
TOTAL WARRANT (Cost $0) $ 1,278
------------
TOTAL INVESTMENT IN SECURITIES (Cost $33,730,561) $37,932,615
------------
Principal
Amount
- -----------
TEMPORARY CASH INVESTMENTS - 6.5%
Commercial Paper - 6.5%
$ 957,000 American Express Co., 6.00%, 7/2/97 $ 957,000
1,677,000 Ford Motor Credit Co., 6.11%, 7/1/97 1,677,000
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $2,634,000) $ 2,634,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENTS - 100% (Cost $36,364,561) (a) (b) $40,566,615
============
</TABLE>
* Non-income producing security.
(a) At June 30, 1997, the net unrealized gain on investments based on
cost for federal income tax purposes of $36,553,811 was as follows:
<TABLE>
<S> <C>
(a) Aggregate gross unrealized gain for all investments in which there is an excess
of value ov r tax cost $ 5,617,061
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (1,604,257)
------------
Net unrealized gain $ 4,012,804
============
</TABLE>
(b) Distribution of investments by country, as a percentage of total
equity holdings, is as follows:
Japan 15.2%
United Kingdom 8.2
South Korea 7.3
France 6.2
Hong Kong 4.9
Thailand 4.7
Brazil 4.5
Germany 4.0
Italy 4.0
Spain 3.9
Sweden 3.1
Switzerland 2.9
Singapore 2.8
Australia 2.5
India 2.5
Netherlands 2.4
Indonesia 2.2
Israel 1.9
Norway 1.8
Finland 1.6
Austria 1.6
Mexico 1.5
Greece 1.1
Portugal 1.1
Peoples Republic of China 1.1
Turkey 1.1
Czech Republic 1.0
Philippines 1.0
Others (individually less than 1%) 3.9
------
100.0%
======
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 aggregated
$30,088,712 and $17,111,210, respectively.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
International Growth Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investments of
$2,634,000) (cost 36,364,561) $40,566,615
Cash 408,557
Foreign currencies, at value 244,335
Receivables--
Investment securities sold 428,009
Dividends, interest and foreign taxes withheld 114,712
Forward foreign currency potfolio hedge contracts open--net 72,876
Other 565
------------
Total assets $41,835,669
------------
Liabilities:
Payables--
Investment securities purchased $ 784,403
Fund shares repurchased 21,724
Forward foreign currency settlement contracts--net 1,385
Due to affiliates 36,685
Accrued expenses 27,114
------------
Total liabilities $ 871,311
------------
Net Assets:
Paid-in capital $35,485,820
Accumulated undistributed net investment income 269,270
Accumulated undistributed net realized gain on investments and foreign
currency transactions 937,431
Net unrealized gain on investments 4,202,054
Net unrealized gain on forward currency contracts and other assets and
liabilities denominated in foreign currencies 69,783
------------
Total net assets $40,964,358
============
Net Assets Value Per Share:
(Unlimited number of shares authorized)
Based on $40,964,358/3,033,551 shares $ 13.50
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
International Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $33,809) $ 408,671
Interest (net of foreign taxes withheld of $481) 89,504
----------
Total investment income $ 498,175
----------
Expenses:
Management fees $ 156,749
Transfer agent fees 56
Accounting 30,522
Custodian fees 49,114
Registration fees 112
Professional fees 4,630
Printing 3,667
Fees and expenses of nonaffiliated trustees 523
Miscellaneous 2,983
----------
Total expenses $ 248,356
Less management fees waived by Pioneering
Management Corporation (18,023)
Less fees paid indirectly (1,362)
----------
Net expenses $ 228,971
----------
Net investment income $ 269,204
----------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain (loss) from:
Investments $ 978,007
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (15,940) $ 962,067
---------- ----------
Change in net unrealized gain from:
Investments $3,732,567
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 69,371 $3,801,938
---------- ----------
Net gain on investments and foreign currency transactions $4,764,005
----------
Net increase in net assets resulting from operations $5,033,209
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
International Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 269,204 $ 104,040
Net realized gain on investments and foreign
currency transactions 962,067 446,589
Change in net unrealized gain on investments and
foreign currency transactions 3,801,938 432,427
----------- -----------
Net increase in net assets resulting from
operations $ 5,033,209 $ 983,056
----------- -----------
Distributions to Shareholders:
Net investment income ($0.03 and $0.00 per
share, respectively) $ (91,398) $ --
Net realized gain ($0.16 and $0.03 per share,
respectively) (479,244) (34,412)
----------- -----------
Total distributions to shareholders $ (570,642) $ (34,412)
----------- -----------
From Fund Share Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 943,943 1,896,992 $11,741,122 $21,695,298
Reinvestment of distributions 42,649 2,934 570,641 34,412
Cost of shares repurchased (47,063) (77,398) (579,916) (875,145)
--------- --------- ----------- -----------
Net increase in net assets resulting from
fund share transactions 939,529 1,822,528 $11,731,847 $20,854,565
========= ========= ----------- -----------
Net increase in net assets $16,194,414 $21,803,209
Net Assets:
Beginning of period 24,769,944 2,966,735
----------- -----------
End of period (including accumulated undistributed
net investment income of $269,270 and $91,464,
respectively) $40,964,358 $24,769,944
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
International Growth Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.83 $ 10.93 $ 10.00
------------ ------------- -----------
Increase from investment operations:
Net investment income $ 0.07 $ 0.05 $ --
Net realized and unrealized gain on investments
and foreign currency transactions 1.79 0.88 1.04
------------ ------------- -----------
Net increase from investment operations $ 1.86 $ 0.93 $ 1.04
Distributions to shareholders from:
Net investment income (0.03) -- (0.02)
Net realized gain (0.16) (0.03) (0.09)
------------ ------------- -----------
Net increase in net asset value $ 1.67 $ 0.90 $ 0.93
------------ ------------- -----------
Net asset value, end of period $ 13.50 $ 11.83 $ 10.93
============ ============= ===========
Total return* 15.76% 8.54% 10.42%
Ratio of net expenses to average net assets 1.47%**+ 1.52%+ 2.10%**+
Ratio of net investment income (loss) to average net
assets 1.70%**+ 0.78%+ (0.25%)**+
Portfolio turnover rate 122%** 115% 139%**
Average commission rate paid(1) $ 0.0052 $ 0.0033 --
Net assets, end of period (in thousands) $ 40,964 $ 24,770 $ 2,967
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 1.58%** 3.04% 17.22%**
Net investment income (loss) 1.59%** (0.74%) (15.37%)**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 1.46%** 1.50% 1.75%**
Net investment income 1.71%** 0.80% 0.10%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1) Amount may fluctuate from period to period as a result of portfolio
transactions executed in different markets where trading practices and
commission rate structures may vary.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------- -------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 86.6%
PREFERRED STOCKS - 1.2%
41,450 Aracruz Cellulose SA (Sponsored A.D.R.) $ 844,544
------------
TOTAL PREFERRED STOCKS (Cost $739,411) $ 844,544
------------
COMMON STOCKS - 85.4%
BASIC INDUSTRIES - 12.3%
Chemicals - 6.0%
60,100 Agrium, Inc. $ 691,150
30,000 Borden Chemical & Plastics, Ltd. 333,750
36,100 The Geon Co. 731,025
29,800 Georgia Gulf Corp. 866,062
1,000 Goodrich (B.F.) Co. 43,312
3,400 NL Industries, Inc. 49,300
46,000 Wellman, Inc. 799,250
25,000 Witco Corp. 953,125
------------
$ 4,466,974
------------
Containers - 1.7%
146,400 Interlake Corp.* $ 658,800
20,000 Jefferson Smurfitt Corp.* 320,000
58,500 Zapata Corp.* 288,844
------------
$ 1,267,644
------------
Forest Products - 0.9%
30,000 Louisiana Pacific Corp. $ 633,750
------------
Iron & Steel - 1.0%
50,000 Armco, Inc.* $ 193,750
40,000 LTV Corp. 570,000
------------
$ 763,750
------------
Metals & Mining - 1.4%
15,000 Newmont Mining Corp. $ 585,000
21,000 Penn Engineering & Manufacturing Corp. 410,812
15,000 TVX Gold, Inc. 79,688
------------
$ 1,075,500
------------
Non-Ferrous Metals - 0.3%
10,200 Brush Wellman, Inc. $ 213,562
------------
Paper Products - 1.0%
6,300 Bowater, Inc. $ 291,375
8,600 Consolidated Papers, Inc. 464,400
------------
$ 755,775
------------
TOTAL BASIC INDUSTRIES $ 9,176,955
------------
CAPITAL GOODS - 10.5%
Aerospace - 0.3%
2,000 Lockheed Martin Corp., Ltd. $ 207,125
------------
Construction & Engineering - 2.9%
39,000 Insteel Industries, Inc. $ 316,875
35,000 Justin Industries 446,250
70,000 Morrison Knudsen Corp.* 953,750
35,000 Perini Corp.* 258,125
8,000 Texas Industries, Inc. 212,500
------------
$ 2,187,500
------------
Pollution & Waste - 1.2%
73,000 Catalytica, Inc.* $ 862,313
------------
Producer Goods - 3.2%
48,500 Brown & Sharpe Manufacturing Co.* $ 727,500
16,000 Griffon Corp.* 225,000
20,000 Insilco Corp.* 750,000
20,100 Keystone International, Inc. 697,219
------------
$ 2,399,719
------------
Telecommunications - 2.9%
45,000 DSC Communications Corp. $ 1,001,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
<S> <C> <C>
Telecommunications (Continued)
28,000 General Instrument Corp. $ 700,000
40,700 Salient 3 Communications, Inc. 488,400
------------
$ 2,189,650
------------
TOTAL CAPITAL GOODS $ 7,846,307
------------
CONSUMER DURABLES - 1.3%
Motor Vehicles - 1.3%
29,500 Chrysler Corp. $ 967,969
------------
TOTAL CONSUMER DURABLES $ 967,969
------------
CONSUMER NON-DURABLES - 18.2%
Consumer Luxuries - 1.7%
60,300 Arctic Cat, Inc. $ 625,612
110,000 Meridian Sports, Inc.* 137,500
15,000 U.S. Industries, Inc.* 534,375
------------
$ 1,297,487
------------
Home Products - 0.9%
22,400 Ladd Furniture, Inc. $ 308,000
25,000 Rival Co. 368,750
------------
$ 676,750
------------
Retail Food - 0.8%
4,500 Arden Group, Inc.* $ 279,000
11,000 Richfood Holdings, Inc. 286,000
------------
$ 565,000
------------
Retail Non-Food - 12.3%
107,000 Charming Shoppes* $ 558,412
18,100 Cole National Corp. 796,400
55,000 Fingerhut Companies, Inc. 955,625
20,300 Josten's, Inc. 535,411
70,000 Kmart Corp.* 857,500
57,400 Levitz Furniture, Inc.* 82,513
18,000 Office Depot, Inc.* 346,500
30,000 Sbarro, Inc. 830,625
53,400 The Stride Rite Corp. 687,525
20,000 Tandy Corp. 1,131,250
16,200 Toro Co. 620,663
20,000 Toys "R" Us, Inc.* 700,000
43,000 Woolworth Corp.* 1,042,750
------------
$ 9,145,174
------------
Textiles/Clothes - 2.5%
52,000 Oshkosh B' Gosh, Inc. $ 1,131,000
30,000 Shaw Industries, Inc. 322,500
74,100 Tultex Corp.* 444,600
------------
$ 1,898,100
------------
TOTAL CONSUMER NON-DURABLES $13,582,511
------------
ENERGY - 2.0%
Oil Refining and Drilling - 2.0%
14,000 Atlantic Richfield Co. $ 987,000
15,000 Crystal Oil Co.* 532,500
------------
TOTAL ENERGY $ 1,519,500
------------
FINANCIAL - 4.7%
Insurance - 4.4%
50,000 20th Century Industries $ 1,050,000
42,200 American Annuity Group, Inc. 759,600
20,000 Financial Security Assurance Holdings Ltd. 780,000
26,000 Western National Corp. 702,000
------------
$ 3,291,600
------------
Real Estate - 0.3%
66,450 Bluegreen Corp.* $ 191,044
------------
TOTAL FINANCIAL $ 3,482,644
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
<S> <C> <C>
SERVICES - 13.1%
Health & Personal Care - 4.4%
20,000 Apria Healthcare Group, Inc.* $ 353,750
35,000 Dial Corp. 544,687
27,000 Integrated Health Services, Inc. 1,039,500
8,000 Pacificare Health Systems (Class B) 511,000
40,000 Sun Health Care Group, Inc.* 832,500
------------
$ 3,281,437
------------
Hotel/Restaurant - 1.9%
25,000 Darden Restaurants, Inc. $ 226,563
24,000 McDonalds Corp. 1,159,500
------------
$ 1,386,063
------------
Pharmaceuticals - 2.0%
35,500 Aronex Pharmaceuticals, Inc.* $ 137,562
35,000 Ivax Corp. 395,938
30,000 Medeva Plc (Sponsored A.D.R.) 513,750
17,000 Sepracor, Inc.* 438,812
------------
$ 1,486,062
------------
Publishing - 0.8%
22,000 Readers Digest Assn. $ 631,125
------------
Services - 4.0%
18,200 Acnielsen Corp. $ 354,900
55,000 Cadmus Communications Corp. 852,500
10,000 Manpower, Inc. 445,000
16,000 Regis Corp. 378,000
35,000 Sabre Group Holdings, Inc.* 949,375
------------
$ 2,979,775
------------
TOTAL SERVICES $ 9,764,462
------------
TECHNOLOGY - 17.2%
Business Machines - 1.0%
100,000 Unisys Corp.* $ 756,250
------------
Computer Services & Software - 5.4%
85,000 Amdahl Corp.* $ 743,750
15,000 Banctec, Inc.* 390,000
75,000 Creative Computers, Inc. 581,250
10,000 Electronic Data Systems Corp. 410,000
11,800 Policy Management Systems Corp. 573,038
30,000 Symantec Corp.* 585,000
50,000 View Logic Systems, Inc. 731,250
------------
$ 4,014,288
------------
Electronics - 9.5%
21,570 Amphenol Corp.* $ 838,534
12,000 Belden Corp. 408,750
20,000 Elsag Bailey Process Automation NV* 367,500
20,000 Esco Electronics Corp. 252,500
5,000 Harman International Industries, Inc. 210,625
25,000 Imation Corp. 659,375
35,000 Intergraph Corp.* 297,500
25,000 LAM Research Corp.* 926,563
14,000 Marcam Corp.* 203,000
19,400 Marshall Industries, Inc. 722,650
27,000 Teradyne, Inc.* 1,059,750
32,550 Vishay Intertechnology, Inc.* 941,916
20,000 Whittaker Corp.* 220,000
------------
$ 7,108,663
------------
Photo/Instrumentation - 1.3%
32,300 Viacom, Inc. (Class B) $ 969,000
------------
TOTAL TECHNOLOGY $12,848,201
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------ ------------
<S> <C> <C>
TRANSPORTATION - 0.6%
Air Transport - 0.6%
49,000 First Aviation Services, Inc. $ 477,750
------------
TOTAL TRANSPORTATION $ 477,750
------------
UTILITIES - 5.5%
Electric Utility - 0.3%
6,400 Dominion Resources, Inc. $ 233,600
------------
Telecommunications - 5.2%
30,000 Alcatel Alsthom, Inc. (Sponsored A.D.R.) $ 757,500
29,000 AT&T Corp. 1,015,000
46,300 Frontier Corp. 923,105
25,000 GTE Corp. 1,096,875
2,000 Nynex Corp. 115,250
------------
$ 3,907,730
------------
TOTAL UTILITIES $ 4,141,330
------------
TOTAL COMMON STOCKS (Cost $55,269,582) $63,807,629
------------
TOTAL INVESTMENT IN SECURITIES (Cost $56,008,993) $64,652,173
------------
Principal
Amount
- -----------
TEMPORARY CASH INVESTMENTS - 13.4%
Commercial Paper - 13.4%
$2,936,000 Ford Motor Credit Co., 5.57%, 7/7/97 $ 2,936,000
1,692,000 Ford Motor Credit Co., 6.11%, 7/1/97 1,692,000
2,364,000 Household Finance Corp., 5.50%, 7/3/97 2,364,000
3,052,000 Prudential Securities Corp., 5.53%, 7/2/97 3,052,000
------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $10,044,000) $10,044,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENTS - 100% (Cost $66,052,993)(a) $74,696,173
============
</TABLE>
<TABLE>
<S> <C> <C>
* Non-income producing security.
(a) At June 30, 1997, the net unrealized gain on investments based
on cost for federal income tax purposes of $66,080,461 was as
follows:
Aggregate gross unrealized gain for all investments in which there
is an excess of value over tax cost $ 11,306,224
Aggregate gross unrealized loss for all investments in which there
is an excess of tax cost over value (2,690,512)
------------
Net unrealized gain $ 8,615,712
============
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 aggregated
$25,559,573 and $9,983,484, respectively.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Capital Growth Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash
investments of $10,044,000) (cost $66,052,993) $74,696,173
Cash 906
Receivables--
Fund shares sold 44,775
Dividends and interest 82,521
Other 4,194
------------
Total assets $74,828,569
------------
Liabilities:
Payables--
Investment securities purchased $ 217,500
Fund shares repurchased 104
Due to affiliates 43,287
Accrued expenses 14,831
------------
Total liabilities $ 275,722
------------
Net Assets:
Paid-in capital $64,451,920
Accumulated undistributed net investment income 387,667
Accumulated undistributed net realized gain on investments 1,070,080
Net unrealized gain on investments 8,643,180
------------
Total net assets $74,552,847
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $74,552,847/4,991,697 shares $ 14.94
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Capital Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $532) $449,561
Interest 170,294
---------
Total investment income $ 619,855
----------
Expenses:
Management fees $192,929
Transfer agent fees 585
Accounting 21,674
Custodian fees 12,159
Professional fees 6,778
Printing 1,247
Fees and expenses of nonaffiliated trustees 362
Miscellaneous 2,469
---------
Total expenses $ 238,203
Less fees paid indirectly (506)
----------
Net expenses $ 237,697
----------
Net investment income $ 382,158
----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $1,067,292
Change in net unrealized gain on investments 7,160,111
----------
Net gain on investments $8,227,403
----------
Net increase in net assets resulting from operations $8,609,561
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Capital Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31,
(unaudited) 1996
------------------ --------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 382,158 $ 103,975
Net realized gain on investments 1,067,292 1,120,540
Change in net unrealized gain or loss on
investments 7,160,111 1,521,356
----------- ------------
Net increase in net assets resulting from
operations $ 8,609,561 $ 2,745,871
----------- ------------
Distributions to Shareholders:
Net investment income ($0.00 and $0.03 per
share, respectively) $ -- $ (98,466)
Net realized gain ($0.11 and $0.23 per share,
respectively) (556,651) (707,881)
----------- ------------
Total distributions to shareholders $ (556,651) $ (806,347)
----------- ------------
From Fund Share Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 1,297,343 3,190,793 $18,265,049 $40,709,119
Reinvestment of distributions 36,696 61,965 553,743 806,347
Cost of shares repurchased (64,412) (339,671) (890,910) (4,239,869)
--------- --------- ----------- ------------
Net increase in net assets resulting from
fund share transactions 1,269,627 2,913,087 $17,927,882 $37,275,597
========= ========= ----------- ------------
Net increase in net assets $25,980,792 $39,215,121
Net Assets:
Beginning of period 48,572,055 9,356,934
----------- ------------
End of period (including accumulated undistributed
net investment income of $387,667 and $5,509,
respectively) $74,552,847 $48,572,055
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Capital Growth Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1996
------------------ ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.05 $ 11.57 $ 10.00
------------ ---------- -----------
Increase from investment operations:
Net investment income $ 0.08 $ 0.03 $ 0.02
Net realized and unrealized gain on investments 1.92 1.71 1.69
------------ ---------- -----------
Net increase from investment operations $ 2.00 $ 1.74 $ 1.71
Distributions to shareholders:
Net investment income -- (0.03) (0.02)
Net realized gain (0.11) (0.23) (0.12)
------------ ---------- -----------
Net increase in net asset value $ 1.89 $ 1.48 $ 1.57
------------ ---------- -----------
Net asset value, end of period $ 14.94 $ 13.05 $ 11.57
============ ========== ===========
Total return* 15.35% 15.03% 17.13%
Ratio of net expenses to average net assets 0.80%**+ 0.93%+ 1.56%**+
Ratio of net investment income to average net assets 1.28%**+ 0.37%+ 0.48%**+
Portfolio turnover rate 37%** 41% 46%**
Average commission rate paid(1) $ 0.0535 $ 0.0661 --
Net assets, end of period (in thousands) $ 74,553 $ 48,572 $ 9,357
Ratios assuming no waiver of management fees by
PMC and no reduction for fees paid indirectly
Net expenses -- 0.95% 3.95%**
Net investment income (loss) -- 0.35% (1.91)%**
Ratios assuming waiver of management fees by
PMC and reduction for fees paid indirectly
Net expenses 0.80%** 0.92% 1.49%**
Net investment income 1.28%** 0.38% 0.55%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1)Amount represents the rate of commission paid per share on the Portfolio's
exchange listed securities transactions.
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
Real Estate Growth Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------ ------------
<S> <C> <C>
COMMON STOCKS - 98.0%
CAPITAL GOODS - 0.7%
Construction & Engineering - 0.7%
25,000 Belmont Homes, Inc.* $ 171,875
------------
TOTAL CAPITAL GOODS $ 171,875
------------
Real Estate Investments Trusts - 79.6%
38,000 Amli Residential Properties Trust $ 893,000
20,000 Apartment Investment & Management Co. 565,000
20,000 Arden Realty Group, Inc. 520,000
17,000 Beacon Properties Corp. 567,375
35,000 Bedford Property Investors, Inc. 700,000
23,000 Cali Realty Corp. 782,000
20,900 Cousins Properties, Inc. 581,281
23,000 Developers Diversified Realty Corp. 920,000
20,000 Equity Residential Property Trust 950,000
24,000 Felcor Suite Hotels, Inc. 889,500
25,000 Franchise Finance Corp. of America* 651,563
14,000 Gables Residential Trust 353,500
24,000 Highwoods Properties, Inc. 768,000
30,000 Irvine Apartment Communities 885,000
23,000 J.P. Realty, Inc. 622,437
33,000 Liberty Property Trust 820,875
32,000 The Macerich Co. 888,000
22,000 National Golf Properties, Inc. 761,750
33,000 Patriot American Hospitality, Inc. 841,500
31,000 Prentiss Properties Trust* 794,375
26,000 Public Storage, Inc. 754,000
22,000 Simon DeBartolo Group, Inc. 704,000
21,000 Spieker Properties, Inc. 738,938
20,000 Starwood Lodging Trust 851,250
25,000 Storage Trust Realty 662,500
20,000 Sun Communities, Inc. 672,500
------------
TOTAL REAL ESTATE INVESTMENTS TRUSTS $19,138,344
------------
Real Estate Services - 14.7%
20,000 Alexandria Real Estate Equities, Inc.* $ 438,750
25,000 Amresco, Inc.* 537,500
50,000 Catellus Development Corp.* 906,250
30,000 Charles E. Smith Residential Realty 862,500
37,000 Trizec Hahn Corp. 790,875
------------
TOTAL REAL ESTATE SERVICES $ 3,535,875
------------
SERVICES - 3.0%
Hotels & Restaurants - 3.0%
40,000 Host Marriott Services Corp.* $ 712,500
------------
TOTAL SERVICES $ 712,500
------------
TOTAL COMMON STOCKS (Cost $ 21,143,214) $23,558,594
------------
Principal
Amount
- ----------
TEMPORARY CASH INVESTMENT - 2.0%
Commercial Paper - 2.0%
$ 479,000 Ford Motor Credit Co., 6.11%, 7/1/97 $ 479,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $ 479,000) $ 479,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENT - 100% (Cost $ 21,622,214) (a) $24,037,594
============
</TABLE>
<TABLE>
<S> <C> <C>
* Non-income producing security.
(a) At June 30, 1997, the net unrealized gain on investments based
on cost for federal
income tax purposes of $21,622,214 was as follows:
Aggregate gross unrealized gain for all investments in which there is
an excess of value over tax cost $2,538,060
Aggregate gross unrealized loss for all investments in which there
is an excess of tax cost over value (122,680)
-----------
Net unrealized gain $2,415,380
===========
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 aggregated
$13,882,927 and $1,885,082, respectively.
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
Real Estate Growth Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$479,000) (cost 21,622,214) $24,037,594
Cash 616
Receivables--
Fund shares sold 42,767
Dividends and interest 84,966
Other 353
-----------
Total assets $24,166,296
-----------
Liabilities:
Payables--
Fund shares repurchased $ 16,783
Due to affiliates 19,753
Accrued expenses 15,728
-----------
Total liabilities $ 52,264
-----------
Net Assets:
Paid-in capital $21,731,624
Distributions in excess of net investment income (14,630)
Accumulated net realized loss on investments (18,342)
Net unrealized gain on investments 2,415,380
-----------
Total net assets $24,114,032
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $24,114,032/1,597,758 shares $ 15.09
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
Real Estate Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends $408,419
Interest 19,604
---------
Total investment income $ 428,023
----------
Expenses:
Management fees $ 86,027
Transfer agent fees 621
Accounting 18,718
Custodian fees 11,666
Professional fees 4,167
Printing 3,010
Fees and expenses of nonaffiliated trustees 372
Miscellaneous 2,507
---------
Total expenses $ 127,088
Less management fees waived and expenses assumed by Pioneering
Management Corporation (18,613)
Less fees paid indirectly (938)
----------
Net expenses $ 107,537
----------
Net investment income $ 320,486
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments $ (18,213)
Change in net unrealized gain on investments 979,737
----------
Net gain on investments $ 961,524
----------
Net increase in net assets resulting from operations $1,282,010
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
Real Estate Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
--------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 320,486 $ 141,516
Net realized gain (loss) on investments (18,213) 121,049
Change in net unrealized gain on investments 979,737 1,403,021
----------- -----------
Net increase in net assets resulting from
operations $ 1,282,010 $ 1,665,586
----------- -----------
Distributions to Shareholders:
Net investment income ($0.25 and $0.53 per
share, respectively) $ (335,116) $ (137,792)
Net realized gain ($0.03 and $0.12 per share,
respectively) (42,489) (82,413)
----------- -----------
Total distributions to shareholders $ (377,605) $ (220,205)
----------- -----------
From Fund Share Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 846,207 772,084 $12,329,200 $ 9,135,087
Reinvestment of distributions 25,285 16,943 377,605 220,206
Cost of shares repurchased (42,289) (16,103) (612,592) (197,756)
--------- --------- ----------- -----------
Net increase in net assets resulting from fund
share transactions 829,203 772,924 $12,094,213 $ 9,157,537
========= ========= ----------- -----------
Net increase in net assets $12,998,618 $10,602,918
Net Assets:
Beginning of period 11,115,414 512,496
----------- -----------
End of period (including distributions in excess of
net investment income of $14,630 and $0,
respectively) $24,114,032 $11,115,414
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
Real Estate Growth Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 31, 1995 to
(unaudited) December 31, 1996 December 31, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.46 $ 11.23 $ 10.00
------------ ---------- -----------
Increase from investment operations:
Net investment income $ 0.24 $ 0.54 $ 0.12
Net realized and unrealized gain on investments 0.67 3.34 1.55
------------ ---------- -----------
Net increase from investment operations $ 0.91 $ 3.88 $ 1.67
Distributions to shareholders:
Net investment income (0.25) (0.53) (0.23)
Tax return of capital -- -- (0.18)
Net realized gain (0.03) (0.12) (0.03)
------------ ---------- -----------
Net increase in net asset value $ 0.63 $ 3.23 $ 1.23
------------ ---------- -----------
Net asset value, end of period $ 15.09 $ 14.46 $ 11.23
============ ========== ===========
Total return* 6.30% 35.73% 16.96%
Ratio of net expenses to average net assets 1.26%**+ 1.34%+ 2.10%**+
Ratio of net investment income to average net assets 3.70%**+ 4.63%+ 2.68%**+
Portfolio turnover rate 23%** 41% 1%**
Average commission rate paid(1) $ 0.0592 $ 0.0595 --
Net assets, end of period $ 24,114 $ 11,115 $ 512
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 1.47%** 3.35% 45.96%**
Net investment income (loss) 3.49%** 2.62% (41.18)%**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 1.25%** 1.24% 1.57%**
Net investment income 3.71%** 4.73% 3.21%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1)Amount represents the rate of commission paid per share on the Portfolio's
exchange listed securities transactions.
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- ------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 97.8%
CONVERTIBLE CORPORATE BOND - 0.3%
$250,000 Phototronics Inc., 6.0%, 2004 $ 276,375
------------
TOTAL CONVERTIBLE CORPORATE BOND (Cost $250,000) $ 276,375
------------
Shares
- ---------
PREFERRED STOCKS - 1.8%
404 Aetna Life & Casualty, 6.25% $ 37,875
570 Sprint Corp., 8.25%, 3/31/00 20,449
10,000 AirTouch Communications, Inc., 4.25%, 08/16/16 480,000
20,000 Rouse Co., 3.0% (Convertible) (Series B) 965,000
-----------
TOTAL PREFERRED STOCKS (Cost $1,487,579) $1,503,324
-----------
COMMON STOCKS - 95.7%
BASIC INDUSTRIES - 9.7%
Chemicals - 6.1%
15,441 ARCO Chemical Co. $ 735,378
46,000 Borden Chemicals & Plastics, L.P. 511,750
10,200 E.I. du Pont de Nemours and Co. 641,325
15,000 Eastman Chemical Co. 946,875
9,000 Dow Chemical Co. 784,125
100,000 Ethyl Corp. 931,250
15,000 Nalco Chemical Co. 579,375
-----------
$5,130,078
-----------
Metals & Mining - 2.7%
10,400 Aluminum Co. of America $ 783,900
15,400 Phelps Dodge Corp. 1,311,887
10,300 Roanoke Electric Steel Corp. 172,525
-----------
$2,268,312
-----------
Paper Products - 0.9%
2,100 Union Camp Corp. $ 106,313
2,300 Westvaco Corp. 72,306
10,000 Consolidated Papers, Inc. 540,000
-----------
$ 718,619
-----------
TOTAL BASIC INDUSTRIES $8,117,009
-----------
CAPITAL GOODS - 0.8%
Producer Goods - 0.8%
7,000 The Gorman-Rupp Co. $ 126,000
12,500 Helix Technology Corp. 506,250
-----------
TOTAL CAPITAL GOODS $ 632,250
-----------
CONSUMER DURABLES - 4.7%
Motor Vehicles - 4.7%
30,000 Chrysler Corp. $ 984,375
74,800 Ford Motor Co. 2,823,700
2,500 General Motors Corp. 139,375
-----------
TOTAL CONSUMER DURABLES $3,947,450
-----------
CONSUMER NON-DURABLES - 7.6%
Agriculture & Food - 3.2%
4,100 CPC International, Inc. $ 378,481
17,000 General Mills, Inc. 1,107,125
13,000 H.J. Heinz Co. 599,625
15,000 PepsiCo, Inc. 563,438
-----------
$2,648,669
-----------
Home Products - 0.8%
20,000 Stanhome, Inc. $ 657,500
-----------
Consumer Luxuries - 0.2%
4,600 Cedar Fair, L.P. $ 201,250
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- -------------
<S> <C> <C>
Retail Non-Food - 3.4%
10,550 May Department Stores Co. $ 505,081
37,450 Mercantile Stores Co., Inc. 2,357,009
------------
$ 2,862,090
------------
TOTAL CONSUMER NON-DURABLES $ 6,369,509
------------
ENERGY - 11.6%
Oil & Gas - 11.6%
19,680 Amoco Corp. $ 1,710,930
40,300 Chevron Corp. 2,979,681
24,000 Mobil Corp. 1,677,000
10,000 Exxon Corp. 615,000
20,000 Sonat, Inc. 1,026,250
24,000 Atlantic Richfield Co. 1,692,000
------------
TOTAL ENERGY $ 9,700,861
------------
FINANCIAL - 18.7%
Commercial Banks - 5.2%
39,400 The Bank of New York Co., Inc. $ 1,713,900
20,400 First Security Corp. 557,175
10,400 First Tennessee National Corp. 499,200
200 First Union Corp. 18,675
16,000 National City Corp. 840,000
14,186 Old Kent Financial Corp. 766,017
------------
$ 4,394,967
------------
Misc. Finance - 2.0%
22,600 Reliastar Financial Corp. $ 1,652,625
------------
Insurance - 8.6%
19,000 Chubb Corp. $ 1,270,625
10,500 Safeco Corp. 490,219
12,000 St. Paul Companies, Inc. 915,000
24,000 American National Insurance Co. 2,142,000
29,000 AmerUs Life Holdings, Inc. 808,375
40,500 Hartford Life, Inc. 1,539,000
------------
$ 7,165,219
------------
Real Estate - 0.2%
4,705 Rouse Co. $ 138,798
------------
Savings & Loan - 2.7%
30,000 H.F. Ahmanson & Co. $ 1,290,000
45,000 Greater New York Savings Bank 1,009,688
------------
$ 2,299,688
------------
TOTAL FINANCIAL $15,651,297
------------
SERVICES - 11.0%
Health & Personal Care - 1.0%
16,000 Becton, Dickinson & Co. $ 825,000
------------
Pharmaceuticals - 9.3%
12,000 Abbott Laboratories $ 796,500
10,400 Bristol-Myers Squibb Co. 842,400
53,400 Schering-Plough Corp. 2,556,525
29,000 Warner-Lambert Co. 3,603,250
------------
$ 7,798,675
------------
Publishing - 0.7%
10,600 McGraw-Hill Co., Inc. $ 623,412
------------
TOTAL SERVICES $ 9,247,087
------------
TECHNOLOGY - 6.2%
Business Machines - 3.0%
9,000 Diebold, Inc. $ 358,875
39,000 Hewlett-Packard Co. 2,184,000
------------
$ 2,542,875
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- ------------
<S> <C> <C>
Computer Services - 2.8%
30,000 Electronic Data Systems Corp. $ 1,230,000
12,000 IBM Corp. 1,082,250
------------
$ 2,312,250
------------
Electronics - 0.2%
3,100 General Motors Corp. (Class H) $ 179,025
------------
Photo/Instrumentation - 0.2%
2,200 Eastman Kodak Co. $ 168,850
------------
TOTAL TECHNOLOGY $ 5,203,000
------------
TRANSPORTATION - 0.2%
Railroad & Bus - 0.2%
2,000 Union Pacific Corp. $ 141,000
------------
TOTAL TRANSPORTATION $ 141,000
------------
UTILITIES - 25.2%
Electricity Utility - 4.1%
70,000 Allegheny Power Systems, Inc. $ 1,868,125
10,000 Dominion Resources, Inc. 365,000
50,000 DPL, Inc. 1,231,250
------------
$ 3,464,375
------------
Gas Utility - 5.9%
15,600 The Brooklyn Union Gas Co. $ 446,550
9,750 Consolidated Natural Gas Co. 524,671
15,000 El Paso Natural Gas Co. 839,063
37,500 NICOR, Inc. 1,345,312
10,000 People's Energy Corp. 373,750
14,000 Public Service Co. of North Carolina, Inc. 268,625
27,300 Questar Corp. 1,122,713
------------
$ 4,920,684
------------
Telecommunications - 15.2%
34,800 Aliant Communications, Inc. $ 678,600
12,600 Ameritech Corp. 856,013
12,500 AT&T Corp. 437,500
14,000 Bell Atlantic Corp. 1,056,125
6,200 BellSouth Corp. 286,363
68,500 GTE Corp. 3,005,437
31,800 NYNEX Corp. 1,832,475
65,000 Sprint Corp. 3,404,375
1,300 U.S. West Communication Group 1,091,132
17,706 SBC Communication Group 48,912
------------
$12,696,932
------------
TOTAL UTILITIES $21,081,991
------------
TOTAL COMMON STOCKS (Cost $67,686,946) $80,091,454
------------
TOTAL INVESTMENT IN SECURITIES (Cost $69,424,525) $81,871,153
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 2.2%
Commercial Paper - 2.2%
$1,830,000 Ford Motor Credit Co., 6.11% 7/01/97 $ 1,830,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $1,830,000) $ 1,830,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $71,254,525) (a) $83,701,153
============
</TABLE>
<TABLE>
<S> <C>
(a) At June 30, 1997, the net unrealized gain on investments based on cost for
federal income tax purposes of $71,254,525 was as follows:
Aggregrate gross unrealized gain for all investments in which there is an
excess of value over tax cost $ 13,656,939
Aggregrate gross unrealized loss for all investments in which there is an
excess of tax cost over value (1,210,311)
------------
Net unrealized gain $ 12,446,628
============
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 aggregated
$34,073,590 and $8,495,032, respectively.
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Equity-Income Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$1,830,000) (cost 71,254,525) $83,701,153
Cash 1,244
Receivables--
Investment securities sold 1,339,413
Fund shares sold 36,209
Dividends and interest 179,838
Other 1,225
------------
Total assets $85,259,082
------------
Liabilities:
Payables:
Investment securities purchased $ 2,510,093
Due to affiliates 47,401
Accrued expenses 9,404
------------
Total liabilities $ 2,566,898
------------
Net Assets:
Paid-in capital $68,516,384
Accumulated undistributed net investment income 210
Accumulated undistributed net realized gain on investments 1,728,962
Net unrealized gain on investments 12,446,628
------------
Total net assets $82,692,184
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $82,692,184/5,151,532 shares $ 16.05
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Equity-Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends $980,131
Interest 34,489
---------
Total investment income $ 1,014,620
-----------
Expenses:
Management fees $199,614
Transfer agent fees 1,059
Accounting 12,857
Custodian fees 7,548
Professional fees 6,657
Printing 1,504
Miscellaneous 4,640
---------
Total expenses $ 233,879
Less fees paid indirectly (191)
-----------
Net expenses $ 233,688
-----------
Net investment income $ 780,932
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 1,713,442
Change in net unrealized gain on investments 8,541,323
-----------
Net gain on investments $10,254,765
-----------
Net increase in net assets resulting from operations $11,035,697
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Equity-Income Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 780,932 $ 671,663
Net realized gain on investments 1,713,442 60,190
Change in net unrealized gain on investments 8,541,323 3,551,636
------------ ------------
Net increase in net assets resulting from
operations $ 11,035,697 $ 4,283,489
------------ ------------
Distributions to Shareholders:
Net investment income ($0.19 and $0.27 per
share, respectively) $ (848,667) $ (590,580)
Net realized gain ($0.01 and $0.00 per share,
respectively) (60,378) --
------------ ------------
Total distributions to shareholders $ (909,045) $ (590,580)
------------ ------------
From Fund Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 1,970,712 3,015,546 $ 29,043,250 $ 38,450,404
Reinvestment of distributions 59,040 45,688 909,046 590,580
Cost of shares repurchased (291,271) (216,188) (4,257,954) (2,776,392)
--------- --------- ------------ ------------
Net increase in net assets resulting from fund
share transactions 1,738,481 2,845,046 $ 25,694,342 $ 36,264,592
========= ========= ------------ ------------
Net increase in net assets $ 35,820,994 $ 39,957,501
Net Assets:
Beginning of period 46,871,190 6,913,689
------------ ------------
End of period (including accumulated undistributed
net investment income of $210 and $67,945,
respectively) $ 82,692,184 $ 46,871,190
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Equity-Income Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.73 $ 12.17 $ 10.00
------------ ---------- -----------
Increase from investment operations:
Net investment income $ 0.17 $ 0.29 $ 0.19
Net realized and unrealized gain on investments 2.35 1.54 2.16
------------ ---------- -----------
Net increase from investment operations $ 2.52 $ 1.83 $ 2.35
Distributions to shareholders:
Net investment income (0.19) (0.27) (0.18)
Net realized gain (0.01) -- --
------------ ---------- -----------
Net increase in net asset value $ 2.32 $ 1.56 $ 2.17
------------ ---------- -----------
Net asset value, end of period $ 16.05 $ 13.73 $ 12.17
============ ========== ===========
Total return* 18.44% 15.19% 23.62%
Ratio of net expenses to average net assets 0.76%**+ 0.96%+ 1.63%**+
Ratio of net investment income to average net assets 2.53%**+ 2.67%+ 2.89%**+
Portfolio turnover rate 28%** 18% --
Average commission rate paid(1) $ 0.0573 $ 0.0583 --
Net assets, end of period (in thousands) $ 82,692 $ 46,871 $ 6,914
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses -- 0.98% 5.32%**
Net investment income (loss) -- 2.65% (0.80%)**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 0.76%** 0.95% 1.47%**
Net investment income 2.53%** 2.68% 3.05%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1)Amount represents the rate of commission paid per share on the Portfolio's
exchange listed transactions.
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- -------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 88.9%
CONVERTIBLE PREFERRED STOCK - 0.4%
2,780 Sprint Corp., 8.25%, 3/31/00 $ 99,733
------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $107,482) $ 99,733
------------
COMMON STOCKS - 58.6%
BASIC INDUSTRIES - 0.7%
Metals & Mining - 0.2%
10,000 Vaal Reefs Exploration & Mining Co., Ltd. (A.D.R.) $ 48,125
------------
Non-Ferrous Metals - 0.5%
1,500 Phelps Dodge Corp. $ 127,781
------------
TOTAL BASIC INDUSTRIES $ 175,906
------------
CAPITAL GOODS - 2.6%
Construct & Engineer - 2.3%
12,000 AGCO Corp. $ 430,500
15,000 Clayton Homes, Inc. 213,750
------------
$ 644,250
------------
Producer Goods - 0.3%
3,000 The Durion Co., Inc. $ 87,750
------------
TOTAL CAPITAL GOODS $ 732,000
------------
CONSUMER DURABLES - 1.7%
Motor Vehicles - 1.7%
15,000 APS Holding Corp. $ 131,250
5,000 Chrysler Corp. 164,063
3,000 General Motors Corp. 167,250
------------
TOTAL CONSUMER DURABLES $ 462,563
------------
CONSUMER NON-DURABLES - 3.6%
7,000 Nike, Inc. $ 408,625
15,000 First Brands Corp. 344,062
5,000 J.C. Penney Co., Inc. 260,938
------------
TOTAL CONSUMER NON-DURABLES $ 1,013,625
------------
ENERGY - 0.9%
Oil & Gas - 0.9%
3,000 Amoco Corp. $ 260,812
------------
TOTAL ENERGY $ 260,812
------------
FINANCIAL - 16.9%
Commercial Banks - 2.5%
5,000 The Bank of New York Co., Inc. $ 217,500
5,000 First Union Corp. 466,875
------------
$ 684,375
------------
Financial Services - 1.7%
7,000 GreenPoint Financial Corp. $ 465,938
------------
Insurance - 1.2%
7,000 Safeco Corp. $ 326,813
------------
Investments - 2.4%
7,000 The Chase Manhattan Corp. $ 679,438
------------
Misc. Finance - 0.8%
7,000 Countywide Credit Industries, Inc. $ 218,312
------------
Real Estate Investment Trusts - 3.1%
12,000 Cali Realty Corp. $ 408,000
8,000 Franchise Finance Corporation of America 208,500
10,000 Gables Residential Trust 252,500
------------
$ 869,000
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -------- ------------
<S> <C> <C>
Savings & Loan - 5.2%
3,500 H.F. Ahmanson & Co. $ 150,500
15,000 Bank Plus Corp. 163,125
6,000 Charter One Financial, Inc. 323,250
4,200 Washington Federal, Inc. 107,888
12,000 Washington Mutual, Inc. $ 717,000
------------
$ 1,461,763
------------
TOTAL FINANCIAL $ 4,705,639
------------
SERVICES - 7.2%
Health & Personal Care - 5.4%
5,000 Apria Healthcare Group, Inc.* $ 88,437
4,000 Becton, Dickinson & Co. 206,250
12,000 Columbia/HCA Healthcare Corp. 471,750
15,000 Integrated Health Services, Inc. 577,500
5,000 Tenet Healthcare Corp. 147,500
------------
$ 1,491,437
------------
Pharmaceuticals - 1.8%
5,000 Merck & Co., Inc. $ 517,500
------------
TOTAL SERVICES $ 2,008,937
------------
TECHNOLOGY - 19.3%
Computer Services - 5.4%
3,000 Compaq Computer Corp. $ 297,750
12,000 FileNet Corp. 174,000
7,000 First Data Corp. 307,562
2,000 International Business Machines Corp. 180,375
25,000 Mercury Interactive Corp.* 371,875
5,000 Seagate Technology, Inc. 175,938
------------
$ 1,507,500
------------
Electronics - 13.9%
15,000 Adaptec, Inc. $ 521,250
7,000 Arrow Electronics, Inc. 373,187
11,000 Avnet, Inc. 648,312
12,000 Lam Research Corp.* 444,750
7,000 Cisco System, Inc. 469,875
3,000 EMC Corp. 117,000
7,000 Entec Systems, Inc. 300,125
2,000 Intel Corp. 283,625
15,000 Phototronics, Inc. 716,250
------------
$ 3,874,374
------------
TOTAL TECHNOLOGY $ 5,381,874
------------
UTILITIES - 5.7%
Electric Utility - 1.6%
12,000 Dominion Resources, Inc. $ 438,000
------------
Telecommunications - 4.1%
5,000 BellSouth Corp. $ 230,938
10,000 GTE Corp. 438,750
15,000 DSC Communications Corp. 333,750
2,000 Lucent Technologies, Inc. 144,125
------------
$ 1,147,563
------------
TOTAL UTILITIES $ 1,585,563
------------
TOTAL COMMON STOCKS (Cost $14,561,643) $16,326,919
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- ------------ ------------- ------------
<S> <C> <C> <C>
DEBT OBLIGATIONS - 29.9%
CORPORATE BONDS - 20.4%
Basic Industries - 3.0%
$ 150,000 BBB+/A3 Lockheed Martin Corp., 6.85%, 5/15/01 $ 150,093
135,000 A/A2 Phelps Dodge Corp., 7.75%, 1/1/02 139,811
500,000 BBB/Baa1 Tosco Corp., 9.625%, 3/15/02 553,050
------------
TOTAL BASIC INDUSTRIES $ 842,954
------------
Financial - 13.4%
200,000 AA-/Aa3 Associates Corp., N.A., 6.0%, 3/15/99 $ 199,296
210,000 A/A1 Chase Manhattan Corp., 5.5%, 2/15/01 202,310
500,000 A/A2 Citicorp, 7.25%, 9/1/08 502,815
250,000 A/A2 First Data Corp., 6.625%, 4/1/03 247,023
511,000 A-/A3 General Motors Acceptance Corp., 5.625%, 2/15/01 493,202
200,000 A-/Baa2 Hertz Corp., 7.0%, 7/15/03 200,866
300,000 A/A2 Hartford Financial Services Group Inc., 6.375%, 11/1/02 292,305
220,000 AA-/Aa3 Merrill Lynch & Co., Inc., 6.375%, 9/8/06 208,864
200,000 A/A2 Nationsbank Corp., 7.5%, 9/15/06 204,980
200,000 A/A2 Nationsbank Corp., 6.5%, 3/15/06 191,982
200,000 BBB/Baa1 Salomon Inc., 7.0%, 6/15/03 197,454
500,000 BBB/A3 Washington Mutual Inc., 7.25%, 8/15/05 500,855
300,000 A-/Baa1 Western National Corp., 7.125%, 2/15/04 299,298
------------
TOTAL FINANCIAL $ 3,741,250
------------
Services - 0.7%
200,000 AA-/A1 Warner-Lambert Co., 6.625%, 9/15/02 $ 199,752
------------
TOTAL SERVICES $ 199,752
------------
TRANSPORTATION - 1.9%
Railroad & Bus - 1.9%
500,000 BBB/Baa2 Kansas City Southern Industries, Inc., 7.875%, 7/1/02 $ 516,244
------------
TOTAL TRANSPORTATION
Telecommunications - 1.4%
400,000 A/A2 Lucent Technologies, Inc., 6.9%, 7/15/01 $ 402,872
------------
TOTAL CORPORATE BONDS $ 5,703,072
------------
U.S. Government Obligations - 9.5%
775,000 U.S. Treasury Notes, 5.25%, 1/31/01 $ 749,851
945,000 U.S. Treasury Notes, 5.625%, 2/15/06 887,459
1,000,000 U.S. Treasury Notes, 6.25%, 3/31/99 1,003,540
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 2,640,850
------------
TOTAL DEBT OBLIGATIONS (Cost $8,362,691) $ 8,343,922
------------
TOTAL INVESTMENT IN SECURITIES (Cost $23,031,816) $24,770,574
------------
TEMPORARY CASH INVESTMENT - 11.1%
Repurchase Agreement - 11.1%
3,100,000 Chase Manhattan Corp., 6/30/97, 5.80%, repurchase price of $3,100,000
plus accrued interest on 7/1/97, collateralized by $3,070,000 U.S.
Treasury Notes, 6.25%, 7/31/98 $ 3,100,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $3,100,000) $ 3,100,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $26,131,816) (a) $27,870,574
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) At June 30, 1997, the net unrealized gain on investments based on
cost for federal income tax purposes of $26,139,609, was as follows:
<TABLE>
<S> <C> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $ 2,165,093
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (434,128)
-----------
Net unrealized gain $ 1,730,965
===========
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 were as follows:
Purchases Sales
----------- -----------
Long-term U.S. Government $9,903,617 $ --
Other Long-term Securities 2,614,877 5,518,223
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
Balanced Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$3,100,000) (cost 26,131,816) $27,870,574
Cash 97,955
Receivables--
Dividends and interest 209,247
Other 513
------------
Total assets $28,178,289
------------
Liabilities:
Payables--
Fund shares repurchased $ 3,606
Due to affiliates 18,045
Accrued expenses 13,215
------------
Total liabilities $ 34,866
------------
Net Assets:
Paid-in capital $25,463,922
Accumulated undistributed net investment income 301
Accumulated undistributed net realized gain 940,442
Net unrealized gain on investments 1,738,758
------------
Total net assets $28,143,423
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $28,143,423/1,984,200 shares $ 14.18
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
Balanced Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends $119,359
Interest 290,264
---------
Total investment income $ 409,623
----------
Expenses:
Management fees $ 69,828
Transfer agent fees 629
Accounting 13,447
Custodian fees 9,629
Professional fees 4,548
Printing 1,980
Fees and expenses of nonaffiliated trustees 576
Miscellaneous 5,499
---------
Total expenses $ 106,136
Less management fees waived by
Pioneering Management Corporation (101)
Less fees paid indirectly (1,514)
-----------
Net expenses $ 104,521
----------
Net investment income $ 305,102
----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 940,751
Change in net unrealized gain on investments 915,408
----------
Net gain on investments $1,856,159
----------
Net increase in net assets resulting from operations $2,161,261
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
Balanced Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 305,102 $ 235,901
Net realized gain on investments 940,751 340,937
Change in net unrealized gain on investments 915,408 712,764
----------- -----------
Net increase in net assets resulting from
operations $ 2,161,261 $ 1,289,602
----------- -----------
Distributions to Shareholders:
Net investment income ($0.18 and $0.29 per
share, respectively) $ (307,281) $ (232,851)
Net realized gain ($0.14 and $0.07 per share,
respectively) (262,435) (81,104)
----------- -----------
Total distributions to shareholders $ (569,716) $ (313,955)
----------- -----------
From Fund Share Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 712,583 1,080,147 $ 9,762,832 $13,535,523
Reinvestment of distributions 40,599 24,566 569,717 313,955
Cost of shares repurchased (41,644) (56,270) (564,109) (702,950)
--------- --------- ----------- -----------
Net increase in net assets resulting from
fund share transactions 711,538 1,048,443 $ 9,768,440 $13,146,528
========= ========= ----------- -----------
Net increase in net assets $11,359,985 $14,122,175
Net Assets:
Beginning of period 16,783,438 2,661,263
----------- -----------
End of period (including accumulated undistributed
net investment income of $301 and $2,480,
respectively) $28,143,423 $16,783,438
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
Balanced Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.19 $ 11.87 $ 10.00
------------ ---------- -----------
Increase from investment operations:
Net investment income $ 0.18 $ 0.29 $ 0.20
Net realized and unrealized gain on investments 1.13 1.39 1.87
------------ ---------- -----------
Net increase from investment operations $ 1.31 $ 1.68 $ 2.07
Distributions to shareholders:
Net investment income (0.18) (0.29) (0.20)
Net realized gain (0.14) (0.07) --
------------ ---------- -----------
Net increase in net asset value $ 0.99 $ 1.32 $ 1.87
------------ ---------- -----------
Net asset value, end of period $ 14.18 $ 13.19 $ 11.87
============ ========== ===========
Total return* 9.95% 14.26% 20.84%
Ratio of net expenses to average net assets 0.98%**+ 1.20%+ 1.76%**+
Ratio of net investment income to average net assets 2.82%**+ 2.83%+ 2.99%**+
Portfolio turnover rate 56%** 74% --
Average commission rate paid(1) $ 0.0556 $ 0.0582 --
Net assets, end of period (in thousands) $ 28,143 $ 16,783 $ 2,661
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 0.99%** 1.55% 14.77%**
Net investment income (loss) 2.81%** 2.45% (10.02)%**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 0.97%** 1.15% 1.45%**
Net investment income 2.83%** 2.88% 3.30%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
(1) Amount represents the rate of commission paid per share on the Portfolio's
exchange listed securities transactions.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
Swiss Franc Bond Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- ------------ ------------- ------------
<S> <C> <C> <C>
DEBT OBLIGATIONS - 84.6%
Austria - 4.0%
$1,000,000 AAA/Aaa City of Vienna, 4.25%, 1/31/00 $ 719,689
------------
Australia - 8.0%
1,000,000 NR/NR Autobahnen-Und Schn, 3.0%, 11/12/01 $ 706,853
1,000,000 NR/NR Shell Australia, 6.0%, 1/14/00 744,506
------------
$ 1,451,359
------------
Belgium - 8.5%
1,000,000 NR/NR Kingdom of Belgium, 7.125%, 6/1/99 $ 749,641
1,000,000 NR/NR Societe Nationale Credit a d'Investissement, 7.25%, 10/2/00 785,582
------------
$ 1,535,223
------------
Canada - 2.4%
600,000 AA-/Aa3 Province of Ontario, 4.0%, 6/29/01 $ 437,051
------------
Denmark - 4.4%
1,340,000 Aa1/AA+ Kingdom of Denmark, 0.0%, 2/17/02 $ 806,137
------------
Germany - 2.4%
600,000 AA+/Aa1 Great Belt AS, 4.25%, 9/24/04 $ 438,078
------------
Ireland - 7.3%
1,700,000 AA/Aa2 Republic of Ireland, 6.5%, 1/15/01 $ 1,318,032
------------
Netherlands - 7.9%
1,000,000 Aaa/NR Helaba Finance, 3.75%, 12/28/00 $ 721,230
1,000,000 AA-/Aa3 De Nationale Investeringsbank NV, 3.25%, 12/20/99 703,772
------------
$ 1,425,002
------------
New Zealand - 4.8%
1,200,000 AA+/Aa1 Transpower Finance Ltd., 4.25%, 6/10/04 $ 872,048
------------
Norway - 10.5%
2,600,000 AA+/Aa2 Statoil, 4.125%, 9/20/01 $ 1,909,906
------------
South Korea - 7.9%
2,000,000 AA-/A1 Korea Development Bank, 4.25%, 3/29/01 $ 1,441,432
------------
Sweden - 2.4%
100,000 A/A2 City of Gothenberg, 6.375%, 12/10/99 $ 74,878
500,000 AA+/Aa3 Swedish Export Credit, 4.25%, 1/31/06 360,872
------------
$ 435,750
------------
Philippines - 5.2%
1,250,000 AAA/Aaa Asian Development Bank, 7.375%, 11/27/00 $ 936,623
------------
United Kingdom - 2.0%
500,000 AA/Aa2 Abbey National Treasury Services, 4.0%, 12/30/99 $ 357,192
------------
United States - 6.9%
300,000 AAA/Aaa General Electric Capital Corp., 3.5%, 5/29/00 $ 212,826
1,500,000 Aa3/AA- Merrill Lynch & Co., 3.0%, 4/08/02 1,038,714
------------
$ 1,251,540
------------
TOTAL DEBT OBLIGATIONS (Cost $16,594,492) $15,335,062
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
Swiss Franc Bond Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------ ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 15.4%
Repurchase Agreement - 15.4%
Chase Manhattan Corp., 6/30/97, 5.80%, repurchase price
of $2,800,000 plus accrued interest on 7/1/97,
collateralized by $2,773,000 U.S
$2,800,000 Treasury Notes, 6.25%, 7/31/98 $ 2,800,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $2,800,000) $ 2,800,000
------------
TOTAL INVESTMENT IN SECURITIES - 100% (Cost $19,394,492)(a) $18,135,062
============
(a) At June 30, 1997, the net unrealized loss on investments based on cost for
federal income tax purposes of $19,394,492 was as follows:
Aggregate gross unrealized gain for all investments in which there
is an excess of value over tax cost $ 19,067
Aggregate gross unrealized loss for all investments in which there is
an excess of tax cost over value (1,278,497)
------------
Net unrealized loss $(1,259,430)
============
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 aggregated
$6,443,596 and $330,632, respectively.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
Swiss Franc Bond Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$2,800,000) (cost $19,394,492) $ 18,135,062
Cash 24,138
Receivables--
Investments securities sold 77,893
Fund shares sold 44,612
Dividends, interest and foreign taxes withheld 310,150
Other 360
------------
Total assets $ 18,592,215
------------
Liabilities:
Payables--
Investment securities purchased $ 1,045,932
Fund shares repurchased 251
Foreign currencies, at value 8,719
Forward foreign currency portfolio hedge contracts, open--net 31,297
Due to affiliates 15,111
Accrued expenses 11,303
------------
Total liabilities $ 1,112,613
------------
Net Assets:
Paid-in capital $ 18,912,673
Accumulated undistributed net investment income 302,148
Accumulated net realized loss on investments and foreign currency
transactions (450,649)
Net unrealized loss on investments (1,259,430)
Net unrealized loss on forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (25,140)
------------
Total net assets $ 17,479,602
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $17,479,602/1,386,846 shares $ 12.60
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
Swiss Franc Bond Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 344,674
----------
Total investment income $ 344,674
------------
Expenses:
Management fees $ 48,649
Transfer agent fees 621
Accounting 15,549
Custodian fees 10,733
Professional fees 10,282
Printing 4,287
Fees and expenses of nonaffiliated trustees 419
Miscellaneous 5,581
----------
Total expenses $ 96,121
Less management fees waived by Pioneering Management Corporation (2,176)
Less fees paid indirectly (1,400)
------------
Net expenses $ 92,545
------------
Net investment income $ 252,129
------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized loss from:
Investments $ (38,428)
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (412,221) $ (450,649)
---------- ------------
Change in net unrealized loss from:
Investments $ (721,880)
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies 84,890 $ (636,990)
---------- ------------
Net loss on investments and foreign currency transactions $ (1,087,639)
------------
Net decrease in net assets resulting from operations $ (835,510)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
Swiss Franc Bond Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 252,129 $ 175,710
Net realized loss on investments and foreign
currency transactions (450,649) (125,670)
Change in net unrealized loss on investments and
foreign currency transactions (636,990) (647,374)
------------ -----------
Net decrease in net assets resulting from
operations $ (835,510) $ (597,334)
------------ -----------
Distributions to Shareholders:
Net investment income ($0.00 and $0.00 per
share, respectively) $ -- $ (558)
------------ -----------
Total distributions to shareholders $ -- $ (558)
------------ -----------
From Fund Share Transactions: '97 Shares '96 Shares
---------- ---------
Net proceeds from sale of shares 512,464 1,011,347 $ 6,509,972 $14,177,025
Reinvestment of dividends -- 40 -- 558
Cost of shares repurchased (99,991) (49,589) (1,274,139) (689,737)
--------- --------- ------------ -----------
Net increase in net assets resulting from
fund share transactions 412,473 961,798 $ 5,235,833 $13,487,846
========= ========= ------------ -----------
Net increase in net assets $ 4,400,323 $12,889,954
Net Assets:
Beginning of period 13,079,279 189,325
------------ -----------
End of period (including accumulated undistributed
net investment income of $302,148 and $50,019,
respectively) $ 17,479,602 $13,079,279
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
Swiss Franc Bond Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended November 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
----------------- ------------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.42 $ 15.06 $ 15.00
----------- ----------- -----------
Increase (decrease) from investment operations:
Net investment income $ 0.17 $ 0.14 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (0.99) (1.78) 0.02
----------- ----------- -----------
Net increase (decrease) in net asset value $ (0.82) $ (1.64) $ 0.06
----------- ----------- -----------
Net asset value, end of period $ 12.60 $ 13.42 $ 15.06
=========== =========== ===========
Total return* (6.11)% (10.88)% 0.40%
Ratio of net expenses to average net assets 1.25%**+ 1.20%+ 2.25%**+
Ratio of net investment income to average net assets 3.34%**+ 3.37%+ 1.70%**+
Portfolio turnover rate 5%** 39% --%
Net assets, end of period (in thousands) $ 17,480 $ 13,079 $ 189
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 1.28%** 2.58% 69.22%**
Net investment income (loss) 3.31%** 1.99% (65.27)%**
Ratios assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 1.23%** 1.15% 1.25%**
Net investment income 3.36%** 3.42% 2.70%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each period
and reinvestment of distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
America Income Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- -----------
<S> <C> <C>
INVESTMENT IN SECURITIES - 100.0%
U.S. Government and Agency Obligations - 100.0%
$250,000 Federal Home Loan Mortgage Corp., 6.9%, 2000 $ 251,770
300,000 Federal Home Loan Mortgage Corp., 6.455%, 2002 297,051
110,000 Federal Home Loan Mortgage Corp., 6.55%, 2000 110,764
200,000 Federal Home Loan Mortgage Corp., 7.055%, 2001 200,010
300,000 Federal Home Loan Mortgage Corp., 7.125%, 2002 308,106
250,000 Federal Home Loan Mortgage Corp., REMIC Series 1142H, 7.95%, 2020 254,415
250,000 Federal National Mortgage Association, 6.7%, 2001 249,688
225,000 Federal National Mortgage Association, 6.8%, 2003 227,401
100,000 Federal National Mortgage Association, 6.85%, 2004 101,144
250,000 Federal National Mortgage Association, Medium Term Note, 6.93%, 2001 250,137
200,000 Federal National Mortgage Association, Medium Term Note, 7.17%, 2001 201,522
300,000 Federal National Mortgage Association, Medium Term Note, 7.53%, 2006 301,395
273,496 Government National Mortgage Association, 8.0%, 2008 283,044
246,972 Government National Mortgage Association, 7.5%, 2022 to 2023 249,516
646,624 Government National Mortgage Association, 7.0%, 2025 to 2026 639,836
300,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 2006 293,352
250,000 Federal Farm Credit Bank, Medium Term Note, 7.15%, 2002 251,783
250,000 Private Export Funding Association, 6.9%, 2003 253,750
250,000 Private Export Funding Association, 7.3%, 2002 257,945
200,000 Student Loan Marketing Association, 7.5%, 2000 205,932
100,000 Tennessee Valley Authority, Global Bond, 6.375%, 2005 98,205
800,000 U.S. Treasury Bonds, 7.25%, 2016 834,416
660,000 U.S. Treasury Notes, 7.125%, 2000 674,565
200,000 U.S. Treasury Notes, 7.875%, 2004 215,714
800,000 U.S. Treasury Notes, 7.0%, 2006 823,192
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $7,919,208) (a) (b) $7,834,653
===========
</TABLE>
(a) At June 30, 1997, the net unrealized loss on investments based on cost
for federal income tax purposes of $7,919,208 was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain of all investments in which there is an excess
of tax cost over value $ 8,750
Aggregate gross unrealized loss of all investments in which there is an excess
of tax cost over value (93,305)
-----------
Net unrealized loss $ (84,555)
===========
</TABLE>
(b) At December 31, 1996, the Portfolio had a capital loss carryforward of
$72,758 which will expire in 2004 if not utilized.
Note: The Portfolio's investments in mortgage-backed securities of the
Government National Mortgage Association (GNMA) are interests in
separate pools of mortgages. All separate investments in this issuer
which have the same coupon rate have been aggregated for the purpose of
presentation in the schedule of investments.
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1997 were $1,919,648 and
$411,167, respectively.
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
America Income Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value (Cost $7,919,208) $7,834,653
Cash 14,709
Receivables--
Interest 129,844
Fund shares sold 101,278
Other 180
----------
Total assets $8,080,664
----------
Liabilities:
Due to affiliates $ 5,749
Accrued expenses 14,827
----------
Total liabilities $ 20,576
----------
Net Assets:
Paid-in capital $8,211,674
Accumulated net realized loss on investments (67,031)
Net unrealized loss on investments (84,555)
----------
Total net assets $8,060,088
==========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $8,060,088/827,535 shares $ 9.74
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
America Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 255,765
---------
Expenses:
Management fees $20,455
Transfer agent fees 376
Accounting 15,912
Custodian fees 9,852
Professional fees 5,409
Printing 2,340
Fees and expenses of nonaffiliated trustees 402
Miscellaneous 2,398
--------
Total expenses $ 57,144
Less management fees waived by Pioneering Management Corporation (9,263)
Less fees paid indirectly (1,392)
---------
Net expenses $ 46,489
---------
Net investment income $ 209,276
---------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments $ 5,727
Change in net unrealized loss on investments (26,418)
---------
Net loss on investments $ (20,691)
---------
Net increase in net assets resulting from operations $ 188,585
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
America Income Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 209,276 $ 225,843
Net realized gain (loss) on investments 5,727 (72,430)
Change in net unrealized loss on investments (26,418) (108,636)
------------ ------------
Net increase in net assets resulting from
operations $ 188,585 $ 44,777
------------ ------------
Distributions to Shareholders:
From investment income ($0.27 and $0.52 per
share, respectively) $ (209,276) $ (225,843)
In excess of net investment income ($0.00 and
$0.00 per share, respectively) -- (130)
------------ ------------
Total distributions to shareholders $ (209,276) $ (225,973)
------------ ------------
'97 shares '96 shares
---------- ---------
From Fund Share Transactions:
Net proceeds from sale of shares 285,150 799,366 $ 2,761,139 $ 7,875,427
Reinvestment of distributions 21,613 23,018 209,276 225,549
Cost of shares repurchased (182,112) (464,797) (1,761,922) (4,561,786)
--------- --------- ------------ ------------
Net increase in net assets resulting from
fund share transactions 124,651 357,587 $ 1,208,493 $ 3,539,190
========= ========= ------------ ------------
Net increase in net assets $ 1,187,802 $ 3,357,994
Net Assets:
Beginning of period 6,872,286 3,514,292
------------ ------------
End of period (including net accumulated
undistributed investment income of $0 and $0,
respectively) $ 8,060,088 $ 6,872,286
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
America Income Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
----------------- ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.78 $ 10.18 $ 10.00
----------- --------- -----------
Increase (decrease) from investment operations:
Net investment income $ 0.27 $ 0.52 $ 0.38
Net realized and unrealized gain (loss) on
investments (0.04) (0.40) 0.18
----------- --------- -----------
Net increase from investment operations $ 0.23 $ 0.12 $ 0.56
Distributions to shareholders:
Net investment income (0.27) (0.52) (0.38)
----------- --------- -----------
Net increase (decrease) in net asset value $ (0.04) $ (0.40) $ 0.18
----------- --------- -----------
Net asset value, end of period $ 9.74 $ 9.78 $ 10.18
=========== ========= ===========
Total return* 2.38% 1.30% 5.68%
Ratio of net expenses to average net assets 1.29%**+ 1.31%+ 1.12%**+
Ratio of net investment income to average net assets 5.58%**+ 5.25%+ 5.22%**+
Portfolio turnover rate 12%** 60% 96%**
Net assets, end of period (in thousands) $ 8,060 $ 6,872 $ 3,514
Ratio assuming no waiver of management fees and
assumption of expenses by PMC and no reduction
for fees paid indirectly:
Net expenses 1.53%** 2.24% 11.86%**
Net investment income (loss) 5.34%** 4.32% (5.52)%**
Ratio assuming waiver of management fees and
assumption of expenses by PMC and reduction for
fees paid indirectly:
Net expenses 1.25%** 1.25% 0.99%**
Net investment income 5.62%** 5.31% 5.35%**
</TABLE>
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
Money Market Portfolio
Schedule of Investments - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------- ------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 100.0%
COMMERCIAL PAPER - 100.0%
$500,000 Abbot Laboratories, 5.5%, 8/4/97 $ 497,403
400,000 Associates Corp. of North America, 5.54%, 7/8/97 399,569
570,000 American General Finance Corp., 5.54%, 7/8/97 566,391
590,000 Amoco Co., 5.46%, 9/03/97 584,273
400,000 American Express Credit Co., 5.54%, 8/29/97 396,368
600,000 AVCO Financial Services Inc., 5.56%, 9/3/97 594,069
310,000 BankAmerica Corp., 5.49%, 8/20/97 307,636
610,000 Bell Atlantic Corp., 5.57%, 7/3/97 609,811
590,000 Beneficial Corp., 5.57%, 9/8/97 583,701
460,000 Coca-Cola Co., 5.48%, 7/14/97 459,090
590,000 Corestates Capital Corp., 5.54%, 8/19/97 585,551
540,000 Equitable Resources Inc., 5.57%, 8/28/97 535,154
600,000 Ford Motor Credit Co., 5.48%, 7/1/97 600,000
380,000 Gannett Co. Inc., 5.48%, 7/25/97 378,612
590,000 Household Finance Corp., 5.57%, 8/4/97 586,896
575,000 John Deere Capital Corp., 5.67%, 7/9/97 574,276
200,000 Norwest Financial Inc., 5.54%, 8/18/97 198,523
400,000 Pacific Gas & Electric Corp., 5.53%, 7/22/97 398,710
630,000 Prudential Funding Corp., 5.53%, 7/22/97 629,129
600,000 Safeco Corp., 5.55%, 7/11/97 599,075
530,000 Southern California Edison, 5.52%, 8/7/97 526,993
515,000 Toys "R" Us Inc., 5.49%, 8/6/97 512,173
595,000 Warner Lambert Co., 5.48%, 8/5/97 591,830
530,000 Xerox Credit Corp., 5.49%, 7/17/97 528,707
------------
TOTAL INVESTMENT IN SECURITIES - 100.0% $12,243,939
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
Money Market Portfolio
Balance Sheet
June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value based on amortized cost $12,243,939
Cash 2,042
Receivables--
Fund shares sold 195,855
Other 269
------------
Total assets $12,442,105
------------
Liabilities:
Payables--
Funds shares repurchased $ 299
Due to affiliates 5,868
Accrued expenses 14,146
------------
Total liabilities $ 20,313
------------
Net Assets:
Fund shares $12,421,792
------------
Total net assets $12,421,792
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $12,421,792/12,421,792 shares $ 1.00
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
Money Market Portfolio
Statement of Operations
For the Six Months Ended June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest $341,134
--------
Expenses:
Management fees $31,175
Transfer agent fees 180
Accounting 12,837
Custodian fees 13,274
Registration fees 81
Professional fees 5,341
Printing 1,152
Fees and expenses of nonaffiliated trustees 500
Miscellaneous 2,910
--------
Total expenses $ 67,450
Less management fees waived by Pioneering Management Corporation (4,833)
Less fees paid indirectly (823)
--------
Net expenses $ 61,794
--------
Net investment income $279,340
--------
Net increase in net assets resulting from operations $279,340
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
Money Market Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1997 and the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(unaudited) December 31, 1996
----------------- ------------------
<S> <C> <C>
From Operations:
Net investment income $ 279,340 $ 373,559
------------- -------------
Net increase in net assets resulting from operations $ 279,340 $ 373,559
------------- -------------
Distributions to Shareholders:
Net investment income ($0.02 and $0.04 per share,
respectively) $ (279,340) $ (373,559)
------------- -------------
From Fund Share Transactions (at $1.00 per share):
Net proceeds from sale of shares $ 22,372,064 $ 38,210,804
Reinvestment of distributions 279,360 373,559
Cost of shares repurchased (21,973,934) (30,255,633)
------------- -------------
Net increase in net assets resulting from fund
share transactions $ 677,490 $ 8,328,730
------------- -------------
Net increase in net assets $ 677,490 $ 8,328,730
Net Assets:
Beginning of period 11,744,302 3,415,572
------------- -------------
End of period $ 12,421,792 $ 11,744,302
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
Money Market Portfolio
Financial Highlights
June 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended March 1, 1995 to
(unaudited) December 31, 1996 December 31, 1995
----------------- ------------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Increase from investment operations:
Net investment income $ 0.02 $ 0.04 $ 0.04
---------- ---------- ----------
Distributions to shareholders from:
Net investment income (0.02) (0.04) (0.04)
---------- ---------- ----------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total return* 2.23% 4.51% 4.35%
Ratio of net expenses to average net assets 1.00%**+ 0.97%+ 0.81%**+
Ratio of net investment income to average net assets 4.44%**+ 4.43%+ 5.00%**+
Net assets, end of period (in thousands) $ 12,422 $ 11,744 $ 3,416
Ratios assuming no waiver of fees and assumption
of expenses by PMC and no reduction for fees
paid indirectly:
Net expenses 1.07%** 1.29% 8.34%**
Net investment income (loss) 4.37%** 4.11% (2.53%)**
Ratios assuming waiver of fees and assumption of
expenses by PMC and reduction for fees paid
indirectly:
Net expenses 0.99%** 0.96% 0.74%**
Net investment income 4.45%** 4.44% 5.07%**
</TABLE>
+ Ratios assuming no reduction for fees paid indirectly.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
Notes to Financial Statements - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies - Pioneer Variable Contracts
Trust (the Trust) is a Delaware business trust registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Trust consists of eight separate portfolios (collectively, the Portfolios or
Funds): International Growth Portfolio, Capital Growth Portfolio, Real Estate
Growth Portfolio, Equity-Income Portfolio, Balanced Portfolio, Swiss Franc Bond
Portfolio, America Income Portfolio, and Money Market Portfolio. Shares of each
Portfolio may be only purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts.
Each Portfolio has its own distinct investment objective. International
Growth Portfolio seeks long-term capital growth. Capital Growth Portfolio seeks
capital growth. Real Estate Growth Portfolio pursues long-term capital growth,
with income as a secondary objective. Equity-Income Portfolio seeks current
income and long-term capital growth. Balanced Portfolio's investment objectives
are capital growth and current income. Swiss Franc Bond Portfolio invests to
approximate the performance of the Swiss franc relative to the U.S. dollar while
earning reasonable income. America Income Portfolio seeks a high level of
current income as consistent with preservation of capital. Money Market
Portfolio invests for current income consistent with preserving capital and
providing liquidity.
The Trust's financial statements have been prepared in conformity with
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Trust, which are in conformity
with those generally accepted in the investment company industry:
A. Security Valuation - Security transactions are recorded on trade date. Each
day, equity securities are valued at the last sale price on the principal
exchange where they are traded. Securities that have not traded on the date of
valuation, or securities for which sale prices are not generally reported, are
valued at the mean between the last bid and asked prices. Trading in foreign
equity securities is substantially completed each day at various times prior to
the close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Portfolio's shares are determined as of
such times.
Taxable fixed income securities are valued based on valuations furnished by
independent pricing services that utilize matrix systems. These matrix systems
reflect such factors as security prices, yields, maturities, and ratings and are
supplemented by dealer and exchange quotations and fair market value information
from other sources, as required. Market discount and premium are accreted and
amortized daily on a straight-line basis.
Securities for which market quotations are not readily available are valued
at their fair values as determined by, or under the direction of, the Board of
Trustees. Dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio is informed of the ex-dividend data
in the exercise of reasonable diligence. Income is recorded on the accrual
basis, net of unrecoverable foreign taxes withheld at the applicable country
rates. Temporary cash investments are valued at amortized cost.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes. It is
the Trust's practice to first select for sale those securities that have the
highest cost and also qualify for long-term capital gain or loss treatment for
tax purposes. In addition, net realized gains on securities in certain countries
give rise to capital gains taxes. It is the Trust's policy to provide a reserve
against net unrealized gains for capital gains taxes on certain foreign
securities held by the Trust. During the six months ended June 30, 1997, no
capital gains taxes realized on the sale of certain foreign securities were
paid.
Because the Real Estate Growth Portfolio may invest a substantial portion
of its assets in Real Estate Investment Trusts (REITs), the Portfolio may be
subject to certain risks associated with direct investments in REITs. REITs may
be affected by changes in the value of their underlying properties and by
defaults by borrowers or tenants. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders, and certain REITs have
self-liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income under the Internal Revenue Code or its failure to
maintain exemption from registration under the Investment Company Act of 1940.
The International Growth Portfolio's investments in emerging markets or
countries with limited or developing markets may subject the Portfolio to a
greater degree of risk than in a developed market. Risks associated with these
developing
65
<PAGE>
Notes to Financial Statements - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
markets include political, social or economic factors and may affect the price
of the Portfolio's investments and income generated by these investments, as
well as the Portfolio's ability to repatriate such amounts. In addition, delays
are common in registering transfers of securities in certain foreign countries,
such as India, and the Portfolio may be unable to sell portfolio securities
until the registration process is completed.
B. Foreign Currency Translation - The books and records of Portfolios are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
among other things, the net realized gains and losses on foreign currency
contracts, disposition of foreign currencies, and the difference between the
amount of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in market
price of those securities but are included with the net realized and unrealized
gain or loss on investments.
C. Forward Foreign Currency Contracts - Certain Portfolios are authorized to
enter into forward foreign currency contracts (contracts) for the purchase or
sale of a specific foreign currency at a fixed price on a future date as a hedge
or cross-hedge against either specific investment transactions (settlement
hedges) or portfolio positions (portfolio hedges). All contracts are marked to
market daily at the applicable exchange rates, and any resulting unrealized
gains or losses are recorded in the Portfolios' financial statements. The
Portfolios record realized gains and losses at the time a portfolio hedge is
offset by entry into a closing transaction or extinguished by delivery of the
currency. Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of the contract and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar (see Note 5).
D. Taxes - It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if any, to
its shareholders. Therefore, no federal income tax provision is required. In
addition to the requirements of the Internal Revenue Code, the Trust may also be
required to pay local taxes on net realized capital gains in certain countries.
The required capital gains taxes, if any, are determined in accordance with
local tax laws. In determining daily net asset value, the Trust estimates the
reserve for capital gains taxes, if any, associated with net unrealized gains on
certain portfolio securities. The estimated reserve for capital gains taxes, if
any, is based on the holding periods of such securities and the related tax
rates, tax loss carryforward (if applicable) and other such factors. During the
six months ended June 30, 1997, none of the Portfolios paid capital gains taxes
on the sale of certain foreign securities.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with income tax rules. Therefore,
the source of each Portfolio's distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or net
realized gain on investment transactions, or from paid-in capital, depending on
the type of book/tax differences that may exist.
A portion of the dividend income recorded by the Real Estate Growth
Portfolio is from distributions by publicly traded real estate investment trusts
(REITs), and such distributions for tax purposes may also consist of capital
gains and return of capital. The actual return of capital and capital gains
portions of such distributions will be determined by formal notifications from
the REITs subsequent to the calendar year-end. Distributions received from the
REITs that are determined to be a return of capital, are recorded by the Trust
as a reduction of the cost basis of the securities held.
E. Fund Shares - The Portfolios record sales and repurchases of their fund
shares on trade date. Net losses, if any, as a result of cancellations are
absorbed by Pioneer Funds Distributor, Inc. (PFD), the principal underwriter for
the Trust and an indirect subsidiary of PGI. The America Income Portfolio and
Money Market Portfolio declare as daily dividends substantially all of their
respective net investment income. All dividends are paid on a monthly basis.
Short-term capital gain distributions, if any, may be declared with the daily
dividends. Dividends and distributions to shareholders are recorded as of the
ex-dividend date.
F. Repurchase Agreements - With respect to repurchase agreements entered into by
the Portfolios, the value of the underlying securities (collateral), including
accrued interest received from counterparties, is required to be at least equal
to or in excess of the value of the repurchase agreement at the time of
purchase. The collateral for all repurchase agreements is held in safekeeping in
the customer-only account of the Fund's custodian, or subcustodians. The Trust's
investment adviser, Pioneering Management Corporation (PMC), is responsible for
determining that the value of the collateral remains at least equal to the
repurchase price.
66
<PAGE>
Notes to Financial Statements - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
2. Management Agreement - PMC is the Trust's investment adviser, manages the
Portfolios, and is a wholly owned subsidiary of The Pioneer Group, Inc. (PGI).
Management fees are calculated daily at the following annual rates:
<TABLE>
<CAPTION>
Management Fee as a Percentage
of each Portfolio's Average
Portfolio Daily Net Assets
- -------------------------------- -------------------------------
<S> <C>
International Growth Portfolio 1.00%
Capital Growth Portfolio 0.65%
Real Estate Growth Portfolio 1.00%
Equity-Income Portfolio 0.65%
Balanced Portfolio 0.65%
Swiss Franc Bond Portfolio 0.65%
America Income Portfolio 0.55%
Money Market Portfolio 0.50%
</TABLE>
PMC has agreed not to impose a portion of its management fees and to assume
other operating expenses for certain Portfolios to the extent necessary to limit
expenses of each Portfolio to the following percentage of its average daily net
assets:
<TABLE>
<CAPTION>
Expense Limitation as a
Percentage of each Portfolio's
Portfolio Average Daily Net Assets
- -------------------------------- -------------------------------
<S> <C>
International Growth Portfolio 1.50%
Real Estate Growth Portfolio 1.25%
Swiss Franc Bond Portfolio 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
</TABLE>
In addition, under the management agreements, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Portfolios. At June 30, 1997, the following amounts were payable to
PMC related to management fees and certain other services:
<TABLE>
<CAPTION>
Portfolio Amount
- -------------------------------- --------
<S> <C>
International Growth Portfolio $35,858
Capital Growth Portfolio 43,183
Real Estate Growth Portfolio 19,653
Equity-Income Portfolio 46,862
Balanced Portfolio 17,937
Swiss Franc Bond Portfolio 15,011
America Income Portfolio 5,320
Money Market Portfolio 5,463
</TABLE>
3. Transfer Agent - PSC, a wholly owned subsidiary of PGI, provides
substantially all transfer agent and shareholder services to the Trust at
negotiated rates. At June 30, 1997 the following transfer agent fees payable to
PSC were included in due to affiliates:
<TABLE>
<CAPTION>
Portfolio Amount
- -------------------------------- -------
<S> <C>
International Growth Portfolio $827
Capital Growth Portfolio 104
Real Estate Growth Portfolio 100
Equity-Income Portfolio 539
Balanced Portfolio 108
Swiss Franc Bond Portfolio 100
America Income Portfolio 429
Money Market Portfolio 405
</TABLE>
67
<PAGE>
Notes to Financial Statements - June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
4. Expense Reductions - The Trust has entered into certain expense offset
arrangements resulting in a reduction in the Portfolios' total expenses. For the
year ended June 30, 1997, the Portfolios' expenses were reduced under such
arrangements as follows:
<TABLE>
<CAPTION>
Portfolio Amount
- -------------------------------- -------
<S> <C>
International Growth Portfolio $1,362
Capital Growth Portfolio 506
Real Estate Growth Portfolio 938
Equity-Income Portfolio 191
Balanced Portfolio 1,514
Swiss Franc Bond Portfolio 1,400
America Income Portfolio 1,392
Money Market Portfolio 823
</TABLE>
5. Forward Foreign Currency Contracts - At June 30, 1997, certain Portfolios had
entered into various contracts that obligate the Portfolios to deliver
currencies at specified future dates. At the maturity of a contact, the
Portfolios must make delivery of the foreign currency. Alternatively, prior to
the settlement date of a portfolio hedge, the Portfolio may close out such
contracts by entering into an offsetting hedge contract. As of June 30, 1997,
the International Growth Portfolio open portfolio hedges were as follows:
<TABLE>
<CAPTION>
In Net
Contracts Exchange Settlement Unrealized
Currency to Deliver For Date Value Gain (Loss)
- ---------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
THB 29,084,000 $1,100,000 8/5/97 $1,147,970 $ (47,970)
ESP 106,815,000 750,000 8/27/97 725,007 24,993
FRF 12,463,000 2,200,000 8/27/97 2,128,802 71,198
JPY 232,701,000 2,100,000 11/25/97 2,075,345 24,655
----------- ----------- ---------
$6,150,000 $6,077,124 $ 72,876
=========== =========== =========
</TABLE>
As of June 30, 1997, the Swiss Franc Bond Portfolio open portfolio hedges
were as follows:
<TABLE>
<CAPTION>
In Net
Contracts Exchange Settlement Unrealized
Currency to Receive For Date Value Loss
- ---------- ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
CHF 1,415,000 $ 981,276 7/1/97 $ 969,510 $(11,766)
CHF 800,000 556,909 7/7/97 548,097 (8,812)
CHF 2,500,000 1,719,868 7/10/97 1,713,441 (6,427)
CHF 925,000 656,433 10/10/97 640,767 (15,666)
----------- ----------- ---------
$3,914,486 $3,871,816 $(42,671)
=========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
In Net
Contracts Exchange Settlement Unrealized
Currency to Deliver For Date Value Gain
- ---------- ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
CHF 800,000 $ 555,016 7/7/97 $ 548,477 $ 6,539
CHF 600,000 416,348 7/10/97 411,513 4,835
----------- ----------- ---------
$ 971,365 $ 959,990 $ 11,374
=========== =========== =========
</TABLE>
The International Growth Portfolio's gross forward foreign currency
settlement contracts receivable and payable were $32,305 and $33,690,
respectively, resulting in a net payable of $1,385.
68
<PAGE>
- --------------------------------------------------------------------------------
This page for your notes.
69
<PAGE>
[Pioneer logo]
PIONEER VISION (SM)
PIONEER VISION 2 (SM)
VARIABLE ANNUITY
Variable Contracts Trust
Officers
John F. Cogan, Jr., Chairman and President
David D. Tripple, Executive Vice President
Stephen G. Kasnet, Vice President
William H. Keough, Treasurer
Joseph P. Barri, Secretary
Trustees
John F. Cogan, Jr.
Richard H. Egdahl, M.D.
Marguerite A. Piret
David D. Tripple
Stephen K. West
Investment Adviser
Pioneering Management Corporation
Custodian
Brown Brothers Harriman & Co.
Legal Counsel
Hale and Dorr LLP
Issuer
Allmerica Financial Life Insurance and Annuity Company, Contract Form A3025-96
In New York and Hawaii, issued by First Allmerica Financial Life Insurance
Company, Contract Form A3025-96 GRC
General Distributor
Allmerica Investments, Inc.
440 Lincoln Street
Worcester, MA 01653
Pioneer Vision(sm) and Pioneer Vision 2(sm) may not be available in all states.
This report must be preceded or accompanied by a prospectus for Pioneer Vision
or Pioneer Vision 2 variable annuity, which includes more information about
charges and expenses. Please read the prospectus carefully before you invest or
send money.
0897-4472
[copyright] Pioneer Funds Distributor, Inc.
