[Photo on cover of navigation tools]
PIONEER VISION(SM)
VARIABLE ANNUITY [Pioneer logo]
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
Annual Report
December 31, 1996
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TABLE OF CONTENTS
Page
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Letter from the Chairman 1
Portfolio Management Discussions
International Growth Portfolio 2
Capital Growth Portfolio 3
Real Estate Growth Portfolio 4
Equity-Income Portfolio 5
Balanced Portfolio 6
Swiss Franc Bond Portfolio 7
America Income Portfolio 8
Growth of a $10,000 Investment 9
Schedules of Investments and Financial Statements
International Growth Portfolio 13
Capital Growth Portfolio 23
Real Estate Growth Portfolio 30
Equity-Income Portfolio 35
Balanced Portfolio 42
Swiss Franc Bond Portfolio 49
America Income Portfolio 54
Money Market Portfolio 59
Notes to Financial Statements 64
Report of Independent Public Accountants 68
Trustees' Fees, Principal Shareholders and Share Ownership
of Trustees and Officers 68
Distributions Made During the Year 69
<PAGE>
Dear Contract Owner,
- --------------------------------------------------------------------------------
Welcome to Pioneer Variable Contracts Trust's annual report covering the year
ended December 31, 1996. Pioneer Variable Contracts Trust, the underlying
funds for Pioneer Vision and Vision2, offers investors a selection of eight
investment Portfolios designed to suit a variety of needs and goals, with the
added tax and insurance benefits of an annuity. The broad array of investment
options continues to have a wide appeal, and the Portfolios had a total of
$180 million in assets by the close of 1996.
A Period of Shifting Financial Markets
The year began with the same enthusiasm that marked financial markets in
1995. Early on, however, investors became concerned about the possibility of
a sharp pick-up in U.S. economic growth. As a result, interest rates rose and
stock and bond prices fell, even though the feared rise in inflation has yet
to materialize. Investors did not remain skeptical for long, however,
preferring to focus on the encouraging signs of moderate economic growth and
positive corporate earnings. This pattern of enthusiasm, concern and renewed
exuberance was repeated many times over the course of the year.
In the U.S., this year's most profitable stocks were noticably volatile,
especially in the technology sector. Overall, stock investors preferred
large, familiar names and seemed to be willing to buy them at nearly any
price. Reflecting this, the Dow Jones Industrial Average generated a total
return of 28.84% over the year. The broader Standard & Poor's 500 Index
returned 22.90%, while small company stocks, represented by the Russell 2000
Index, returned 16.50%. These results are particularly striking given that
the U.S. stock market has returned an average of 10% a year, looking back 70
years. Overseas, results continued to improve but were less impressive, with
non-U.S. markets returning 6.05% to U.S.-dollar based investors this year,
according to the MSCI EAFE (Europe, Australasia, Far East) Index.
Bond investors probably felt the change in mood the most as the Federal
Reserve (the Fed) moved into a "watch and wait" mode after cutting short-term
interest rates in January. Up to that point, the Fed had been acting to
stimulate U.S. economic growth. But when February's employment report showed
the biggest job gain in 12 years, the Fed became concerned the economy could
be overheating and that inflation might rise. As a result, there were no more
Fed rate-cuts during the year, but interest rates rose several times as
investors tried to anticipate potential Fed actions. Bond prices moved up
when the Fed did not raise rates, but unease lingered, fueling an
emotion-driven market. Interest rates on the benchmark 30-year Treasury bond
are a good example -- its peak was 7.19% on June 12 and July 5, its low for
the year was 5.96% on January 2, and it closed the year at 6.64%.
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 $0.044 per share in dividends over
the year, and closed the period with a 7-day yield of 4.39%, 4.49% assuming
the compounding of dividends. As a result, the Portfolio provided a 4.51%
total return for the year, reflecting its conservative nature and goal of
maintaining a stable $1 per share net asset value.
Looking Ahead
As we move into 1997, you continue to enjoy a useful variety of investment
choices for your Pioneer annuity, which also offers significant tax and
insurance benefits. The following pages provide detailed information about
the investment strategy and results for each of the individual Portfolios
offered as part of Pioneer Variable Contracts Trust. Please keep in mind that
your investment results will vary, and are reduced by any fees and charges
assessed under your annuity contract. We encourage you to read on. Please
contact your financial professional if you have any questions about your
investment. Thank you for selecting Pioneer.
Respectfully,
/s/John F. Cogan, Jr.
John F. Cogan, Jr.
Chairman and President
1
<PAGE>
International Growth Portfolio
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International markets delivered mixed results in 1996. Economic recoveries in
Europe continued to sputter, and some Latin American and Asian emerging
markets picked up steam while others faltered. Individuals and institutions
continued to look overseas as a way to diversify; at the end of the year,
International Growth Portfolio totaled $25 million in net assets. The
Portfolio produced solid results, thanks to our emphasis on researching
individual companies. Net asset value (NAV) closed the year at $11.83 per
share versus $10.93 on December 31, 1995. The Portfolio paid $0.034 per share
in short-term capital gains. With distributions reinvested, total return for
the year was 8.54% based on NAV.
Finding Undervalued Growth Potential
International Growth Portfolio pursues well-valued companies in established
and emerging markets outside the United States. We focus on attributes such
as company operations, cash flows and management. We also evaluate economic
and governmental conditions that could affect companies' growth prospects.
Our opportunistic approach means we often are buying into companies we like
when markets are weak. This strategy keeps the Portfolio well-diversified
with a mix of established and emerging markets from many regions. As of
December 31, your Portfolio held over 150 companies in 11 sectors. This
chart shows the Portfolio's geographical distribution at the period's end.
Geographical Distribution
(Percentage of equity holdings as of December 31, 1996)
[typeset representation of pie chart]
Europe 47%
Asia/Pacific Basin
(excluding Japan) 32%
Japan 11%
Latin America 7%
Other 3%
We took advantage of declining prices in Japan to buy stocks of leading
exporters. Several of these appeared among the largest holdings at year-end,
including Nintendo and Canon. Other large positions are leaders in their
industries in emerging markets, including Telecommunicacoes Brasileiras,
Malaysian Assurance Alliance and Korea Mobile Telecommunication. In Europe,
financial stocks have been strong performers, particularly in Italy.
Looking Ahead
Around the world, governments and companies are working to make their
economies and financial markets more attractive to outside investors. These
trends translate into opportunities for your Portfolio, whether directly
through privatization or indirectly by improving the quality of information
available on companies we consider for the Portfolio. We still think emerging
markets offer compelling values, and Europe is starting to show real signs of
economic recovery. We'll continue to monitor risks, including currency
fluctuations and economic and political instabilities. While short-term
setbacks and volatility remain an inevitable part of overseas investing, we
expect the Portfolio's broad assortment of companies and countries will offer
investors convenient access and solid results over the long term.
Respectfully,
[SIG]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.
2
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Capital Growth Portfolio
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Capital Growth Portfolio closed the year with improving performance. On
December 31, 1996, the Portfolio's net asset value (NAV) stood at $13.05,
versus $11.57 on December 31, 1995. The Portfolio paid a total of $0.028 in
income dividends and $0.231 in capital gains distributions per share in 1996.
The price change and distributions combined to provide a 15.03% total return
for the year, based on NAV.
The Portfolio's performance was solid, even though it did lag the stock
market. (The unmanaged Standard & Poor's 500 Index returned 22.90% for the
year.) A major reason for the difference was that investors flocked to stocks
of large, familiar companies. They preferred to pay increasingly high prices
for those stocks, rather than turn their attention to the values offered by
lesser known, smaller or more complicated investment opportunities such as
those you find in this Portfolio. Even so, interest in your Portfolio was
strong; net assets reached $49 million by the period's end.
Finding Value in a Fast-Paced Market
We continue to employ a strict "aggressive value" strategy for Capital Growth
Portfolio. Our investment team researches companies individually and we
invest when we believe a stock is undervalued compared to the company's
assets and growth prospects. We examine basics such as cash flow, quality of
management, balance sheet and earnings growth, as well as any major change or
restructuring a company may be undergoing. Rather than attempting to "time
the market," we keep the Fund fully invested.
Investments remain varied across industries and company size; we don't follow
a "theme" strategy. We did, however, find a number of opportunities among
technology and retail companies. In both cases, we took advantage of
attractive values created when the market beat down prices across these
groups, regardless of individual merits. This approach paid off as we saw
strong results from Amphenol, DSC Communications and Unisys in technology.
Retailers Fingerhut, Kmart, Levitz Furniture, Stride Rite and Woolworth all
proved rewarding. Financial companies, such as 20th Century Industries, also
benefited from the sustained environment of low interest rates and low
inflation. Despite their run-up in price, we think these stocks still offer
potential, although we will take gains if they start to hit our target
prices.
This chart shows the Portfolio's diverse array of industries at the period's
end.
Sector Distribution
(Percentage of equity holdings as of December 31, 1996)
[typeset representation of pie chart]
Technology 25%
Capital Goods 23%
Consumer Non-Durables 23%
Services 15%
Financial 8%
Consumer Durables 4%
Basic Industries 1%
Energy 1%
Looking Ahead
In 1996, the market was volatile and fast-paced, with a relatively small
group of stocks leading the surge into historic highs. In 1997, we expect
investors will begin to take profits and diversify their holdings into more
attractively valued companies. This should work to the benefit of the stocks
in your Portfolio. We continue to see strong values and appealing potential
among Portfolio holdings, and are confident our approach has the potential to
generate significant long-term results.
Respectfully,
[SIG]J. Rodman Wright
J. Rodman Wright,
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.
3
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Real Estate Growth Portfolio
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Real Estate Growth Portfolio had an outstanding year in 1996. Real estate
investment trusts (REITs) and real estate-related investments were among the
stock market's top-performing groups for the year. On December 31, 1996, the
Portfolio's net asset value (NAV) stood at $14.46, versus $11.23 one year
earlier. The Portfolio paid a total of $0.531 in income dividends and $0.118
in capital gains distributions per share in 1996. The price change and
reinvested distributions combined to provide a 35.73% total return for the
year, based on NAV. Investor interest in your Portfolio was strong, lifting
net assets to $11 million by year-end.
Targeting Good Value in Right Regions
We take a "basic value" strategy for this Portfolio. This means we look for
individual companies with strong financial conditions, competent management
and leading market positions. It also means that we work to acquire their
stocks at what we think are reasonable or low prices; we do not chase "hot"
stocks. Our efforts are aided by Boston Financial, which was added as sub-
adviser to the Portfolio on February 1, 1996. They provide special expertise
in real estate development and management and also contribute broad analyses
of the factors that can affect whole regions or categories of real
estate-related investments.
Our combined efforts proved quite successful. Standouts in the Portfolio
included REIT stocks Beacon Properties, Duke Realty Investments and Simon
DeBartolo Group. Investments in non-REITs also proved profitable. We sold the
position in Amresco after it appreciated to our target price. We added
Catellus Development, Trizec Hahn and Host Marriott Services. Each of these
offers an opportunity to benefit from favorable trends in the real estate
arena, without taking on the special risks real estate investments can
entail, including sensitivity to interest rates and regional economic
conditions.
Looking Ahead
There's no doubt that 1996 was an especially strong year for real
estate-related investments. Despite their striking gains, we still think
there's room for this attractive market segment to grow. More investors are
including real estate in their asset allocation plans, and REITs are a
practical way to accomplish that diversification. REIT stock prices also have
tended to show little correlation to the general stock market. This trait has
gained considerable appeal among individual and institutions concerned that
the stock market's rapid rise won't be sustained. In all, we think this is a
good time to participate in real estate investments.
Respectfully,
[SIG]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.
4
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Equity-Income Portfolio
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Equity-Income Portfolio closed a fairly difficult year on a positive note. It
continued to gain assets throughout 1996 and reached more than $47 million by
year-end. Net asset value (NAV) was $13.73 on December 31, 1996, up from
$12.17 one year earlier. The Portfolio paid a total of $0.267 in income
dividends over the course of the year. With dividends reinvested, the
Portfolio generated a total return of 15.19% for the year, based on NAV.
Portfolio Influenced by Utility Stocks
Investment results for this income-oriented portfolio were significantly
affected during the year by the sharp underperformance of utility stocks
relative to the rest of the stock market. We generally must keep a
substantial part of the Portfolio's assets invested in that high-yielding
sector in order to meet its objective for current income. The disparity we
saw in 1996 between returns on utility stocks and stocks of other issuers has
seldom been equaled in recent decades. Under the circumstances, the
Portfolio's total return was not altogether disappointing.
The five largest holdings as of December 31, 1996, reflect our effort to keep
the Portfolio as broadly diversified as possible within the income-producing
sectors of the stock market. Warner-Lambert, Mobil, Amoco, First Union and
Allegheny Power Systems are all leaders in their respective industries. In
all, the Portfolio contained positions in about 80 companies at year- end,
permitting a degree of diversification you would be unlikely to achieve on
your own and also creating the opportunity for you to take part in the
business success of many very fine companies. We look into companies
thoroughly before we purchase their shares, and we emphasize stocks we feel
are reasonably priced relative to their underlying value. For your Portfolio,
most stocks are "blue chips"--high-quality companies that enjoy premium
prices in the marketplace because of their proven financial consistency and
growth potential over very long periods of time.
Sector Distribution
(Percentage of equity holdings as of December 31, 1996)
[typeset representation of pie chart]
Utilities 25%
Financial 20%
Energy 12%
Services 12%
Basic Industries 9%
Consumer Non-Durables 8%
Technology 7%
Consumer Durables 5%
Capital Goods 2%
Looking Ahead
We are hoping for a more normal year in 1997, in which the utility sector and
other interest-rate sensitive stocks perform near the level of the overall
market. Your Portfolio should perform particularly well if that occurs.
Because we are not market forecasters, however, the Portfolio is well
diversified, giving it exposure to a variety of industries and a vast array
of companies.
Respectfully,
[SIG]John A. Carey
John A. Carey,
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 the original cost.
5
<PAGE>
Balanced Portfolio
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Balanced Portfolio had a solid year. Its allocation to stocks helped it
participate in the rising equity market; its investments in bonds helped
provide an attractive income level. On December 31, 1996, the Portfolio's net
asset value (NAV) stood at $13.19 versus $11.87 on December 31, 1995. The
Portfolio paid a total of $0.285 in income dividends and $0.068 in capital
gains distributions per share in 1996. Combined, this translated into a
14.26% total return for the year.
As expected, the Portfolio's performance fell squarely between that of the
stock market and bond market. The unmanaged Standard & Poor's 500 Index
returned 22.90% for the year, and the Lehman Brothers Government/Corporate
Bond Index posted a 2.90% total return. Investors looking for a combination
of growth and income potential continued to select the Portfolio; net assets
were $17 million by the end of the year.
An Actively Managed, Diversified Portfolio
Balanced Portfolio is designed to seek capital growth and current income. We
work toward this goal by actively managing investments in a diversified
portfolio that contains both equity securities and bonds. At the close of the
fiscal year, 59% of the Portfolio was invested in equities, with 34% in bonds
and 7% in short-term cash equivalents. This is fairly typical of the
Portfolio's emphasis.
Over the course of the year, we expanded stock investments to include real
estate investment trusts (REITs). REITs offer potential for both growth and
income, and were among the top-performing stock groups in 1996. Technology
stocks added price appreciation. Financial stocks were also strong
performers, particularly during periods when investors were confident
inflation and interest rates would remain low. Utility stocks, primarily
purchased for their strong dividends, did not fare as well, given a
combination of regulatory and competitive factors. The accompanying chart
shows the variety of industries represented in the Portfolio at year's end.
Sector Distribution
(Percentage of equity holdings as of December 31, 1996)
[typeset representation of pie chart]
Financial 28%
Technology 23%
Utilities 15%
Services 13%
Consumer Durables 10%
Consumer Non-Durables 5%
Basic Industries 3%
Energy 2%
Capital Goods 1%
The Portfolio's bond investments have an average quality rating of AA, and an
average effective maturity of 6.78 years. By design, our bias is toward
high-quality bonds. In this particular period, we took a middle-of-the-road
approach to bonds, given the changing interest rate environment.
Looking Ahead
Our overall strategy is to combine stocks and bonds in a way we think will
deliver Portfolio investors good returns, with a low level of risk. We may
select some stocks for their growth potential, some for their ability to
offer appreciation and income, and some primarily for income. The same is
true of our bond strategy, although to a lesser degree. In total, we hope to
provide conservative investors with a convenient, "all-in-one" approach to
long-term investing.
Respectfully,
[SIG]William C. Field
William C. Field,
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.
6
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Swiss Franc Bond Portfolio
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The Swiss franc declined in value significantly versus the U.S. dollar in the
year ended December 31, 1996. The relationship between the two currencies set
the tone for the performance of Swiss Franc Bond Portfolio. As a result, on
December 31, 1996, the Portfolio's net asset value (NAV) was $13.42 per share,
versus $15.06 on December 31, 1995. Over the year, the Portfolio paid $0.0023
in income dividends. The result was a 12-month total return of -10.88%,
assuming dividends were reinvested at NAV. Despite the generally difficult
period for Swiss-denominated investments, U.S. investors continued to select
the Portfolio, and net assets had reached $13 million by the close of 1996.
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. As of December
31, 1996, the franc:dollar exchange rate was fr1.3415:$1, compared to
fr1.1543:$1 one year earlier. Over the past year, global interest rates
fluctuated sharply both up and down, although less so for the shorter-term
bonds that are eligible for the Portfolio.
As part of our investment strategy, we seek the best values we can find in
franc-denominated bonds. That means the Portfolio will usually contain issues
from a variety of sources. At the close of the period, there were 19
securities in the Portfolio representing 15 countries. The Portfolio's bond
investments have an average quality rating of AA+, and an average effective
maturity of 3.27 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. Our overall strategy continues to center on taking advantage of
opportunities we think will deliver Portfolio investors a strong income
stream and attractive returns over the long term.
Respectfully,
[SIG]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.
7
<PAGE>
America Income Portfolio
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The bond market did not enjoy the same robust returns the U.S. equity market
did in 1996. Investors continued to worry about the potential for rising
inflation and higher interest rates, and bond prices reflected their concern.
In addition, high- quality issues, particularly U.S. government securities,
were in far less demand than low-rated issues. The performance of "junk"
bonds often reflects stock performance, and many investors opted for these
issues as a way to participate in the rising stock market. Interestingly,
low-quality bonds cost nearly as much as higher-quality issues by the end of
the year.
Even in this challenging environment, America Income Portfolio generated an
attractive level of income while adhering to its commitment to high-quality
securities. The Portfolio paid a total of $0.52 per share in income dividends
in 1996. On December 31, 1996, the Portfolio's net asset value (NAV) stood at
$9.78 per share versus $10.18 on December 31, 1995, reflecting the decline in
bond prices. Assuming reinvestment of the dividends, however, the Portfolio
provided a positive total return of 1.30% for the year, based on NAV.
Focus on High-Quality Securities
At year-end, 94% of Portfolio holdings were securities issued by the U.S.
government or its agencies, with 18% in Government National Mortgage
Association (GNMA) issues. Mortgage-backed securities were the top-performing
group in your Portfolio. Treasury bonds continued to pay an attractive level
of income, and their ready liquidity gave us a flexible, convenient way to
adjust the Portfolio. By the end of 1996, the average effective maturity of
issues in the Portfolio was a relatively conservative 5.94 years. In terms of
maturity, the Portfolio's largest allocations were to bonds in the
two-to-five year range (35%) and seven-to-10 year range (28%). We think this
offers the right blend of reward and risk for this conservative investment
choice as we move into 1997.
Looking Ahead
No one can predict with any accuracy how financial markets will behave.
However, the benefits of a high-quality portfolio and a disciplined
investment style are clear, and should become more apparent if the stock
market runs into any difficulty. The backdrop for bonds is favorable as we
move into 1997, with interest rates moving down and inflation holding at low
levels. In all, we think this high-quality Portfolio can still play an
important part in a diversified investment strategy.
Respectfully,
[SIG]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.
8
<PAGE>
Performance of a $10,000 Investment
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The following chart shows the value of an investment made in International
Growth Portfolio, compared to the growth of the MSCI EAFE Index.
[GRAPHIC]INTERNATIONAL GROWTH PORTFOLIO LINE GRAPH
INTERNATIONAL GROWTH PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 10.34%
1 Year 8.54
International
Growth
Portfolio MSCI EAFE Index
3/1/95 10000 10000
3/31/95 9990 10624
9990 11023
10010 10892
6/30/95 10350 10701
11080 11367
10750 10933
9/30/95 11040 11147
10960 10847
10950 11149
12/31/95 11042 11598
11396 11646
11436 11685
3/31/96 11396 11933
12062 12280
11931 12054
6/30/96 11834 12122
11297 11768
11469 11794
9/30/96 11580 12107
11256 11983
11834 12460
12/31/96 11985 12300
The Morgan Stanley Capital International (MSCI) EAFE (Europe Australasia Far
East) Index is an unmanaged, capitalization-weighted index of international
stock markets. The Index includes: Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Italy, Japan, the Netherlands, New
Zealand, Norway, Singapore/Malaysia, Spain, Sweden, Switzerland, and the
United Kingdom. Index return is calculated monthly and assumes reinvestment
of dividends. Portfolio return does not reflect any annuity-related fees or
expenses. You cannot invest directly in the Index.
The following chart shows the value of an investment made in Capital Growth
Portfolio, compared to the growth of the Standard & Poor's 500 Index.
[GRAPHIC]CAPITAL GROWTH PORTFOLIO LINE GRAPH
CAPITAL GROWTH PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 17.59%
1 Year 15.03
Capital
Growth S&P 500
Portfolio Index
3/1/95 10000 10000
3/31/95 9910 10338
10070 10627
10160 11013
6/30/95 10650 11321
11460 11681
11800 11677
9/30/95 11980 12218
11600 12157
11840 12656
12/31/95 11713 12951
11976 13374
12037 13467
3/31/96 12624 13646
13373 13829
13909 14145
6/30/96 13527 14257
12418 13605
12937 13860
9/30/96 13141 14694
12978 15078
13364 16184
12/31/96 13473 15917
The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the Over-the-Counter market. Index return assumes reinvestment
of dividends. Portfolio return does not reflect any annuity-related fees or
expenses. You cannot invest directly in the Index.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
9
<PAGE>
Performance of a $10,000 Investment
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The following chart shows the value of an investment made in Real Estate
Growth Portfolio, compared to the growth of the Standard & Poor's 500 Index
and the Wilshire Real Estate Securities Index.
[GRAPHIC]REAL ESTATE GROWTH PORTFOLIO LINE GRAPH
REAL ESTATE GROWTH PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 28.55%
1 Year 35.73
Real Estate Wilshire Real
Growth S&P 500 Estate Securities
Portfolio Index Index
3/31/95 10,000 10,000 10,000
4/30/95 9,830 10,280 9,928
5/31/95 10,350 10,653 10,256
6/30/95 10,721 10,951 10,435
7/31/95 11,056 11,299 10,603
8/31/95 11,218 11,296 10,732
9/30/95 11,482 11,819 10,929
10/31/95 11,090 11,760 10,591
11/30/95 11,111 12,243 10,701
12/31/95 11,696 12,528 11,321
1/31/96 11,811 12,937 11,478
2/29/96 12,019 13,027 11,705
3/31/96 12,020 13,200 11,800
4/30/96 11,988 13,377 11,853
5/31/96 12,231 13,683 12,117
6/30/96 12,316 13,791 12,360
7/31/96 12,498 13,160 12,250
8/31/96 13,140 13,408 12,771
9/30/96 13,548 14,214 13,089
10/31/96 13,840 14,585 13,444
11/30/96 14,382 15,656 14,002
12/31/96 15,875 15,397 15,496
The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the Over-the-Counter market. The Wilshire Real Estate Securities
Index is a market-capitalization weighted measure of the performance of real
estate securities. The Index is 79% REITs (equity and hybrid) and 21% real
estate operating companies. Index returns assume reinvestment of dividends.
Portfolio return does not reflect any annually-related fees or expenses. You
cannot invest directly in the Indexes.
The following chart shows the value of an investment made in Equity-Income
Portfolio, compared to the growth of the Standard & Poor's 500 Index.
[GRAPHIC]EQUITY-INCOME PORTFOLIO LINE GRAPH
EQUITY-INCOME PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 21.18%
1 Year 15.19
Equity-Income S&P 500
Portfolio Index
3/1/95 10000 10000
3/31/95 10280 10338
10270 10627
10620 11013
6/30/95 10990 11321
11372 11681
11543 11677
9/30/95 11785 12218
11532 12157
12138 12656
12/31/95 12362 12951
12687 13374
12677 13467
3/31/96 12778 13646
12860 13829
12901 14145
6/30/96 12881 14257
12429 13605
12686 13860
9/30/96 13189 14694
13560 15078
14499 16184
12/31/96 14240 15917
The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the Over-the-Counter market. Index return assumes reinvestment
of dividends. Portfolio return does not reflect any annuity-related fees or
expenses. You cannot invest directly in the Index.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
10
<PAGE>
Performance of a $10,000 Investment
- --------------------------------------------------------------------------------
The following chart shows the value of an investment made in Balanced
Portfolio, compared to the growth of the Standard & Poor's 500 Index and the
Lehman Brothers Corporate Bond Index.
[GRAPHIC]BALANCED PORTFOLIO LINE GRAPH
BALANCED PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 19.16%
1 Year 14.26
Lehman Brothers Corporate
Balanced S&P 500 Bond
Portfolio Index Index
3/1/95 10000 10000 10000
3/31/95 10200 10338 10067
10180 10627 10207
10570 11013 10635
6/30/95 10810 11321 10720
11152 11681 10678
11333 11677 10815
9/30/95 11655 12218 10925
11332 12157 11085
12010 12656 11268
12/31/95 12084 12951 11434
12532 13374 11505
12440 13467 11261
3/31/96 12450 13646 11166
12573 13829 11089
12624 14145 11071
6/30/96 12686 14257 11219
12367 13605 11245
12563 13860 11218
9/30/96 12954 14694 11417
13408 15078 11683
13998 16184 11898
12/31/96 13806 15917 11766
The Standard & Poor's (S&P) 500 Index is an unmanaged measure of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the Over-the-Counter market. The Lehman Brothers Corporate Bond
Index is an unmanaged measure of investment-grade domestic and yankee bonds.
Bonds in the Index must be publicly issued, fixed-rate and non-convertible.
Index returns assume reinvestment of dividends. Portfolio return does not
reflect any annuity-related fees or expenses. You cannot invest directly in
the Indexes.
The following chart shows the value of an investment made in Swiss Franc Bond
Portfolio, compared to the growth of the Merrill Lynch Global Bond Index.
[GRAPHIC]SWISS FRANC BOND PORTFOLIO
SWISS FRANC BOND PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (11/1/95) -9.06%
1 Year -10.88
Swiss Franc Bond Merill Lynch Global Bond
Portfolio Index
11/30/95 10000 10000
12/31/95 10013 10102
9654 9982
9694 9930
3/31/96 9807 9917
9435 9886
9249 9886
6/30/96 9244 9967
9643 10149
9729 10188
9/30/96 9416 10237
9403 10434
9104 10578
12/31/96 8931 10488
The Merrill Lynch Global Bond Index is an unmanaged measure of nearly 3,000
global government securities and Eurobonds. Index return is calculated
monthly and assumes reinvestment of dividends. Portfolio return does not
reflect any annuity-related fees or expenses. You cannot invest directly in
the Index.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
11
<PAGE>
Performance of a $10,000 Investment
- --------------------------------------------------------------------------------
The following chart shows the value of an investment made in America Income
Portfolio, compared to the growth of the Lehman Brothers Government Index.
[GRAPHIC]AMERICA INCOME PORTFOLIO LINE GRAPH
AMERICA INCOME PORTFOLIO
Average Annual Total Returns
(As of December 31, 1996)
Life (3/1/95) 3.77%
1 Year 1.30
America Income Lehman Brothers Government
Portfolio Bond Index
3/1/95 10000 10000
3/31/95 9994 10063
10008 10195
10042 10606
6/30/95 10103 10687
10044 10648
10113 10772
9/30/95 10201 10876
10310 11041
10448 11213
12/31/95 10568 11373
10641 11442
10424 11209
3/31/96 10314 11116
10264 11044
10238 11026
6/30/96 10333 11168
10347 11196
10332 11171
9/30/96 10473 11357
10661 11606
10808 11808
12/31/96 10705 11688
The Lehman Brothers Government Bond Index is an unmanaged performance measure
of U.S. Treasury debt, all publicly issued debt of U.S. government agencies
and quasi-federal corporations and corporate debt guaranteed by the U.S.
government. Index return assumes reinvestment of dividends. Portfolio return
does not reflect any annuity-related fees or expenses. You cannot invest
directly in the Index.
Past performance does not guarantee future results. Return and principal
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
12
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 82.8%
CONVERTIBLE CORPORATE BOND - 0.1%
$ 20,000 Republic of Italy Privatization Note (INA), 5.0%, 6/28/01 $ 20,400
---------------
TOTAL CONVERTIBLE CORPORATE BOND (Cost $20,000) $ 20,400
---------------
Shares
-------
PREFERRED STOCKS - 3.5%
4,300 Banco Comercial Portugues, 8%, Non-Cumm., Conv. $ 222,256
1,700 Bau Holdings AG 85,012
2,800,000 Companhia Energetica de Minas Gerais 95,390
1,990 SAP AG (Non-voting) 278,276
247 Samsung Electronics Co. (1/2 Non-Voting) (G.D.R.) 4,557
1,000 Telecomunications Brasileiras SA (Sponsored A.D.R.) 76,500
3,200,000 Unibanco 104,398
---------------
TOTAL PREFERRED STOCKS (Cost $846,726) $ 866,389
---------------
COMMON STOCKS - 79.2%
BASIC INDUSTRIES - 4.6%
Chemicals - 0.9%
150 Clariant AG $ 64,214
13,900 Reliance Industries Ltd. (G.D.R.) 166,800
---------------
$ 231,014
---------------
Containers - 0.3%
3,600 NV Koninklijke KNP BT $ 78,687
---------------
Iron & Steel - 2.2%
1,100 Boehler-Uddeholm AG $ 78,800
1,000 Daimler Benz AG* 68,943
12,000 Pohang Iron & Steel Ltd. (Sponsored A.D.R.) 243,000
9,900 Usinor Sacilor 144,217
---------------
$ 534,960
---------------
Metals & Mining - 1.2%
2,500 Kloof Gold Mining Co., Ltd. $ 20,359
105,000 Orogen Mining Ltd.* 244,458
300 Vaal Reefs Exploration & Mining Co., Ltd. 19,237
---------------
$ 284,054
---------------
TOTAL BASIC INDUSTRIES $1,128,715
---------------
Capital Goods - 7.4%
CONSTRUCTION, BUILDING MATERIALS & ENGINEERING - 3.6%
9,000 Bouygues Offshore SA (Sponsored A.D.R.)* $ 115,875
1,050 Felten & Guillaume Energietechnik AG 123,951
300 Hollandsche Beton Groep NV 62,251
70,000 Kumagai Gumi Co., Ltd. 81,453
3,400 Lafarge SA 204,218
1,700 L.G. Construction Ltd. 33,396
800 Portland Valderrivas SA 53,857
13,740 Powerscreen International Plc 132,953
2,200 Siam Cement Public Co., Ltd. 68,970
5 Wolseley Plc 40
---------------
$ 876,964
---------------
Machinery - 1.8%
320 GEA AG $ 98,029
5,000 Sasib SpA 15,671
8,000 Sasib SpA Di Risp 15,018
5,630 Stork NV 198,787
53,500 PT United Tractors 112,119
---------------
$ 439,624
---------------
Producer Goods - 2.0%
560 IWKA AG $ 132,943
365 Schmalbach Lubeca AG* 89,737
3,900 Sidel, SA 268,639
---------------
$ 491,319
---------------
TOTAL CAPITAL GOODS $1,807,907
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DURABLES - 1.8%
Motor Vehicles - 1.5%
28,000 Cowie Group Plc $ 194,211
600 KTM Motorradholding AG* 33,554
39,000 Magneti Marelli SpA 48,509
700 Sylea 76,850
---------------
$ 353,124
---------------
Office Furnishings - 0.3%
1,900 Samas-Groep NV $ 81,517
---------------
TOTAL CONSUMER DURABLES $ 434,641
---------------
CONSUMER NON-DURABLES - 8.2%
Agriculture & Food Manufacturing - 0.4%
3,000 Louis Dreyfus Citrus* $ 98,402
---------------
Cosmetics - 0.7%
55,200 McBride Plc $ 129,515
4,000 Shiseido Co., Ltd. 46,351
---------------
$ 175,866
---------------
Retail Food - 0.8%
89,000 Dairy Farm International Holdings Ltd. $ 71,645
4,500 Kwik Save Group Plc 24,893
1,300 Panamerican Beverages Inc. 60,938
12,000 Standard Foods Taiwan Ltd.* 30,109
---------------
$ 187,585
---------------
General Retail - 4.2%
1,800 Autobacs Seven Co., Ltd. $ 127,482
250 Forbo Holdings AG 100,859
7,200 Makro Atacadista SA (G.D.R.)* 48,600
104,000 PT Matahari Putra Prima 121,084
17,500 Merloni Elettrodomedtici Spa 38,106
6,300 Nintendo Corp. 449,455
8,800 Siam Makro Public Co., Ltd. 37,058
6,500 Zag Industries Ltd.* 107,250
---------------
$1,029,894
---------------
Textiles - 2.1%
3,250 Charguers International SA* $ 161,158
15 Hugo Boss AG 18,829
9,200 Marzotto & Figli SpA 59,492
2,200 Shin won Corp. 42,959
4,900 Xebio Co., Ltd. 146,186
24,000 Wing Tai Holdings 68,635
---------------
$ 497,259
---------------
TOTAL CONSUMER NON-DURABLES $1,989,006
---------------
ENERGY - 0.4%
Oil & Gas - 0.4%
1,100 Elf Aquitaine SA $ 100,241
---------------
TOTAL ENERGY $ 100,241
---------------
FINANCIAL - 23.0%
Commercial Banks - 12.2%
31,000 Australia & New Zealand Banking Group Ltd. $ 195,336
4,500 Banco Wiese Ltd. (Sponsored A.D.R.) 26,437
45,375 PT Bank Dagang Nasional 46,105
72,000 Christiania Bank Og Kreditkasse 225,730
30,000 CIDEA SA* 142,529
23,000 Commercial Bank of Korea 150,249
3,000 Credit National 172,957
1,300 Credit Suisse Group 133,545
1,600 DePfa Bank Plc 72,294
6,600 Development Bank of Singapore Ltd. 89,183
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
Commercial Banks (Continued)
214,800 First Bangkok City Bank Public Co., Ltd. $ 209,389
11,956 Fokus Bank ASA 81,277
2,000 Grupo Financiero Banamex Accival S.A. de C.V. (Class L)* 3,799
14,400 Hanil Bank 98,840
8,000 HSBC Holdings Plc 178,798
16,600 Industrial Credit & Investment Corp. of India Ltd. (G.D.R.)* 161,850
90 Julius Baer Holding AG 94,337
22,500 Korea First Bank* 113,965
42,000 Krung Thai Bank Public Co., Ltd. 81,065
17,000 Merita Ltd.* 52,916
6,000 Overseas-Chinese Banking Corp., Ltd. 74,641
81,000 PT Pan Indonesia Bank 92,591
2,740 Shinhan Bank 44,064
186,500 Siam City Bank Public Co., Ltd. 174,530
4,200 Skandinaviska Enskilda Banken 43,150
7,000 State Bank of India Ltd. (G.D.R.)* 121,590
3,900 Svenska Handelbanken 112,191
---------------
$2,993,358
---------------
Financial Services - 0.8%
4,570 Housing and Commercial Bank (New Common 1)* $ 72,006
28,000 National Finance & Securities Co., Ltd. 52,679
300 Shohkoh Fund 65,375
---------------
$ 190,060
---------------
Misc. Finance - 1.2%
45,000 PT Bimantara Citra $ 60,013
11,680 Cho Hung Bank Ltd. 95,030
16,000 Hong Leong Finance Ltd. 55,594
1,000 Nichiei Co., Ltd. 73,590
---------------
$ 284,227
---------------
Investments - 1.4%
33,000 Dhana Siam Finance & Securities Public Co., Ltd. $ 78,492
34,000 Jardine Matheson Holdings Ltd. 224,400
22,200 Pacific & Orient Bhd. 53,625
---------------
$ 356,517
---------------
Insurance - 5.3%
6,800 Assurances Generales de France $ 219,765
2,200 Corporacion Mapfre 134,042
10 Corporacion Mapfre (Class E) 622
67,000 PT Lippo Life Insurance 61,696
64,000 Malaysian Assurance Alliance Bhd. 311,725
53,000 National Mutual Asia Ltd. 50,365
36,000 National Mutual Holdings Ltd.* 53,778
36,000 Reinsurance Australia Corp. 140,167
8,410 Skandia Forsakrings AB 238,226
13,500 Storebrand ASA * 77,525
---------------
$1,287,911
---------------
Real Estate - 2.1%
12,000 Cheung Kong Holdings Ltd. $ 106,665
290,000 China Resources Bejing Land Ltd.* 183,722
25,000 DBS Land Ltd. 92,050
17,000 New World Development Co., Ltd. 114,843
11,800 Property Perfect Public Co., Ltd. 12,193
---------------
$ 509,473
---------------
TOTAL FINANCIAL $5,621,546
---------------
SERVICES - 8.4%
Commercial - 0.6%
9,000 Loxley Public Co., Ltd. $ 59,307
4,500 PT Tigaraksa Satria 6,287
66,000 PT Wicaksana Overseas International 75,445
---------------
$ 141,039
---------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
Broadcasting & Media - 1.2%
2,000 Benesse Corp. $ 124,697
3,600 Central European Media Enterprises Ltd.* 114,300
13,000 Television Broadcasts Ltd. 51,936
---------------
$ 290,933
---------------
Health & Personal Care - 0.6%
600 Nu Skin Asia Pacific Inc.* $ 18,525
57,500 TC Group Plc 133,435
---------------
$ 151,960
---------------
Hotel & Restaurants - 0.3%
16,500 Overseas Union Enterprise Ltd. $ 82,577
---------------
Pharmaceuticals - 3.9%
4,800 Astra AB (Series A) $ 237,415
3,000 Eisai Co. Ltd. 59,149
60,000 Medeva Plc 261,004
12 Roche Holdings AG 93,373
6,000 Takeda Chemical Industries 126,081
44,500 PT Tempo Scan Pacific 81,954
2,100 Teva Pharmaceutical Industries Ltd. (Sponsored A.D.R.) 105,525
---------------
$ 964,501
---------------
Publishing - 1.2%
13,000 Arnoldo Mondadori Editore SpA $ 105,939
10,000 Schibsted ASA 182,366
---------------
$ 288,305
---------------
Misc. Sevices - 0.6%
5,400 ISS International Service System AS (Class B) $ 142,306
---------------
TOTAL SERVICES $2,061,621
---------------
TECHNOLOGY - 7.5%
Business Machines - 2.0%
16,000 Canon, Inc. $ 354,203
4,085 Esselte AB (Series B) 90,533
3,000 Intentia International AB (B Shares)* 44,912
---------------
$ 489,648
---------------
Electronics - 5.2%
950 Austria Micro Systeme International AG $ 73,411
13,500 K.R. Precision Public Co. Ltd. 92,120
5,650 Philips Electronics NV 229,302
2,000 Rohm Co. Ltd. 131,442
1,700 Samsung Display Devices Co. 98,143
3,720 Samsung Electronics Co. (1/2 Non-Voting)(G.D.S.) 68,911
5 Samsung Electronics Co. (G.D.R.) 207
1,000 Secom Co. 60,619
33,000 Siliconware Precision Industries Co. Ltd.* 69,600
3,400 Sony Corp. 223,158
27,250 Tatung Co., Ltd. 52,518
2,000 TDK Corp. 130,578
3,500 Yageo Corp. (G.D.R.)* 35,009
---------------
$1,265,018
---------------
Telephone Networks - 0.3%
1,400 Nokia AB $ 81,365
---------------
TOTAL TECHNOLOGY $1,836,031
---------------
TRANSPORTATION - 0.4%
Ships & Shipping - 0.4%
18,500 Great Eastern Shipping Co. (G.D.R.) $ 101,657
---------------
TOTAL TRANSPORTATION $ 101,657
---------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
UTILITIES - 14.7%
Electric Utility - 2.9%
17,675 Iberdrola SA $ 250,506
5,400 Korea Electric Power Corp. (Sponsored A.D.R.) 111,375
36,750 Scottish Power Plc 222,174
11,700 Shandong Huaneng Power Co. Ltd. (Sponsored A.D.R.) 114,075
---------------
$ 698,130
---------------
Telecommunications - 11.4%
2,460 Alcatel Alsthom SA $ 197,833
7,000 Amper SA 160,408
364,466 Champion Technology Holdings Ltd. 69,270
5 DDI Corp. 33,120
5,300 ECI Telecommunications Ltd. 112,625
3,700 Grupo Iusacell SA (Series L) (Sponsored A.D.R.)* 28,213
3,500 Hellenic Telecommunications Organization SA 59,797
3,920 Intracom S.A. 88,185
10,000 Manitoba Telephone Systems* 94,925
22,835 Korea Mobile Telecommunication Corp.* 294,002
3,400 Multicanal Participacoes SA (A.D.R.)* 43,563
65,935 Olivetti SpA* 23,276
63,500 Stet Societa Finanziaria Telefonica SpA 289,112
3,200 Tadrian Ltd. (Sponsored A.D.R.) 90,000
1,200 Telecel-Comunicacaoes Pessoais, SA* 76,620
4,600 Telecom Argentina Stet-France SA (Sponsored A.D.R.) 185,725
4,400,000 Telecomunicacoes Brasileiras SA 315,465
102,140 Telecom Italia SpA 265,544
4,750 Telefonica de Argentina SA (Class B) (Sponsored A.D.R.) 122,906
5,000 Telefonica de Espana 116,118
6,100 Telefonica del Peru SA (Class B) (Sponsored A.D.R.) 115,137
---------------
$ 2,781,844
---------------
Misc. Utilities - 0.4%
2,225 Nordtank Energy Group $ 104,030
---------------
TOTAL UTILITIES $ 3,584,004
---------------
MISCELLANEOUS - 2.8%
Conglomerates & Holdings - 2.8%
32,600 Benpres Holdings Corp. (G.D.R.)* $ 244,500
6,200,000 Net Holdings AS 185,800
47,350 Wassall Plc 258,686
---------------
TOTAL MISCELLANEOUS $ 688,986
---------------
TOTAL COMMON STOCKS (Cost $18,906,514) $19,354,355
---------------
WARRANT - 0.0%
72,893 Champion Technology Holding, 6/30/98 $ 2,733
---------------
TOTAL WARRANT (Cost $1,150) $ 2,733
---------------
TOTAL INVESTMENT IN SECURITIES (Cost $19,774,390) (a) $20,243,877
---------------
Principal
Amount
---------
TEMPORARY CASH INVESTMENT - 17.2%
Repurchase Agreement - 17.2%
$4,200,000 Chase Manhattan Bank, 12/31/96, 6.55%, repurchase price of
$4,200,000 plus accrued interest on 1/1/97, collateralized
by $4,242,000 U.S. Treasury Notes, 5.125%, 2/28/98 $ 4,200,000
---------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $4,200,000) $ 4,200,000
---------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENT - 100.0% (Cost $23,974,390) (b) $24,443,877
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
International Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) Distribution of investments by country of issue, as a percentage of total
equity holdings, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Japan 10.7%
France 8.7
United Kingdom 7.6
South Korea 7.3
Germany 4.4
Italy 4.4
Thailand 4.3
Hong Kong 3.8
Sweden 3.8
Spain 3.5
Brazil 3.4
Indonesia 3.2
Netherlands 3.2
Australia 3.1
Norway 2.8
India 2.7
Switzerland 2.4
Singapore 2.3
Argentina 2.2
Israel 2.1
Malaysia 1.8
Portugal 1.5
China 1.5
Austria 1.3
Denmark 1.2
Philippines 1.2
Others (individually less than 1%) 5.6
--------
100.0%
========
</TABLE>
(b) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $23,998,569 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $ 1,958,985
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (1,513,677)
---------------
Net unrealized gain $ 445,308
===============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 aggregated $29,561,479 and $12,712,472,
respectively.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
International Growth Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$4,200,000) (cost $23,974,390) $24,443,877
Cash 68,961
Foreign currencies, at value 447,882
Receivables--
Investment securities sold 40,999
Fund shares sold 62,800
Dividends, interest and foreign taxes withheld 36,647
Due from Pioneering Management Corporation 20,171
Other 1,672
---------------
Total assets $25,123,009
---------------
Liabilities:
Payables--
Investment securities purchased $ 286,335
Fund shares repurchased 68
Forward foreign currency settlement contracts--net 413
Due to affiliates 1,396
Accrued expenses 64,853
---------------
Total liabilities $ 353,065
---------------
Net Assets:
Paid-in capital $23,753,973
Accumulated undistributed net investment income 91,464
Accumulated undistributed net realized gain on investments and foreign currency
transactions 454,608
Net unrealized gain on investments 469,487
Net unrealized gain on forward currency contracts and other assets
and liabilities denominated in foreign currencies 412
---------------
Total net assets $24,769,944
===============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $24,769,944/2,094,022 shares $ 11.83
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
International Growth Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $24,019) $193,396
Interest (net of foreign taxes withheld of $578) 104,008
-----------
Total investment income $ 297,404
------------
Expenses:
Management fees $128,708
Transfer agent fees 1,705
Accounting 125,470
Custodian fees 99,456
Registration fees 2,562
Professional fees 21,585
Printing 4,262
Fees and expenses of nonaffiliated trustees 977
Miscellaneous 8,046
-----------
Total expenses $ 392,771
Less management fees waived and expenses assumed by
Pioneering Management Corporation (196,283)
Less fees paid indirectly (3,124)
------------
Net expenses $ 193,364
------------
Net investment income $ 104,040
------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain (loss) from:
Investments $459,190
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (12,601) $ 446,589
----------- ------------
Change in net unrealized gain from:
Investments $432,085
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 342 $ 432,427
----------- ------------
Net gain on investments and foreign currency transactions $ 879,016
------------
Net increase in net assets resulting from operations $ 983,056
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
International Growth Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 104,040 $ 827
Net realized gain on investments and foreign currency
transactions 446,589 56,014
Change in net unrealized gain on investments
and foreign currency transactions 432,427 37,472
--------------------------------
Net increase in net assets resulting from
operations $ 983,056 $ 94,313
--------------------------------
Distributions to Shareholders:
Net investment income ($0.00 and $0.00 per share,
respectively) $ -- $ (827)
In excess of net investment income ($0.00 and $0.02
per share, respectively) -- (2,895)
Net realized gain ($0.03 per share and $0.09 per
share, respectively) (34,412) (23,264)
--------------------------------
Total distributions to shareholders $ (34,412) $ (26,986)
--------------------------------
From Fund Share Transactions: '96 Shares '95 Shares
------------- -------------
Net proceeds from sale of shares 1,896,992 253,350 $21,695,298 $2,725,200
Reinvestment of distributions 2,934 2,510 34,412 26,986
Cost of shares repurchased (77,398) (9,366) (875,145) (102,778)
------------- ---------------------------------------------
Net increase in net assets resulting from
fund share transactions 1,822,528 246,494 $20,854,565 $2,649,408
============= =============--------------------------------
Net increase in net assets $21,803,209 $2,716,735
Net Assets:
Beginning of period 2,966,735 250,000
--------------------------------
End of period (including accumulated undistributed net
investment income of $91,464 and $0, respectively) $24,769,944 $2,966,735
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
International Growth Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, 1996 December 31, 1995
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.93 $ 10.00
--------------------------------------
Increase from investment operations:
Net investment income $ 0.05 $ --
Net realized and unrealized gain on investments
and foreign currency transactions 0.88 1.04
--------------------------------------
Net increase from investment operations $ 0.93 $ 1.04
Distributions to shareholders from:
Net investment income -- (0.02)
Net realized gain (0.03) (0.09)
--------------------------------------
Net increase in net asset value $ 0.90 $ 0.93
--------------------------------------
Net asset value, end of period $ 11.83 $ 10.93
======================================
Total return* 8.54% 10.42%
Ratio of net expenses to average net assets 1.52%+ 2.10%**+
Ratio of net investment income (loss) to average net
assets 0.78%+ (0.25%)**+
Portfolio turnover rate 115% 139%**
Average commission rate paid(1) $0.0033 --
Net assets, end of period (in thousands) $24,770 $ 2,967
Ratios assuming no waiver of fees and assumption of
expenses by PMC and no reduction for fees paid
indirectly:
Net expenses 3.04% 17.22%**
Net investment loss (0.74%) (15.37%)**
Ratios assuming waiver of fees and assumption of
expenses by PMC and reduction for fees paid indirectly:
Net expenses 1.50% 1.75%**
Net investment income 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.
22
<PAGE>
Capital Growth Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 83.2%
BASIC INDUSTRIES - 1.2%
Paper Products - 1.2%
70,000 Aracruz Cellulose S.A. (A.D.R.) $ 577,500
---------------
TOTAL BASIC INDUSTRIES $ 577,500
---------------
CAPITAL GOODS - 18.7%
Chemicals - 5.1%
65,000 Agrium, Inc. $ 893,750
40,000 Borden Chemical & Plastics, Ltd. 330,000
25,000 The Geon Co. 490,625
45,000 Wellman, Inc. 770,625
---------------
$2,485,000
---------------
Construction & Engineering - 3.1%
39,000 Insteel Industries, Inc. $ 346,125
35,000 Justin Industries 402,500
54,200 Morrison Knudsen Corp.* 487,800
40,000 Perini Corp.* 312,500
---------------
$1,548,925
---------------
Containers - 2.3%
146,400 Interlake Corp.* $ 512,400
20,000 Jefferson Smurfit Corp.* 321,250
75,000 Zapata Corp.* 318,750
---------------
$1,152,400
---------------
Forest Products - 0.9%
20,000 Louisiana Pacific Corp. $ 422,500
---------------
Iron & Steel - 0.4%
50,000 Armco, Inc.* $ 206,250
---------------
Metals & Mining - 0.9%
21,000 Penn Engineering & Manufacturing Corp. $ 430,500
---------------
Pollution & Waste - 2.5%
180,000 Allwaste, Inc.* $ 922,500
73,000 Catalytica, Inc.* 296,562
---------------
$1,219,062
---------------
Producer Goods - 3.5%
48,500 Brown & Sharpe Manufacturing Co.* $ 679,000
24,000 Griffon Corp.* 294,000
20,000 Insilco Corp.* 770,000
---------------
$1,743,000
---------------
TOTAL CAPITAL GOODS $9,207,637
---------------
CONSUMER DURABLES - 3.5%
Consumer Luxuries - 2.8%
50,000 Arctic Cat Inc. $ 493,750
110,000 Meridian Sports, Inc.* 137,500
22,000 U.S. Industries, Inc.* 756,250
---------------
$1,387,500
---------------
Home Products - 0.7%
22,400 Ladd Furniture, Inc. $ 327,600
---------------
Total Consumer Durables $1,715,100
---------------
Consumer Non-Durables - 18.9%
Retail Food - 0.5%
4,500 Arden Group, Inc.* $ 260,437
---------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Capital Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
Retail Non-Food - 15.0%
130,000 Charming Shoppes* $ 658,125
10,000 Cole National Corp. 262,500
15,000 CVS Corp. 620,625
55,000 Fingerhut Companies, Inc. 673,750
28,500 Genesco, Inc.* 263,625
555,500 Grossmans, Inc.* 451,344
70,000 Kmart Corp.* 726,250
57,400 Levitz Furniture, Inc.* 179,375
20,000 Office Depot, Inc.* 355,000
60,000 The Stride Rite Corp. 600,000
20,000 Swiss Army Brands, Inc.* 265,000
29,000 Syms Corp.* 246,500
20,000 Tandy Corp. 880,000
10,000 Toys "R" Us, Inc.* 300,000
40,000 Woolworth Corp.* 875,000
---------------
$7,357,094
---------------
Textiles/Clothes - 3.4%
40,000 Oshkosh B' Gosh, Inc. $ 610,000
45,000 Shaw Industries, Inc. 528,750
74,100 Tultex Corp.* 518,700
---------------
$1,657,450
---------------
TOTAL CONSUMER NON-DURABLES $9,274,981
---------------
ENERGY - 1.1%
Oil Refining and Drilling - 1.1%
15,000 Crystal Oil Co.* $ 540,000
---------------
TOTAL ENERGY $ 540,000
---------------
FINANCIAL - 6.5%
Financial Services - 0.8%
60,000 Express America Holdings Co.* $ 420,000
---------------
Insurance - 5.3%
50,000 20th Century Industries $ 843,750
42,200 American Annuity Group, Inc. 596,075
20,000 Financial Security Assurance Holdings Ltd. 657,500
26,000 Western National Corp. 500,500
---------------
$2,597,825
---------------
Real Estate - 0.4%
66,450 Bluegreen Corp.* $ 182,737
---------------
TOTAL FINANCIAL $3,200,562
---------------
SERVICES - 12.5%
Health & Personal Care - 3.7%
20,000 Apria Healthcare Group, Inc.* $ 375,000
60,000 Coastal Physician Group Inc.* 210,000
27,300 Integrated Health Services, Inc. 665,438
40,000 Sun Health Care Group, Inc.* 540,000
---------------
$1,790,438
---------------
Pharmaceuticals - 4.1%
35,500 Aronex Pharmaceuticals, Inc.* $ 332,813
26,400 Autoimmune Inc.* 405,900
35,000 Ivax Corp. 358,750
35,000 Medeva Plc (Sponsored A.D.R.) 590,625
20,000 Sepracor, Inc.* 332,500
---------------
$2,020,588
---------------
Publishing - 1.0%
11,500 Value Line, Inc. $ 508,875
---------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Capital Growth Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
Services - 3.7%
90,000 AMRE, Inc.* $ 146,250
45,000 Cadmus Communications Corp. 697,500
35,000 Sabre Group Holdings, Inc.* 975,625
---------------
$ 1,819,375
---------------
TOTAL SERVICES $ 6,139,276
---------------
TECHNOLOGY - 20.8%
Business Machines - 1.4%
100,000 Unisys Corp.* $ 675,000
---------------
Computer Services & Software - 6.4%
70,000 Amdahl Corp.* $ 848,750
15,000 Banctec, Inc.* 309,375
77,000 Crosscom Corp.* 404,250
12,500 Fusion Systems Corp.* 265,625
50,000 Symantec Corp.* 725,000
50,000 Viewlogic Systems, Inc.* 568,750
---------------
$ 3,121,750
---------------
Electronics - 12.3%
40,000 Amphenol Corp.* $ 890,000
15,000 Belden Corp. 555,000
50,000 DSC Communications Corp.* 893,750
20,000 Elsag Bailey Process Automation NV* 375,000
20,000 Esco Electronics Corp. 200,000
35,000 Intergraph Corp.* 358,750
28,000 LAM Research Corp.* 787,500
14,000 Marcam Corp.* 182,000
35,000 Teradyne, Inc.* 853,125
30,000 Vishay Intertechnology, Inc.* 701,250
20,000 Whittaker Corp.* 252,500
---------------
$ 6,048,875
---------------
Telecommunications - 0.7%
8,000 AT&T Corp. $ 348,000
---------------
TOTAL TECHNOLOGY $10,193,625
---------------
TOTAL COMMON STOCKS (Cost $39,365,612) $40,848,681
Principal
Amount
---------
TEMPORARY CASH INVESTMENTS - 16.8%
Commercial Paper - 16.8%
$1,839,000 American Express Co., 5.80%, 1/7/97 $ 1,839,000
2,229,000 Ford Motor Credit Co., 5.91%, 1/2/97 2,229,000
2,315,000 Household Finance Corp., 6.15%, 1/6/97 2,315,000
1,864,000 Texaco, Inc., 6.0%, 1/3/97 1,864,000
---------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $8,247,000) $ 8,247,000
---------------
TOTAL INVESTMENT IN SECURITIES - 100% (Cost $47,612,612)(a) $49,095,681
===============
</TABLE>
* Non-income producing security.
(a) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $47,612,612 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $ 4,388,655
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (2,905,586)
---------------
Net unrealized gain $ 1,483,069
===============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 aggregated $39,240,070 and $9,385,472,
respectively.
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Capital Growth Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash
investments of $8,247,000) (cost $47,612,612) $49,095,681
Cash 937
Receivables--
Fund shares sold 42,578
Dividends and interest 18,868
Other 1,494
---------------
Total assets $49,159,558
---------------
Liabilities:
Payables--
Investment securities purchased $ 539,850
Fund shares repurchased 189
Due to affiliates 30,519
Accrued expenses 16,945
---------------
Total liabilities $ 587,503
---------------
Net Assets:
Paid-in capital $46,524,038
Accumulated undistributed net investment income 5,509
Accumulated undistributed net realized gain on investments 559,439
Net unrealized gain on investments 1,483,069
---------------
Total net assets $48,572,055
===============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $48,572,055/3,722,070 shares $ 13.05
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Capital Growth Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $678) $108,750
Interest 248,553
-----------
Total investment income $ 357,303
-------------
Expenses:
Management fees $178,068
Transfer agent fees 945
Accounting 44,722
Custodian fees 23,009
Registration fees 1,860
Professional fees 1,020
Printing 3,929
Fees and expenses of nonaffiliated trustees 931
Miscellaneous 6,959
-----------
Total expenses $ 261,443
Less management fees waived by Pioneering Management Corporation (5,409)
Less fees paid indirectly (2,706)
-------------
Net expenses $ 253,328
-------------
Net investment income $ 103,975
-------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $1,120,540
Change in net unrealized gain on investments 1,521,356
-------------
Net gain on investments $2,641,896
-------------
Net increase in net assets resulting from operations $2,745,871
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Capital Growth Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 103,975 $ 15,202
Net realized gain on investments 1,120,540 242,294
Change in net unrealized gain (loss) on investments 1,521,356 (38,287)
--------------------------------
Net increase in net assets resulting from
operations $ 2,745,871 $ 219,209
--------------------------------
Distributions to Shareholders:
Net investment income ($0.03 and $0.02 per share,
respectively) $ (98,466) $ (15,202)
In excess of net investment income ($0.00 and $0.00
per share, respectively) -- (1,654)
Net realized gain ($0.23 and $0.12 per share,
respectively) (707,881) (93,860)
--------------------------------
Total distributions to shareholders $ (806,347) $ (110,716)
--------------------------------
From Fund Share Transactions: '96 Shares '95 Shares
------------ -------------
Net proceeds from sale of shares 3,190,793 812,531 $40,709,119 $9,287,478
Reinvestment of distributions 61,965 9,447 806,347 110,716
Cost of shares repurchased (339,671) (22,995) (4,239,869) (249,753)
------------ ---------------------------------------------
Net increase in net assets resulting from
fund share transactions 2,913,087 798,983 $37,275,597 $9,148,441
============ =============--------------------------------
Net increase in net assets $39,215,121 $9,256,934
Net Assets:
Beginning of period 9,356,934 100,000
--------------------------------
End of period (including accumulated undistributed net
investment income of $5,509 and $0, respectively) $48,572,055 $9,356,934
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
Capital Growth Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, 1996 December 31, 1995
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.57 $10.00
--------------------------------------
Increase from investment operations:
Net investment income $ 0.03 $ 0.02
Net realized and unrealized gain on investments 1.71 1.69
--------------------------------------
Net increase from investment operations $ 1.74 $ 1.71
Distributions to shareholders:
Net investment income (0.03) (0.02)
Net realized gain (0.23) (0.12)
--------------------------------------
Net increase in net asset value $ 1.48 $ 1.57
--------------------------------------
Net asset value, end of period $ 13.05 $11.57
======================================
Total return* 15.03% 17.13%
Ratio of net expenses to average net assets 0.93%+ 1.56%**+
Ratio of net investment income to average net assets 0.37%+ 0.48%**+
Portfolio turnover rate 41% 46%**
Average commission rate paid(1) $0.0661 --
Net assets, end of period (in thousands) $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 0.92% 1.49%**
Net investment income 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.
29
<PAGE>
Real Estate Growth Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 94.6%
CAPITAL GOODS - 2.1%
Construction & Engineering - 2.1%
25,000 Belmont Homes, Inc.* $ 240,625
---------------
TOTAL CAPITAL GOODS $ 240,625
---------------
REAL ESTATE INVESTMENT TRUSTS - 80.4%
19,000 Amli Residential Properties Trust $ 444,125
14,000 Arden Realty Group, Inc. 388,500
9,000 Beacon Properties Corp. 329,625
21,000 Bedford Property Investors, Inc. 367,500
14,000 Berkshire Realty Co., Inc. 138,250
12,000 Cali Realty Corp. 370,500
8,000 Cousins Properties, Inc. 225,000
8,000 Developers Diversified Realty Corp. 297,000
6,000 Duke Realty Investments, Inc. 231,000
12,000 Equity Residential Property Trust 495,000
12,000 Felcor Suite Hotels, Inc. 424,500
11,000 Gables Residential Trust 319,000
17,000 Glimcher Realty Trust 374,000
9,000 Highwoods Properties, Inc. 303,750
10,000 Horizon Group, Inc. 198,750
10,000 J.P. Realty, Inc. 258,750
16,000 Liberty Property Trust 412,000
16,000 The Macerich Co. 418,000
12,000 Merry Land & Investments, Co. 258,000
11,200 National Golf Properties, Inc. 354,200
12,000 Nationwide Health Properties, Inc. 291,000
10,000 Patriot American Hospitality, Inc. 431,250
15,000 Prentiss Properties Trust* 375,000
9,000 Public Storage, Inc. 279,000
12,000 Simon DeBartolo Group, Inc 372,000
12,000 Storage Trust Realty 324,000
6,800 Sun Communities, Inc. 234,600
6,000 Town & Country Trust 87,750
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS $ 9,002,050
---------------
REAL ESTATE SERVICES - 8.0%
42,000 Catellus Development Corp.* $ 477,750
19,000 Trizec Hahn Corp. 418,000
---------------
TOTAL REAL ESTATE SERVICES $ 895,750
---------------
SERVICES - 4.1%
Hotels & Restaurants - 4.1%
28,800 Host Marriott Services Corp.* $ 460,800
---------------
TOTAL SERVICES $ 460,800
---------------
TOTAL INVESTMENT IN SECURITIES (Cost $9,163,582) $10,599,225
---------------
Principal
Amount
----------
TEMPORARY CASH INVESTMENT - 5.4%
Repurchase Agreement - 5.4%
$ 600,000 Chase Manhattan Corp., 12/31/96, 6.55%, repurchase price of
$600,000 plus accrued interest on 1/2/97, collateralized by
$606,000 U.S. Treasury Notes, 5.125%, 2/28/98 $ 600,000
---------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $600,000) $ 600,000
---------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENT - 100% (Cost $9,763,582)(a) $11,199,225
===============
</TABLE>
* Non-income producing security.
(a) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $9,763,582 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $1,474,809
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (39,166)
-------------
Net unrealized gain $1,435,643
=============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 aggregated $9,915,870 and $1,253,637,
respectively.
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
Real Estate Growth Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$600,000) (cost $9,763,582) $11,199,225
Cash 64,794
Receivables--
Fund shares sold 60,066
Dividends and interest 63,403
Other 1,334
---------------
Total assets $11,388,822
---------------
Liabilities:
Payables--
Investment securities purchased $ 242,610
Fund shares repurchased 27
Due to affiliates 9,112
Accrued expenses 21,659
---------------
Total liabilities $ 273,408
---------------
Net Assets:
Paid-in capital $ 9,637,411
Accumulated undistributed net realized gain on investments 42,360
Net unrealized gain on investments 1,435,643
---------------
Total net assets $11,115,414
===============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $11,115,414/768,555 shares $ 14.46
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
Real Estate Growth Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends $169,732
Interest 8,818
-----------
Total investment income $ 178,550
------------
Expenses:
Management fees $ 29,633
Transfer agent fees 897
Accounting 38,562
Custodian fees 14,115
Professional fees 7,061
Printing 3,848
Fees and expenses of nonaffiliated trustees 841
Miscellaneous 5,221
-----------
Total expenses $ 100,178
Less management fees waived and expenses assumed by Pioneering
Management Corporation (59,986)
Less fees paid indirectly (3,158)
------------
Net expenses $ 37,034
------------
Net investment income $ 141,516
------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 121,049
Change in net unrealized gain on investments 1,403,021
------------
Net gain on investments 1,524,070
------------
Net increase in net assets resulting from operations $1,665,586
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
Real Estate Growth Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 141,516 $ 6,087
Net realized gain on investments 121,049 950
Change in net unrealized gain on investments 1,403,021 32,622
--------------------------------
Net increase in net assets resulting from
operations $ 1,665,586 $ 39,659
--------------------------------
Distributions to Shareholders:
Net investment income ($0.53 and $0.23 per share,
respectively) $ (137,792) $ (5,705)
Net realized gain ($0.12 and $0.03 per share,
respectively) (82,413) (1,332)
Tax return of capital ($0.00 and $0.18 per share,
respectively) -- (4,425)
--------------------------------
Total distributions to shareholders $ (220,205) $(11,462)
--------------------------------
From Fund Share Transactions: '96 Shares '95 Shares
------------ -------------
Net proceeds from sale of shares 722,084 37,073 $ 9,135,087 $400,041
Reinvestment of distributions 16,943 1,048 220,206 11,462
Cost of shares repurchased (16,103) (2,490) (197,756) (27,204)
------------ ---------------------------------------------
Net increase in net assets resulting from fund
share transactions 722,924 35,631 $ 9,157,537 $384,299
============ =============--------------------------------
Net increase in net assets $10,602,918 $412,496
Net Assets:
Beginning of period 512,496 100,000
--------------------------------
End of period (including accumulated undistributed net
investment income of $0 and $0, respectively) $11,115,414 $512,496
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
Real Estate Growth Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31, 1995 to
December 31, 1996 December 31, 1995
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.23 $ 10.00
--------------------------------------
Increase from investment operations:
Net investment income $ 0.54 $ 0.12
Net realized and unrealized gain on investments 3.34 1.55
--------------------------------------
Net increase from investment operations $ 3.88 $ 1.67
Distributions to shareholders:
Net investment income (0.53) (0.23)
Tax return of capital -- (0.18)
Net realized gain (0.12) (0.03)
--------------------------------------
Net increase in net asset value $ 3.23 $ 1.23
--------------------------------------
Net asset value, end of period $ 14.46 $ 11.23
======================================
Total return* 35.73% 16.96%
Ratio of net expenses to average net assets 1.34%+ 2.10%**+
Ratio of net investment income to average net assets 4.63%+ 2.68%**+
Portfolio turnover rate 41% 1%**
Average commission rate paid(1) $0.0595 --
Net assets, end of period (in thousands) $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 3.35% 45.96%**
Net investment income (loss) 2.62% (41.18)%**
Ratios assuming waiver of management fees and assumption
of expenses by PMC and reduction for fees paid
indirectly:
Net expenses 1.24% 1.57%**
Net investment income 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 security transactions.
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
Equity-Income Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 97.4%
PREFERRED STOCKS - 0.1%
404 Aetna Life & Casualty, 6.25% $ 32,068
570 Sprint Corp., 8.25%, 3/31/00 20,449
---------------
TOTAL PREFERRED STOCKS (Cost $44,479) $ 52,517
---------------
COMMON STOCKS - 97.3%
BASIC INDUSTRIES - 9.1%
Chemicals - 5.0%
15,441 ARCO Chemical Co. $ 756,609
21,000 Borden Chemicals & Plastics, L.P. 173,250
5,100 E.I. du Pont de Nemours and Co. 481,312
15,000 Eastman Chemical Co. 828,750
4,000 A. Schulman, Inc. 98,000
---------------
$2,337,921
---------------
Metals & Mining - 3.3%
8,400 Aluminum Co. of America $ 535,500
15,400 Phelps Dodge Corp. 1,039,500
---------------
$1,575,000
---------------
Paper Products - 0.8%
2,100 Union Camp Corp. $ 100,275
10,000 Westvaco Corp. 287,500
---------------
$ 387,775
---------------
TOTAL BASIC INDUSTRIES $4,300,696
---------------
CAPITAL GOODS - 1.6%
Producer Goods - 1.6%
7,000 The Gorman-Rupp Co. $ 95,375
10,000 Helix Technology Corp. 290,000
2,360 Thomas & Betts Corp. 104,725
12,500 Westinghouse Electric Co. 248,437
---------------
TOTAL CAPITAL GOODS $ 738,537
---------------
CONSUMER DURABLES - 4.5%
Motor Vehicles - 4.5%
7,000 Chrysler Corp. $ 231,000
39,800 Ford Motor Co. 1,268,625
11,500 General Motors Corp. 641,125
---------------
TOTAL CONSUMER DURABLES $2,140,750
---------------
CONSUMER NON-DURABLES - 7.3%
Agriculture & Food - 3.9%
4,100 CPC International, Inc. $ 317,750
17,000 General Mills, Inc. 1,077,375
13,000 H.J. Heinz Co. 464,750
---------------
$1,859,875
---------------
Consumer Luxuries - 0.4%
4,600 Cedar Fair, L.P. $ 170,200
---------------
Retail Non-Food - 3.0%
15,550 May Department Stores Co. $ 726,962
7,450 Mercantile Stores Co., Inc. 367,844
6,950 J.C. Penney Co., Inc. 338,813
---------------
$1,433,619
---------------
TOTAL CONSUMER NON-DURABLES $3,463,694
---------------
ENERGY - 11.5%
Oil & Gas Extraction - 9.3%
19,680 Amoco Corp. $1,584,240
16,300 Chevron Corp. 1,059,500
14,000 Mobil Corp. 1,711,500
1,693 Union Pacific Resources Group Inc. 49,520
---------------
$4,404,760
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Equity-Income Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy - Other - 2.2%
20,000 Sonat, Inc. $ 1,030,000
---------------
TOTAL ENERGY $ 5,434,760
---------------
FINANCIAL - 19.8%
Commercial Banks - 15.6%
8,000 BankAmerica Corp. $ 798,000
29,400 The Bank of New York Co., Inc. 992,250
11,000 CoreStates Financial Corp. 570,625
12,000 First Chicago NBD Corp. 645,000
13,600 First Security Corp. 459,000
10,400 First Tennessee National Corp. 390,000
20,000 First Union Corp. 1,480,000
26,642 Huntington Bancshares, Inc. 702,683
16,000 National City Corp. 718,000
13,510 Old Kent Financial Corp. 645,102
---------------
$ 7,400,660
---------------
Insurance - 3.4%
9,000 Chubb Corp. $ 483,750
10,500 Safeco Corp. 414,094
12,000 St. Paul Companies, Inc. 703,500
---------------
$ 1,601,344
---------------
Real Estate - 0.3%
4,705 The Rouse Co. $ 149,384
---------------
Savings & Loan - 0.5%
7,000 H.F. Ahmanson & Co. $ 227,500
---------------
TOTAL FINANCIAL $ 9,378,888
---------------
SERVICES - 12.1%
Health & Personal Care - 1.5%
16,000 Becton, Dickinson & Co. $ 694,000
---------------
Broadcating & Media - 0.5%
10,000 Gaylord Entertainment Co. $ 228,750
---------------
Pharmaceuticals - 9.1%
12,000 Abbott Laboratories $ 609,000
6,200 Bristol-Myers Squibb Co. 674,250
17,700 Schering-Plough Corp. 1,146,075
25,000 Warner-Lambert Co. 1,875,000
---------------
$ 4,304,325
---------------
Publishing - 1.0%
10,600 McGraw-Hill Co., Inc. $ 488,925
---------------
TOTAL SERVICES $ 5,716,000
---------------
TECHNOLOGY - 6.9%
Business Machines - 3.3%
6,000 Diebold, Inc. $ 377,250
24,000 Hewlett-Packard Co. 1,206,000
---------------
$ 1,583,250
---------------
Computer Services - 2.8%
10,000 Electronic Data Systems Corp. $ 432,500
6,000 IBM, Corp. 906,000
---------------
$ 1,338,500
---------------
Electronics - 0.4%
3,100 General Motors Corp. (Class H) $ 174,375
---------------
Photo/Instrumentation - 0.4%
2,200 Eastman Kodak Co. $ 176,550
---------------
TOTAL TECHNOLOGY $ 3,272,675
---------------
TRANSPORTATION - 0.3%
Railroad & Bus - 0.3%
2,000 Union Pacific Corp. $ 120,250
---------------
TOTAL TRANSPORTATION $ 120,250
---------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Equity-Income Portfolio
Schedule of Investments - December 31, 1996
- ---------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
UTILITIES - 24.2%
Electricity Utilities - 6.2%
44,000 Allegheny Power Systems, Inc. $ 1,336,500
10,000 Dominion Resources, Inc. 385,000
50,000 DPL, Inc. 1,225,000
---------------
$ 2,946,500
---------------
Gas Utilities - 5.7%
5,600 The Brooklyn Union Gas Co. $ 168,700
4,750 Consolidated Natural Gas Co. 262,438
10,000 El Paso Natural Gas Co. 505,000
27,500 NICOR, Inc. 983,125
10,000 People's Energy Corp. 338,750
14,000 Public Service Co. of North Carolina, Inc. 255,500
5,000 Questar Corp. 183,750
---------------
$ 2,697,263
---------------
Telecommunications - 12.2%
34,800 Aliant Communications, Inc. $ 591,600
12,600 Ameritech Corp. 763,875
5,000 AT&T Corp. 217,500
15,500 Bell Atlantic Corp. 1,003,625
6,200 BellSouth Corp. 250,325
16,000 GTE Corp. 728,000
1,620 Lucent Technologies, Inc. 74,925
11,800 NYNEX Corp. 567,875
3,700 Pacific Telesis Group 135,975
15,000 SBC Communications, Inc. 776,250
15,000 Sprint Corp. 598,125
1,300 U.S. West Communication Group 41,925
---------------
$ 5,750,000
---------------
Utility/ Other - 0.1%
800 E'Town Corp. $ 25,300
---------------
TOTAL UTILITIES $11,419,063
---------------
TOTAL COMMON STOCKS (Cost $42,088,046) $45,985,313
---------------
TOTAL INVESTMENTS IN SECURITIES (Cost $42,132,525) $46,037,830
---------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
----------
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 2.6%
Commercial Paper - 2.6%
$1,249,000 American Express Co., 6.55%, 1/2/97 $ 1,249,000
---------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $1,249,000) $ 1,249,000
---------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $43,381,525) (a) $47,286,830
===============
</TABLE>
(a) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $43,381,525 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $ 4,467,344
Aggregate gross unrealized gain for all investments in which there is an excess
of tax cost over value (562,039)
---------------
Net unrealized gain $ 3,905,305
===============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 aggregated $40,557,237 and $4,474,176,
respectively.
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Equity-Income Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$1,249,000) (cost $43,381,525) $47,286,830
Cash 663
Receivables--
Dividends and interest 104,119
Other 1,596
---------------
Total assets $47,393,208
---------------
Liabilities:
Payables:
Fund shares repurchased $ 468,313
Due to affiliates 32,688
Accrued expenses 21,017
---------------
Total liabilities $ 522,018
---------------
Net Assets:
Paid-in capital $42,822,042
Accumulated undistributed net investment income 67,945
Accumulated undistributed net realized gain on investments 75,898
Net unrealized gain on investments 3,905,305
---------------
Total net assets $46,871,190
===============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $46,871,190/3,413,051 shares $ 13.73
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Equity-Income Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends $858,007
Interest 50,225
-----------
Total investment income $ 908,232
-------------
Expenses:
Management fees $161,879
Transfer agent fees 888
Accounting 46,878
Custodian fees 18,024
Professional fees 6,044
Printing 4,172
Fees and expenses of nonaffliated trustees 1,434
Miscellaneous 6,482
-----------
Total expenses $ 245,801
Less management fees waived by Pioneering Management Corporation (6,631)
Less fees paid indirectly (2,601)
-------------
Net expenses $ 236,569
-------------
Net investment income $ 671,663
-------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 60,190
Change in net unrealized gain on investments 3,551,636
-------------
Net gain on investments $3,611,826
-------------
Net increase in net assets resulting from operations $4,283,489
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Equity-Income Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 671,663 $ 51,707
Net realized gain on investments 60,190 2
Change in net unrealized gain on investments 3,551,636 353,669
--------------------------------
Net increase in net assets resulting from
operations $ 4,283,489 $ 405,378
--------------------------------
Distributions to Shareholders:
Net investment income ($0.27 and $0.18 per share,
respectively) $ (590,580) $ (49,139)
--------------------------------
Total distributions to shareholders $ (590,580) $ (49,139)
--------------------------------
From Fund Transactions: '96 Shares '95 Shares
------------- -------------
Net proceeds from sale of shares 3,015,546 566,392 $38,450,404 $6,550,913
Reinvestments of distributions 45,688 4,147 590,580 49,139
Cost of shares repurchased (216,188) (12,534) (2,776,392) (142,602)
------------- ---------------------------------------------
Net increase in net assets resulting from fund
share transactions 2,845,046 558,005 $36,264,592 $6,457,450
============= =============--------------------------------
Net increase in net assets $39,957,501 $6,813,689
Net Assets:
Beginning of period 6,913,689 100,000
--------------------------------
End of period (including accumulated undistributed
net investment income of $67,945 and $2,568,
respectively) $46,871,190 $6,913,689
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Equity-Income Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, 1996 December 31, 1995
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.17 $ 10.00
--------------------------------------
Increase from investment operations:
Net investment income $ 0.29 $ 0.19
Net realized and unrealized gain on investments 1.54 2.16
--------------------------------------
Total increase from investment operations $ 1.83 $ 2.35
Distributions to shareholders:
Net investment income (0.27) (0.18)
--------------------------------------
Net increase in net asset value $ 1.56 $ 2.17
--------------------------------------
Net asset value, end of period $ 13.73 $ 12.17
======================================
Total return* 15.19% 23.62%
Ratio of net expenses to average net assets 0.96%+ 1.63%**+
Ratio of net investment income to average net assets 2.67%+ 2.89%**+
Portfolio turnover rate 18% --
Average commission rate paid(1) $0.0583 --
Net assets, end of period (in thousands) $46,871 $ 6,914
Ratios assuming no waiver of management fees
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 by PMC and
reduction for fees paid indirectly:
Net expenses 0.95% 1.47%**
Net investment income 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 security transactions.
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Balanced Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 93.0%
CONVERTIBLE PREFERRED STOCK - 0.6%
2,780 Sprint Corp., 8.25%, 3/31/00 $ 99,733
---------------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $107,482) $ 99,733
---------------
COMMON STOCKS - 58.5%
BASIC INDUSTRIES - 1.6%
Chemicals - 0.6%
2,035 ARCO Chemical Co. $ 99,715
---------------
Non-Ferrous Metals - 1.0%
2,500 Phelps Dodge Corp. $ 168,750
---------------
TOTAL BASIC INDUSTRIES $ 268,465
---------------
CAPITAL GOODS - 0.8%
Producer Goods - 0.8%
6,500 Westinghouse Electric Co. $ 129,188
---------------
TOTAL CAPITAL GOODS $ 129,188
---------------
CONSUMER DURABLES - 5.8%
Motor Vehicles - 5.8%
10,000 APS Holding Corp.* $ 155,000
3,900 Chrysler Corp. 128,700
9,050 Ford Motor Co. 288,469
7,600 General Motors Corp. 423,700
---------------
TOTAL CONSUMER DURABLES $ 995,869
---------------
CONSUMER NON-DURABLES - 3.0%
Retail Non-Food - 3.0%
3,600 The May Department Stores Co. $ 168,300
7,000 J.C. Penney Co., Inc. 341,250
---------------
TOTAL CONSUMER NON-DURABLES $ 509,550
---------------
ENERGY - 1.4%
Oil & Gas Extraction - 1.4%
3,000 Amoco Corp. $ 241,500
---------------
TOTAL ENERGY $ 241,500
---------------
FINANCIAL - 16.1%
Commercial Bank - 2.7%
6,400 The Bank of New York Co., Inc. $ 216,000
4,500 First Chicago NBD Corp. 241,875
---------------
$ 457,875
---------------
Financial Services - 5.9%
6,000 The Chase Manhattan Corp. $ 535,500
10,000 GreenPoint Financial Corp. 472,500
---------------
$1,008,000
---------------
Insurance - 5.2%
15,000 Safeco Corp. $ 591,563
5,000 St. Paul Companies, Inc. 293,125
---------------
$ 884,688
---------------
Misc. Finance - 0.8%
5,000 Countywide Credit Industries, Inc. $ 143,125
---------------
Real Estate Investment Trust - 0.9%
5,000 Cali Realty Corp. $ 154,375
---------------
Savings & Loan - 0.6%
3,500 H.F. Ahmanson & Co. $ 113,750
---------------
TOTAL FINANCIAL $2,761,813
---------------
SERVICES - 7.6%
Health & Personal Care - 7.6%
18,000 Apria Healthcare Group, Inc.* $ 337,500
7,000 Becton, Dickinson & Co. 303,625
15,000 Integrated Health Services, Inc. 365,625
10,000 OrNda HealthCorp.* 292,500
---------------
TOTAL SERVICES $1,299,250
---------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
Balanced Portfolio
Schedule of Investments - December 31, 1996
- ---------------------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------------------
TECHNOLOGY - 13.2%
Computer Services - 4.8%
5,000 Electronic Data Systems Corp. $ 216,250
1,000 International Business Machines Corp. 151,000
35,000 Mercury Interactive Corp.* 455,000
---------------
$ 822,250
---------------
Electronics - 8.4%
6,500 Avnet, Inc. $ 378,625
10,000 DuPont Photomasks, Inc.* 453,750
10,000 EMC Corp.* 331,250
10,000 Lam Research Corp.* 281,250
---------------
$ 1,444,875
---------------
TOTAL TECHNOLOGY $ 2,267,125
---------------
UTILITIES - 9.0%
Electric Utility - 2.7%
12,000 Dominion Resources, Inc. $ 462,000
---------------
Telecommunications - 6.3%
10,000 BellSouth Corp. $ 403,750
9,620 Lucent Technologies, Inc. 444,925
7,000 MCI Communications Corp. 228,812
---------------
$ 1,077,487
---------------
TOTAL UTILITIES $ 1,539,487
---------------
TOTAL COMMON STOCKS (Cost $9,172,997) $10,012,247
---------------
</TABLE>
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited)
--------- -------------
<S> <C> <C> <C>
DEBT OBLIGATIONS - 33.9%
CORPORATE BONDS - 24.3%
Basic Industries - 1.7%
$150,000 BBB+/A3 Lockheed Martin Corp., 6.85%, 5/15/01 $ 151,335
135,000 A/A2 Phelps Dodge Corp., 7.75%, 1/1/02 137,662
---------------
TOTAL BASIC INDUSTRIES $ 288,997
---------------
Financial - 19.0%
200,000 AA-/Aa3 Associates Corp., N.A., 6.0%, 3/15/99 $ 199,078
210,000 A/A1 Chase Manhattan Corp., 5.50%, 2/15/01 201,963
500,000 A/A2 Citicorp, 7.25%, 9/1/08 503,755
250,000 A/A2 First Data Corp., 6.625%, 4/1/03 249,400
511,000 General Motors Acceptance Corp., 5.625%,
A-/A3 2/15/01 492,384
200,000 A-/Baa2 Hertz Corp., 7.0%, 7/15/03 199,922
110,000 A/A1 ITT Hartford Group, Inc., 6.375%, 11/1/02 107,207
220,000 AA-/Aa3 Merrill Lynch & Co., Inc., 6.375%, 9/8/06 207,889
200,000 A/A2 Nationsbank Corp., 7.5%, 9/15/06 205,482
200,000 A/A2 Nationsbank Corp., 6.5%, 3/15/06 192,206
200,000 BBB/Baa1 Salomon Inc., 7.0%, 6/15/03 197,248
200,000 BBB/A3 Washington Mutual Inc., 7.25%, 8/15/05 202,200
300,000 A-/Baa1 Western National Corp., 7.125%, 2/15/04 303,300
---------------
TOTAL FINANCIAL $3,262,034
---------------
Service - 1.2%
200,000 AA-/A1 Warner-Lambert Co., 6.625%, 9/15/02 $ 200,682
---------------
TOTAL SERVICE $ 200,682
---------------
Telecommunications - 2.4%
400,000 A/A2 Lucent Technologies, Inc., 6.9%, 7/15/01 $ 405,188
---------------
TOTAL TELECOMMUNICATIONS $ 405,188
---------------
TOTAL CORPORATE BONDS $4,156,901
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
Balanced Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Obligations - 9.6%
$ 775,000 U.S. Treasury Notes, 5.25%, 1/31/01 $ 750,417
945,000 U.S. Treasury Notes, 5.625%, 2/15/06 894,206
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 1,644,623
---------------
TOTAL DEBT OBLIGATIONS (Cost $5,809,675) $ 5,801,524
---------------
TOTAL INVESTMENT IN SECURITIES (Cost $15,090,154) $15,913,504
---------------
TEMPORARY CASH INVESTMENT - 7.0%
Repurchase Agreement - 7.0%
1,200,000 Chase Manhattan Corp., 12/31/96, 6.55%, repurchase price of
$1,200,000 plus accrued interest on 1/2/97, collateralized by
$1,212,000 U.S. Treasury Notes, 5.125%, 2/28/98 $ 1,200,000
---------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $1,200,000) $ 1,200,000
---------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $16,290,154) (a) $17,113,504
===============
</TABLE>
* Non-income producing security.
(a) At December 31, 1996, the net unrealized gain on investments based on
cost for federal income tax purposes of $16,290,154 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized
gain for all investments
in which there is an
excess of value over tax
cost $ 958,834
Aggregate gross unrealized
loss for all investments
in which there is an
excess of tax cost over
value (135,484)
---------------
Net unrealized gain $ 823,350
===============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------------------------
<S> <C> <C>
Long-term U.S. Government $ 1,675,690 $ 68,623
Other Long-term Securities 16,542,514 5,849,482
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
Balanced Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash
investment of $1,200,000) (cost $16,290,154) $17,113,504
Cash 275,334
Receivables--
Investment securities sold 180,938
Fund shares sold 22,471
Dividends and interest 137,505
Other 2,291
---------------
Total assets $17,732,043
---------------
Liabilities:
Payables--
Investment securities purchased $ 914,708
Fund shares repurchased 156
Due to affiliates 11,163
Accrued expenses 22,578
---------------
Total liabilities $ 948,605
---------------
Net Assets:
Paid-in capital $15,695,482
Accumulated undistributed net investment income 2,480
Accumulated undistributed net realized gain on investments 262,126
Net unrealized gain on investments 823,350
---------------
Total net assets $16,783,438
===============
Net Asset Value Per Share:
(unlimited number of shares authorized)
Based on $16,783,438/1,272,662 shares $ 13.19
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
Balanced Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends $150,711
Interest 179,440
-----------
Total investment income $ 330,151
-------------
Expenses:
Management fees $ 52,926
Transfer agent fees 905
Accounting 47,806
Custodian fees 11,328
Registration fees 1,582
Professional fees 2,483
Printing 5,347
Fees and expenses of nonaffiliated trustees 861
Miscellaneous 5,829
-----------
Total expenses $ 129,067
Less management fees waived by
Pioneering Management Corporation (30,616)
Less fees paid indirectly (4,201)
-------------
Net expenses $ 94,250
-------------
Net investment income $ 235,901
-------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 340,937
Change in net unrealized gain on investments 712,764
-------------
Net gain on investments $1,053,701
-------------
Net increase in net assets resulting from operations $1,289,602
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
Balanced Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 1, 1995
Year Ended to
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 235,901 $ 20,164
Net realized gain on investments 340,937 --
Change in net unrealized gain on investments 712,764 110,586
------------- -------------
Net increase in net assets resulting from
operations $ 1,289,602 $ 130,750
------------- -------------
Distributions to Shareholders:
Net investment income ($0.29 and $0.20 per share,
respectively) $ (232,851) $ (20,164)
Net realized gain ($0.07 and $0.00 per share,
respectively) (81,104) --
Tax return of capital ($0.00 and $0.00 per share,
respectively) -- (450)
------------- -------------
Total distributions to shareholders $ (313,955) $ (20,614)
------------- -------------
From Fund Share Transactions: '96 Shares '95 Shares
------------- -------------
Net proceeds from sale of shares 1,080,147 214,614 $13,535,523 $2,454,594
Reinvestment of distributions 24,566 1,781 313,955 20,614
Cost of shares repurchased (56,270) (2,176) (702,950) (24,081)
------------- ------------- ------------- -------------
Net increase in net assets resulting from
fund share transactions 1,048,443 214,219 $13,146,528 $2,451,127
============= ============= ------------- -------------
Net increase in net assets $14,122,175 $2,561,263
Net Assets:
Beginning of period 2,661,263 100,000
------------- -------------
End of period (including accumulated undistributed
net investment income of $2,480 and $0,
respectively) $16,783,438 $2,661,263
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
Balanced Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 1, 1995
Year Ended to
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 11.87 $ 10.00
------------- -------------
Increase from investment operations:
Net investment income $ 0.29 $ 0.20
Net realized and unrealized gain on investments 1.39 1.87
------------- -------------
Net increase from investment operations $ 1.68 $ 2.07
Distributions to shareholders:
Net investment income (0.29) (0.20)
Net realized gain (0.07) --
------------- -------------
Net increase in net asset value $ 1.32 $ 1.87
------------- -------------
Net asset value, end of period $ 13.19 $ 11.87
============= =============
Total return* 14.26% 20.84%
Ratio of net expenses to average net assets 1.20%+ 1.76%**+
Ratio of net investment income to average net assets 2.83%+ 2.99%**+
Portfolio turnover rate 74% --
Average commission rate paid(1) $0.0582 --
Net assets, end of period (in thousands) $16,783 $ 2,661
Ratios assuming no waiver of management fees by PMC and
no reduction for fees paid indirectly:
Net expenses 1.58% 14.77%**
Net investment income (loss) 2.45% (10.02)% **
Ratios assuming waiver of management fees by PMC and
reduction for fees paid indirectly:
Net expenses 1.15% 1.45%**
Net investment income 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 security transactions.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
Swiss Franc Bond Portfolio
Schedule of Investments - December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (Unaudited) Value
------------- -------------------------------------------------- -----------
<S> <C> <C> <C>
DEBT OBLIGATIONS - 86.1%
Austria - 6.7%
$1,000,000 AAA/Aaa City of Vienna, 4.25%, 1/31/00 $ 780,725
-----------
Belgium - 7.9%
100,000 AA+/Aa1 Kingdom of Belgium, 7.25%, 3/19/01 $ 86,477
1,000,000 AA+/Aa1 Kingdom of Belgium, 7.125%, 6/1/99 824,654
-----------
$ 911,131
-----------
Canada - 4.0%
600,000 AA-/Aa3 Ontario Province, 4.0%, 6/29/01 $ 465,969
-----------
Denmark - 4.0%
600,000 AA+/Aa1 Great Belt AS, 4.25%, 9/24/04 $ 461,711
-----------
France - 0.7%
100,000 AAA/Aaa Societe National Chemins de fer France,
5.25%, 7/27/00 $ 79,940
-----------
Germany - 8.2%
25,000 AAA/Aaa Deutsche Siedlungs LB Bank, 4.25%,
12/28/98 $ 19,415
1,000,000 AAA/Aaa Helaba Finance, 3.75%, 12/28/00 775,869
200,000 AAA/Aaa KFW International Finance Inc., 4.0%,
11/15/02 154,912
-----------
$ 950,196
-----------
Ireland - 3.6%
500,000 AA/Aa2 Republic of Ireland, 6.5%, 1/15/01 $ 420,732
-----------
Netherlands - 6.6%
1,000,000 AA-/Aa3 Nationale Investeringsbank NV, 3.25%,
12/20/99 $ 763,168
-----------
New Zealand - 5.3%
800,000 AA+/Aa1 Transpower Finance Ltd., 4.25%, 6/10/04 $ 612,028
-----------
Norway - 17.4%
2,600,000 AA+/Aa2 Statoil, 4.125%, 9/20/01 $ 2,010,460
-----------
South Korea - 3.3%
500,000 AA-/A1 Korea Development Bank, 4.25%, 3/29/01 $ 388,495
-----------
Sweden - 4.0%
100,000 A/A2 City of Gothenberg, 6.375%, 12/10/99 $ 81,808
500,000 AA+/Aa3 Swedish Export Credit Corp., 4.25%,
1/31/06 379,156
-----------
$ 460,964
-----------
Philippines - 9.0%
1,250,000 AAA/Aaa Asian Development Bank, 7.375%, 11/27/00 $ 1,037,542
-----------
United Kingdom - 3.4%
500,000 AA/Aa2 Abbey National Treasury Services, 4.0%,
12/30/99 $ 391,109
-----------
United States - 2.0%
300,000 AAA/Aaa General Electric Capital Corp., 3.5%,
5/29/00 $ 230,295
-----------
TOTAL DEBT OBLIGATIONS (Cost
$10,502,250) $ 9,964,465
-----------
TEMPORARY CASH INVESTMENTS - 13.9%
U.S. Treasury Obligation - 8.7%
1,000,000 U.S. Treasury Notes, 6.875%, 4/30/97 $ 1,005,313
-----------
Repurchase Agreement - 5.2%
600,000 Chase Manhattan Corp., 12/31/96, 6.55%,
repurchase price of $600,000 plus accrued
interest on 1/2/97, collateralized by
$606,000 U.S. Treasury Notes, 5.125%,
2/28/98 $ 600,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS (Cost
$1,605,078) $ 1,605,313
-----------
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $12,107,328)(a) $11,569,778
-----------
</TABLE>
(a) At December 31, 1996, the net unrealized loss on investments based on
cost for federal income tax purposes of $12,107,328 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of value over tax cost $ 235
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost over value (537,785)
------------
Net unrealized loss $(537,550)
============
</TABLE>
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 1996 aggregated $11,966,236 and $1,540,838,
respectively.
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
Swiss Franc Bond Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investments of
$1,605,078) (cost $12,107,328) $11,569,778
Cash 1,428,112
Foreign currencies, at value 12,197
Receivables--
Interest and foreign taxes withheld 205,651
Due from Pioneering Management Corporation 2,850
Other 1,067
-------------
Total assets $13,219,655
-------------
Liabilities:
Payables--
Fund shares repurchased $ 30,401
Forward foreign currency portfolio hedge contracts, open--net 98,673
Due to affiliates 104
Accrued expenses 11,198
-------------
Total liabilities $ 140,376
-------------
Net Assets:
Paid-in capital $13,676,840
Accumulated undistributed net investment income 50,019
Net unrealized loss on investments (537,550)
Net unrealized loss on forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (110,030)
-------------
Total net assets $13,079,279
=============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $13,079,279/974,373 shares $ 13.42
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
Swiss Franc Bond Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $ 234,997
------------
Total investment income $ 234,997
------------
Expenses:
Management fees $ 33,183
Transfer agent fees 1,214
Accounting 58,545
Custodian fees 17,575
Professional fees 11,968
Printing 3,963
Registration 16
Fees and expenses of nonaffiliated trustees 1,202
Miscellaneous 5,000
------------
Total expenses $ 132,666
Less management fees waived and expenses assumed by Pioneering Management
Corporation (71,052)
Less fees paid indirectly (2,327)
------------
Net expenses $ 59,287
------------
Net investment income $ 175,710
------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain (loss) from:
Investments $ 7,575
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (133,245) $(125,670)
------------ ------------
Change in net unrealized gain or loss from:
Investments $(537,346)
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (110,028) $(647,374)
------------ ------------
Net loss on investments and foreign currency transactions $(773,044)
------------
Net decrease in net assets resulting from operations $(597,334)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
Swiss Franc Bond Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 1,
Year Ended 1995 to
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 175,710 $ 537
Net realized loss on investments and foreign
currency transactions (125,670) (206)
Change in net unrealized gain or loss on investments
and foreign currency transactions (647,374) --
----------- --------
Net increase (decrease) in net assets resulting
from operations $ (597,334) $ 331
----------- --------
Distributions to Shareholders:
Net investment income ($0.00 and $0.00 per share,
respectively) $ (558) $ --
----------- --------
Total distributions to shareholders $ (558) $ --
----------- --------
From Fund Share Transactions: '96 Shares '95 Shares
---------- ----------
Net proceeds from sale of shares 1,011,347 5,908 $14,177,025 $ 88,994
Reinvestment of dividends 40 -- 558 --
Cost of shares repurchased (49,589) -- (689,737) --
--------- ----- ----------- ---------
Net increase in net assets resulting from fund
share transactions 961,798 5,908 $13,487,846 $ 88,994
========= ===== ----------- --------
Net increase in net assets $12,889,954 $ 89,325
Net Assets:
Beginning of period 189,325 100,000
----------- --------
End of period (including accumulated undistributed
net investment income of $50,019 and $537,
respectively) $13,079,279 $189,325
=========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
Swiss Franc Bond Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 1,
Year Ended 1995 to
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 15.06 $ 15.00
------------- -------------
Increase (decrease) from investment operations:
Net investment income $ 0.14 $ 0.04
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (1.78) 0.02
------------- -------------
Net increase (decrease) in net asset value $ (1.64) $ 0.06
------------- -------------
Net asset value, end of period $ 13.42 $ 15.06
============= =============
Total return* (10.88)% 0.40%
Ratio of net expenses to average net assets 1.20%+ 2.25%**+
Ratio of net investment income to average net assets 3.37%+ 1.70%**+
Portfolio turnover rate 39% --%
Net assets, end of period (in thousands) $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 2.58% 69.22%**
Net investment income (loss) 1.99% (65.27)%**
Ratios assuming waiver of management fees and assumption
of expenses by PMC and reduction for fees paid
indirectly:
Net expenses 1.15% 1.25%**
Net investment income 3.42% 2.70%**
</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.
53
<PAGE>
America Income Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- ----------- -------------------------------------------------------------------- ------------
Principal
Amount Value
- ----------- -------------------------------------------------------------------- ------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 94.1%
U.S. Government and Agency Obligations - 94.1%
$300,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 2006 $ 291,984
110,000 Federal Home Loan Mortgage Corp., 6.55%, 2000 111,100
200,000 Federal Home Loan Mortgage Corp., 7.055%, 2001 200,218
300,000 Federal Home Loan Mortgage Corp., 7.125%, 2002 310,032
250,000 Federal Home Loan Mortgage Corp., REMIC Series 1142H, 7.95%, 2020 255,857
250,000 Federal National Mortgage Association, 6.7%, 2001 250,665
225,000 Federal National Mortgage Association, 6.8%, 2003 228,550
100,000 Federal National Mortgage Association, 6.85%, 2004 101,469
250,000 Federal National Mortgage Association, Medium Term Note, 6.93%, 2001 249,923
200,000 Federal National Mortgage Association, Medium Term Note, 7.17%, 2001 202,532
300,000 Federal National Mortgage Association, Medium Term Note, 7.53%, 2006 302,343
298,797 Government National Mortgage Association, 8.0%, 2008 310,581
261,497 Government National Mortgage Association, 7.5%, 2022 to 2023 262,684
585,402 Government National Mortgage Association, 7.0%, 2025 to 2026 572,593
91,415 Government National Mortgage Association II, 8.0%, 2025 92,959
250,000 Private Export Funding Association, 7.3%, 2002 258,830
200,000 Student Loan Marketing Association, 7.5%, 2000 207,218
100,000 Tennessee Valley Authority, Global Bond, 6.375%, 2005 98,422
200,000 U.S. Treasury Bonds, 7.25%, 2016 211,188
100,000 U.S. Treasury Notes, 6.0%, 1997 100,359
660,000 U.S. Treasury Notes, 7.125%, 2000 679,490
200,000 U.S. Treasury Notes, 7.875%, 2004 218,250
800,000 U.S. Treasury Notes, 7.0%, 2006 831,128
------------
TOTAL INVESTMENT IN SECURITIES (Cost $6,406,512) $6,348,375
------------
TEMPORARY CASH INVESTMENT - 5.9%
Repurchase Agreement - 5.9%
400,000 Chase Manahattan Bank, 1/2/97, 6.55%, repurchase price of $400,000
plus accrued interest on 1/2/97, collateralized by $404,000 U.S.
Treasury Note, 5.125%, 2/28/98 $ 400,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $400,000) $ 400,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH INVESTMENT
(Cost $6,806,512)(a) (b) $6,748,375
============
</TABLE>
(a) At December 31, 1996, the net unrealized loss on
investments based on cost for federal income tax purposes
of $6,806,512 was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized gain of all investments in
which there is an excess of tax cost over value $ 12,015
Aggregate gross unrealized loss of all investments in
which there is an excess of tax cost over value (70,152)
--------
Net unrealized loss $(58,137)
========
</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 year ended December 31, 1996
were $5,899,866 and $2,231,448, respectively.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
America Income Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value (including temporary
cash
investments of $400,000)(cost $6,806,512) $6,748,375
Cash 34,449
Receivables--
Interest 101,901
Fund shares sold 10,758
Other 1,020
-------------
Total assets $6,896,503
-------------
Liabilities:
Payables--
Fund shares repurchased $ 224
Due to affiliates 5,467
Accrued expenses 18,526
-------------
Total liabilities $ 24,217
-------------
Net Assets:
Paid-in capital $7,003,181
Accumulated net realized loss on investments (72,758)
Net unrealized loss on investments (58,137)
-------------
Total net assets $6,872,286
=============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $6,872,286/702,884 shares $ 9.78
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
America Income Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $ 278,783
-------------
Expenses:
Management fees $23,307
Transfer agent fees 1,464
Accounting 35,611
Custodian fees 15,732
Registration fees 1,201
Professional fees 7,021
Printing 3,940
Fees and expenses of nonaffiliated trustees 864
Miscellaneous 6,042
----------
Total expenses $ 95,182
Less management fees waived and expenses assumed
by Pioneering Management Corporation (39,531)
Less fees paid indirectly (2,711)
-------------
Net expenses $ 52,940
-------------
Net investment income $ 225,843
-------------
Realized and Unrealized Loss on Investments:
Net realized loss on investments $ (72,430)
Change in net unrealized gain on investments (108,636)
-------------
Net loss on investments $(181,066)
-------------
Net increase in net assets resulting from
operations $ 44,777
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
America Income Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 225,843 $ 37,752
Net realized loss on investments (72,430) (198)
Change in net unrealized gain on investments (108,636) 50,499
--------------------------------
Net increase in net assets resulting from
operations $ 44,777 $ 88,053
--------------------------------
Distributions to Shareholders:
Net investment income ($0.52 and $0.38 per
share, respectively) $ (225,843) $ (37,752)
In excess of net investment income ($0.00 and
$0.00 per share, respectively) (130) --
--------------------------------
Total distributions to shareholders $ (225,973) $ (37,752)
--------------------------------
'96 Shares '95 Shares
------------ -----------
From Fund Share Transactions:
Net proceeds from sale of shares 799,366 364,974 $ 7,875,427 $3,661,407
Reinvestment of distributions 23,018 3,744 225,549 37,752
Cost of shares repurchased (464,797) (33,421) (4,561,786) (335,168)
------------ ----------- --------------------------------
Net increase in net assets resulting from
fund share transactions 357,587 335,297 $ 3,539,190 $3,363,991
============ =========== --------------------------------
Net increase in net assets $ 3,357,994 $3,414,292
Net Assets:
Beginning of period 3,514,292 100,000
--------------------------------
End of period (including accumulated
undistributed net investment income of $0 and
$0, respectively.) $ 6,872,286 $3,514,292
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
America Income Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, 1996 December 31, 1995
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $10.18 $10.00
--------------------------------------
Increase from investment operations:
Net investment income $ 0.52 $ 0.38
Net realized and unrealized gain (loss) on investments (0.40) 0.18
--------------------------------------
Net increase from investment operations $ 0.12 $ 0.56
Distributions to shareholders from:
Net investment income (0.52) (0.38)
--------------------------------------
Net increase in net asset value $(0.40) $ 0.18
--------------------------------------
Net asset value, end of period $ 9.78 $10.18
======================================
Total return* 1.30% 5.68%
Ratio of net expenses to average net assets 1.31%+ 1.12%**+
Ratio of net investment income to average net assets 5.25%+ 5.22%**+
Portfolio turnover rate 60% 96%**
Net assets, end of period (in thousands) $6,872 $3,514
Ratios assuming no waiver of management fees and
assumption of expenses by PMC and no reduction for fees
paid indirectly:
Net expenses 2.24% 11.86%**
Net investment income (loss) 4.32% (5.52)%**
Ratios assuming waiver of management fees and assumption
of expenses by PMC and reduction for fees paid
indirectly:
Net expenses 1.25% 0.99%**
Net investment income 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.
58
<PAGE>
Money Market Portfolio
Schedule of Investments - December 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- -------------
Principal
Amount Value
- -------------------------------------------------------------------- -------------
<S> <C> <C>
COMMERCIAL PAPER - 78.4%
$ 480,000 Associates Corp. of North America, 5.35%, 1/13/97 $ 479,215
490,000 Amoco Co., 5.25%, 1/24/97 488,428
480,000 Bankers Trust Co., 5.29%, 1/24/97 478,448
480,000 Coca-Cola Co., 5.25%, 2/21/97 476,500
480,000 Corestates Capital Corp., 5.39%, 1/16/97 478,994
450,000 Chevron Oil Finance Co., 5.5%, 1/14/97 449,175
500,000 Ford Motor Credit Co., 5.66%, 1/6/97 499,686
410,000 Gannett Co., Inc., 5.33%, 1/10/97 409,514
440,000 General Electric Capital Corp., 5.4%, 1/09/97 439,538
450,000 Household Finance Corp., 6.15%, 1/2/97 450,000
450,000 JP Morgan & Company, 5.37%, 1/8/97 449,597
545,000 Norwest Financial Inc., 5.44%, 1/3/97 544,918
485,000 Pepsico Inc., 5.37%, 1/17/97 483,915
300,000 Pfizer Inc., 5.25%, 3/19/97 296,675
450,000 Prudential Funding Corp., 5.56%, 1/7/97 449,653
500,000 Raytheon Co., 5.27%, 1/31/97 497,877
425,000 Republic New York, 5.35%, 1/9/97 424,558
415,000 TransAmerica Financial Corp., 5.36%, 1/30/97 413,270
500,000 Xerox Credit Corp., 5.25%, 3/10/97 495,115
-------------
TOTAL COMMERCIAL PAPER $ 8,705,076
-------------
REPURCHASE AGREEMENT - 21.6%
2,400,000 Chase Securities, 12/31/96, 6.55%, repurchase price of
$2,400,000 plus accrued interest on 1/2/97,
collateralized by $2,424,000 U.S. Treasury Notes,
5.125%, 2/28/97 $ 2,400,000
-------------
TOTAL REPURCHASE AGREEMENT $ 2,400,000
-------------
TOTAL INVESTMENT IN SECURITIES--100.0% $11,105,076
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
Money Market Portfolio
Balance Sheet
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investment in securities, at value based on
amortized cost $11,105,076
Cash 27,004
Receivables--
Fund shares sold 635,964
Interest 873
Other 1,096
---------------
Total assets $11,770,013
---------------
Liabilities:
Due to affiliates $ 8,270
Accrued expenses 17,441
---------------
Total liabilities $ 25,711
---------------
Net Assets:
Fund shares $11,744,302
---------------
Total net assets 11,744,302
===============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $11,744,302/11,744,302 shares $ 1.00
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
Money Market Portfolio
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $454,720
-----------
Expenses:
Management fees $42,001
Transfer agent fees 1,638
Accounting 30,636
Custodian fees 17,737
Registration fees 410
Professional fees 3,972
Printing 4,732
Fees and expenses of nonaffiliated trustees 732
Miscellaneous 6,688
----------
Total expenses $108,546
Less management fees waived by
Pioneering Management Corporation (26,774)
Less fees paid indirectly (611)
-----------
Net expenses $ 81,161
-----------
Net investment income $373,559
-----------
Net increase in net assets resulting from
operations $373,559
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
Money Market Portfolio
Statements of Changes in Net Assets
For the Periods Ended December 31, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
---------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 373,559 $ 50,903
---------------------------------
Net increase in net assets resulting from operations $ 373,559 $ 50,903
---------------------------------
Distributions to Shareholders:
Net investment income ($0.04 and $0.04 per share,
respectively) $ (373,559) $ (50,903)
---------------------------------
From Fund Share Transactions (at $1.00 per share):
Net proceeds from sale of shares $ 38,210,804 $ 8,860,820
Reinvestment of distributions 373,559 50,885
Cost of shares repurchased (30,255,633) (5,596,133)
---------------------------------
Net increase in net assets resulting from fund share
transactions $ 8,328,730 $ 3,315,572
---------------------------------
Net increase in net assets $ 8,328,730 $ 3,315,572
Net Assets:
Beginning of period 3,415,572 100,000
---------------------------------
End of period $ 11,744,302 $ 3,415,572
=================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
Money Market Portfolio
Financial Highlights
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 1, 1995 to
December 31, December 31,
1996 1995
--------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
--------------------------------
Increase from investment operations:
Net investment income $ 0.04 $ 0.04
--------------------------------
Distributions to shareholders from:
Net investment income (0.04) (0.04)
--------------------------------
Net asset value, end of period $ 1.00 $ 1.00
================================
Total return* 4.51% 4.35%
Ratio of net expenses to average net assets 0.97%+ 0.81%**+
Ratio of net investment income to average net assets 4.43%+ 5.00%**+
Net assets, end of period (in thousands) $11,744 $3,416
Ratios assuming no waiver of fees by PMC and no
reduction for fees paid indirectly:
Net expenses 1.29% 8.34%**
Net investment income (loss) 4.11% (2.53%)**
Ratios assuming waiver of fees by PMC and reduction for
fees paid indirectly:
Net expenses 0.96% 0.74%**
Net investment income 4.44% 5.07%**
</TABLE>
+ Ratio 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.
63
<PAGE>
Notes to Financial Statements - December 31, 19961.
- --------------------------------------------------------------------------------
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 by investing in foreign
equity securities. Capital Growth Portfolio seeks capital growth through a
portfolio consisting primarily of common stocks. 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 by
investing in income-producing equity securities of U.S.-based corporations.
Balanced Portfolios 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 value of
such securities used in computing the net asset value of the Portfolios
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. Temporary
cash investments maturing in 60 days or less are valued at amortized cost.
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
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 year
ended December 31, 1996, 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
64
<PAGE>
Notes to Financial Statements - December 31, 19961.
- --------------------------------------------------------------------------------
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 Portfolio's
financial statements. The Portfolio's 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 each Portfolio'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 the separate accounts of participating insurance companies. Therefore, no
federal income tax provision is required. In addition to the requirements of
the Internal Revenue Code, certain Portfolios 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 Portfolio 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 year ended December 31, 1996, 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 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.
At December 31, 1996, certain Portfolios have made reclassifications as
described below. These reclassifications have no impact on the net asset
values of the respective Portfolios and are designed to present the
Portfolios' capital accounts on a tax basis.
<TABLE>
<CAPTION>
Accumulated Accumulated Distributions in
Undistributed Undistributed Excess of Net
Net Investment Net Realized Investment Paid-in
Portfolio Income Gain Income Capital
- -------------------------------------------------- --------------------------------- ----------
<S> <C> <C> <C> <C>
International Growth Portfolio $ (12,576) $ 12,576 $ -- $ --
Real Estate Growth Portfolio (3,724) 3,724 -- --
Equity-Income Portfolio (15,706) 15,706 -- --
Balanced Portfolio (570) 2,293 -- (1,723)
Swiss Franc Bond Portfolio (125,670) 125,670 -- --
America Income Portfolio -- (130) 130 --
</TABLE>
65
<PAGE>
Notes to Financial Statements - December 31, 19961.
- --------------------------------------------------------------------------------
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 The Pioneer Group, Inc. (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.
2. Management Agreement - PMC manages the Portfolios and is a wholly owned
subsidiary of 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 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 the 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%
Capital Growth Portfolio 1.25%
Real Estate Portfolio 1.25%
Equity-Income Portfolio 1.25%
Balanced Portfolio 1.25%
Swiss Franc Bond Portfolio 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
</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 December 31, 1996, the following amounts were
payable to PMC related to management fees and certain other services:
<TABLE>
<CAPTION>
Portfolio Amount
- -------------------------- ----------
<S> <C>
Capital Growth Portfolio $30,375
Real Estate Portfolio 9,008
Equity-Income Portfolio 32,583
Balanced Portfolio 11,059
America Income Portfolio 4,789
Money Market Portfolio 7,419
</TABLE>
66
<PAGE>
Notes to Financial Statements - December 31, 19961.
- --------------------------------------------------------------------------------
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 December 31, 1996 the following transfer agent fees
payable to PSC were included in due to affiliates:
<TABLE>
<CAPTION>
Portfolio Amount
- --------------------------------- ---------
<S> <C>
International Growth Portfolio $1,396
Capital Growth Portfolio 144
Real Estate Portfolio 104
Equity-Income Portfolio 105
Balanced Portfolio 104
Swiss Franc Bond Portfolio 104
America Income Portfolio 678
Money Market Portfolio 851
</TABLE>
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 December 31, 1996, the Portfolios' expenses were reduced under
such arrangements as follows:
<TABLE>
<CAPTION>
Portfolio Amount
- --------------------------------- ---------
<S> <C>
International Growth Portfolio $3,124
Capital Growth Portfolio 2,706
Real Estate Portfolio 3,158
Equity-Income Portfolio 2,601
Balanced Portfolio 4,201
Swiss Franc Bond Portfolio 2,327
America Income Portfolio 2,711
Money Market Portfolio 611
</TABLE>
5. Forward Foreign Currency Contracts - At December 31, 1996, 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
December 31, 1996, the Swiss Franc Bond Portfolio's open portfolio hedges
were as follows:
<TABLE>
<CAPTION>
In Net
Contracts Exchange Settlement Unrealized
Currency to Receive For Date Value Gain (Loss)
----------- ------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
CHF 425,000 $ 314,675 1/9/97 $ 317,594 $ 2,919
CHF 250,000 188,224 3/10/97 187,971 (253)
CHF 250,000 189,466 3/10/97 187,971 (1,495)
CHF 1,300,000 997,009 3/10/97 977,451 (19,558)
CHF 450,000 342,231 3/10/97 338,348 (3,883)
CHF 1,250,000 1,016,260 3/10/97 939,857 (76,403)
------------- ------------- ------------
$3,047,865 $2,949,192 $(98,673)
============= ============= ============
</TABLE>
The International Growth Portfolio's gross forward foreign currency
settlement contracts receivable and payable were $91,558 and $91,971,
respectively, resulting in a net payable of $413.
67
<PAGE>
Pioneer Variable Contracts Trust
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of Pioneer Variable Contracts
Trust:
We have audited the accompanying balance sheets, including the schedules of
investments, of Pioneer Variable Contracts Trust (comprising, respectively,
the International Growth Portfolio, the Capital Growth Portfolio, the Real
Estate Growth Portfolio, the Equity-Income Portfolio, the Balanced Portfolio,
the Swiss Franc Bond Portfolio, the America Income Portfolio, and the Money
Market Portfolio), as of December 31, 1996, and the related statements of
operations, the statements of changes in net assets and the financial
highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
each of the respective Portfolios comprising the Pioneer Variable Contracts
Trust as of December 31, 1996, the results of their operations, the changes
in their net assets, and the financial highlights for the periods presented,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 3, 1997
Pioneer Variable Contracts Trust
Trustees' Fees and Share Ownership December 31, 1996
- --------------------------------------------------------------------------------
Trustees' Fees, Principal Shareholders and Share Ownership of Trustees and
Officers (Unaudited)
The aggregate direct remuneration paid by the Trust to nonaffiliated trustees
and officers during the year ended December 31, 1996, plus expenses incurred
in attending trustees meetings, are described below. Fees of trustees who are
affiliated with or "interested persons" of Pioneering Management Corporation,
the investment adviser, of the Trust, are reimbursed to the Trust by
Pioneering Management Corporation in accordance with the management contract
with the Trust are described below. The Pioneer Group, Inc. is a publicly
held corporation of which Mr. Cogan, Chairman and President of the Trust,
owned approximately 14% of the outstanding shares of capital stock at
December 31, 1996.
<TABLE>
<CAPTION>
Direct
Remuneration
Portfolio Paid
- ------------------------------------------------
<S> <C>
International Growth Portfolio $900
Capital Growth Portfolio 900
Real Estate Portfolio 899
Equity-Income Portfolio 900
Balanced Portfolio 899
Swiss Franc Portfolio 900
America Income Portfolio 900
Money Market Portfolio 900
</TABLE>
68
<PAGE>
Pioneer Variable Contracts Trust
Distributions Made During the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
During the year ended December 31, 1996, the Trust paid the following
distributions from net investment income:
<TABLE>
<CAPTION>
Capital Real Estate Equity- Swiss America Money
Payment Growth Growth Income Balanced Franc Bond Income Market
To Shareholders Date Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- January 31, 1996 $ -- $ -- $ -- $ -- $ -- $0.040 $0.004
-- February 29, 1996 -- -- -- -- -- 0.042 0.003
March 19, 1996 March 29, 1996 -- 0.150 0.070 0.060 -- 0.044 0.004
-- April 30, 1996 -- -- -- -- -- 0.043 0.004
-- May 31, 1996 -- -- -- -- -- 0.045 0.004
June 18, 1996 June 28, 1996 -- 0.160 0.060 0.060 0.002 0.040 0.003
-- July 31, 1996 -- -- -- -- -- 0.043 0.004
-- August 30, 1996 -- -- -- -- -- 0.046 0.004
September 19, 1996 September 30, 1996 -- 0.140 0.070 0.070 -- 0.041 0.003
-- October 31, 1996 -- -- -- -- -- 0.044 0.004
-- November 29, 1996 -- -- -- -- -- 0.046 0.004
December 17, 1996 December 27, 1996 0.028 0.081 0.067 0.095 -- 0.045 0.004
- ---------------------------------------- ------------- ------------- ------------- ------------ ------------ ------------ ----------
Total $0.028 $0.531 $0.267 $0.285 $0.002 $0.519 $0.045
============= ============= ============= ============ ============ ============ ==========
During the year ended December 31, 1996, the Trust paid the following
distributions from net realized gain on investments:
International Capital Real Estate
To Shareholders Payment Growth Growth Growth Balanced
Of Record Date Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------- ---------------- ------------- ------------- ------------
June 18, 1996 June 28, 1996 $0.034 $0.073 $ -- $ --
December 17, 1996 December 27, 1996 -- 0.158 0.118 0.068
---------------- ------------- ------------- ------------
Total $0.034 $0.231 $0.118 $0.068
================ ============= ============= ============
</TABLE>
* America Income and Money Market Portfolios distribute daily to record date
shareholders.
Certain Portfolios hereby designate the following amounts as a capital gain
for the purposes of the dividend paid deduction:
<TABLE>
<CAPTION>
Portfolio Amount
- --------------------------------- ----------
<S> <C>
International Growth Portfolio $ 23,524
Capital Growth Portfolio 371,931
Real Estate Growth Portfolio 34,891
Equity-Income Portfolio 60,190
Balanced Portfolio 145,144
</TABLE>
69
<PAGE>
[Pioneer logo] PIONEER VISION(SM)
PIONEER VISION2(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
Independent Public Accountants
Arthur Andersen LLP
Issuer
SMA Life Assurance Company, Policy Form A3023-95
In New York and Hawaii, issued by State Mutual Life Assurance Company of
America,
Policy Form A3023-95 GRC.
General Distributor
Allmerica Investments, Inc.
440 Lincoln Street
Worcester, MA 01653
Pioneer Vision(sm) and Pioneer Vision2(sm) may not be available in all
states.
This report must be preceded or accompanied by a prospectus for Pioneer
Vision variable annuity, which includes more information about charges and
expenses. Please read the prospectus carefully before you invest or send
money.
0397-3941
(C) Pioneer Funds Distributor, Inc.
