[Pioneer logo]
Pioneer Vision(SM)
Pioneer Vision 2(SM)
Variable Annuity
Pioneer Variable Contracts Trust
International Growth Portfolio
Capital Growth Portfolio
Growth Shares Portfolio
Real Estate Growth Portfolio
Growth and Income Portfolio
Equity-Income Portfolio
Balanced Portfolio
Swiss Franc Bond Portfolio
America Income Portfolio
Money Market Portfolio
[Photo of Antique Binoculars, Compass, Old Key, Fountain Pen
and Other Such Artifacts]
Semiannual Report
June 30, 1998
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
Table of Contents
<TABLE>
<S> <C>
Letter from the Chairman 1
International Growth Portfolio
Portfolio Management Discussion 2
Portfolio and Performance Update 3
Capital Growth Portfolio
Portfolio Management Discussion 4
Portfolio and Performance Update 5
Growth Shares Portfolio
Portfolio Management Discussion 6
Portfolio and Performance Update 7
Real Estate Growth Portfolio
Portfolio Management Discussion 8
Portfolio and Performance Update 9
Growth and Income Portfolio
Portfolio Management Discussion 10
Portfolio and Performance Update 11
Equity-Income Portfolio
Portfolio Management Discussion 12
Portfolio and Performance Update 13
Balanced Portfolio
Portfolio Management Discussion 14
Portfolio and Performance Update 15
Swiss Franc Bond Portfolio
Portfolio Management Discussion 16
Portfolio and Performance Update 17
America Income Portfolio
Portfolio Management Discussion 18
Portfolio and Performance Update 19
Money Market Portfolio
Portfolio Management Discussion 1
Schedules of Investments and Financial Statements
International Growth Portfolio 20
Capital Growth Portfolio 31
Growth Shares Portfolio 39
Real Estate Growth Portfolio 45
Growth and Income Portfolio 50
Equity-Income Portfolio 58
Balanced Portfolio 66
Swiss Franc Bond Portfolio 74
America Income Portfolio 80
Money Market Portfolio 86
Notes to Financial Statements 91
</TABLE>
<PAGE>
PIONEER VARIABLE CONTRACTS TRUST
LETTER FROM THE CHAIRMAN 6/30/98
Dear Contract Owner,
I am pleased to introduce the semiannual report for Pioneer Variable Contracts
Trust, covering the six-month period ended June 30, 1998. On behalf of all of us
at Pioneer, I thank you for your interest and this opportunity to comment
briefly on today's investing environment.
The bull market in the United States rolled on through the first half of 1998.
Although the effects of Asia's financial crisis showed more frequently in the
earnings reports of many U.S. companies, strong employment and low inflation
kept consumer confidence at record highs. The Dow Jones Industrial Average was
up over 14% for the six months. The Standard & Poor's 500 Index rose nearly 18%.
The Russell 2000 Index reflected investors' near abandonment of smaller
capitalization stocks during the period, rising only 5%.
Overseas, Europe's own bull market continued its strong run, while emerging
markets dropped considerably, especially in Asia. Investors showed concern over
Asia's problems, and the steady reduction in the number of companies actually
participating in the U.S. bull market by moving toward the relative safety of
U.S. blue chip companies and high-quality bonds, particularly Treasurys.
Fixed-income markets as a whole produced strong results over the past six months
as the powerful combination of low interest rates and low inflation pushed bond
prices higher. Holders of a diverse combination of bonds - like those owned by
some Pioneer Portfolios-- enjoyed the best of both worlds - high yields and
stable prices.
In the end, this "flight to quality" reflects a general wariness over the
historic U.S. bull market's continued viability. The decision for new investors
among the growth potential of the U.S. stock market, international securities
and the safety and income features of high-quality domestic bonds has become
more difficult. Of course, predicting the short-term direction of financial
markets is almost always a futile exercise, as the events of the last year
reminded many investors.
We think it is critical to adhere to disciplined investment approaches with
clear, long-term objectives. To that end, I encourage you to periodically review
your financial goals and strategy with your investment professional. It's a
simple step to make sure you will be better prepared to weather the inevitable
swings in the market.
Pioneer Variable Contracts Trust, the underlying funds for Pioneer Vision and
Pioneer Vision 2 variable annuities, gives you a diverse selection of Portfolios
modeled after our Pioneer funds. The array of investment options and the added
tax and insurance benefits offered by annuities continue to make these
investment products an attractive option for your individual investment needs.
I encourage you to read on to learn more about Pioneer Variable Contracts Trust.
If you have questions about your investment, please contact your financial
professional.
Respectfully,
/s/ John F. Cogan, Jr.
- ----------------------
John F. Cogan, Jr.,
Chairman and President
[side bar]
Money Market
Portfolio
Money Market Portfolio continued to provide current income and a stable $1 share
price for its shareowners. The Portfolio generated a total of $0.023 per share
dividends over the past six months, and closed the period with a 7-day yield of
4.69%, 4.80% assuming the compounding of dividends. As a result, the Portfolio
provided a 2.30% total return for the six months, reflecting its conservative
nature.
Demand for High-Quality Securities
The Portfolio invests exclusively in high-quality money market instruments,
specifically, holdings that are issued by the U.S. government, corporations and
banks. All issues are given the highest rating by the two leading nationally
recognized securities rating organizations, Standard & Poor's Investor Services
(A1) and Moody's Investor Services (P1).
At period end, the Portfolio's average maturity was 23 days. In comparison to an
average money market fund's maturity, this is a relatively conservative strategy
but it gives your Portfolio extra liquidity and mobility.
Heading Forward
Once again, our primary focus will be on only the highest-quality issues of the
U.S. government and corporations. Because we understand that investors are
looking for a "safe harbor" in fast-moving markets, our investment team will
continue to seek the liquidity and safety that investors have come to expect.
Respectfully,
/s/ Sherman B. Russ
- -------------------
Sherman B. Russ,
Portfolio Manager
Investments in Money Market Portfolio are not insured or guaranteed by the U.S.
government. There can be no assurance the Portfolio will be able to maintain a
stable net asset value of $1.00 per share.
[end side bar]
1
<PAGE>
International Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
International investing may involve special risks, including differences in
accounting and currency, as well as economic and political instability.
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.
[end side bar]
Bear markets, bull markets, nuclear detonations and political unrest were just a
few of the global events that affected International Growth Portfolio and
illustrated some of the risks associated with international investing. In the
end, the Portfolio returned 2.41% at net asset value for the six months through
June 30, 1998. The unique combination of an extreme Asian bear market and one of
Europe's greatest bull runs ever led our fundamental investment strategy to lag
the 16.06% average return of the 448 portfolios in the Lipper Variable Annuity
International Funds category. (Lipper Analytical Services, Inc. is an
independent firm that reports mutual fund performance.)
Investing for the Long-Term
Our value-oriented investment strategy favors stocks that are inexpensive
relative to the company's financial health and business prospects. This, and our
belief in emerging markets, slowed the Portfolio's performance during the
period. Instead of wholly migrating to the established markets of Europe - where
stocks now have some of the highest valuations in 30 years - we followed our
value investing discipline to Asia's emerging markets. This strategy worked
early in the semiannual period but then proved costly in the last four months
when Asian emerging markets deteriorated from political unrest throughout the
region and the weak Japanese yen.
Japan's inability to effectively handle its banking crisis brought down the yen,
putting pressure on other Asian nations to devalue their currencies and making
it harder for companies in other countries to compete. Combined with the
sluggish economy of China and political unrest throughout Asia, investors shied
away from the region and the Portfolio's investments suffered. Malaysian
Assurance Alliance, a provider of life and general insurance in Malaysia, was
down more than 19% by period end.
The Portfolio's few Japanese investments actually posted gains during the
period. Our focus in the beleaguered economy has been on exporters such as Sony
and Canon as a hedge against the devaluing yen. Hedging against devaluing
currencies with exporters worked as well in other countries such as Korea,
especially Samsung Display Devices.
The European Bull
Over the course of the period we shifted about 5% of the Portfolio's assets from
emerging markets into the more established markets of Europe to take advantage
of the continuing bull market and reduce the volatility from the weighting in
Asia's developing nations.
Finland outperformed all other markets by gaining over 65% in the last six
months. Spain, Belgium and Greece followed with approximately 44% each. Holdings
from these three countries comprised nearly 13% of your Portfolio's holdings at
the end of the period. The telecommunications industry across the European
region did well for the Portfolio. Spain's Telefonica and Telecom Italia were
winners, as was Nokia of Finland.
Overall, though, the Portfolio's relatively large weighting in the United
Kingdom (12%) versus the Continent (50%) restrained performance. The U.K.
market, as a whole, performed less than one-half as well as its counterparts on
the Continent.
Looking Forward
As we move into the second half of the Portfolio's fiscal year, we are prepared
to continue shifting assets to the Continent when we can find compelling value.
However, we remain committed to the world's emerging markets including those in
Asia. We continue to have confidence in our fundamental investment philosophy
and believe that for the long-term investor, International Growth Portfolio may
hold tremendous value for the coming years.
Respectfully,
/s/ Norman Kurland
- ------------------
Norman Kurland,
Portfolio Manager
2
<PAGE>
International Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
<TABLE>
<S> <C>
International Common Stocks 84%
Depositary Receipts for International Stocks 6%
Short-Term Cash Equivalents 7%
International Preferred Stocks 3%
</TABLE>
[End of Pie Chart]
Geographical Distribution
(As a percentage of equity holdings)
[Pie Chart]
<TABLE>
<S> <C>
Europe 62%
Asia 17%
Japan 8%
Other 7%
Latin America 6%
</TABLE>
[End of Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
Hunter Douglas NV 1.96%
Telecom Italia SpA 1.77
Astra AB 1.65
Schibsted ASA 1.54
NV Koninklijke KNP BT 1.52
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $11.43 $12.23
Accumulation Unit Value 1.2315 1.2108
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.194 $ 0.744 $ 0.146
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in International
Growth Portfolio, compared to the growth of the MSCI EAFE Index.
[plot points for line chart]
<TABLE>
<CAPTION>
International MSCI
Growth EAFE
Portfolio* Index
<S> <C> <C>
3/95 10000 10000
6/95 10360 10073
11051 10493
11053 10917
11407 11233
6/96 11845 11411
11592 11396
11998 11578
12515 11396
6/97 13888 12875
14125 12785
12581 11783
14824 13517
6/98 12885 13660
</TABLE>
Index comparison begins 3/31/95. 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,
Ireland, Italy, Japan, Malaysia, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland and the United Kingdom. Index returns are
calculated monthly, assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses. Portfolio returns are based on net
asset value and do not reflect any annuity-related costs. You cannot invest
directly in the Index.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 7.88%
1 Year -7.22
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 6.39% 5.33%
Portfolio
1 Year -8.50 -13.95
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 6.39% 4.80%
Portfolio
1 Year -8.50 -14.27
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 3
<PAGE>
Capital Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
The U.S. stock market produced solid returns in the first half of 1998, although
the gains were focused on a relatively narrow group of large-capitalization
stocks. Capital Growth Portfolio performed accordingly; its bias toward smaller
and mid-sized companies meant it generated good performance, but not at the
breathtaking pace of funds with a big company focus. The Portfolio generated a
8.50% total return at net asset value for the six-month period. By comparison,
the Standard & Poor's 500 Index returned 17.67%.
Portfolio Emphasizes Value
The Portfolio is well diversified. We can and do invest in a variety of large,
mid-sized and small companies. Currently, about 61% of the Portfolio's holdings
are in small and medium-sized companies with market capitalizations of less than
$5 billion.
The Portfolio has investments in many conservatively valued companies we think
have the potential for significant capital appreciation over the course of the
next few years. Our value investing style typically means choosing companies
that have some type of undervalued or hidden assets we think can support the
stock price in a difficult market. Often, although not always, we find
opportunities in out-of-favor, misunderstood or turn-around companies with
significant cash flow, asset value or earnings power potential. Frequently, a
catalyst such as the sale of an asset or the arrival of new management is
required in order to unlock the hidden value. Sometimes it can take years for a
company's value to be realized.
Time Tells
A year or more has passed since we significantly expanded holdings to broaden
the Portfolio. A number of these new investments have started to come to
fruition. McDonald's has begun to show some promise after deciding to reallocate
capital; its stock was up over 40% for the period. Both Broderbund Software and
Green Tree Financial benefited from the consolidation trends taking place
throughout the world, after it was announced that they would be acquired by The
Learning Co. and Conseco, respectively. Strong moves in the Portfolio's
large-cap holdings also added gains, with Hasbro and Viacom both rising over 25%
in the past six months.
There also were some disappointments in the first half of the year. A change in
management at John H. Harland triggered a sell-off in the stock. Because we like
the improvement in its basic business and financial status, we used the price
decline to increase holdings in what looked to us like a very undervalued
company. Prices of technology stocks came down, too. Investors moved away from
the group because of the perceived threat of a slow-down in Asian economies.
Looking Forward
As we move into the second half of the fiscal year, the Portfolio remains well
diversified, both in terms of sectors and the size of companies. We are
encouraged by recent performance and the way the Fund's investment discipline is
beginning to be borne out. We believe that well-valued stocks offer some of the
most attractive equity investments available today, and are optimistic about the
Fund's prospects.
Respectfully,
/s/ John Rodman Wright
- ----------------------
J. Rodman Wright,
Portfolio Manager
4
<PAGE>
Capital Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
<TABLE>
<S> <C>
U.S. Common Stocks 84%
Short-Term Cash Equivalents 10%
International Common Stocks 4%
Depositary Receipts for International Stocks 2%
</TABLE>
[End Pie Chart]
Sector Distribution
(As a percentage of equity holdings)
[Pie Chart]
<TABLE>
<S> <C>
Technology 16%
Consumer Cyclicals 16%
Consumer Staples 14%
Capital Goods 11%
Communication Services 10%
Financial 10%
Basic Materials 9%
Healthcare 7%
Energy 4%
Other 3%
</TABLE>
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
McDonald's Corp 2.68%
Viacom, Inc. (Class B) (Non-voting) 2.46
NCR Corp. 2.31
20th Century Industries 2.28
Hasbro, Inc. 2.26
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $16.38 $16.15
Accumulation Unit Value 1.7406 1.6153
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.099 $0.659 $0.371
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Capital Growth
Portfolio, compared to the growth of the Standard & Poor's (S&P) 500 Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Capital S&P
Growth 500
Portfolio* Index
<S> <C> <C>
3/95 10000 10000
9910 10375
10650 11362
6/95 11980 12262
11713 12998
12624 13695
6/96 13527 14308
13141 14747
13473 15974
14268 16405
6/97 15541 19263
17559 20704
16800 21296
18652 24261
6/98 18228 25059
</TABLE>
The S&P 500 Index is a unmanaged measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and over-the-counter
market. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses. Portfolio returns are based on net
asset value and do not reflect any annuity-related costs. You cannot invest
directly in the Index.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 19.76%
1 Year 17.29
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 18.11% 17.27%
Portfolio
1 Year 15.67 8.79
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 18.11% 16.86%
Portfolio
1 Year 15.67 8.67
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 5
<PAGE>
Growth Shares Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
The longest running bull market in U.S. history wrote another successful chapter
over the six months ended June 30, 1998, with the broad-based Standard & Poor's
(S&P) 500 Index rising 17.67%. The lowest unemployment rate in three decades
helped fuel steady growth and sent consumer confidence soaring. Even the Asian
crisis, which caused intermittent jitters about U.S. corporate earnings, failed
to dampen investors' spirits.
Growth Shares Portfolio was well positioned to capture its share of rising stock
prices. The Portfolio's 22.95% total return for the six month period at net
asset value placed well ahead of the 16.38% average for the 734 portfolios
tracked by the Lipper Variable Annuity Growth Funds category. While we're
pleased with this performance, we encourage shareowners to temper their
expectations in this prolonged rally. Market volatility is an inherent risk in
equity investments. (Lipper Analytical Services, Inc. is an independent firm
that reports mutual fund performance.)
Looking for the Very Best
We like to think Growth Shares Portfolio captures the very best in corporate
America. We prefer large, well-established companies with dominant franchises.
Management must be focused and forward thinking. Not only are we looking for
companies capable of committing significant resources to build an edge in their
respective industries, but also those who can withstand market downturns better
than their smaller counterparts due to their lower relative costs. Just as
important, we like businesses that are well positioned to supplement their
domestic strategy with foreign operations.
We look for companies that can expand earnings at 15% or more a year over the
next decade. To fuel future earnings, many companies are turning to overseas
markets, where they can reinvest capital at a very profitable rate. Often,
competition is less intense - paving the way for faster growth. Fast-food legend
McDonald's is a good example of a company turning to international markets to
boost earnings. Faced with slipping sales at home, McDonald's has successfully
built a formidable international business on the strength of its brand name.
Today, the company reaps 60% of its business from overseas.
Bigger Was Better
Generally speaking, the Portfolio's emphasis on large-company stocks explains
its favorable performance. Even so, many companies stand out. Monsanto, the
Portfolio's largest holding, announced it would merge with American Home
Products, which distributes products such as Robitussin and Advil. The company
is also benefiting from a new anti-inflammatory drug called Celebra, which
doesn't have many of the gastrointestinal side effects associated with other
products on the market. Monsanto's decision to consolidate its
agricultural-biotech business has also been well-received by investors. Pfizer
is another very successful pharmaceutical holding, riding the tide of its launch
of Viagra. The drug, which treats impotence, is scheduled for introduction in
Europe by the end of this year and in Japan during 1999.
Within the technology sector, Dell Computer - the Portfolio's third largest
holding - had a strong influence, delivering more than 100% for the six months.
This personal computer-maker is keeping costs low through its build-to-order,
direct sales approach and continues to dramatically increase its market share. A
disappointment for the Portfolio this period was the packaging company Sealed
Air. Down 40%, Sealed Air had difficulties integrating the recently acquired
Cryovac, the former packaging unit of W.R. Grace.
Looking Forward
Several factors bode well for the holdings in the Portfolio - particularly the
strength of the U.S. economy and low inflation. For the multinationals in the
portfolio, increasing foreign acceptance of American goods - from soft drinks to
entertainment to razors - should provide plenty of demand for U.S. goods in the
long term.
Respectfully,
/s/ Jeff Poppenhagen
- --------------------
Jeffrey Poppenhagen,
Portfolio Manager
6
<PAGE>
Growth Shares Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
U.S. Common Stocks 91%
Short-Term Cash Equivalents 6%
International Preferred Stocks 3%
[End Pie Chart]
Sector Distribution
(As a percentage of equity holdings)
[Pie Chart]
Consumer Staples 26%
Technology 21%
Financial 13%
Consumer Cyclicals 12%
Healthcare 12%
Basic Materials 11%
Capital Goods 5%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
Monsanto Co. 6.48%
Pioneer Hi-Bred International, Inc. 5.86
Dell Computer Corp. 5.76
Minerals Technologies Inc. 4.82
Progressive Corp. 4.74
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $18.86 $15.34
Accumulation Unit Value 1.2459 1.0203
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.001 - -
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Growth Shares
Portfolio, compared to the growth of the Standard & Poor's (S&P) 500 Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Growth S&P
Shares 500
Portfolio* Index
<S> <C> <C>
10/97 10000 10000
10160 10446
12/97 10227 10653
10460 10762
11527 11520
3/98 11773 12136
12273 12246
12080 12016
6/98 12574 12536
</TABLE>
The S&P 500 Index is a unmanaged measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and over-the-counter
market. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses. Portfolio returns are based on net
asset value and do not reflect any annuity-related costs. You cannot invest
directly in the Index.
[side bar]
Cumulative Total Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 40.76%
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 24.59% 17.59%
Portfolio
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 24.59% 17.59%
Portfolio
</TABLE>
The Portfolio began operations on 10/31/97.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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>
Real Estate Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
Real-estate related investments involve specific risks, including those related
to general and local economic conditions and individual properties.
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.
[end side bar]
For the first half of fiscal 1998, Real Estate Growth Portfolio produced a total
return of -5.95% at net asset value. This compares with the -5.24% average
return posted by the 52 portfolios in the Lipper Variable Annuity Real Estate
Funds category. (Lipper Analytical Services, Inc. is an independent firm that
reports mutual fund performance.)
During the six months ended June 30, 1998, real estate investment trusts (REITs)
proved once again that they march to the beat of a different drummer. While the
Dow Jones Industrial Average and Standard & Poor's 500 Index - commonly used
measures of general stock market performance - posted handsome gains despite
brief spells of weakness, REITs continued to lose their footing after a slow
start at the beginning of the year. In large part, we believe the reasons behind
the disappointing performance have more to do with perception than reality.
Too Much of a Good Thing?
Generally, special risks associated with real estate investments include
national and local economic conditions and risks related to individual property.
Ironically, in the past six months, the very same forces that pushed the REIT
market forward over the past several years helped to halt the securities thus
far in 1998. Low vacancy rates, rising lease rates, strong company cash flows,
widespread consolidation, and heightened demand for properties have created an
almost ideal environment for REITs and real estate-related stocks.
The boom in real estate has given rise to some nagging concerns that hurt
stocks: Are regional markets becoming overbuilt? Will there be a glut of
properties, as in the late 1980s? Are companies now paying too much to acquire
additional holdings? Can growth rates be sustained? As a result, many investors
- - individual and institutional alike - began looking for the next fast-growing
sector and increasingly took their assets elsewhere as the period progressed.
Recent government opposition to the tax-favored status of a select group of
REITs, known as "paired-share" REITs, along with ill-timed news articles about
bank lending strategies to REITs, further diminished the sector's appeal. In the
face of weak demand, share prices fell considerably.
Holding a Steady Course
Against this backdrop, the Portfolio underperformed its peers primarily because
of its heavy exposure to the hotels and office sectors - the two areas from
which most investors fled. We, however, are choosing to stay the course and
maintain the Portfolio's positions in these arenas believing that hotel and
office REITs present the Portfolio with the most opportunity. Starwood Hotels
and Resorts, Patriot American Hospitality, and Equity Office Properties continue
to be favored holdings.
The Glass Is Half Full
As we enter the second half of fiscal 1998, we remain optimistic about the
income-producing potential and growth prospects of REITs, despite the recent
setback. While there are pockets of overbuilding around the country, the
construction activity is, in our opinion, moderate and justifiable. We also
believe the fundamentals for the real estate market remain strong. Once
investors recognize this, we believe demand for the securities should pick up
and share prices should rebound.
Respectfully,
/s/ Robert Benson
- -----------------
Robert W. Benson,
Portfolio Manager
8
<PAGE>
Real Estate Growth Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
U.S. Common Stocks 96%
Short-Term Cash Equivalents 4%
[End Pie Chart]
Sector Distribution
(As a percentage of equity holdings)
[Pie Chart]
Real Estate Investment Trusts 87%
Real Estate Services 10%
Services 3%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
Prentiss Properties Trust 4.13%
Starwood Hotels and Resorts Trust 4.10
Catellus Development Corp. 3.86
Apartment Investment & Management Co. 3.83
Patriot American Hospitality, Inc. 3.78
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $15.50 $16.90
Accumulation Unit Value 1.7285 1.8494
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.310 $ 0.081 -
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Real Estate Growth
Portfolio, compared to the growth of the Standard & Poor's (S&P) 500 Index and
the Wilshire Real Estate Securities Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Wilshire
Real Real
Estate S&P Estate
Growth 500 Securities
Portfolio* Index Index+
<S> <C> <C> <C>
3/95 10000 10000 10000
6/95 10721 10951 10435
11482 11819 10930
11696 12528 11322
12020 13200 11800
6/96 12316 13791 12360
13548 14214 13090
15875 15397 15497
16178 15813 15781
6/97 16875 18568 16507
19340 19956 18592
19235 20527 18565
19105 23384 18425
6/98 18090 24154 17579
</TABLE>
+Index comparisons begin 3/31/95. The 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 92% REITs (real estate investment
trusts) (equity and hybrid) and 8% real estate operating companies. Index
returns are calculated monthly, assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Indexes.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 19.48%
1 Year 7.20
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 17.85% 17.02%
Portfolio
1 Year 5.79 -0.50
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 17.85% 16.60%
Portfolio
1 Year 5.79 -0.87
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 9
<PAGE>
Growth and Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
In the first six months of 1998, we largely completed the work of structuring
Growth and Income Portfolio. The Portfolio's investment objective is growth and
income, mostly from stocks of U.S. companies. Portfolio holdings tend to be
high-quality, well-known enterprises. Most provide products or services familiar
to investors of all walks of life.
The Portfolio has a sizable collection of large-company stocks, which performed
very well as a group over the past six months. Accordingly, investment results
through June 30, 1998 were encouraging. The Portfolio generated a 13.48% total
return at net asset value (NAV). In comparison, the Standard & Poor's 500 Index,
a broad measure of large U.S. stocks, returned 17.67%.
Diversified, High-Quality Holdings
The Portfolio is now invested across a broad range of 56 industries and a varied
roster of 110 companies. The Portfolio is positioned for both growth and income.
In general, our focus has been on "blue-chip" names such as IBM, E.I. duPont de
Nemours, Ameritech, Ford Motor and May Department Stores. We believe that
companies such as these will tend to provide the kind of consistent returns over
time that investors in a portfolio like this expect. Why do we think so? Because
they offer long operating records and, usually, long dividend-paying records -
with skillful and dedicated managements, the most important requirement of all.
New additions over the period spanned a range of industries. For instance,
Ameritech and SBC Communications represent telecommunications while
Bristol-Byers Squibb and Johnson & Johnson are both high-quality pharmaceutical
companies.
Looking Ahead
Much of the run in stock prices has been due to the high profits across
corporate America. We see many economic studies, most of which counsel investors
to expect lower profits over the next 12 months. If profits do come down among
the narrow collection of companies currently in vogue with investors, it should
create opportunities for a wide range of very fine but obscure companies that
today investors are generally overlooking. While some Portfolio holdings are
among the current market "darlings," there are many that fall into the second
group, giving the Portfolio good potential going forward, even after its strong
recent returns.
Of course, nothing in investing is guaranteed. That is why careful and ongoing
research and analysis is so important. We follow all of the Portfolio's holdings
actively and aim to make changes when circumstances warrant - either good or
bad. Changes can be triggered by fast-paced appreciation, impaired earnings
power or an adverse development in the industry, or simply our finding a more
attractive investment. We are glad you have chosen this Portfolio and look
forward to updating you regularly on our investment activities.
Respectfully,
/s/ John A. Carey
- -----------------
John A. Carey,
Portfolio Manager
10
<PAGE>
Growth and Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
U.S. Common Stocks 93%
Depositary Receipts for International Stocks 5%
Short-Term Cash Equivalents 2%
[End Pie Chart]
Sector Distribution
(As a percentage of long-term holdings)
[Pie Chart]
Financial 22%
Technology 13%
Healthcare 12%
Consumer Staples 11%
Consumer Cyclicals 11%
Communication Services 11%
Basic Materials 6%
Capital Goods 6%
Energy 4%
Other 4%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
Schering-Plough Corp. 2.51%
The Bank of New York Co., Inc. 2.20
Ameritech Corp. 2.06
ReliaStar Financial Corp. 1.93
IBM Corp. 1.90
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $17.84 $15.80
Accumulation Unit Value 1.1855 1.0525
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
12/31/97 - 6/30/98 Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.090 - -
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Growth and Income
Portfolio, compared to the growth of the Standard & Poor's (S&P) 500 Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Growth and S&P
Income 500
Portfolio* Index
<S> <C> <C>
10/97 10000 10000
10473 10446
10550 10653
12/97 10790 10762
11490 11520
11944 12136
3/98 11944 12246
11663 12016
6/98 11964 12536
</TABLE>
The S&P 500 Index is a unmanaged measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and over-the-counter
market. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses. Portfolio returns are based on net
asset value and do not reflect any annuity-related costs. You cannot invest
directly in the Index.
[side bar]
Cumulative Total Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 19.65%
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 18.55% 11.55%
Portfolio
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 18.55% 11.55%
Portfolio
</TABLE>
The Portfolio began operations on 10/31/97.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 11
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
While the stock market was generally strong during the first half of 1998, the
focus of investors was somewhat narrow. Large, growth-oriented stocks in many
cases did very well. Smaller-capitalization stocks, as well as more mature,
income-oriented stocks, tended to lag. Equity-Income Portfolio generally kept
pace with the market indices, generating a 12.35% total return based on net
asset value (NAV) for the six months ended June 30, 1998. The total return
reflects the increase in NAV from $18.14 per share on December 31, 1997 to
$19.98 on June 30 and the reinvestment of $0.180 per share in income dividends
and $0.219 in capital gains distributions.
High-Quality, Dividend Paying Stocks
The Portfolio, of course, places a great deal of emphasis on dividends. First,
we think a company shows its commitment to stockholders and fiscal discipline by
paying regular or growing dividends. Then, from the viewpoint of long-term
investors, dividends are an excellent way to build total return since they
purchase additional shares that can, in turn, earn dividends.
We made few adjustments over the period on a sector basis. The Portfolio remains
invested in a diverse group of U.S.-based companies we believe have long-term
income and growth potential. Some stocks performed particularly well because
they combined growth and income characteristics. Bristol-Myers Squibb and
Schering-Plough in the pharmaceutical industry and Ford Motor and Chrysler in
the automotive arena, are examples.
We did add several new stocks to the Portfolio. Mellon Bank and U.S. Bancorp are
both high-quality financial institutions. Norfolk Southern is one of the premier
American transportation companies. Aspen Technology, whose convertible
debentures we purchased in recent months, is a leader in process-control
software for industrial clients.
In terms of sales, we took significant profits on Warner-Lambert, a company that
had achieved tremendous success, but where we felt that the success was amply
reflected in its increased share price. The Portfolio also had investments that
did not keep pace with the market - for example, in the energy and utility
industries. Both of these suffered from sinking oil prices. We also sold
People's Energy, which had not been a fruitful holding. One stock that appears
for the first time, MarketSpan, is actually the former Brooklyn Union Gas; it
also had the name Keyspan at one point. The name changes are the result of the
company's more meaningful involvement in the oil and gas industry, firstly, and
secondly the combination of the company with portions of the old Long Island
Lighting. Fortunately, its business hasn't changed as much as its name.
Going Forward
Although the stock markets were somewhat volatile over the first six months of
the year, we were pleased by the results and look forward to the balance of the
year. Even if volatility increases, we think investors can be well-served by a
high-quality, income-oriented investment such as Equity-Income Portfolio.
Respectfully,
/s/ John A. Carey
- -----------------
John A. Carey,
Portfolio Manager
12
<PAGE>
Equity-Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
U.S. Common Stocks 96%
Short-Term Cash Equivalents 2%
U.S. Convertible Securities 2%
[End Pie Chart]
Sector Distribution
(As a percentage of equity holdings)
[Pie Chart]
Financial 23%
Communications Services 18%
Healthcare 11%
Utilities 9%
Energy 9%
Consumer Cyclicals 9%
Consumer Staples 8%
Technology 6%
Basic Materials 5%
Other 2%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of equity holdings)
<TABLE>
<S> <C>
Schering-Plough Corp. 4.84%
Sprint Corp. 4.00
Ford Motor Co. 3.34
GTE Corp. 2.94
Ameritech Corp. 2.71
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $19.98 $18.14
Accumulation Unit Value 2.0657 1.8514
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
12/31/97 - 6/30/98 Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.180 $ 0.101 $ 0.118
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the value of an investment made in Equity-Income
Portfolio, compared to the growth of the Standard & Poor's (S&P) 500 Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Equity- S&P
Income 500
Portfolio* Index
<S> <C> <C>
3/95 10000 10000
10280 10375
6/95 10990 11362
11785 12262
12362 12998
12778 13695
6/96 12881 14308
13189 14747
14240 15974
14745 16405
6/97 16866 19263
18202 20704
19257 21296
21433 24261
6/98 21635 25059
</TABLE>
The S&P 500 Index is a unmanaged measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and over-the-counter
market. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees or expenses. Portfolio returns are based on net
asset value and do not reflect any annuity-related costs. You cannot invest
directly in the Index.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 26.08%
1 Year 28.27
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 24.34% 23.60%
Portfolio
1 Year 26.50 19.51
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 24.34% 23.23%
Portfolio
1 Year 26.50 19.51
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 13
<PAGE>
Balanced Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
Over the past six months, neither the aging bull market in the United States nor
the bear market in Asia gave any real signs of going away. In the United States
stocks surged ahead, despite a slower second quarter that included rumblings
from Asia's troubled economy. As the period progressed, bonds, especially the
U.S. Treasurys, benefited from nervous investors' "flight to quality."
On an absolute basis, Balanced Portfolio posted solid performance numbers. For
the six months ended June 30, 1998, the Portfolio returned 6.28% at net asset
value. Unfortunately, we underperformed the 9.59% average return for the 234
funds in the Lipper Variable Annuity Balanced Funds category. (Lipper Analytical
Services, Inc. is an independent firm that reports mutual fund performance.)
Winners and Losers
The largest holdings in the Portfolio did well. Drug manufacturer Merck rose
27%. Green Tree Financial was up 83%, benefiting from its acquisition by another
of our investments, Conseco. American Home Products returned 37%.
The Portfolio's gains from these stocks, however, were dampened by holdings in
technology, specifically the semiconductor and semiconductor-related industries
where lack of demand and too much inventory wreaked havoc on business. The
Portfolio's holdings in Applied Materials, Teradyne, Helix Technology and
Photronics hurt results. This normally cyclical business has been down for two
years now. That's usually its inflection point - when business rebounds - but
that hasn't happened this time around. The lack of Asian demand has put off any
improvement, since companies in Asia can't raise capital to build new plants and
order equipment.
REITs, which traditionally move independently of the general stock market, were
another problem. With the current demand for these stocks so low, and our belief
that this would not change any time soon, we decided to significantly bring down
the weighing in REITs. As a matter of fact, the only REIT still in the portfolio
is Mack-Cali Realty.
Fund Strategy
In seeking better performance, we sold small-cap technology stocks and
reallocated some of that money to large healthcare enterprises, specifically
pharmaceutical companies. We completely sold positions in Adaptec, Avnet and Lam
Research while CVS was a new buy for the portfolio this period. We believe
pharmaceuticals will have more consistent growth going forward, even though they
look a little expensive right now. In terms of demographics, they have the wind
at their backs.
On the bond side, we also used money from equity sales to bolster exposure to
Treasurys. The Portfolio nearly doubled its holdings in Treasurys to $6 million
by period end. Considering the global economic environment and the changing
conditions of bond markets, we felt Treasurys were a prudent move. New buys IBM,
Sony and AT&T are examples of the high-quality, value-oriented corporate bonds
we will continue to seek and buy when available.
Looking Forward
We hope to see more consistent performance from the Portfolio. Selling small-cap
technology stocks should take out a lot of potential volatility. We've increased
the Portfolio's average market capitalization - now at $35 billion - by using
the money from small-caps to invest in large healthcare and pharmaceutical
firms. With this shift in strategy, we hope to see the Portfolio's relative
performance improve as well. Ultimately, our goal is to provide shareowners with
regular income and performance that lands between the returns of the Lehman
Brothers Government/Corporate Index and the Standard & Poor's 500 Index.
Respectfully,
/s/ William C. Field
- --------------------
William C. Field,
Portfolio Manager
14
<PAGE>
Balanced Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
<TABLE>
<S> <C>
U.S. Commmon Stocks 54.0%
Corporate Bonds 21.7%
U.S. Government Obligations 10.3%
U.S. Government Agency Obligations 8.6%
Short-Term Cash Equivalents 4.6%
Depositary Receipts for International Stocks 0.5%
Convertible Preferred Stock 0.3%
</TABLE>
[End Pie Chart]
Sector Distribution
(As a percentage of long-term holdings)
[Pie Chart]
<TABLE>
<S> <C>
Financial 26%
U.S. Government Securities 20%
Healthcare 17%
Technology 10%
Basic Materials 7%
Consumer Cyclicals 6%
Consumer Staples 4%
Communication Services 3%
Energy 3%
Other 4%
</TABLE>
[End Pie Chart]
Portfolio Maturity
(Effective life as a percentage of total fixed-income holdings)
[Pie Chart]
<TABLE>
<S> <C>
0-2 Years 7%
2-5 Years 43%
5-7 Years 14%
7-10 Years 29%
10-20 Years 2%
20+ Years 5%
</TABLE>
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of long-term holdings)
<TABLE>
<S> <C>
U.S. Treasury Bonds, 6.5%, 10/15/06 3.81%
U.S. Treasury Notes, 6.5%, 8/31/01 3.68
Monsanto Co. 3.51
Green Tree Financial Corp. 3.30
Merck & Co., Inc. 3.12
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $15.21 $14.99
Accumulation Unit Value 1.6067 1.5161
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
(12/31/97 - 6/30/98) Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$ 0.200 $ 0.337 $ 0.184
</TABLE>
- --------------------------------------------------------------------------------
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 (S&P) 500 Index and the Lehman
Brothers Government/ Corporate Bond Index.
[plots points for line chart]
<TABLE>
<CAPTION>
Lehman
Brothers
S&P Government/
Balanced 500 Corporate
Portfolio* Index Bond Index
<S> <C> <C> <C>
3/95 10000 10000 10000
10200 10375 10067
6/95 10810 11362 10720
11655 12262 10925
12084 12998 11434
12450 13695 11170
6/96 12686 14308 11222
12954 14747 11421
13806 15974 11770
13794 16405 11668
6/97 15180 19263 12092
16442 20704 12516
16239 21296 12918
17399 24261 13114
6/98 17259 25059 13456
</TABLE>
Index comparisons begin 3/31/95. The S&P 500 Index is a unmanaged measure of 500
widely held common stocks listed on the New York Stock Exchange, American Stock
Exchange and over-the-counter market. The Lehman Brothers Government/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 and, unlike
Portfolio returns, do not reflect any fees or expenses. Portfolio returns are
based on net asset value and do not reflect any annuity-related costs. You
cannot invest directly in the Indexes.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 17.81%
1 Year 13.70
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 16.18% 15.32%
Portfolio
1 Year 12.13 5.46
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 16.18% 14.88%
Portfolio
1 Year 12.13 5.13
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 15
<PAGE>
Swiss Franc Bond Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
International investing may involve special risks, including differences in
accounting and currency, as well as economic and political instability.
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.
[end side bar]
Although total return for Swiss Franc Bond Portfolio was down 2.81% at net asset
value for the semiannual period ended June 30, 1998, the Portfolio achieved its
investment goal by staying close to the return of Swiss franc deposits, which
fell 2.85%. The Swiss franc currency was down 3.54% against the U.S. dollar for
the period.
To achieve the goal of tracking the value of the Swiss franc, we invest in Swiss
franc denominated bonds with an average maturity of three to five years. The
Portfolio seeks 100% exposure to the Swiss franc for our fiscally conservative
investors through these high-quality bonds. As of June 30, over 65% of the
Portfolio's investments were rated AA+ or better. The average maturity of the
bonds in the Portfolio was 3.42 years. (Ratings apply to underlying securities,
not Portfolio shares.)
Why the Swiss Franc
A country's currency signals to the rest of the world the state of its internal
affairs, especially in relation to other global market participants. Bad loans,
inflation, poor trade balances and civil strife are symptoms that affect a
country's currency value relative to other currencies around the world.
Traditionally, across wars and economic hard times, the Swiss Franc, through
Switzerland's political neutrality and tight economic control, has played the
role of safe haven against the world's economic uncertainties.
A Rising Tide
Over the last several years, however, a decline in inflation across the globe
and the credibility of global central banking have lowered the Swiss franc's
comparative advantage. There is, for instance, the perception that the euro with
its own independent central bank will be strong competition for the Swiss franc
as the next world reserve currency. This perception already hurt the Swiss franc
over the short term of this period.
During the period, the Portfolio's return was more directly a reflection of the
strength of the U.S. dollar among all currencies and the underperformance of
Swiss franc versus other major currencies. Because of its relatively high
interest rates and the strength of its economy, the United States continued to
attract capital from around the world, driving up the value of the U.S. dollar.
It was a global phenomenon. Around the world investors sold currencies, yen,
deutschmarks etc., and bought dollars.
Looking Forward
Today, the questions are: Will the euro in fact become a strong currency in the
long term? Will U.S. economic prosperity continue? Will global inflation return?
Investors who fear the worst when answering these questions might want to
allocate some of their investment dollars to the Swiss franc. Given that the
Swiss franc has fallen 25% since 1995, we think it now offers an even more
attractive choice to hedge against global financial instability.
Respectfully,
/s/ Salvatore Pramas
- --------------------
Salvatore Pramas,
Portfolio Manager
16
<PAGE>
Swiss Franc Bond Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
Corporate Bonds 53%
Foreign Government Bonds 32%
U.S. Government Obligations 4%
Short-Term Cash Equivalents 11%
[End Pie Chart]
Geographical Distribution
(As a percentage of long-term holdings)
[Pie Chart]
Europe 66%
North America 22%
Other 8%
Asia 4%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of debt holdings)
<TABLE>
<S> <C>
Bayrische Vereinsbank, 4.25%, 2/21/07 6.96%
U.S. Treasury Notes, 5.375%, 2/15/01 5.10
BMW Finance NV, 5.0%, 4/21/13 4.99
Morgan (J.P.) & Co., 2.0%, 12/27/01 4.98
Rhone-Alpes, 6.375%, 11/25/02 4.98
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $12.05 $12.50
Accumulation Unit Value 0.7802 0.8083
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
12/31/97 - 6/30/98 Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.100 - -
</TABLE>
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
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.
[plot points for line chart]
<TABLE>
<CAPTION>
Merrill
Swiss Lynch
Franc Global
Bond Bond
Portfolio* Index
<S> <C> <C>
11/95 10000 10000
10013 10110
9807 9944
6/96 9217 9991
9416 10246
8931 10517
8399 10206
6/97 8379 10544
8372 10741
8313 10848
8100 10971
6/98 8079 11199
</TABLE>
Index comparison begins 11/30/95. The Merrill Lynch Global Bond Index is an
unmanaged measure of nearly 3,000 global government securities and Eurobonds.
Index returns are calculated monthly, assume reinvestment of dividends and,
unlike Portfolio returns, do not reflect any fees or expenses. Portfolio returns
are based on net asset value and do not reflect any annuity-related costs. You
cannot invest directly in the Index.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio -7.61%
1 Year -3.58
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- -8.91% -10.38%
Portfolio
1 Year -4.91 -10.57
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- -8.91% -11.11%
Portfolio
1 Year -4.91 -10.90
</TABLE>
The Portfolio began operations on 11/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 17
<PAGE>
America Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 6/30/98
[side bar]
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.
[end side bar]
The first half of Pioneer America Income Portfolio's fiscal year ended on June
30, 1998. During that time, both foreign and domestic investors were attracted
to the favorable investment climate in the United States, and the safe haven
U.S. government securities represent. This demand pushed bond prices higher and
interest rates lower, and produced attractive total returns for investors in
U.S. government bonds.
The Portfolio generated a competitive total return and attractive income over
the past six months. The Portfolio paid a total of $0.270 per share in income
dividends and its net asset value (NAV) rose $0.05 per share. On June 30, the
NAV stood at $10.09, versus $10.04 on December 31, 1997. This increase in share
price, plus the reinvestment of dividends produced a total return of 3.23%,
based on net asset value, for the first half of the Portfolio's fiscal year.
Strong domestic labor and housing markets propelled economic growth, while
inflation remained minimal over the period. The country's fiscal situation also
continued to improve as the economy's strength produced higher tax revenues.
Higher tax receipts helped the U.S. Treasury generate its first budget surplus
in nearly 30 years, reducing its need to borrow and lowering the supply of
securities. The smaller supply also was positive for bond prices. Many investors
were concerned that our strong economy eventually might stimulate inflation and
lead the Federal Reserve to raise interest rates; however, since the United
States and Asia are such active trading partners, slowing Asian economies could
lessen U.S. growth.
Quality, Relative Value and Income
As of June 30, 71% of the Portfolio was invested in U.S. Treasury and agency
securities other than mortgage-backed issues, 26% was in mortgage-backed issues
and 3% was in cash equivalents. This structure, which is in accordance with the
Portfolio's high standards of quality and diversification, reflects our goal of
maximizing total return and relative value, while maintaining a high degree of
liquidity.
We focused on U.S. Treasurys to build liquidity and adjust the Portfolio's
sensitivity to interest rate changes. Treasurys also increase the Portfolio's
flexibility to adjust to changing interest rate and market conditions. We
invested in U.S. government agency bonds that both offered an attractive yield
advantage to U.S. Treasurys and maintained credit quality. This strategy enabled
us to increase yield and take advantage of attractive relative value.
We also increased yield by investing in mortgage-backed securities and select
collateralized mortgage obligations (CMOs) issued by U.S. government agencies.
CMOs are pools of government agency-backed mortgages that are designed to offer
a greater degree of certainty regarding the cash flows of the underlying
mortgages. The Portfolio's position in mortgage-backed securities emphasized
bonds whose underlying mortgages had coupons that reflect the current interest
rate environment. These so-called "current coupon" securities have a lower
chance of being prepaid than those with higher coupons, keeping the income in
the Portfolio longer.
Heading Forward
As we head into the second half of 1998, we expect the bond market to continue
to benefit from many of the trends that existed over the past year. We expect
inflation to remain low and developments with the Federal budget surplus to be
positive. We also believe the uncertainty of the Asian crisis will continue to
boost the U.S. bond market. Near term, we think it will prompt investors to
maintain a strong preference for quality and liquidity, which should
particularly benefit U.S. Treasurys and support the U.S. dollar.
Respectfully,
/s/ Sherman B. Russ
- -------------------
Sherman B. Russ,
Portfolio Manager
18
<PAGE>
America Income Portfolio PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO AND PERFORMANCE UPDATE 6/30/98
Portfolio Diversification
(As a percentage of total portfolio)
[Pie Chart]
U.S. Government Agency Obligations 70%
U.S. Treasury Obligations 27%
Short-Term Cash Equivalents 3%
[End Pie Chart]
Portfolio Maturity
(Effective life as a percentage of total investment portfolio)
[Pie Chart]
0-2 Years 16%
2-5 Years 31%
5-7 Years 15%
7-10 Years 27%
10-20 Years 4%
20+ Years 7%
[End Pie Chart]
- --------------------------------------------------------------------------------
Five Largest Holdings
(As a percentage of debt holdings)
<TABLE>
<S> <C>
U.S. Treasury Bonds, 7.0%, 7/15/06 6.43%
U.S. Treasury Notes, 6.5%, 8/31/01 6.04
U.S. Treasury Bonds, 6.25%, 8/15/23 5.73
U.S. Treasury Notes, 6.625%, 5/15/07 4.60
U.S. Treasury Bonds, 7.25%, 5/15/16 3.76
</TABLE>
Holdings will vary for other periods.
- --------------------------------------------------------------------------------
Prices and Distributions
<TABLE>
<CAPTION>
6/30/98 12/31/97
<S> <C> <C>
Net Asset Value per Share $10.09 $10.04
Accumulation Unit Value 1.1423 1.1141
</TABLE>
<TABLE>
<CAPTION>
Distributions per Share Income Short-Term Long-Term
12/31/97 - 6/30/98 Dividends Capital Gains Capital Gains
<S> <C> <C> <C>
$0.270 - -
</TABLE>
- --------------------------------------------------------------------------------
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 Bond Index.
[plot points for line chart]
<TABLE>
<CAPTION>
Lehman
Brothers
America Government
Income Bond
Portfolio* Index
<S> <C> <C>
3/95 10000 10000
6/95 10109 10620
10207 10809
10574 11302
10320 11047
6/96 10339 11099
10479 11286
10712 11615
10615 11521
6/97 10967 11920
11288 12320
11616 12729
11758 12921
6/98 11991 13261
</TABLE>
Index comparison begins 3/31/95. 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 returns are calculated monthly, assume
reinvestment of dividends and, unlike Portfolio returns, do not reflect any fees
or expenses. Portfolio returns are based on net asset value and do not reflect
any annuity-related costs. You cannot invest directly in the Index.
[side bar]
Average Annual Total
Returns
(As of June 30, 1998)
- --------------------------------------------------------------------------------
Net Asset Value*
<TABLE>
<S> <C>
Period
Life-of-Portfolio 5.58%
1 Year 9.34
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision 2
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 4.19% 3.11%
Portfolio
1 Year 7.82 1.41
</TABLE>
- --------------------------------------------------------------------------------
Accumulation Unit Value
Pioneer Vision
<TABLE>
<CAPTION>
If If
Period Held** Redeemed***
<S> <C> <C>
Life-of- 4.19% 2.52%
Portfolio
1 Year 7.82 1.03
</TABLE>
The Portfolio began operations on 3/1/95.
All total returns shown assume reinvestment of distributions at net asset value.
* Reflects Portfolio performance only. Does not reflect insurance fees or
surrender charges.
** Reflects deduction of a 1.25% mortality and expense risk charge and a 0.15%
administrative expense charge. Does not reflect surrender charges.
*** Reflects deduction of a 1.25% mortality and expense risk charge, a 0.15%
administrative expense charge and the applicable contingent deferred sales
charge (CDSC), as if the contract were surrendered at the end of each
period. The maximum CDSC of 7% declines over seven years; it is deducted
only while the contract is in the surrender charge period. Returns do not
reflect a $30 annual contract fee; this fee is applied only until the
contract value reaches $50,000.
[end side bar]
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. 19
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 92.9%
PREFERRED STOCKS - 3.6%
300,000 Banco Itau SA $ 171,199
1,130 Bau Holdings AG 53,884
190,000 Companhia Riograndense de Telecomunicacoes 207,159
23,850 L.G. Electronics Inc. 51,938
1,550,000 Petroleo Brasileiro SA 288,141
6,000 Samsung Display Devices Co. 64,239
560 Suedzucker AG 340,702
2,500 Telecomunicacoes Brasileiras SA (A.D.R) 272,969
1,800,000 Telecomunicacoes de Sao Paulo SA 423,328
1,800,000 Telecomunicacoes de Sao Paulo SA (Class B)* 149,410
84,595 Telecomunicacoes de Sao Paolo SA (Receipts)* 19,024
17,250 Usinas Siderurgicas de Minas Gerais SA 87,999
-----------
TOTAL PREFERRED STOCKS (Cost $2,395,410) $ 2,129,992
-----------
COMMON STOCKS - 89.2%
BASIC MATERIALS - 7.3%
Agricultural Products - 0.9%
3,500 Daeseng Corp. $ 112,163
424,000 IOI Corporation Bhd. 211,476
2,320,000 London Sumatra Indonesia 182,116
-----------
$ 505,755
-----------
Chemicals - 0.5%
6,100 BASF AG $ 294,056
-----------
Construction (Cement and Aggregates) - 0.0%
1,100 Siam Cement Public Co., Ltd.* $ 5,318
-----------
Containers and Packaging (Paper) - 1.5%
11,300 Gerresheimer Glas AG $ 168,582
47,000 Malaysian Pacific Industries Bhd. 55,491
2,550 Schmalbach Lubeca AG 643,475
-----------
$ 867,548
-----------
Gold and Precious Metals Mining - 0.5%
213,700 Orogen Minerals Ltd. $ 285,207
-----------
Iron and Steel - 1.5%
6,650 Boehler-Uddeholm AG $ 439,752
23,000 Broken Hill Proprietary Co., Ltd. 194,885
2,600 Pohang Iron & Steel Co. Ltd. 86,209
12,000 Pohang Iron & Steel Co. Ltd. (A.D.R.) 144,000
-----------
$ 864,846
-----------
Metals Mining - 0.1%
172,000 M.I.M. Holdings Ltd. $ 83,280
-----------
Paper and Forest Products - 2.3%
181,000 Jaya Tiasa Holdings Bhd. $ 224,601
31,850 NV Koninklijke KNP BT 822,410
10,000 UPM-Kymmene Corp. 273,670
-----------
$ 1,320,681
-----------
TOTAL BASIC MATERIALS $ 4,226,691
-----------
CAPITAL GOODS - 15.3%
Aerospace/Defense - 0.1%
84,000 Woolworths Holdings Ltd. $ 62,327
-----------
Electrical Equipment - 3.2%
52,000 GP Batteries International Ltd. $ 94,797
3,400 Phillips Electronics NV 285,953
75 SAIA-Burgess Electronics AG* 20,207
27,240 Samsung Display Devices Co. 743,991
149,000 TT Group Plc 735,162
-----------
$ 1,880,110
-----------
Engineering and Construction - 2.9%
40,000 Ashtead Group Plc $ 156,952
20,000 Gujarat Ambuja Cements Ltd. (G.D.R.) 94,500
20,500 Larson and Toubro (G.D.R.) 186,038
1,700 L.G. Construction Ltd. 2,241
36,000 Leighton Holdings Ltd. 126,372
162,000 Powerscreen International Plc 243,442
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Engineering and Construction - (Continued)
4,900 Technip $ 598,955
2,200 VA Technologies AG 273,971
-----------
$ 1,682,471
-----------
Machinery (Diversified) - 3.1%
265 GEA AG $ 103,613
3,700 KCI Konecranes International Plc 186,990
8,000 Sampo Insurance Co. Ltd. 379,489
31,200 Siebe Plc 628,782
28,000 Valmet Corp. 480,201
-----------
$ 1,779,075
-----------
Manufacturing (Diversified) - 1.4%
142,188 BTR Plc $ 400,037
2,875 Plettac AG 403,402
-----------
$ 803,439
-----------
Metal Fabricators - 1.8%
19,500 Hunter Douglas NV $ 1,059,783
-----------
Office Equipment and Supplies - 1.9%
18,000 Canon, Inc. $ 410,067
12,000 Koninkluke Ahrend NV 391,895
4,300 Samas-Groep NV 302,429
-----------
$ 1,104,391
-----------
Trucks and Parts - 0.9%
160 Bucher Holding AG $ 210,262
13,700 Svedala Industri AB 317,766
-----------
$ 528,028
-----------
TOTAL CAPITAL GOODS $ 8,899,624
-----------
COMMUNICATION SERVICES - 8.7%
Cellular/Wireless Telecommunications - 1.4%
26,000 Hutchinson Whampoa Ltd. $ 137,248
494 SK Telecom Co., Ltd. 230,733
23,520 SK Telecom Co., Ltd. (A.D.R.) 130,831
80,800 Telecom Italia Mobile SpA 272,858
74,500 United Communication Industry Public Co., Ltd.* 35,308
-----------
$ 806,978
-----------
Telephone - 7.3%
21,200 Mahanagar Telephone Nigam Ltd. (G.D.R.)* $ 222,070
13 NTT Data Corp. 471,035
1,650 Stet Hellas Telecommunications SA (A.D.R.)* 68,475
611,000 Technology Resources Industries Bhd. 419,577
2,692,000 Telecomunicacoes Brasileiras SA 211,813
130,077 Telecom Italia SpA* 957,961
163,000 TelecomAsia Public Co., Ltd. 47,316
18,350 Telefonica de Argentina SA (Class B) (A.D.R.) 595,228
13,509 Telefonica SA 624,577
70,500 Telekom Malaysia Bhd. 118,908
47,100 Videsh Sanchar Nigam Ltd. (G.D.R.) 503,970
-----------
$ 4,240,930
-----------
TOTAL COMMUNICATION SERVICES $ 5,047,908
-----------
CONSUMER CYCLICALS - 13.8%
Auto Parts and Equipment - 0.0%
12,000 Thai Rung Union Car Public Co. Ltd. $ 3,768
-----------
Building Materials - 2.8%
29,990 Asko OY $ 637,439
1,500 Cemex, SA de CV (Class A) 220,633
50,000 Cemex, SA de CV (Class B) 5,626
5,800 Koramic Building Products SA 420,301
50,600 Williams Plc 325,274
-----------
$ 1,609,273
-----------
Homebuilding - 0.1%
2,354,000 DMCI Holdings Inc* $ 74,515
119,000 Land & House Public Co., Ltd.* 21,149
11,800 Property Perfect Public Co., Ltd.* 224
-----------
$ 95,888
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Household Furniture and Appliances - 2.1%
500 Forbo Holding AG $ 254,903
7,500 Moulinex* 194,642
3,400 Ryohin Keikaku Ltd. 327,042
5,500 Sony Corp. 475,338
-----------
$ 1,251,925
-----------
Leisure Time (Products) - 0.4%
12,000 Baja Auto Ltd. (G.D.R.) $ 162,600
750 KTM Motorradholding AG 58,522
-----------
$ 221,122
-----------
Publishing (Newspapers) - 0.2%
122,000 Star Publications $ 102,297
-----------
Retail (Deptartment Stores) - 0.1%
7,766,500 PT Matahari Putra Prima $ 79,520
-----------
Retail (Discounters) - 0.1%
5,000 Makro Atacadista SA (G.D.R.) $ 37,500
-----------
Retail (Home Shopping) - 0.5%
33,000 Next Plc $ 285,901
-----------
Retail (Specialty) - 2.3%
103,000 Arriva Plc $ 601,927
77,000 Carpetright Plc 340,702
210,000 Cifra SA de CV (Series C) 291,670
68,700 MFI Furniture Group Plc 72,840
100,000 Sa Sa International Holdings Ltd. 16,778
-----------
$ 1,323,917
-----------
Retail (Specialty - Apparel) - 0.5%
1,514,000 Giordano International Ltd. $ 306,786
-----------
Services (Commercial and Consumer) - 2.6%
3,250 Falck AS $ 201,070
7,000 Hagemeyer NV 302,971
167,500 Jasmine International Public Co., Ltd. 53,584
7,700,000 Net Holdings AS* 89,636
31,700 Select Appointments Holdings Plc 452,547
13,300 Stork NV 423,883
-----------
$ 1,523,691
-----------
Textiles (Apparel) - 0.9%
7,300 Adolfo Dominguez SA* $ 247,538
11,600 Fila Holding SpA (A.D.R.) 174,000
669,000 Goldiron Holdings Ltd. 75,120
15 Hugo Boss AG 31,571
-----------
$ 528,229
-----------
Textiles (Home Furnishings) - 1.2%
6,450 Chargeurs International SA $ 532,904
6,000 Industrie Natuzzi SpA (A.D.R.) 156,000
-----------
$ 688,904
-----------
TOTAL CONSUMER CYCLICALS $ 8,058,721
-----------
CONSUMER STAPLES - 9.4%
Beverages (Non-Alcoholic) - 0.7%
11,700 Louis Dreyfus Citrus $ 390,922
-----------
Broadcasting (Television/Radio/Cable) - 2.6%
1,760,000 Benpres Holdings Corp.* $ 265,899
18,300 Central European Media Enterprises Ltd.* 395,738
49,400 Schibsted ASA 831,444
-----------
$ 1,493,081
-----------
Distributors (Food and Health) - 0.7%
7,300 Gehe AG $ 391,700
-----------
Entertainment - 1.0%
1,370 Pathe SA $ 268,530
15,200 Pearson Plc 278,666
-----------
$ 547,196
-----------
Foods - 2.2%
3,000 Delta Dairy SA $ 35,832
125,000 Grupo Industrial Maseca SA de CV 90,980
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Foods - (Continued)
10,500 Huhtamaki Oy (Series I) $ 597,696
1,975,500 JG Summit Holding Inc. 85,273
19,000 Raisio Group Plc 343,876
45,000 Thai Union Frozen Products Public Co. Ltd. 138,625
-----------
$ 1,292,282
-----------
Household Products (Non-Durables) - 0.2%
600 Nu Skin Enterprises Inc.* $ 11,700
11,000 Shiseido Co., Ltd. 125,378
-----------
$ 137,078
-----------
Restaurants - 0.1%
147,000 Kentucky Fried Chicken Bhd.* $ 77,923
-----------
Retail Stores (Food Chains) - 0.8%
610 Circle K Japan Co. Ltd. $ 21,308
148,000 Dairy Farm International Holdings Ltd. 158,360
4,400 Delhaize-Le Lion, SA 307,610
-----------
$ 487,278
-----------
Services (Facilities and Enviroment) - 0.6%
9,800 Brambles Industries Ltd. $ 192,781
14,800 Jaakko Poyry Group 175,514
-----------
$ 368,295
-----------
Services (Rentals) - 0.5 %
4,400 ORIX Corp. $ 298,170
-----------
TOTAL CONSUMER STAPLES $ 5,483,925
-----------
ENERGY - 2.5%
Oil (International Integrated) - 0.6%
2,650 Elf Aquataine SA $ 372,579
-----------
Oil and Gas (Exploration/Production) - 0.1%
121,000 Cultus Petroleum NL* $ 62,117
-----------
Oil and Gas (Refining and Marketing) - 1.8%
18,000 ENI SpA $ 118,024
12,200 Repsol SA 670,662
2,000 Total SA (Class B) 260,020
-----------
$ 1,048,706
-----------
TOTAL ENERGY $ 1,483,402
-----------
FINANCIAL - 9.9%
Banks (Major Regional) - 6.1%
37,000 Banca Popolare di Milano $ 296,594
12,000 Banco de Santander SA 307,141
136,000 Bangkok Bank Ltd. 167,583
1,400 Credit Suisse Group 312,025
136,500 Dao heng Bank Ltd. 193,792
2,300 DePfa-Bank 184,194
90,480 Development Bank of Singapore Ltd. 500,733
465,000 Dhana Siam Finance Public Co.* 8,815
20,981 Housing & Commercial Bank 69,835
6,800 HSBC Holding Plc 172,012
4,000 Industrial Credit and Investment Corp. of India Ltd. (A.D.R.) 40,900
535,000 JCG Holdings Ltd. 148,458
40,133 Kookmin Bank 149,074
247,200 National Finance Public Co., Ltd.* 19,331
80,200 Overseas-Chinese Banking Corp., Ltd. 272,951
27,200 Skandia Enskilda Banken 465,496
3,950 Svenska Handelbanken 183,237
79,000 Thai Farmers Bank, Ltd. 69,733
-----------
$ 3,561,904
-----------
Financial (Diversified) - 2.2%
16,000 AMP Ltd.* $ 187,715
677,000 C & P Homes, Inc.* 34,094
175,000 DBS Land Ltd. 145,013
285,600 HKR International Ltd. 101,368
7,180 Nichiei Co., Ltd. 490,195
600 Shohkoh Fund 147,971
5,000 Uniao de Bancos Brasileiros S.A. (G.D.R.) 147,500
-----------
$ 1,253,856
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Life/Health) - 0.1%
1,800 Mediolanum SpA $ 57,138
-----------
Insurance (Multi-Line) - 0.6%
1,250 Axa Colonia Konzern AG $ 155,879
1,500 Catalana Occidente SA 47,440
1,500 Catalana Occidente SA (New E Shares)* 45,484
133,200 Malaysian Assurance Alliance Bhd. 115,541
-----------
$ 364,344
-----------
Insurance (Property/Casualty) - 0.5%
10,621 Reinsurance Australia Corp. $ 27,176
66,000 Yasuda Fire and Marine Insurance 281,623
-----------
$ 308,799
-----------
Savings and Loan Companies - 0.4%
255,000 Hong Leong Finance Ltd. $ 208,286
-----------
TOTAL FINANCIAL $ 5,754,327
-----------
HEALTHCARE - 6.9%
Healthcare (Diversified) - 0.4%
7,600 Teva Pharmaceutical Industries Ltd. (A.D.R.) $ 267,425
-----------
Healthcare (Drugs/Major Pharmaceuticals) - 5.0%
43,766 Astra AB $ 894,415
4,100 Fabrica Espanola de Productos Quimicos y Farmaceuticos, SA 280,730
270 Fabrica Espanola de Productos Quimicos y Farmaceuticos, SA (E Shares)* 18,205
194,600 Medeva Plc 552,372
280 Novartis AG 466,697
10,632 Rhone-Poulenc SA 599,684
85,000 SkyePharma Plc* 90,832
-----------
$ 2,902,935
-----------
Healthcare (Medical Products/Supplies) - 1.3%
30,200 Biora AB* $ 397,568
22,000 Elbit Medical Imaging, Ltd. 182,875
10,000 Terumo Corp. 159,109
-----------
$ 739,552
-----------
Healthcare (Specialized Services) - 0.2%
8,700 Nobel Biocare $ 129,802
-----------
TOTAL HEALTHCARE $ 4,039,714
-----------
TECHNOLOGY - 11.9%
Communications Equipment - 3.9%
2,300 Alcatel Alsthom SA $ 468,316
9,300 ECI Telecommunications Ltd. 352,238
13,600 LG Information and Communication 196,125
10,000 Nokia AB 735,261
25,400 Tadiran Telecommunications Ltd. 377,825
3,700 Tadiran Telecommunications Ltd. (A.D.R.) 122,563
-----------
$ 2,252,328
-----------
Computer (Hardware) - 0.2%
4,000 Samsung Electronics Co. $ 123,816
-----------
Computers (Networking) - 0.5%
11,000 Olicom AS* $ 295,625
-----------
Computers (Peripherals) - 0.4%
1,500 Logitech International AG* $ 213,960
3,700 Logitech International AG (A.D.R.)* 50,413
-----------
$ 264,373
-----------
Computers (Software and Services) - 0.9%
3,600 Intentia International AB (Class B)* $ 130,440
19,000 Tecnomatix Technologies Ltd.* 380,000
-----------
$ 510,440
-----------
Electronics (Component Distributors) - 1.7%
14,000 GSS Array Technology Public Co., Ltd.* $ 30,355
80,900 KCE Electronics Public Co., Ltd.* 299,062
8,500 K.R. Precision Plc* 5,640
12,300 Telefonaktiebolaget LM Ericsson (Series B) 359,315
86,000 Varitronix International Ltd. 172,044
55,000 Venture Manufacturing Ltd. 104,174
-----------
$ 970,590
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (Instrumentation) - 0.4%
71,200 Elec & Eltek International Co. Ltd. $ 240,656
-----------
Electronics (Semiconductors) - 2.7%
950 Austria Micro Systeme International AG $ 64,394
4,500 Rohm Co., Ltd. 463,767
3,400 SGS Thomson Electronics* 240,980
5,000 SGS Thomson Microelectronics NV (A.D.R.)* 349,375
15,000 Tokyo Electron Ltd. 461,054
-----------
$ 1,579,570
-----------
Equipment (Semiconductors) - 0.3%
418,000 ASM Pacific Technology Ltd. $ 178,033
-----------
Services (Computer Systems) - 0.1%
181,400 Loxley Public Co., Ltd.* $ 33,099
-----------
Services (Data Processing) - 0.8%
39,500 Merkantildata ASA $ 499,902
2,500 Shinawatra Computer Co., Plc 9,122
-----------
$ 509,024
-----------
TOTAL TECHNOLOGY $ 6,957,554
-----------
TRANSPORTATION - 1.4%
Airlines - 0.8%
28,000 British Airways Plc $ 301,547
2,700 Flughafen Wien AG 129,600
-----------
$ 431,147
-----------
Railways - 0.6%
17,061 Stagecoach Holdings Plc $ 363,206
-----------
TOTAL TRANSPORTATION $ 794,353
-----------
UTILITIES - 2.1%
Electric Companies - 1.8%
7,700,000 Centrais Geradoras do Sul do Brasil SA* $ 10,519
7,700,000 Centrais Electricas Brasileiras SA 226,363
18,500 Electrcidade de Portugal, SA 430,330
28,000 Scottish Power Plc 246,848
3,900 Shandong Huaneng Power Co., Ltd. (N Shares) (A.D.R.) 20,964
450,000 Zhejiang Southeast Electric Power (B Shares) 126,000
-----------
$ 1,061,024
-----------
Natural Gas - 0.3%
68,000 Fletcher Challenge Energy $ 162,767
-----------
TOTAL UTILITIES $ 1,223,791
-----------
TOTAL COMMON STOCKS (Cost $56,637,899) $51,970,010
-----------
RIGHTS - 0.1%
7,000,000 Net Holdings AS, 7/1/98* $ 51,889
-----------
TOTAL RIGHTS (Cost $57,265) $ 51,889
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $59,090,574)(a) $54,151,891
-----------
Principal
Amount
---------
TEMPORARY CASH INVESTMENTS - 7.1%
Commercial Paper - 7.1%
$1,914,000 American Express Credit Corp., 5.65%, 7/1/98 $ 1,914,000
2,197,000 Ford Motor Credit Co., 5.85%, 7/2/98 2,197,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $4,111,000) $ 4,111,000
-----------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENTS - 100% (Cost 63,201,574)(b) $58,262,891
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
International Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) Distribution of investments by country, as a percentage of total
equity holdings, is as follows:
<TABLE>
<S> <C>
United Kingdom 11.5%
Japan 7.6
Netherlands 7.3
France 7.2
Finland 7.0
Sweden 5.3
Germany 5.0
Brazil 4.1
Spain 4.1
South Korea 3.8
Italy 3.7
Israel 3.1
Singapore 2.9
Switzerland 2.8
Hong Kong 2.7
Norway 2.4
Malaysia 2.4
India 2.2
Australia 2.1
Austria 1.9
Thailand 1.7
Belgium 1.3
Mexico 1.1
Argentina 1.1
Bermuda 1.1
Others (individually less than 1%) 4.6
-----
100.0%
=====
</TABLE>
(b) At June 30, 1998, the net unrealized loss on investments based
on cost for federal income tax purposes of $63,893,582 was as
follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments
in which there is an excess of value
over tax cost $ 4,753,906
Aggregate gross unrealized loss for all investments
in which there is an excess of tax
cost over value (10,384,597)
------------
Net unrealized loss $ (5,630,691)
============
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1998 aggregated
$41,642,404 and $32,648,173, respectively.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
International Growth Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investments
of $4,111,000) (cost $63,201,574) $58,262,891
Cash 7,955
Foreign currencies, at value 420,828
Receivables--
Investment securities sold 1,129,056
Fund shares sold 32,452
Dividends, interest and foreign taxes withheld 125,999
-----------
Total assets $59,979,181
-----------
Liabilities:
Payables--
Investment securities purchased $ 1,241,246
Forward foreign currency settlement contracts open--net 1,466
Due to affiliates 57,718
Accrued expenses 46,309
-----------
Total liabilities $ 1,346,739
-----------
Net Assets:
Paid-in capital $62,982,221
Accumulated undistributed net investment income 327,063
Accumulated undistributed net realized gain on investments and foreign
currency transactions 260,580
Net unrealized loss on investments (4,938,683)
Net unrealized gain on foreign forward currency contracts and other
assets and liabilities denominated in foreign currencies 1,261
-----------
Total net assets $58,632,442
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $58,632,442/5,129,893 shares $ 11.43
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
International Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $65,693) $ 631,252
Interest (net of foreign taxes withheld of $201) 159,501
-----------
Total investment income $ 790,753
-----------
Expenses:
Management fees $ 286,893
Transfer agent fees 425
Accounting 34,260
Custodian fees 98,029
Professional fees 4,185
Printing 740
Fees and expenses of nonaffiliated trustees 480
Miscellaneous 6,219
-----------
Total expenses $ 431,231
Less management fees waived by Pioneering
Management Corporation (17,408)
Less fees paid indirectly (639)
-----------
Net expenses $ 413,184
-----------
Net investment income $ 377,569
-----------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain from:
Investments $ 1,119,493
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 2,527 $ 1,122,020
----------- -----------
Change in net unrealized gain or loss from:
Investments $(1,098,794)
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 1,161 $(1,097,633)
----------- -----------
Net gain on investments and foreign currency transactions $ 24,387
-----------
Net increase in net assets resulting from operations $ 401,956
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
International Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 377,569 $ 314,179
Net realized gain on investments and foreign
currency transactions 1,122,020 3,838,459
Change in net unrealized gain or loss on
investments and foreign currency transactions (1,097,633) (4,309,688)
----------- -----------
Net increase (decrease) in net assets resulting
from operations $ 401,956 $ (157,050)
----------- -----------
Distributions to Shareholders:
Net investment income ($0.19 and $0.03 per
share, respectively) $ (902,675) $ (91,398)
Net realized gain ($0.89 and $0.16 per share,
respectively) (4,137,338) (479,245)
----------- -----------
Total distributions to shareholders $(5,040,013) $ (570,643)
----------- -----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 971,392 2,153,395 $13,134,270 $27,923,006
Reinvestment of distributions 445,231 42,649 5,040,013 570,643
Cost of shares repurchased (327,815) (248,981) (4,316,063) (3,123,621)
--------- --------- ----------- -----------
Net increase in net assets resulting
from fund share transactions 1,088,808 1,947,063 $13,858,220 $25,370,028
========= ========= ----------- -----------
Net increase in net assets $ 9,220,163 $24,642,335
Net Assets:
Beginning of period 49,412,279 24,769,944
----------- -----------
End of period (including accumulated undistributed
net investment income of $327,063 and
$852,169, respectively) $58,632,442 $49,412,279
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
International Growth Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.23 $ 11.83 $ 10.93 $ 10.00
------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.05 $ 0.06 $ 0.05 $ --
Net realized and unrealized gain on
investments and foreign currency
transactions 0.23 0.53 0.88 1.04
------- ------- ------- -------
Net increase from investment
operations $ 0.28 $ 0.59 $ 0.93 $ 1.04
Distributions to shareholders:
Net investment income (0.19) (0.03) -- --
In excess of net investment income -- -- -- (0.02)
Net realized gain (0.89) (0.16) (0.03) (0.09)
------- ------- ------- -------
Net increase (decrease) in net
asset value $ (0.80) $ 0.40 $ 0.90 $ 0.93
------- ------- ------- -------
Net asset value, end of period $ 11.43 $ 12.23 $ 11.83 $ 10.93
======= ======= ======= =======
Total return* 2.41 % 4.87% 8.54% 10.42%
Ratio of net expenses to average net
assets 1.44%**+ 1.49%+ 1.52%+ 2.10%**+
Ratio of net investment income (loss)
to average net assets 1.31%**+ 0.78%+ 0.78%+ ( 0.25)%**+
Portfolio turnover rate 126%** 133% 115% 139%**
Net assets, end of period
(in thousands) $58,632 $49,412 $24,770 $ 2,967
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 1.50%** 1.71% 3.04% 17.22%**
Net investment income (loss) 1.25%** 0.56% (0.74)% (15.37)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 1.44%** 1.48% 1.50% 1.75%**
Net investment income 1.31%** 0.79% 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 each period.
** Annualized.
+ Ratio assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 90.5%
PREFERRED STOCK - 0.4%
41,450 Aracruz Cellulose SA (A.D.R.) $ 474,084
------------
TOTAL PREFERRED STOCK (Cost $739,411) $ 474,084
------------
COMMON STOCKS - 90.1%
BASIC MATERIALS - 7.5%
Chemicals - 1.3%
76,200 The Geon Co. $ 1,747,837
------------
Chemicals (Specialty) - 1.3%
116,300 Agrium, Inc. $ 1,468,287
30,000 Borden Chemicals & Plastics, L.P. 172,500
3,400 NL Industries, Inc. 68,000
------------
$ 1,708,787
------------
Gold & Precious Metals Mining - 0.8%
37,000 Newmont Mining Corp. $ 874,125
35,000 TVX Gold Inc.* 107,187
------------
$ 981,312
------------
Iron & Steel - 0.8%
106,000 LTV Corp. $ 1,013,625
------------
Metals & Mining - 0.6%
23,000 Freeport-McMoRan Copper & Gold, Inc. $ 327,750
21,000 Penn Engineering & Manufacturing Corp. 517,125
------------
$ 844,875
------------
Paper & Forest Products - 2.7%
33,000 Bowater, Inc. $ 1,559,250
20,200 Consolidated Papers, Inc. 550,450
75,000 Louisiana-Pacific Corp. 1,368,750
------------
$ 3,478,450
------------
TOTAL BASIC MATERIALS $ 9,774,886
------------
CAPITAL GOODS - 9.8%
Electrical Equipment - 3.0%
19,000 Belden, Inc. $ 581,875
21,000 Philips Electronics NV (NY Shares) 1,785,000
88,765 Vishay Intertechnology, Inc.* 1,592,222
------------
$ 3,959,097
------------
Engineering & Construction - 1.4%
130,000 Morrison Knudsen Corp.* $ 1,828,125
------------
Manufacturing (Diversified) - 2.0%
20,000 Corning, Inc. $ 701,950
48,000 Raychem Corp. 1,419,000
22,500 U.S. Industries, Inc. 556,875
------------
$ 2,677,825
------------
Metal Fabricators - 1.5%
43,500 Brush Wellman, Inc. $ 894,468
62,200 CommScope, Inc.* 1,003,625
------------
$ 1,898,093
------------
Office Equipment & Supplies - 0.5%
45,000 Moore Corporation Ltd. $ 596,250
------------
Waste Management - 1.4%
54,000 Waste Management, Inc. $ 1,890,000
------------
TOTAL CAPITAL GOODS $ 12,849,390
------------
COMMUNICATION SERVICES - 8.7%
Telecommunications (Long Distance) - 1.5%
28,000 Sprint Corp. $ 1,974,000
------------
Telephone - 7.2%
36,914 Bell Atlantic Corp. $ 1,684,201
91,649 Citizens Utilities Co. (Class B)* 882,124
84,000 Frontier Corp. 2,646,000
39,000 GTE Corp. 2,169,375
49,500 Telephone and Data Systems, Inc. 1,949,063
------------
$ 9,330,763
------------
TOTAL COMMUNICATION SERVICES $ 11,304,763
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS - 14.3%
Auto Parts & Equipment - 1.4%
47,000 ITT Industries $ 1,756,625
------------
Automobiles - 1.0%
54,500 Republic Industries, Inc.* $ 1,362,500
------------
Consumer (Jewelry, Novelties & Gifts) - 0.7%
40,000 Jostens, Inc. $ 965,000
------------
Household Furniture & Appliances - 0.6%
21,100 Harman International Industries, Inc. $ 812,350
------------
Leisure Time (Products) - 3.0%
45,300 Arctic Cat, Inc. $ 447,338
39,000 Callaway Golf Co. 767,813
68,000 Hasbro, Inc. 2,673,250
------------
$ 3,888,401
------------
Publishing - 0.4%
40,800 PRIMEDIA, Inc.* $ 553,350
------------
Retail (Specialty) - 2.7%
22,000 Cole National Corp.* $ 880,000
68,000 Pep Boys - Manny, Moe & Jack 1,287,750
68,000 Venator Group, Inc.* 1,300,500
------------
$ 3,468,250
------------
Textiles (Apparel) - 3.4%
45,000 Fruit of the Loom, Inc.* $ 1,493,438
35,000 Justin Industries 564,375
36,000 Reebok International Ltd.* 996,750
85,000 The Stride Rite Corp. 1,280,313
51,300 Tultex Corp.* 125,044
------------
$ 4,459,920
------------
Textiles (Specialty) - 1.1%
65,000 Wellman, Inc. $ 1,474,688
------------
TOTAL CONSUMER CYCLICALS $ 18,741,084
------------
CONSUMER STAPLES - 13.1%
Foods - 1.1%
67,000 Tyson Foods, Inc. $ 1,453,063
------------
Entertainment - 2.2%
50,000 Viacom, Inc. (Class B) (Non-voting)* $ 2,912,500
------------
Household Products (Non-Durables) - 0.9%
15,000 Kimberly Clark Corp. $ 688,125
39,000 The Rival Co. 526,500
------------
$ 1,214,625
------------
Housewares - 1.4%
62,000 Tupperware Corp. $ 1,743,750
------------
Restaurants - 3.7%
122,800 Lone Star Steakhouse & Saloon, Inc.* $ 1,696,175
46,000 McDonald's Corp. 3,174,000
------------
$ 4,870,175
------------
Retail Stores (Food Chains) - 1.0%
38,000 The Great Atlantic & Pacific Tea Co., Inc. $ 1,256,375
------------
Services (Employment) - 1.7%
56,000 The Loewen Group, Inc. $ 1,514,147
25,000 Manpower, Inc. 717,187
------------
$ 2,231,334
------------
Specialty Printing - 1.1%
87,500 John H. Harland Co. $ 1,482,031
------------
TOTAL CONSUMER STAPLES $ 17,163,853
------------
ENERGY - 4.0%
Oil (Domestic Integrated) - 1.6%
26,000 Atlantic Richfield Co. $ 2,031,250
------------
Oil & Gas (Drilling & Equipment) - 0.7%
25,200 ENSCO International, Inc. $ 437,850
16,500 Tidewater, Inc. 544,500
------------
$ 982,350
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas (Exploration/Production) - 1.7%
16,700 Crystal Oil Co.* $ 701,400
25,000 Oryx Energy Co.* 553,125
35,000 Seagull Energy Corp.* 579,687
23,000 Union Pacific Resources Group, Inc. 403,937
------------
$ 2,238,149
------------
TOTAL ENERGY $ 5,251,749
------------
FINANCIAL - 9.3%
Consumer Finance - 1.4%
42,000 Green Tree Financial Corp. $ 1,798,125
------------
Financial (Diversified) - 2.0%
15,029 American General Corp. $ 1,069,877
19,700 Equitable Companies, Inc. 1,476,269
------------
$ 2,546,146
------------
Insurance (Life/Health) - 0.5%
15,000 Conseco, Inc. $ 701,250
------------
Insurance (Property/Casualty) - 3.5%
11,700 Allmerica Financial Corp. $ 760,500
20,000 Financial Security Assurance Holdings Ltd. 1,175,000
94,000 20th Century Industries 2,696,625
------------
$ 4,632,125
------------
Investment Management - 0.9%
44,000 United Asset Management Corp. $ 1,146,750
------------
Savings & Loan Companies - 1.0%
30,000 Washington Mutual, Inc. $ 1,303,125
------------
TOTAL FINANCIAL $ 12,127,521
------------
HEALTHCARE - 5.9%
Healthcare (Diversified) - 1.2%
35,000 IVAX Corp.* $ 323,750
32,000 Mallinckrodt, Inc. 950,000
30,000 Medeva Plc (A.D.R.) 341,250
------------
$ 1,615,000
------------
Healthcare (Hospital Management) - 2.2%
89,000 Columbia/HCA Healthcare Corp. $ 2,592,125
16,000 Sun Healthcare Group, Inc.* 235,000
------------
$ 2,827,125
------------
Healthcare (Long-Term Care) - 1.4%
50,000 Integrated Health Services, Inc. $ 1,875,000
------------
Healthcare (Managed Care) - 0.5%
60,000 Mid Atlantic Medical Services, Inc.* $ 690,000
------------
Healthcare (Medical Products/Supplies) - 0.6%
12,500 Beckman Coulter, Inc. $ 728,125
------------
TOTAL HEALTHCARE $ 7,735,250
------------
TECHNOLOGY - 14.7%
Communications Equipment - 3.1%
40,000 Alcatel Alsthom (A.D.R.) $ 1,627,500
49,000 Andrew Corp.* 885,063
50,000 DSC Communications Corp.* 1,500,000
------------
$ 4,012,563
------------
Computers (Hardware) - 2.1%
84,000 NCR Corp.* $ 2,730,000
------------
Computers (Peripherals) - 0.9%
30,000 Intergraph Corp.* $ 256,875
37,000 Seagate Technology, Inc.* 881,063
------------
$ 1,137,938
------------
Computers (Software & Services) - 2.0%
70,000 Broderbund Software, Inc.* $ 1,596,875
35,000 Unisys Corp.* 988,750
------------
$ 2,585,625
------------
Electronics (Component Distributors) - 0.9%
43,000 Marshall Industries* $ 1,171,750
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
Capital Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electronics (Defense) - 0.2%
20,000 Whittaker Corp.* $ 265,000
------------
Equipment (Semiconductors) - 0.3%
15,000 Teradyne, Inc.* $ 401,250
------------
Photography/Imaging - 3.6%
27,100 Eastman Kodak Co. $ 1,979,994
110,000 Imation Corp.* 1,821,875
27,400 Polaroid Corp. 974,412
------------
$ 4,776,281
------------
Services (Data Processing) - 1.6%
63,500 First Data Corp. $ 2,115,344
------------
TOTAL TECHNOLOGY $ 19,195,751
------------
TRANSPORTATION - 1.3%
Railroads - 1.3%
18,000 Norfolk Southern Corp. $ 536,625
26,500 Union Pacific Corp. 1,169,312
------------
TOTAL TRANSPORTATION $ 1,705,937
------------
UTILITIES - 1.5%
Electronic Companies - 1.5%
7,000 BEC Energy Co. $ 290,500
25,000 Dominion Resources, Inc. 1,018,750
15,000 DTE Energy Co. 605,625
------------
TOTAL UTILITIES $ 1,914,875
------------
TOTAL COMMON STOCKS (Cost $111,087,757) $117,765,059
------------
TOTAL INVESTMENT IN SECURITIES (Cost $111,827,168) $118,239,143
------------
Principal
Amount
- -----------
TEMPORARY CASH INVESTMENTS - 9.5%
Commercial Paper - 9.5%
$4,750,000 American Express Credit Corp., 5.65%, 7/1/98 $ 4,750,000
2,903,000 Ford Motor Credit Co., 5.65%, 7/6/98 2,903,000
4,816,000 Norwest Financial, Inc., 6.03%, 7/2/98 4,816,000
------------
TOTAL TEMPORARY CASH INVESTMENTS (Cost $12,469,000) $ 12,469,000
------------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENTS - 100% (Cost $124,296,168)(a) $130,708,143
============
* Non-income producing security.
(a) At June 30, 1998, the net unrealized gain on investments based on cost for federal
income tax purposes of $124,375,525 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of value
over tax cost $ 15,522,360
Aggregate gross unrealized loss for all investments in which there is an excess of tax
cost over value (9,189,742)
------------
Net unrealized gain $ 6,332,618
============
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 aggregated $49,039,339 and $38,416,066, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
Capital Growth Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investments
of $12,469,000) (cost $124,296,168) $130,708,143
Cash 270
Receivables--
Investment securities sold 433,124
Fund shares sold 214,824
Dividends and interest 129,449
Other 476
------------
Total assets $131,486,286
------------
Liabilities:
Payables--
Investment securities purchased $ 790,165
Fund shares repurchased 6,593
Due to affiliates 75,277
Accrued expenses 25,398
------------
Total liabilities $ 897,433
------------
Net Assets:
Paid-in capital $113,701,020
Accumulated undistributed net investment income 568,664
Accumulated undistributed net realized gain on investments 9,907,194
Net unrealized gain on investments 6,411,975
------------
Total net assets $130,588,853
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $130,588,853/7,973,299 shares $ 16.38
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Captial Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $930) $631,784
Interest 320,966
--------
Total investment income $ 952,750
-----------
Expenses:
Management fees $388,505
Transfer agent fees 625
Accounting 16,813
Custodian fees 24,031
Professional fees 6,164
Printing 4,192
Fees and expenses of nonaffliated trustees 566
Miscellaneous 9,757
--------
Total expenses $ 450,653
Less fees paid indirectly (801)
-----------
Net expenses $ 449,852
-----------
Net investment income $ 502,898
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments $ 9,903,479
Change in net unrealized gain on investments (1,307,812)
-----------
Net gain on investments $ 8,595,667
-----------
Net increase in net assets resulting from operations $ 9,098,565
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Capital Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 502,898 $ 789,549
Net realized gain on investments 9,903,479 7,625,055
Change in net unrealized gain on investments (1,307,812) 6,236,718
------------ ------------
Net increase in net assets resulting from
operations $ 9,098,565 $ 14,651,322
------------ ------------
Distributions to Shareholders:
Net investment income ($0.10 and $0.00 per
share, respectively) $ (732,912) $ --
Net realized gain ($1.03 and $0.11 per share,
respectively) (7,620,509) (556,650)
------------ ------------
Total distributions to shareholders $ (8,353,421) $ (556,650)
------------ ------------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 1,215,251 3,048,885 $ 20,980,873 $ 46,594,217
Reinvestment of distributions 515,962 36,889 8,353,421 556,650
Cost of shares repurchased (290,061) (275,697) (4,966,821) (4,341,358)
--------- --------- ------------ ------------
Net increase in net assets resulting
from fund share transactions 1,441,152 2,810,077 $ 24,367,473 $ 42,809,509
========= ========= ------------ ------------
Net increase in net assets $ 25,112,617 $ 56,904,181
Net Assets:
Beginning of period 105,476,236 48,572,055
------------ ------------
End of period (including accumulated undistributed
net investment income of $568,664 and
$798,678, respectively) $130,588,853 $105,476,236
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Capital Growth Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.15 $ 13.05 $ 11.57 $10.00
-------- -------- ------- ------
Increase from investment operations:
Net investment income $ 0.05 $ 0.12 $ 0.03 $ 0.02
Net realized and unrealized gain on
investments 1.31 3.09 1.71 1.69
-------- -------- ------- ------
Net increase from investment
operations $ 1.36 $ 3.21 $ 1.74 $ 1.71
Distributions to shareholders:
Net investment income (0.10) -- (0.03) (0.02)
Net realized gain (1.03) (0.11) (0.23) (0.12)
-------- -------- ------- ------
Net increase in net asset value $ 0.23 $ 3.10 $ 1.48 $ 1.57
-------- -------- ------- ------
Net asset value, end of period $ 16.38 $ 16.15 $ 13.05 $11.57
======== ======== ======= ======
Total return* 8.50% 24.69% 15.03% 17.13%
Ratio of net expenses to average net
assets 0.75%**+ 0.80%+ 0.93%+ 1.56%**+
Ratio of net investment income to
average net assets 0.84%**+ 1.02%+ 0.37%+ 0.48%**+
Portfolio turnover rate 71%** 50% 41% 46%
Net assets, end of period
(in thousands) $130,589 $105,476 $48,572 $9,357
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 0.75%** 0.80% 0.95% 3.95%**
Net investment income (loss) 0.84%** 1.02% 0.35% (1.91)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 0.75%** 0.79% 0.92% 1.49%**
Net investment income 0.84%** 1.03% 0.38% 0.55%**
</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.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Growth Shares Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 93.6%
PREFERRED STOCK - 2.4%
1,362 SAP AG $ 925,323
----------
TOTAL PREFERRED STOCK (Cost $579,997) $ 925,323
----------
COMMON STOCKS - 91.2%
BASIC MATERIALS - 10.7%
Agricultural Products - 5.5%
50,087 Pioneer Hi-Bred International, Inc. $2,072,350
----------
Chemicals (Specialty) - 5.2%
33,487 Minerals Technologies Inc. $1,703,651
6,562 OM Group, Inc. 270,683
----------
$1,974,334
----------
TOTAL BASIC MATERIALS $4,046,684
----------
CAPITAL GOODS - 4.6%
Electrical Equipment - 2.0%
10,000 Molex, Inc. $ 250,000
20,537 Molex, Inc. (Non-voting) 480,052
----------
$ 730,052
----------
Manufacturing (Specialized) - 2.6%
26,900 Sealed Air Corp.* $ 988,575
----------
TOTAL CAPITAL GOODS $1,718,627
----------
CONSUMER CYCLICALS - 11.6%
Building Materials - 2.3%
19,100 Fastenal Co. $ 886,956
----------
Retail (General Merchandise) - 3.0%
26,625 Fred Meyer, Inc.* $1,131,563
----------
Retail (Specialty) - 1.3%
13,601 Barnes & Noble, Inc.* $ 509,187
----------
Services (Commercial & Consumer) - 1.3%
9,400 Cintas Corp. $ 479,400
----------
Textiles (Apparel) - 3.7%
28,381 Nike, Inc. (Class B) $1,381,800
----------
TOTAL CONSUMER CYCLICALS $4,388,906
----------
CONSUMER STAPLES - 23.9%
Beverages (Non-Alcoholic) - 3.8%
16,872 The Coca-Cola Co. $1,442,556
----------
Broadcasting (Television/Radio/Cable) - 2.1%
19,200 Comcast Corp. (Non-voting) $ 779,400
----------
Entertainment - 1.2%
4,224 The Walt Disney Co. $ 443,784
----------
Foods - 3.9%
15,078 Wrigley (Wm.) Jr. Co. $1,477,644
----------
Household Products (Non-Durables) - 3.1%
12,700 Procter & Gamble Co. $1,156,494
----------
Personal Care - 3.1%
20,564 Gillette Co. $1,165,722
----------
Restaurants - 3.7%
20,576 McDonald's Corp. $1,419,744
----------
Retail (Drug Stores) - 3.0%
27,557 Walgreen Co. $1,138,449
----------
TOTAL CONSUMER STAPLES $9,023,793
----------
FINANCIAL - 12.1%
Insurance (Multi-Line) - 3.6%
9,244 American International Group, Inc. $1,349,624
----------
Insurance (Property/Casualty) - 4.9%
11,900 Progressive Corp. $1,677,900
5,723 20th Century Industries 164,179
----------
$1,842,079
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Growth Shares Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Banking/Brokerage - 1.9%
22,825 Charles Schwab Corp. $ 741,813
-----------
Investment Management - 1.7%
11,966 Franklin Resources, Inc. $ 646,164
-----------
TOTAL FINANCIAL $ 4,579,680
-----------
HEALTHCARE - 11.0%
Healthcare (Drugs/Major Pharmaceuticals) - 11.0%
6,158 Merck & Co., Inc. $ 823,633
41,021 Monsanto Co. 2,292,048
9,506 Pfizer, Inc. 1,033,183
-----------
TOTAL HEALTHCARE $ 4,148,864
-----------
TECHNOLOGY - 17.3%
Computers (Hardware) - 5.4%
21,938 Dell Computer Corp.* $ 2,036,121
-----------
Computers (Networking) - 2.0%
8,328 Cisco Systems, Inc.* $ 766,697
-----------
Computers (Software & Services) - 3.2%
11,262 Microsoft Corp.* $ 1,220,516
-----------
Electronics (Semiconductors) - 2.4%
12,352 Intel Corp. $ 915,592
-----------
Equipment (Semiconductors) - 1.1%
13,436 Applied Materials, Inc.* $ 396,362
-----------
Services (Data Processing) - 3.2%
36,163 First Data Corp. $ 1,204,680
-----------
TOTAL TECHNOLOGY $ 6,539,968
-----------
TOTAL COMMON STOCKS (Cost $31,696,085) $34,446,522
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $32,276,082) $35,371,845
-----------
Principal
Amount
---------
TEMPORARY CASH INVESTMENT - 6.4%
Repurchase Agreement - 6.4%
$2,400,000 Chase Manhattan Bank, 5.25%, 7/1/98, repurchase price of $2,400,000 plus accrued
interest on 7/1/98, collateralized by $2,418,000 U.S. Treasury Notes, 5.5%, 3/31/00 $ 2,400,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $2,400,000) $ 2,400,000
-----------
TOTAL INVESTMENT IN SECURITIES AND
TEMPORARY CASH INVESTMENT - 100% (Cost $34,676,082)(a) $37,771,845
===========
* Non-income producing security.
(a) At June 30, 1998, the net unrealized gain on investments, based on cost for federal
income tax purposes of $34,690,773, was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of value
over tax cost $ 3,997,685
Aggregate gross unrealized loss for all investments in which there is an excess of tax
cost over value (916,613)
-----------
Net unrealized gain $ 3,081,072
===========
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 aggregated $28,706,627 and $621,804, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Growth Shares Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary
cash investment of $2,400,000) (cost $34,676,082) $37,771,845
Cash 13,701
Receivables--
Investment securities sold 20,626
Fund shares sold 352,177
Dividends and interest 15,098
-----------
Total assets $38,173,447
-----------
Liabilities:
Payables--
Investment securities purchased $ 1,018,302
Fund shares repurchased 23
Due to affiliates 24,957
Accrued expenses 20,529
-----------
Total liabilities $ 1,063,811
-----------
Net Assets:
Paid-in capital $34,028,833
Accumulated net investment loss (5,327)
Accumulated net realized loss on investments (9,633)
Net unrealized gain on investments 3,095,763
-----------
Total net assets $37,109,636
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $37,109,636/1,967,790 shares) $ 18.86
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Growth Shares Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $188) $41,765
Interest 43,276
-------
Total investment income $ 85,041
----------
Expenses:
Management fees $59,292
Transfer agent fees 709
Accounting 6,783
Custodian fees 27,186
Professional fees 7,453
Printing 1,957
Fees and expenses of nonaffiliated trustees 313
Miscellaneous 1,733
-------
Total expenses $ 105,426
Less management fees waived by
Pioneering Management Corporation (13,678)
Less fees paid indirectly (1,471)
----------
Net expenses $ 90,277
----------
Net investment loss $ (5,236)
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments $ (5,575)
Change in net unrealized gain on investments 3,070,994
----------
Net gain on investments $3,065,419
----------
Net increase in net assets resulting from operations $3,060,183
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
Growth Shares Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Period Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended October 31,1997
June 30, 1998 to
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income (loss) $ (5,236) $ 1,773
Net realized loss on investments (5,575) (4,058)
Change in net unrealized gain on investments 3,070,994 24,769
----------- ----------
Net increase in net assets resulting
from operations $ 3,060,183 $ 22,484
----------- ----------
Distributions to Shareholders:
Net investment income ($0.00 and $0.00 per
share, respectively) $ (1,864) $ --
----------- ----------
Total distributions to shareholders $ (1,864) $ --
----------- ----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 1,842,655 302,450 $32,626,961 $4,620,514
Reinvestment of distributions 99 -- 1,864 --
Cost of shares repurchased (177,884) (6,196) (3,223,992) (96,514)
--------- ------- ----------- ----------
Net increase in net assets resulting from
fund share transactions 1,664,870 296,254 $29,404,833 $4,524,000
========= ======= ----------- ----------
Net increase in net assets $32,463,152 $4,546,484
Net Assets:
Beginning of period 4,646,484 100,000
----------- ----------
End of period (including accumulated net
investment income (loss) of ($5,327) and
$1,773, respectively) $37,109,636 $4,646,484
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
Growth Shares Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 October 31, 1997 to
(unaudited) December 31, 1997
------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $ 15.34 $15.00
------- ------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.01) $ 0.01
Net realized and unrealized gain on investments 3.53 0.33
------- ------
Net increase from investment operations $ 3.52 $ 0.34
Distributions to shareholders:
Net investment income 0.00 --
------- ------
Net increase in net asset value $ 3.52 $ 0.34
------- ------
Net asset value, end of period $ 18.86 $15.34
======= ======
Total return* 22.95% 2.27%
Ratio of net expenses to average net assets 0.99%**+ 1.25%**
Ratio of net investment income (loss) to average net assets ( 0.07)%**+ 0.60%**
Portfolio turnover rate 7%** 16%**
Net assets, end of period (in thousands) $37,110 $4,646
Ratios assuming no waiver of management fees and assumption
of expenses by PMC and no reduction for fees paid indirectly:
Net expenses 1.14%** 6.57%**
Net investment loss (0.22)%** (4.72)%**
Ratios assuming waiver of management fees and assumption of
expenses by PMC and reduction for fees paid indirectly:
Net expenses 0.98%** 1.25%**
Net investment income (loss) (0.06)%** 0.60%**
</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.
44
<PAGE>
Real Estate Growth Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 96.5%
REAL ESTATE INVESTMENT TRUSTS - 83.7%
40,000 Apartment Investment & Mangement Co. $ 1,580,000
85,000 Bedford Property Investors, Inc. 1,551,250
65,000 Brandywine Realty Trust 1,454,375
44,000 Camden Property Trust 1,309,000
45,000 Charles E. Smith Residential Realty 1,440,000
50,000 Cousins Properties, Inc. 1,493,750
35,000 Developers Diversified Realty Corp. 1,371,562
48,157 Equity Office Properties Trust 1,366,455
29,700 Equity Residential Property Trust 1,408,894
43,600 Felcor Suite Hotels Inc. 1,367,950
35,000 Franchise Finance Corporation of America 907,812
55,000 Glenborough Realty Trust 1,450,625
35,000 Highwoods Properties, Inc. 1,130,937
11,000 Home Properties of New York, Inc. 283,250
40,200 Irvine Apartment Communities, Inc. 1,163,287
40,000 Liberty Property Trust 1,022,500
45,000 Macerich Co. 1,319,063
40,000 Mack-Cali Realty Corp. 1,375,000
35,000 National Golf Properties, Inc. 1,050,000
57,200 Pacific Gulf Properties Inc. 1,219,075
65,199 Patriot American Hospitality, Inc. 1,560,701
70,000 Prentiss Properties Trust 1,701,875
35,000 Public Storage, Inc. 980,000
40,000 Simon DeBartolo Group, Inc. 1,300,000
30,000 Spieker Properties, Inc. 1,162,500
35,000 Starwood Hotels and Resorts Trust 1,690,938
50,000 Storage Trust Realty 1,168,750
28,300 Sun Communities, Inc. 937,438
-----------
TOTAL REAL ESTATE INVESTMENTS TRUSTS $35,766,987
-----------
REAL ESTATE SERVICES - 9.9%
43,000 Amresco, Inc.* $ 1,252,375
90,000 Catellus Development Corp.* 1,591,875
65,000 Trizec Hahn Corp. 1,393,438
-----------
TOTAL REAL ESTATE SERVICES $ 4,237,688
-----------
SERVICES - 2.9%
Hotels & Restaurants - 2.9%
70,000 Host Marriott Corp.* $ 1,246,875
-----------
TOTAL SERVICES $ 1,246,875
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $39,404,232) $41,251,550
-----------
Principal
Amount
---------
TEMPORARY CASH INVESTMENT - 3.5%
Commercial Paper - 3.5%
$1,498,000 Household Finance Corp., 6.05%, 7/1/98 $ 1,498,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $1,498,000) $ 1,498,000
-----------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENT - 100% (Cost $40,902,232)(a) $42,749,550
===========
* Non-income producing security.
(a) At June 30, 1998, the net unrealized gain on investments based on cost for federal
income tax purposes of $40,902,857 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of value
over tax cost $ 2,247,782
Aggregate gross unrealized loss for all investments in which there is an excess of tax
cost over value (401,089)
-----------
Net unrealized gain $ 1,846,693
===========
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 aggregated $7,234,774 and $3,320,518, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
Real Estate Growth Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$1,498,000) (cost $40,902,232) $42,749,550
Cash 803
Receivables--
Investment securities sold 323,999
Fund shares sold 12,823
Dividends and interest 254,202
Other 352
-----------
Total assets $43,341,729
-----------
Liabilities:
Payables--
Investment securities purchased $ 412,217
Fund shares repurchased 68,197
Due to affiliates 40,469
Accrued expenses 13,073
-----------
Total liabilities $ 533,956
-----------
Net Assets:
Paid-in capital $40,689,847
Accumulated undistributed net investment income 31,164
Accumulated undistributed net realized gain 239,444
Net unrealized gain on investments 1,847,318
-----------
Total net assets $42,807,773
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $42,807,773/2,761,435 shares $ 15.50
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
Real Estate Growth Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of withholding taxes of $1,350) $1,051,048
Interest 38,255
----------
Total investment income $ 1,089,303
-----------
Expenses:
Management fees $ 214,458
Transfer agent fees 501
Accounting 20,755
Custodian fees 13,044
Professional fees 4,992
Printing 562
Fees and expenses of nonaffiliated trustees 232
Miscellaneous 3,604
----------
Total expenses $ 258,148
Less fees paid indirectly (509)
-----------
Net expenses $ 257,639
-----------
Net investment income $ 831,664
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments $ 243,665
Change in net unrealized gain on investments (3,708,916)
-----------
Net loss on investments $(3,465,251)
-----------
Net decrease in net assets resulting from operations $(2,633,587)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
Real Estate Growth Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 831,664 $ 805,272
Net realized gain on investments 243,665 423,094
Change in net unrealized gain on investments (3,708,916) 4,120,591
----------- -----------
Net increase (decrease) in net assets resulting
from operations $(2,633,587) $ 5,348,957
----------- -----------
Distributions to Shareholders:
Net investment income ($0.31 and $0.45 per
share, respectively) $ (831,566) $ (754,106)
Net realized gain ($0.08 and $0.12 per share,
respectively) (220,126) (269,649)
----------- -----------
$(1,051,692) $(1,023,755)
----------- -----------
Total distributions to shareholders
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 640,288 1,842,009 $10,476,787 $28,581,231
Reinvestment of distributions 68,027 64,684 1,051,692 1,023,755
Cost of shares repurchased (443,705) (178,423) (7,222,139) (2,858,890)
-------- --------- ----------- -----------
Net increase in net assets resulting from fund
share transactions 264,610 1,728,270 $ 4,306,340 $26,746,096
======== ========= ----------- -----------
Net increase in net assets $ 621,061 $31,071,298
Net Assets:
Beginning of period 42,186,712 11,115,414
----------- -----------
End of period (including accumulated undistributed
net investment income of $31,164 and $31,066,
respectively) $42,807,773 $42,186,712
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
Real Estate Growth Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 31, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.90 $ 14.46 $ 11.23 $ 10.00
------- ------- ------- -------
Increase (decrease) from investment
operations:
Net investment income $ 0.31 $ 0.47 $ 0.54 $ 0.12
Net realized and unrealized gain
(loss) on investments (1.32) 2.54 3.34 1.55
------- ------- ------- -------
Net increase (decrease) from
investment operations $ (1.01) $ 3.01 $ 3.88 $ 1.67
Distributions to shareholders:
Net investment income (0.31) (0.45) (0.53) (0.23)
Tax return of capital -- -- -- (0.18)
Net realized gain (0.08) (0.12) (0.12) (0.03)
------- ------- ------- -------
Net increase (decrease) in net
asset value $ (1.40) $ 2.44 $ 3.23 $ 1.23
------- ------- ------- -------
Net asset value, end of period $ 15.50 $ 16.90 $ 14.46 $ 11.23
======= ======= ======= =======
Total return* (5.95)% 21.16% 35.73% 16.96%
Ratio of net expenses to average net
assets 1.20%**+ 1.25%+ 1.34%+ 2.10%**+
Ratio of net investment income to
average net assets 3.88%**+ 3.16%+ 4.63%+ 2.68%**+
Portfolio turnover rate 16%** 28% 41% 1%**
Net assets, end of period
(in thousands) $42,808 $42,187 $11,115 $ 512
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 1.20%** 1.37% 3.35% 45.96%**
Net investment income (loss) 3.88%** 3.04% 2.62% (41.18)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 1.20%** 1.24% 1.24% 1.57%**
Net investment income 3.88%** 3.17% 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.
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
Growth and Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 97.9%
BASIC MATERIALS - 6.3%
Aluminum - 1.4%
7,400 Aluminum Co. of America $ 487,937
----------
Chemicals - 1.8%
1,700 Dow Chemical Co. $ 164,369
6,500 E.I. du Pont de Nemours and Co. 485,063
----------
$ 649,432
----------
Chemicals (Diversified) - 1.0%
7,100 Bayer AG (A.D.R.) $ 365,650
----------
Chemicals (Specialty) - 0.1%
400 Ciba Specialty Chemicals AG (A.D.R.) $ 25,600
----------
Gold & Precious Metals Mining - 0.3%
5,000 Newmont Mining Corp. $ 118,125
----------
Iron & Steel - 0.9%
5,400 Nucor Corp. $ 248,400
4,900 Steel Dynamics, Inc.* 67,988
----------
$ 316,388
----------
Metals Mining - 0.8%
5,100 Phelps Dodge Corp. $ 291,656
----------
TOTAL BASIC MATERIALS $2,254,788
----------
CAPITAL GOODS - 6.3%
Aerospace/Defense - 0.7%
2,400 Lockheed Martin Corp. $ 254,100
----------
Electrical Equipment - 1.9%
10,000 Emerson Electric Co. $ 603,125
900 General Electric Co. 81,900
----------
$ 685,025
----------
Machinery (Diversified) - 2.1%
6,900 Caterpillar, Inc. $ 364,838
7,500 Deere & Co. 396,562
----------
$ 761,400
----------
Manufacturing (Diversified) - 0.4%
2,700 Johnson Controls, Inc. $ 154,069
----------
Manufacturing (Specialized) - 0.6%
7,000 Diebold, Inc. $ 202,125
----------
Office Equipment & Supplies - 0.6%
8,600 Canon, Inc. (A.D.R.) $ 196,725
----------
TOTAL CAPITAL GOODS $2,253,444
----------
COMMUNICATION SERVICES - 10.6%
Telecommunications (Long Distance) - 1.2%
6,200 Sprint Corp. $ 437,100
----------
Telephone - 9.4%
5,000 Aliant Communications, Inc. $ 137,188
16,100 Ameritech Corp. 722,487
10,400 Bell Atlantic Corp. 474,500
8,400 BellSouth Corp. 563,850
9,100 GTE Corp. 506,187
5,000 SBC Communications, Inc. 200,000
6,300 Teligent, Inc.* 185,456
12,100 US West, Inc. 568,700
----------
$3,358,368
----------
TOTAL COMMUNICATION SERVICES $3,795,468
----------
CONSUMER CYCLICALS - 10.8%
Automobiles - 3.1%
8,400 Chrysler Corp. $ 473,550
10,900 Ford Motor Co. 643,100
----------
$1,116,650
----------
Household Furniture & Appliances - 1.0%
4,100 Sony Corp. (A.D.R.) $ 352,856
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
Growth and Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Publishing - 1.5%
6,500 McGraw-Hill Co., Inc. $ 530,156
----------
Publishing (Newspapers) - 0.5%
2,800 Central Newspapers, Inc. $ 195,300
----------
Retail (Department Stores) - 2.2%
3,200 Harcourt General, Inc. $ 190,400
9,000 May Department Stores Co. 589,500
----------
$ 779,900
----------
Retail (General Merchandise) - 2.5%
11,200 Dayton Hudson Corp. $ 543,200
5,500 Wal-Mart Stores, Inc. 334,125
----------
$ 877,325
----------
TOTAL CONSUMER CYCLICALS $3,852,187
----------
CONSUMER STAPLES - 11.1%
Beverages (Non-Alcoholic) - 0.5%
4,800 PepsiCo, Inc. $ 197,700
----------
Broadcasting (Television/Radio/Cable) - 0.8%
2,600 Belo (A.H.) Corp. $ 63,375
7,000 CBS Corp. 222,250
100 Hearst-Argyle Television, Inc.* 4,000
----------
$ 289,625
----------
Distributors (Food & Health) - 0.4%
5,000 Sysco Corp. $ 128,125
----------
Foods - 5.7%
8,800 BestFoods $ 510,950
8,900 ConAgra, Inc. 282,019
7,200 General Mills, Inc. 492,300
6,000 Heinz (H.J.) Co. 336,750
1,700 Nestle SA (A.D.R.) 181,900
4,100 Sara Lee Corp. 229,344
----------
$2,033,263
----------
Household Products (Non-Durables) - 1.6%
6,600 Colgate-Palmolive Co. $ 580,800
----------
Restaurants - 1.0%
5,000 McDonald's Corp. $ 345,000
----------
Retail Stores (Drug Stores) - 1.1%
9,700 Walgreen Co. $ 400,731
----------
TOTAL CONSUMER STAPLES $3,975,244
----------
ENERGY - 4.1%
Oil (International Integrated) - 3.0%
6,800 Amoco Corp. $ 283,050
4,600 Chevron Corp. 382,087
3,100 Exxon Corp. 221,069
2,500 Mobil Corp. 191,563
----------
$1,077,769
----------
Oil & Gas (Drilling & Equipment) - 1.1%
2,400 Schlumberger Ltd. $ 163,950
6,000 Smith International, Inc.* 208,875
----------
$ 372,825
----------
TOTAL ENERGY $1,450,594
----------
FINANCIAL - 21.2%
Banks (Major Regional) - 5.9%
12,700 The Bank of New York Co., Inc. $ 770,731
5,050 Comerica, Inc. 334,563
1,200 Mellon Bank Corp. 83,550
8,900 National City Corp. 631,900
4,100 State Street Corp. 284,950
----------
$2,105,694
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
Growth and Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Banks (Regional) - 1.0%
8,400 First Tennessee National Corp. $ 265,125
2,000 Zions Bancorporation 106,250
----------
$ 371,375
----------
Financial (Diversified) - 1.6%
760 Associates First Capital Corp. $ 58,425
5,000 Equitable Companies, Inc. 374,687
2,000 Federal National Mortgage Association 121,500
----------
$ 554,612
----------
Insurance (Brokers) - 0.8%
4,650 Marsh & McLennan Co., Inc. $ 281,034
----------
Insurance (Life/Health) - 1.9%
14,100 ReliaStar Financial Corp. $ 676,800
----------
Insurance (Multi-Line) - 0.5%
1,200 American International Group, Inc. $ 175,200
----------
Insurance (Property/Casualty) - 5.0%
5,400 Chubb Corp. $ 434,025
3,800 Exel Ltd. 295,688
10,600 Partnerre Ltd. 540,600
6,000 Safeco Corp. 272,625
6,000 St. Paul Companies, Inc. 252,375
----------
$1,795,313
----------
Investment Banking/Brokerage - 3.0%
9,500 Charles Schwab Corp. $ 308,750
4,700 Merrill Lynch & Co., Inc. 433,575
7,700 Paine Webber Group, Inc. 330,138
----------
$1,072,463
----------
Investment Management - 1.0%
20,000 Federated Investors, Inc.* $ 370,000
----------
Savings & Loan Companies - 0.5%
2,700 H.F. Ahmanson & Co. $ 191,700
----------
TOTAL FINANCIAL $7,594,191
----------
HEALTHCARE - 11.8%
Healthcare (Diversified) - 4.0%
7,600 Abbott Laboratories $ 310,650
4,000 Bristol-Myers Squibb Co. 459,750
7,500 Johnson & Johnson 553,125
1,650 Warner-Lambert Co. 114,469
----------
$1,437,994
----------
Healthcare (Drugs/Major Pharmaceuticals) - 6.2%
8,000 Eli Lilly & Co. $ 528,500
2,400 Novartis AG (A.D.R.) 199,800
2,100 Roche Holdings AG (A.D.R.) 206,325
9,600 Schering-Plough Corp. 879,600
6,500 SmithKline Beecham Plc (A.D.R.) 393,250
----------
$2,207,475
----------
Healthcare (Managed Care) - 0.6%
3,000 United Healthcare Corp. $ 190,500
----------
Healthcare (Medical Products/Supplies) - 1.0%
4,700 Becton, Dickinson & Co. $ 364,838
----------
TOTAL HEALTHCARE $4,200,807
----------
TECHNOLOGY - 12.3%
Communications Equipment - 2.0%
2,300 Harris Corp. $ 102,781
3,500 Lucent Technologies, Inc. 291,156
6,300 Motorola, Inc. 331,144
----------
$ 725,081
----------
Computers (Hardware) - 4.7%
11,200 Compaq Computer Corp. $ 317,800
6,200 Hewlett-Packard Co. 371,225
5,800 IBM Corp. 665,912
7,000 Sun Microsystems, Inc.* 304,063
----------
$1,659,000
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
Growth and Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computers (Software & Services) - 1.6%
3,100 Aspen Technology, Inc.* $ 156,550
6,400 Computer Sciences Corp. 409,600
-----------
$ 566,150
-----------
Electronics (Semiconductors) - 1.6%
4,000 Intel Corp. $ 296,500
4,800 Texas Instruments, Inc. 279,900
-----------
$ 576,400
-----------
Equipment (Semiconductors) - 0.3%
3,400 Applied Materials, Inc.* $ 100,300
-----------
Photography/Imaging - 0.5%
2,500 Eastman Kodak Co. $ 182,656
-----------
Services (Data Processing) - 1.6%
3,200 Automatic Data Processing, Inc. $ 233,200
4,000 DST Systems, Inc.* 224,000
3,000 Fiserv, Inc.* 127,406
-----------
$ 584,606
-----------
TOTAL TECHNOLOGY $ 4,394,193
-----------
TRANSPORTATION - 1.2%
Airlines - 0.6%
1,600 Delta Air Lines, Inc. $ 206,800
-----------
Railroads - 0.6%
7,700 Norfolk Southern Corp. $ 229,556
-----------
TOTAL TRANSPORTATION $ 436,356
-----------
UTILITIES - 2.2%
Electric Companies - 0.9%
18,500 DPL, Inc. $ 335,312
-----------
Natural Gas - 0.8%
9,000 Indiana Energy, Inc. $ 268,875
-----------
Water Utilities - 0.5%
5,700 American Water Works Co., Inc. $ 176,700
-----------
TOTAL UTILITIES $ 780,887
-----------
TOTAL COMMON STOCKS (Cost $33,546,323) $34,988,159
-----------
Principal
Amount
- ---------
TEMPORARY CASH INVESTMENT - 2.1%
Commercial Paper - 2.1%
$750,000 American Express Credit Corp., 5.95%, 7/1/98 $ 750,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $750,000) $ 750,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100% (Cost $34,296,323)(a) $35,738,159
===========
* Non-income producing security.
(a) At June 30, 1998, the net unrealized gain on investments based on cost for federal
income tax purposes of $34,298,351 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost $ 2,365,163
Aggregate gross unrealized loss for all investments in which there is an excess of tax
cost over value (925,355)
-----------
Net unrealized gain $ 1,439,808
===========
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 aggregated $29,912,067 and $197,230, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
Growth and Income Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$750,000) (cost $34,296,323) $35,738,159
Cash 346
Receivables--
Fund shares sold 350,013
Dividends and interest 33,801
Other 1,239
-----------
Total assets $36,123,558
-----------
Liabilities:
Payables--
Investment securities purchased $ 275,662
Due to affiliates 22,072
Accrued expenses 19,014
-----------
Total liabilities $ 316,748
-----------
Net Assets:
Paid-in capital $34,395,360
Distributions in excess of net investment income (43,348)
Accumulated undistributed net realized gain on investments 12,962
Net unrealized gain on investments 1,441,836
-----------
Total net assets $35,806,810
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $35,806,810/2,007,322 shares $ 17.84
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
Growth and Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $1,335) $150,495
Interest 36,747
--------
Total investment income $ 187,242
----------
Expenses:
Management fees $ 59,474
Transfer agent fees 415
Accounting 5,727
Custodian fees 17,391
Professional fees 6,741
Printing 2,006
Fees and expenses of nonaffliated trustees 313
Miscellaneous 740
--------
Total expenses $ 92,807
Less management fees waived and expenses reimbursed by
Pioneering Management Corporation (3,603)
Less fees paid indirectly (1,444)
----------
Net expenses $ 87,760
----------
Net investment income $ 99,482
----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 12,962
Change in net unrealized gain on investments 1,371,079
----------
Net gain on investments $1,384,041
----------
Net increase in net assets resulting from operations $1,483,523
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
Growth and Income Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Period Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 October 31, 1997 to
(unaudited) December 31, 1997
------------- -------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 99,482 $ 2,817
Net realized gain on investments 12,962 --
Change in net unrealized gain on investments 1,371,079 70,757
----------- ----------
Net increase in net assets resulting from
operations $ 1,483,523 $ 73,574
----------- ----------
Distributions To Shareholders:
Net investment income ($0.09 and $0.01 per
share, respectively) $ (142,830) $ (2,870)
----------- ----------
Total distributions to shareholders $ (142,830) $ (2,870)
----------- ----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 1,767,015 227,558 $30,730,203 $4,320,369
Reinvestment of distributions 8,028 183 142,830 2,870
Cost of shares repurchased (52,099) (29) (900,407) (452)
--------- ------- ----------- ----------
Net increase in net assets resulting from fund
share transactions 1,722,944 227,712 $29,972,626 $4,322,787
========= ======= ----------- ----------
Net increase in net assets $31,313,319 $4,393,491
Net Assets:
Beginning of period 4,493,491 100,000
----------- ----------
End of period (including distributions in excess of
net investment income of $43,348 and $0,
respectively) $35,806,810 $4,493,491
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
Growth and Income Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 October 31, 1997 to
(unaudited) December 31, 1997
------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $ 15.80 $15.00
------- ------
Increase from investment operations:
Net investment income $ 0.07 $ 0.01
Net realized and unrealized gain on investments 2.06 0.80
------- ------
Net increase from investment operations $ 2.13 $ 0.81
Distributions to shareholders:
Net investment income (0.09) (0.01)
------- ------
Net increase in net asset value $ 2.04 $ 0.80
------- ------
Net asset value, end of period $ 17.84 $15.80
======= ======
Total return* 13.48% 5.43%
Ratio of net expenses to average net assets 0.97%**+ 1.25%**
Ratio of net investment income to average net assets 1.06%**+ 1.07%**
Portfolio turnover rate 2%** --
Net assets, end of period (in thousands) $35,807 $4,493
Ratios assuming no waiver of management fees and assumption
of expenses by PMC and no reduction for fees paid indirectly:
Net expenses 1.00%** 5.30%**
Net investment income (loss) 1.03%** (2.98)%**
Ratios assuming waiver of management fees and assumption of
expenses by PMC and reduction for fees paid indirectly:
Net expenses 0.95%** 1.25%**
Net investment income 1.08%** 1.07%**
</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.
57
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 98.0%
COVERTIBLE CORPORATE BONDS - 1.3%
$1,300,000 Aspen Technology, Inc., 5.25%, 6/15/05 (144A) $ 1,498,250
500,000 John H. Harland Co., 6.75%, 6/1/11 479,965
250,000 Phototronics Inc., 6.0%, 6/1/04 277,627
-----------
TOTAL CONVERTIBLE CORPORATE BONDS (Cost $2,065,000) $ 2,255,842
-----------
Shares
- -----------
CONVERTIBLE PREFERRED STOCKS - 1.2%
10,000 AirTouch Communications, Inc., 4.25%, 8/16/16 $ 825,000
3,500 Lomak Petroleum, Inc., 5.75%, 11/1/27 (144A) 130,592
20,000 The Rouse Co., 3.00% (Series B) 995,000
570 Sprint Corp., 8.25%, 3/31/00 32,953
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,624,894) $ 1,983,545
-----------
COMMON STOCKS - 95.5%
BASIC MATERIALS - 4.9%
Aluminum - 1.0%
25,400 Aluminum Co. of America $ 1,674,812
-----------
Chemicals - 2.1%
19,000 Dow Chemical Co. $ 1,837,062
10,200 E.I. du Pont de Nemours and Co. 761,175
15,000 Eastman Chemical Co. 933,750
-----------
$ 3,531,987
-----------
Chemicals (Diversified) - 0.5%
15,441 ARCO Chemical Co. $ 885,927
-----------
Chemicals (Specialty) - 0.5%
25,000 Nalco Chemical Co. $ 878,125
-----------
Iron & Steel - 0.2%
15,450 Roanoke Electric Steel Corp. $ 289,688
-----------
Metals & Mining - 0.6%
18,400 Phelps Dodge Corp. $ 1,052,250
-----------
TOTAL BASIC MATERIALS $ 8,312,789
-----------
CAPITAL GOODS - 1.2%
Electrical Equipment - 0.4%
19,000 Hubbell, Inc. (Class B) $ 790,875
-----------
Machinery (Diversified) - 0.1%
7,000 The Gorman-Rupp Co. $ 126,875
-----------
Manufacturing (Diversified) - 0.3%
9,000 Johnson Controls, Inc. $ 513,563
-----------
Manufacturing (Specialized) - 0.4%
24,000 Diebold, Inc. $ 693,000
-----------
TOTAL CAPITAL GOODS $ 2,124,313
-----------
COMMUNICATION SERVICES - 17.4%
Telecommunications (Long Distance) - 5.1%
34,500 AT&T Corp. $ 1,970,812
95,000 Sprint Corp. 6,697,500
-----------
$ 8,668,312
-----------
Telephone - 12.3%
34,800 Aliant Communications, Inc. $ 954,825
101,200 Ameritech Corp. 4,541,350
76,844 Bell Atlantic Corp. 3,506,007
41,200 BellSouth Corp. 2,765,550
88,500 GTE Corp. 4,922,813
52,412 SBC Communications, Inc. 2,096,480
47,800 U.S. West Communication Group 2,246,600
-----------
$21,033,625
-----------
TOTAL COMMUNICATION SERVICES $29,701,937
-----------
CONSUMER CYCLICALS - 8.5%
Automobiles - 5.2%
60,000 Chrysler Corp. $ 3,382,500
94,800 Ford Motor Co. 5,593,200
-----------
$ 8,975,700
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Publishing - 0.5%
10,600 McGraw-Hill Co., Inc. $ 864,563
-----------
Retail (Department Stores) - 2.8%
24,550 May Department Stores Co. $ 1,608,025
39,450 Mercantile Stores Co., Inc. 3,114,084
-----------
$ 4,722,109
-----------
TOTAL CONSUMER CYCLICALS $14,562,372
-----------
CONSUMER STAPLES - 8.0%
Beverages (Non-Alcoholic) - 0.4%
15,000 PepsiCo, Inc. $ 617,813
-----------
Entertainment - 1.3%
79,200 Cedar Fair, L.P. $ 2,187,900
-----------
Foods - 4.1%
44,700 BestFoods $ 2,595,394
47,000 General Mills, Inc. 3,213,625
23,000 Heinz (H.J.) Co. 1,290,875
-----------
$ 7,099,894
-----------
Household Products (Non-Durables) - 2.2%
19,000 Colgate-Palmolive Co. $ 1,672,000
47,000 Kimberly Clark Corp. 2,156,125
-----------
$ 3,828,125
-----------
TOTAL CONSUMER STAPLES $13,733,732
-----------
ENERGY - 8.7%
Oil (Domestic Integrated) - 1.1%
24,000 Atlantic Richfield Co. $ 1,875,000
-----------
Oil (International Integrated) - 7.6%
85,360 Amoco Corp. $ 3,553,110
54,300 Chevron Corp. 4,510,294
40,000 Exxon Corp. 2,852,500
26,000 Mobil Corp. 1,992,250
-----------
$12,908,154
-----------
TOTAL ENERGY $14,783,154
-----------
FINANCIAL - 21.8%
Banks (Major Regional) - 6.0%
59,400 The Bank of New York Co., Inc. $ 3,604,837
42,200 Mellon Bank Corp. 2,938,175
36,000 National City Corp. 2,556,000
26,000 U.S. Bancorp 1,118,000
-----------
$10,217,012
-----------
Banks (Regional) - 2.9%
112,600 First Security Corp. $ 2,410,344
45,800 First Tennessee National Corp. 1,445,563
29,789 Old Kent Financial Corp. 1,071,455
-----------
$ 4,927,362
-----------
Financial (Diversified) - 0.7%
10,000 Equitable Companies, Inc. $ 749,375
17,205 Rouse Co. 540,882
-----------
$ 1,290,257
-----------
Insurance (Life/Health) - 5.2%
24,000 American National Insurance Co. $ 2,526,000
29,000 AmerUs Life Holdings, Inc. 938,875
40,500 Hartford Life, Inc. 2,305,969
65,200 ReliaStar Financial Corp. 3,129,600
-----------
$ 8,900,444
-----------
Insurance (Property/Casualty) - 3.5%
19,000 Chubb Corp. $ 1,527,125
30,500 HSB Group Inc. 1,631,750
25,400 Safeco Corp. 1,154,113
39,000 St. Paul Companies, Inc. 1,640,438
-----------
$ 5,953,426
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
Investment Management - 1.2%
71,200 Alliance Capital Management L.P. $ 1,802,250
7,000 Eaton Vance Corp. 324,187
------------
$ 2,126,437
------------
Savings & Loans Companies - 2.3%
32,876 Astoria Financial Corp. $ 1,758,866
30,000 H.F. Ahmanson & Co. 2,130,000
------------
$ 3,888,866
------------
TOTAL FINANCIAL $ 37,303,804
------------
HEALTHCARE - 10.6%
Healthcare (Diversified) - 4.4%
70,000 Abbott Laboratories $ 2,861,250
50,000 American Home Products Corp. 2,587,500
10,400 Bristol-Myers Squibb Co. 1,195,350
12,000 Johnson & Johnson 885,000
------------
$ 7,529,100
------------
Healthcare (Drugs/Major Pharmaceuticals) - 4.8%
88,400 Schering-Plough Corp. $ 8,099,650
------------
Healthcare (Medical Products/Supplies) - 1.4%
31,000 Becton, Dickinson & Co. $ 2,406,375
------------
TOTAL HEALTHCARE $ 18,035,125
------------
TECHNOLOGY - 4.8%
Communications Equipment - 1.2%
45,000 Harris Corp. $ 2,010,938
------------
Computers (Hardware) - 2.3%
44,000 Hewlett-Packard Co. $ 2,634,500
12,000 IBM Corp. 1,377,750
------------
$ 4,012,250
------------
Equipment (Semiconductors) - 0.7%
85,000 Helix Technology Corp. $ 1,275,000
------------
Photography/Imaging - 0.6%
13,000 Eastman Kodak Co. $ 949,813
------------
TOTAL TECHNOLOGY $ 8,248,001
------------
TRANSPORTATION - 0.6%
Railroads - 0.6%
35,300 Norfolk Southern Corp. $ 1,052,381
------------
TOTAL TRANSPORTATION $ 1,052,381
------------
UTILITIES - 9.0%
Electric Companies - 4.3%
70,000 Allegheny Energy, Inc. $ 2,108,750
53,000 Baltimore Gas & Electric Co. 1,646,312
50,000 BEC Energy 2,075,000
80,300 DPL, Inc. 1,455,438
------------
$ 7,285,500
------------
Natural Gas - 4.5%
4,000 Buckeye Partners, L.P. $ 114,500
14,750 Consolidated Natural Gas Co. 868,406
30,000 El Paso Natural Gas Co. 1,147,500
7,600 Indiana Energy, Inc. 227,050
3,475 Kinder Morgan Energy Partners, L.P. 125,534
5,000 Lakehead Pipe Line Partners, L.P. 240,937
15,600 Marketspan Corp. 467,025
39,200 NICOR, Inc. 1,572,900
19,000 Public Service Co. of North Carolina, Inc. 413,250
84,600 Questar Corp. 1,660,275
25,000 Sonat, Inc. 965,625
------------
$ 7,803,002
------------
Water Utilities - 0.2%
10,000 American Water Works Co., Inc. $ 310,000
------------
TOTAL UTILITIES $ 15,398,502
------------
TOTAL COMMON STOCKS (Cost $128,213,872) $163,256,110
------------
TOTAL INVESTMENT IN SECURITIES (Cost $131,903,766) $167,495,497
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
Equity-Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT - 2.0%
Commercial Paper - 2.0%
$3,420,000 Household Finance Corp., 6.05%, 7/1/98 $ 3,420,000
------------
TOTAL TEMPORARY CASH INVESTMENT (Cost $3,420,000) $ 3,420,000
------------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $135,323,766)(a) $170,915,497
============
144A Security is exempt from registration under Rule 144A of the Securities Act of 1933. Such
securities may be resold normally to qualified institutional buyers in a transaction exempt
from registration. At June 30, 1998, the value of these securities was $1,628,842 or 1.0%
of total net assets.
(a) At June 30,1998, the net unrealized gain on investments based on cost for federal income
income tax purposes of $135,323,766 was as follows:
Aggregrate gross unrealized gain for all investments in which there is an excess of value
over tax cost $ 37,335,872
Aggregrate gross unrealized loss for all investments in which there is an excess of tax
cost over value (1,744,141)
------------
Net unrealized gain $ 35,591,731
============
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 aggregated $41,413,244 and $10,507,260, respectively.
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
Equity-Income Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary
cash investment of $3,420,000) (cost $135,323,766) $170,915,497
Cash 886
Receivables--
Fund shares sold 662,508
Dividends and interest 302,819
Other 6,276
------------
Total assets $171,887,986
------------
Liabilities:
Payable for investment securities purchased $ 296,441
Due to affiliates 98,196
Accrued expenses 21,217
------------
Total liabilities $ 415,854
------------
Net Assets:
Paid-in capital $131,745,531
Accumulated undistributed net investment income 67,941
Accumulated undistributed net realized gain on investments 4,066,929
Net unrealized gain on investments 35,591,731
------------
Total net assets $171,472,132
============
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $171,472,132/8,581,579 shares $ 19.98
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
Equity-Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends $1,858,372
Interest 104,858
----------
Total investment income $ 1,963,230
-----------
Expenses:
Management fees $ 477,047
Transfer agent fees 513
Accounting 19,661
Custodian fees 19,165
Professional fees 6,555
Printing 1,934
Fees and expenses of nonaffliated trustees 321
Miscellaneous 4,028
----------
Total expenses $ 529,224
Less fees paid indirectly (292)
-----------
Net expenses $ 528,932
-----------
Net investment income $ 1,434,298
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 3,903,710
Change in net unrealized gain on investments 11,064,868
-----------
Net gain on investments $14,968,578
-----------
Net increase in net assets resulting from operations $16,402,876
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
Equity-Income Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 1,434,298 $ 1,913,851
Net realized gain on investments 3,903,710 2,027,178
Change in net unrealized gain on
investments 11,064,868 20,621,558
------------ ------------
Net increase in net assets resulting from
operations $ 16,402,876 $ 24,562,587
------------ ------------
Distributions to Shareholders:
Net investment income ($0.18 and $0.37 per share, respectively) $ (1,417,602) $ (1,974,930)
Net realized gain ($0.22 and $0.01 per share, respectively) (1,835,100) (60,378)
------------ ------------
Total distributions to shareholders $ (3,252,702) $ (2,035,308)
------------ ------------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 1,864,696 3,870,768 $ 36,438,853 $ 61,680,376
Reinvestment of distributions 162,813 123,265 3,252,702 2,035,308
Cost of shares repurchased (291,714) (561,300) (5,582,898) (8,900,852)
--------- --------- ------------ ------------
Net increase in net assets resulting from
fund share transactions 1,735,795 3,432,733 $ 34,108,657 $ 54,814,832
========= ========= ------------ ------------
Net increase in net assets $ 47,258,831 $ 77,342,111
Net Assets:
Beginning of period 124,213,301 46,871,190
------------ ------------
End of period (including accumulated
undistributed net investment income of
$67,941 and $51,245, respectively) $171,472,132 $124,213,301
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
Equity-Income Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.14 $ 13.73 $ 12.17 $10.00
-------- -------- ------- ------
Increase from investment operations:
Net investment income $ 0.18 $ 0.35 $ 0.29 $ 0.19
Net realized and unrealized gain on
investments 2.06 4.44 1.54 2.16
-------- -------- ------- ------
Net increase from investment
operations $ 2.24 $ 4.79 $ 1.83 $ 2.35
Distributions to shareholders:
Net investment income (0.18) (0.37) (0.27) (0.18)
Net realized gain (0.22) (0.01) -- --
-------- -------- ------- ------
Net increase in net asset value $ 1.84 $ 4.41 $ 1.56 $ 2.17
-------- -------- ------- ------
Net asset value, end of period $ 19.98 $ 18.14 $ 13.73 $12.17
======== ======== ======= ======
Total return* 12.35% 35.23% 15.19% 23.62%
Ratio of net expenses to average net
assets 0.72%**+ 0.77%+ 0.96%+ 1.63%**+
Ratio of net investment income to
average net assets 1.95%**+ 2.31%+ 2.67%+ 2.89%**+
Portfolio turnover rate 15%** 15% 18% --
Net assets, end of period
(in thousands) $171,472 $124,213 $46,871 $6,914
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 0.72%** 0.77% 0.98% 5.32%**
Net investment income (loss) 1.95%** 2.31% 2.65% (0.80)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 0.72%** 0.77% 0.95% 1.47%**
Net investment income 1.95%** 2.31% 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.
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 95.4%
CONVERTIBLE PREFERRED STOCK - 0.3%
2,780 Sprint Corp., 8.25%, 3/31/00 $ 160,719
----------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $107,483) $ 160,719
----------
COMMON STOCKS - 54.5%
BASIC MATERIALS - 5.8%
Chemicals - 4.4%
8,000 E. I. du Pont de Nemours and Co. $ 597,000
35,000 Monsanto Co. 1,955,625
----------
$2,552,625
----------
Metals & Mining - 1.4%
35,000 Newmont Mining Corp. $ 826,875
----------
TOTAL BASIC MATERIALS $3,379,500
----------
CAPITAL GOODS - 1.4%
Aerospace/Defense - 0.4%
5,000 Boeing Co. $ 222,812
----------
Machinery (Diversified) - 0.4 %
10,800 AGCO Corp.* $ 222,075
----------
Manufacturing (Specialized) - 0.6 %
10,000 Selaed Air Corp.* $ 367,500
----------
TOTAL CAPITAL GOODS $ 812,387
----------
COMMUNICATION SERVICES - 2.0%
Telephone - 2.0%
5,000 Ameritech Corp. $ 224,375
4,000 Bell Atlantic Corp. 182,500
3,000 Bellsouth Corp. 201,375
10,000 GTE Corp. 556,250
----------
TOTAL COMMUNICATION SERVICES $1,164,500
----------
CONSUMER CYCLICALS - 1.6%
Auto Parts & Equipment - 0.4%
3,000 Magna International Inc. $ 205,875
----------
Homebuilding - 0.4%
13,000 Clayton Homes, Inc. $ 247,000
----------
Retail (Department Stores) - 0.6%
5,000 Penney (J.C.) Co., Inc. $ 361,562
----------
Textiles (Apparel) - 0.2%
3,000 Nike, Inc. (Class B) $ 146,062
----------
TOTAL CONSUMER CYCLICALS $ 960,499
----------
CONSUMER STAPLES - 3.4%
Foods - 0.2%
2,000 BestFoods $ 116,125
----------
Household Products (Non-Durables) - 2.9%
13,100 First Brands Corp. $ 335,688
29,700 Kimberly Clark Corp. 1,362,488
----------
$1,698,176
----------
Retail (Drug Stores) - 0.3%
4,000 CVS Corp. $ 155,750
----------
TOTAL CONSUMER STAPLES $1,970,051
----------
ENERGY - 1.8%
Oil (Domestic Integrated) - 0.7%
5,000 Atlantic Richfield Co. $ 390,625
----------
Oil (International Integrated) - 0.8%
6,000 Amoco Corp. $ 249,750
3,000 Mobil Corp. 229,875
----------
$ 479,625
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas (Drilling & Equipment) - 0.1%
2,000 EVI, Inc.* $ 74,250
----------
Oil & Gas (Refining & Marketing) - 0.2%
3,000 Sun Company, Inc. $ 116,437
----------
TOTAL ENERGY $1,060,937
----------
FINANCIAL - 15.6%
Banks (Money Center) - 0.7%
5,000 The Chase Manhattan Corp. $ 377,500
----------
Consumer Finance - 5.3%
5,000 Countrywide Credit Industries, Inc. $ 253,750
43,000 Green Tree Financial Corp. 1,840,938
20,000 SLM Holdings Corp. 980,000
----------
$3,074,688
----------
Financial (Diversified) - 0.8%
2,000 Federal National Mortgage Association $ 121,500
10,000 Mack-Cali Realty Corp. 343,750
1,200 Ocwen Asset Investment Corp. 19,875
----------
$ 485,125
----------
Insurance (Life/Health) - 2.3%
29,000 Conseco, Inc. $1,355,750
----------
Insurance (Property/Casualty) - 3.2%
17,200 Allstate Corp. $1,574,875
7,000 Safeco Corp. 318,062
----------
$1,892,937
----------
Savings & Loan Companies - 3.3%
10,100 Charter One Financial, Inc. $ 340,244
3,500 H.F. Ahmanson & Co. 248,500
31,500 Washington Mutual, Inc. 1,368,281
----------
$1,957,025
----------
TOTAL FINANCIAL $9,143,025
----------
HEALTHCARE - 16.1%
Healthcare (Diversified) - 5.5%
29,600 American Home Products Corp. $1,531,800
7,000 Bristol Myers Squibb Co. 804,563
8,000 Johnson & Johnson 590,000
8,000 Teva Pharmaceutical Industries Ltd. (A.D.R.) 281,500
----------
$3,207,863
----------
Healthcare (Drugs/Major Pharmaceuticals) - 3.0%
13,000 Merck & Co., Inc. $1,738,750
----------
Healthcare (Hospital Management) - 2.4%
25,500 Quorum Health Group, Inc.* $ 675,750
23,700 Tenet Healthcare Corp.* 740,625
----------
$1,416,375
----------
Healthcare (Long-Term Care) - 2.7%
42,206 Intergrated Health Services, Inc. $1,582,725
----------
Healthcare (Medical Products/Supplies) - 2.5%
20,000 Beckman Instruments, Inc. $1,165,000
4,000 Becton, Dickinson & Co. 310,500
----------
$1,475,500
----------
TOTAL HEALTHCARE $9,421,213
----------
TECHNOLOGY - 6.8%
Communications Equipment - 1.3%
15,000 DSC Communications Corp.* $ 450,000
4,000 Lucent Technologies, Inc. 332,750
----------
$ 782,750
----------
Computers (Hardware) - 0.4%
2,000 IBM Corp. $ 229,625
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Ratings
Shares (unaudited) Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronics (Semiconductors) - 1.4%
10,000 Etec Systems, Inc.* $ 351,875
6,000 Intel Corp. 444,750
-----------
$ 796,625
-----------
Equipment (Semiconductors) - 2.8%
20,000 Applied Materials, Inc.* $ 590,000
25,000 Helix Technology Corp. 375,000
25,200 Photronics, Inc.* 555,975
5,000 Teradyne, Inc.* 133,750
-----------
$ 1,654,725
-----------
Services (Data Processing) - 0.9%
15,000 First Data Corp. $ 499,688
-----------
TOTAL TECHNOLOGY $ 3,963,413
-----------
TOTAL COMMON STOCKS (Cost $28,432,819) $31,875,525
-----------
Principal
Amount
- -----------
DEBT OBLIGATIONS - 40.6%
CORPORATE BONDS - 21.7%
BASIC MATERIALS - 0.5%
$ 150,000 BBB+/A3 Lockheed Martin Corp., 6.85%, 5/15/01 $ 152,427
135,000 A/A2 Phelps Dodge Corp., 7.75%, 1/1/02 142,668
-----------
TOTAL BASIC MATERIALS $ 295,095
-----------
CAPITAL GOODS - 0.9%
500,000 BBB+/Baa3 Waste Management Inc., 6.625%, 7/15/02 $ 504,245
-----------
TOTAL CAPITAL GOODS $ 504,245
-----------
COMMUNICATION SERVICES - 0.9%
500,000 AA-/Baa2 AT&T Corp., 8.2%, 2/15/05 $ 516,305
-----------
TOTAL COMMUNICATION SERVICES $ 516,305
-----------
CONSUMER CYCLICALS - 3.6%
1,000,000 A/A2 Penney (J.C.) Co., 7.6%, 4/1/07 $ 1,076,350
1,000,000 A+/Aa3 Sony Corp., 6.125%, 3/4/03 1,005,190
-----------
TOTAL CONSUMER CYCLICALS $ 2,081,540
-----------
ENERGY - 0.9%
500,000 BBB-/Baa1 Tosco Corp., 9.625%, 3/15/02 $ 552,555
-----------
TOTAL ENERGY $ 552,555
-----------
FINANCIAL - 9.6%
200,000 AA-/Aa3 Associates Corp. of North America, 6.0%, 3/15/99 $ 200,250
210,000 A+/Aa3 The Chase Manahattan Corp., 5.5%, 2/15/01 207,688
500,000 A/A1 Citicorp, 7.25%, 9/1/08 533,560
511,000 A/A2 General Motors Acceptance Corp., 5.625%, 2/15/01 506,288
300,000 A/A2 Hartford Financial Services Group Inc., 6.375%, 11/1/02 302,973
200,000 BBB/Baa2 Hertz Corp., 7.0%, 7/15/03 206,562
1,000,000 A+/A1 IBM Credit Corp., 6.75%, 12/24/07 1,005,380
220,000 AA/Aa3 Merrill Lynch & Co., Inc., 6.375%, 9/8/06 222,053
200,000 A/A1 Nationsbank Corp., 6.5%, 3/15/06 203,458
200,000 A/A1 Nationsbank Corp., 7.5%, 9/15/06 216,062
200,000 A/A2 Salomon Inc., 7.0%, 6/15/03 206,268
500,000 BBB/Baa2 Spieker Properties, 6.875%, 2/1/05 504,410
500,000 A/A2 SunTrust Banks Inc., 6.0%, 2/15/26 493,215
500,000 BBB+/A3 Washington Mutual Inc., 7.25%, 8/15/05 525,205
300,000 A-/A2 Western National Corp., 7.125%, 2/15/04 312,486
-----------
TOTAL FINANCIAL $ 5,645,858
-----------
HEALTHCARE - 0.4%
200,000 AA/A1 Warner-Lambert Co., 6.625%, 9/15/02 $ 205,080
-----------
TOTAL HEALTHCARE $ 205,080
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
Balanced Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (unaudited) Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY - 2.9%
$ 250,000 A/A2 First Data Corp., 6.625%, 4/1/03 $ 256,107
400,000 A/A2 Lucent Technologies, Inc., 6.9%, 7/15/01 410,888
1,000,000 AA-/Aa3 Motorola Inc., 6.5%, 3/1/08 1,027,340
-----------
TOTAL TECHNOLOGY $ 1,694,335
-----------
TRANSPORTATION - 0.9%
500,000 BBB-/Baa2 Kansas City Southern Industries, Inc., 7.875%, 07/1/02 $ 526,845
-----------
TOTAL TRANSPORTATION $ 526,845
-----------
UTILITIES - 1.1%
650,000 A/A2 Virginia Electric & Power, 6.75%, 2/1/07 $ 665,132
-----------
TOTAL UTILITIES $ 665,132
-----------
TOTAL CORPORATE BONDS $12,686,990
-----------
U.S. GOVERNMENT OBLIGATIONS - 10.3%
2,000,000 U.S. Treasury Bonds, 6.5%, 10/15/06 $ 2,123,940
1,000,000 U.S. Treasury Bonds, 6.125%, 11/15/27 1,071,880
775,000 U.S. Treasury Notes, 5.25%, 1/31/01 770,040
2,000,000 U.S. Treasury Notes, 6.5%, 8/31/01 2,053,140
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS $ 6,019,000
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 8.6%
500,000 Federal Farm Credit Bank, Medium Term Note, 6.24%, 12/13/02 $ 504,280
500,000 Federal Home Loan Mortgage Corp., REMIC Series 1487F, 6.0%, 11/15/20 499,110
1,000,000 Federal Home Loan Mortgage Corp., REMIC Series 1541G, 6.75%, 11/15/21 1,020,340
1,000,000 Federal Home Loan Mortgage Corp., REMIC Series 1652PJ, 6.6%, 8/15/22 1,017,040
500,000 Federal National Mortgage Association, 4.94%, 1/27/03 497,685
500,000 Federal National Mortgage Association, 5.75%, 2/15/08 498,055
1,000,000 Federal National Mortgage Association, REMIC Series 93-23PJ, 6.7%,
7/25/19 1,011,380
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 5,047,890
-----------
TOTAL DEBT OBLIGATIONS (Cost $23,482,581) $23,753,880
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $52,022,883) $55,790,124
-----------
TEMPORARY CASH INVESTMENT - 4.6%
Commercial Paper - 4.6%
2,668,000 Household Finance Corp., 6.1%, 7/6/98 $ 2,668,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $2,668,000) $ 2,668,000
-----------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY
CASH INVESTMENT - 100% (Cost $54,690,883)(a) $58,458,124
===========
* Non-income producing security.
(a) At June 30, 1998, the net unrealized gain on investments based on cost for federal
income tax purposes of $54,690,883, was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost $ 5,238,465
Aggregate gross unrealized loss for all investments in which there is an excess of tax
cost over value (1,471,224)
-----------
Net unrealized gain $ 3,767,241
===========
</TABLE>
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended June 30, 1998 were as
follows:
<TABLE>
<S> <C> <C>
Purchases Sales
----------- -----------
Long-term U.S. Government $18,297,160 $11,053,270
Other Long-term Securities 23,216,789 10,244,583
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
Balanced Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary
cash investment of $2,668,000) (cost $54,690,883) $58,458,124
Cash 135
Receivables--
Investment securities sold 1,317,780
Fund shares sold 249,619
Dividends and interest 449,595
-----------
Total assets $60,475,253
-----------
Liabilities:
Payable for investment securities purchased $ 1,424,302
Due to affiliates 16,297
Accrued expenses 15,567
-----------
Total liabilities $ 1,456,166
-----------
Net Assets:
Paid-in capital $54,576,248
Accumulated undistributed net investment income 2,990
Accumulated undistributed net realized gain on investments 672,608
Net unrealized gain on investments 3,767,241
-----------
Total net assets $59,019,087
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $59,019,087/3,880,798 shares $ 15.21
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
Balanced Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign taxes withheld of $761) $207,693
Interest 689,173
--------
Total investment income $ 896,866
----------
Expenses:
Management fees $167,342
Transfer agent fees 480
Accounting 19,283
Custodian fees 11,677
Professional fees 7,859
Printing 2,782
Fees and expenses of nonaffiliated trustees 291
Miscellaneous 4,145
--------
Total expenses $ 213,859
Less fees paid indirectly (826)
----------
Net expenses $ 213,033
----------
Net investment income $ 683,833
----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 672,913
Change in net unrealized gain on investments 1,483,995
----------
Net gain on investments $2,156,908
----------
Net increase in net assets resulting from operations $2,840,741
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
Balanced Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 683,833 $ 763,758
Net realized gain on investments 672,913 1,950,534
Change in net unrealized gain on investments 1,483,995 1,459,896
----------- -----------
Net increase in net assets resulting from
operations $ 2,840,741 $ 4,174,188
----------- -----------
Distributions to Shareholders:
Net investment income ($0.20 and $0.36 per
share, respectively) $ (693,218) $ (768,655)
Net realized gain ($0.52 and $0.14 per share,
respectively) (1,935,738) (262,435)
----------- -----------
Total distributions to shareholders $(2,628,956) $(1,031,090)
----------- -----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 920,823 1,712,892 $14,475,342 $24,796,670
Reinvestment of distributions 172,190 71,377 2,628,956 1,031,090
Cost of shares repurchased (148,137) (121,009) (2,304,656) (1,746,636)
-------- --------- ----------- -----------
Net increase in net assets resulting from fund
share transactions 944,876 1,663,260 $14,799,642 $24,081,124
======== ========= ----------- -----------
Net increase in net assets $15,011,427 $27,224,222
Net Assets:
Beginning of period 44,007,660 16,783,438
----------- -----------
End of period (including accumulated undistributed
net investment income of $2,990 and $12,375,
respectively) $59,019,087 $44,007,660
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
Balanced Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.99 $ 13.19 $ 11.87 $ 10.00
------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.20 $ 0.36 $ 0.29 $ 0.20
Net realized and unrealized gain on
investments 0.74 1.94 1.39 1.87
------- ------- ------- -------
Net increase from investment
operations $ 0.94 $ 2.30 $ 1.68 $ 2.07
Distributions to shareholders:
Net investment income (0.20) (0.36) (0.29) (0.20)
Net realized gain (0.52) (0.14) (0.07) --
------- ------- ------- -------
Net increase in net asset value $ 0.22 $ 1.80 $ 1.32 $ 1.87
------- ------- ------- -------
Net asset value, end of period $ 15.21 $ 14.99 $ 13.19 $ 11.87
======= ======= ======= =======
Total return* 6.28% 17.62% 14.26% 20.84%
Ratio of net expenses to average net
assets 0.83%**+ 0.96%+ 1.20%+ 1.76%* *+
Ratio of net investment income to
average net assets 2.65%**+ 2.63%+ 2.83%+ 2.99%* *+
Portfolio turnover rate 91%** 63% 74% --
Net assets, end of period
(in thousands) $59,019 $44,008 $16,783 $ 2,661
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 0.83%** 0.96% 1.58% 14.77%**
Net investment income (loss) 2.65%** 2.63% 2.45% (10.02)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 0.83%** 0.95% 1.15% 1.45%**
Net investment income 2.65%** 2.64% 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.
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
Swiss Franc Bond Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (Unaudited) Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEBT OBLIGATIONS - 89.1%
Australia - 3.2%
$1,000,000 AA+/Aa2 Shell Australia, 6.0%, 1/14/00 $ 693,390
-----------
Austria - 6.2%
1,000,000 AAA/NR Autobahn Schnell AG, 3.0%, 11/12/01 $ 671,597
1,000,000 AAA/Aaa City of Vienna, 4.25%, 1/31/00 677,706
-----------
$ 1,349,303
-----------
Belgium - 7.4%
1,300,000 AA+/Aa1 Kingdom of Belgium, 7.125%, 6/1/99 $ 893,895
1,000,000 AA+/Aa1 Societe Nationale Credit a d'Investissement, 7.25%, 10/2/00 724,757
-----------
$ 1,618,652
-----------
Canada - 5.4%
600,000 AA-/Aa3 Province of Ontario, 4.0%, 6/29/01 $ 414,251
1,200,000 A+/A2 Quebec Province, 3.5%, 9/17/08 762,729
-----------
$ 1,176,980
-----------
Denmark - 5.5%
600,000 AA+/Aa1 Great Belt AS, 4.25%, 9/24/04 $ 419,996
1,340,000 AA+/Aa1 Kingdom of Denmark, 0.0%, 2/17/02 796,408
-----------
$ 1,216,404
-----------
France - 4.4%
1,300,000 NR/NR Rhone-Alpes, 6.375%, 11/25/02 $ 973,305
-----------
Germany - 21.6%
2,000,000 NR/Aa3 Bayerische Vereinsbank, 4.25%, 2/21/07 $ 1,359,374
1,400,000 NR/A1 BMW Finance NV, 5.0%, 4/21/13 975,137
1,400,000 AAA/Aa1 Deutsche Finance BV, 3.5%, 2/19/03 950,406
1,200,000 AAA/Aaa Frankfurter Hypothekenbank Centralboden AG, 3.125%, 4/29/08 763,917
1,000,000 NR/Aaa Helaba Finance, 3.75%, 12/28/00 681,503
-----------
$ 4,730,337
-----------
Ireland - 4.3%
1,300,000 AA+/Aaa Republic of Ireland, 6.5%, 1/15/01 $ 936,819
-----------
Netherlands - 3.0%
1,000,000 NR/Aa3 De Nationale Investeringsbank NV, 3.25%, 12/20/99 $ 668,626
-----------
New Zealand - 3.8%
1,200,000 AA+/Aa1 Transpower Finance Ltd., 4.25%, 6/10/04 $ 835,436
-----------
Norway - 4.4%
1,400,000 AA+/Aa2 Statoil, 4.125%, 9/20/01 $ 965,661
-----------
Sweden - 0.3%
100,000 NR/A1 City of Gothenberg, 6.375%, 12/10/99 $ 69,421
-----------
Philippines - 3.9%
1,250,000 AAA/Aaa Asian Development Bank, 7.375%,11/27/00 $ 857,863
-----------
United Kingdom - 1.5%
500,000 AA/Aa2 Abbey National Treasury Services, 4.0%, 12/30/99 $ 338,275
-----------
United States - 14.2%
300,000 AAA/Aaa General Electric Capital Corp., 3.5%, 5/29/00 $ 201,578
1,400,000 AA-/Aa3 Merrill Lynch & Co., 3.0%, 4/08/02 940,699
1,500,000 AA/Aa3 Morgan (J.P.) & Co., 2.0%, 12/27/01 974,212
1,000,000 U.S. Treasury Notes, 5.375%, 2/15/01 996,380
-----------
$ 3,112,869
-----------
TOTAL DEBT OBLIGATIONS (Cost $21,597,649) $19,543,341
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
Swiss Franc Bond Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S&P/Moody's
Principal Ratings
Amount (Unaudited) Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TEMPORARY CASH INVESTMENT - 10.9%
Repurchase Agreement - 10.9%
$2,400,000 Chase Manhattan Bank, 5.50%, 07/01/98, repurchase price of
$2,400,000 plus accrued interest on 7/01/98, collateralized by
$2,406,000 U.S. Treasury Notes, 6.375%, 4/30/99 $ 2,400,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $2,400,000) $ 2,400,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100% (Cost $23,997,649)(a)(b) $21,943,341
===========
NR Not rated.
(a) At June 30, 1998, the net unrealized loss on investments based on cost for
federal income tax purposes of $23,997,649 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost $ 443
Aggregate gross unrealized loss for all investments in which there is an excess of
tax cost over value (2,054,751)
-----------
Net unrealized loss $(2,054,308)
===========
(b) At December 31, 1997, the Portfolio had a capital loss carryforward of $5,280,
which will expire in 2005 if not utilized.
Purchases and sales of securities (excluding temporary cash investments) for the six
months ended June 30, 1998 were as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Purchases Sales
---------- ----------
Long-term U.S. Government $ 995,938 $ --
Other Long-term Securities 2,621,507 3,748,327
</TABLE>
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
Swiss Franc Bond Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash investment of
$2,400,000) (cost $23,997,649) $21,943,341
Cash 45,545
Foreign currencies, at value 17,618
Receivables--
Fund shares sold 202,671
Interest and foreign taxes withheld 342,720
Other 329
-----------
Total assets $22,552,224
-----------
Liabilities:
Payables--
Forward foreign currency portfolio hedge contracts, open-net $ 162,135
Forward foreign currency portfolio hedge contracts, closed-net 17,553
Due to affiliates 16,681
Accrued expenses 20,787
-----------
Total liabilities $ 217,156
-----------
Net Assets:
Paid-in capital $24,744,566
Accumulated undistributed net investment income 164,273
Accumulated net realized loss on investments and foreign currency
transactions (349,878)
Net unrealized loss on investments (2,054,308)
Net unrealized loss on forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (169,585)
-----------
Total net assets $22,335,068
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $22,335,068/1,853,426 shares $ 12.05
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
Swiss Franc Bond Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest (net of foreign taxes withheld of $371) $ 478,760
---------
Expenses:
Management fees 70,458
Transfer agent fees 494
Accounting 24,011
Custodian fees 13,757
Professional fees 9,667
Printing 1,934
Fees and expenses of nonaffiliated trustees 237
Miscellaneous 6,361
---------
Total expenses $ 126,919
Less fees paid indirectly (1,248)
---------
Net expenses $ 125,671
---------
Net investment income $ 353,089
---------
Realized and Unrealized Loss on Investments and
Foreign Currency Transactions:
Net realized loss from:
Investments $(320,544)
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (12,760) $(333,304)
--------- ---------
Change in net unrealized gain or loss from:
Investments $(485,283)
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (175,915) $(661,198)
--------- ---------
Net loss on investments and foreign currency transactions $(994,502)
---------
Net decrease in net assets reslting from operations $(641,413)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
Swiss Franc Bond Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 353,089 $ 568,206
Net realized loss on investments and foreign
currency transactions (333,304) (640,426)
Change in net unrealized gain or loss on
investments and foreign currency transactions (661,198) (915,115)
----------- -----------
Net decrease in net assets resulting from
operations $ (641,413) $ (987,335)
----------- -----------
Distributions to Shareholders:
Net investment income ($0.10 and $0.00 per
share, respectively) $ (183,189) $ --
----------- -----------
Total distributions to shareholders $ (183,189) $ --
----------- -----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 420,539 979,273 $ 5,254,833 $12,351,838
Reinvestment of dividends 15,102 -- 183,189 --
Cost of shares repurchased (349,684) (186,177) (4,366,275) (2,355,859)
-------- -------- ----------- -----------
Net increase in net assets resulting from fund
share transactions 85,957 793,096 $ 1,071,747 $ 9,995,979
======== ======== ----------- -----------
Net increase in net assets $ 247,145 $ 9,008,644
Net Assets:
Beginning of period 22,087,923 13,079,279
----------- -----------
End of period (including accumulated net
investment income (loss) of $164,273 and
($5,627), respectively) $22,335,068 $22,087,923
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
Swiss Franc Bond Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended November 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of peri od $ 12.50 $ 13.42 $ 15.06 $ 15.00
------- ------- ------- -------
Increase (decrease) from investment
operations:
Net investment income $ 0.19 $ 0.30 $ 0.14 $ 0.04
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (0.54) (1.22) (1.78) 0.02
------- ------- ------- -------
Net increase (decrease) from
investment operations $ (0.35) $ (0.92) $ (1.64) $ 0.06
Distributions to shareholders:
Net investment income (0.10) -- -- --
------- ------- ------- -------
Net increase (decrease) in net
asset value $ (0.45) $ (0.92) $ (1.64) $ 0.06
------- ------- ------- -------
Net asset value, end of period $ 12.05 $ 12.50 $ 13.42 $ 15.06
======= ======= ======= =======
Total return* (2.80)% (6.92)% (10.88)% 0.40%
Ratio of net expenses to average net
assets 1.17%**+ 1.23%+ 1.20%+ 2.25%**+
Ratio of net investment income to
average net assets 3.25%**+ 3.22%+ 3.37%+ 1.70%**+
Portfolio turnover rate 37%** 17% 39% --
Net assets, end of period
(in thousands) $22,335 $22,088 $13,079 $ 189
Ratios assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 1.17%** 1.25% 2.58% 69.22%**
Net investment income (loss) 3.25%** 3.20% 1.99% (65.27)%**
Ratios assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 1.16%** 1.22% 1.15% 1.25%**
Net investment income 3.26%** 3.23% 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.
79
<PAGE>
America Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN SECURITIES - 96.9%
U.S. Government and Agency Obligations - 96.9%
$ 250,000 Federal Farm Credit Bank, 7.15%, 8/7/01 $ 250,398
350,000 Federal Farm Credit Bank, Medium Term Note, 6.24%, 12/13/02 352,996
300,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 310,893
350,000 Federal Farm Credit Bank, Medium Term Note, 6.78%, 12/12/07 353,262
300,000 Federal Home Loan Bank, 6.455%, 2/22/02 303,186
350,000 Federal Home Loan Bank, 7.0%, 11/13/07 356,412
350,000 Federal Home Loan Bank, Medium Term Note, 6.59%, 11/5/03 363,216
110,000 Federal Home Loan Mortgage Corp., 6.55%, 1/4/00 111,481
300,000 Federal Home Loan Mortgage Corp., 7.125%, 11/18/02 316,254
300,000 Federal Home Loan Mortgage Corp., 5.75%, 7/15/03 297,562
600,000 Federal Home Loan Mortgage Corp., 6.54%, 11/6/07 607,974
221,440 Federal Home Loan Mortgage Corp., 7.0%, 9/1/27 224,651
430,142 Federal Home Loan Mortgage Corp., REMIC Series G031K, 6.5%, 10/25/14 429,702
239,654 Federal Home Loan Mortgage Corp., REMIC Series 1142H, 7.95%, 12/15/20 242,165
500,000 Federal Home Loan Mortgage Corp., REMIC Series 1541G, 6.75%, 11/15/21 510,170
250,000 Federal National Mortgage Association, 6.7%, 8/10/01 252,387
225,000 Federal National Mortgage Association, 6.8%, 1/10/03 234,333
100,000 Federal National Mortgage Association, 6.85%, 4/5/04 105,235
500,000 Federal National Mortgage Association, Medium Term Note, 5.78%, 2/12/03 497,025
300,000 Federal National Mortgage Association, Medium Term Note, 6.05%, 4/14/03 299,589
300,000 Federal National Mortgage Association, Medium Term Note, 7.53%, 10/12/06 305,754
360,000 Federal National Mortgage Association, Medium Term Note, 6.82%, 12/13/06 364,295
300,000 Federal National Mortgage Association, Medium Term Note, 6.84%, 7/17/07 308,238
300,000 Federal National Mortgage Association, Medium Term Note, 6.44%, 8/14/07 312,948
350,000 Federal National Mortgage Association, Medium Term Note, 6.59%, 9/17/07 368,659
256,993 Government National Mortgage Association, 8.0%, 2/15/08 268,509
208,427 Government National Mortgage Association, 7.5%, 10/15/22 to 6/15/23 214,828
2,552,216 Government National Mortgage Association, 7.0%, 12/15/25 to 4/15/28 2,591,628
300,000 Government National Mortgage Association, 6.5%, 6/15/28 298,977
62,198 Government National Mortgage Association II, 8.0%, 8/20/25 64,064
219,721 Government National Mortgage Association II, 7.5%, 8/20/27 224,529
200,000 Private Export Funding, 7.3%, 1/31/02 262,850
200,000 Private Export Funding, 6.24%, 5/15/02 203,804
500,000 Private Export Funding, 6.9%, 1/31/03 522,045
200,000 Student Loan Marketing Association, 7.5%, 3/08/00 205,896
250,000 Tennessee Valley Authority, 6.375%, 6/15/05 258,550
300,000 Tennessee Valley Authority, 6.75%, 6/1/28 302,250
600,000 U.S. Treasury Bonds, 7.25%, 5/15/16 703,026
1,000,000 U.S. Treasury Bonds, 6.25%, 8/15/23 1,070,560
1,100,000 U.S. Treasury Notes, 6.5%, 8/31/01 1,129,227
200,000 U.S. Treasury Notes, 7.875%, 11/15/04 224,630
1,100,000 U.S. Treasury Notes, 7.0%, 7/15/06 1,201,431
800,000 U.S. Treasury Notes, 6.625%, 5/15/07 859,552
-----------
TOTAL INVESTMENT IN SECURITIES (Cost $18,445,332) $18,685,141
-----------
TEMPORARY CASH INVESTMENT - 3.1%
Repurchase Agreement - 3.1%
600,000 Chase Manhattan Bank, 5.5%, 7/1/98, repurchase price of $600,000 plus accrued
interest on 7/1/98, collateralized by $601,000 U.S. Treasury Notes, 6.375%, 4/30/99 $ 600,000
-----------
TOTAL TEMPORARY CASH INVESTMENT (Cost $600,000) $ 600,000
-----------
TOTAL INVESTMENT IN SECURITIES AND TEMPORARY CASH
INVESTMENT - 100% (Cost $19,045,332) (a) (b) $19,285,141
===========
</TABLE>
(a) At June 30, 1998, the net unrealized gain on investments based
on cost for federal income tax purposes of $19,045,332 was a
follows:
<TABLE>
<S> <C>
Aggregate gross unrealized gain for all investments in which there is an excess
of tax cost over value $266,560
Aggregate gross unrealized loss for all investments in which there is an excess
of tax cost under value (26,751)
--------
Net unrealized gain $239,809
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
<PAGE>
America Income Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
(b) At December 31, 1997, the Portfolio had a capital loss carryforward
of $67,031 which will expire in 2004 if not utilized.
Note: The Portfolio's investments in mortgage-backed securities of
the Government National Mortgage Association (GNMA) are interests in
separate pools of mortgages. All separate investments in this issuer
which have the same coupon rate have been aggregated for the purpose
of presentation in the schedule of investments.
Purchases and sales of securities (excluding temporary cash
investments) for the six months ended December 31, 1997 were
$8,690,106 and $3,983,714, respectively.
The accompanying notes are an integral part of these financial statements.
81
<PAGE>
America Income Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (including temporary cash
investment of $600,000) (cost $19,045,332) $19,285,141
Cash 81,263
Interest receivable 256,433
Other 218
-----------
Total assets $19,623,055
-----------
Liabilities:
Payable for fund shares repurchased $ 18,265
Due to affiliates 12,764
Accrued expenses 14,663
-----------
Total liabilities $ 45,692
-----------
Net Assets:
Paid-in capital $19,340,915
Accumulated net realized loss on investments (3,361)
Net unrealized gain on investments 239,809
-----------
Total net assets $19,577,363
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $19,577,363/1,939,937 shares $ 10.09
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
America Income Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest $599,413
--------
Expenses:
Management fees $50,772
Transfer agent fees 1,024
Accounting 21,070
Custodian fees 8,942
Professional fees 5,864
Printing 2,340
Fees and expenses of nonaffiliated trustees 427
Miscellaneous 7,530
-------
Total expenses $ 97,969
Less management fees waived by Pioneering Management Corporation (57)
Less fees paid indirectly (1,652)
--------
Net expenses $ 96,260
--------
Net investment income $503,153
--------
Realized and Unrealized Gain on Investments:
Net realized gain on investments $ 63,670
Change in net unrealized gain on investments 14,922
--------
Net gain on investments $ 78,592
--------
Net increase in net assets resulting from operations $581,745
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
America Income Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 503,153 $ 499,639
Net realized gain on investments 63,670 5,727
Change in net unrealized gain on investments 14,922 283,024
----------- -----------
Net increase in net assets resulting from
operations $ 581,745 $ 788,390
----------- -----------
Distributions to Shareholders:
Net investment income ($0.27 and $0.54 per
share, respectively) $ (503,153) $ (499,639)
----------- -----------
Total distributions to shareholders $ (503,153) $ (499,639)
----------- -----------
From Fund Share Transactions: '98 Shares '97 Shares
---------- ----------
Net proceeds from sale of shares 1,025,987 943,506 $10,323,891 $ 9,298,835
Reinvestment of distributions 50,021 50,797 503,153 499,639
Cost of shares repurchased (582,664) (250,594) (5,847,160) (2,440,624)
--------- -------- ----------- -----------
Net increase in net assets resulting from fund
share transactions 493,344 743,709 $ 4,979,884 $ 7,357,850
========= ======== ----------- -----------
Net increase in net assets $ 5,058,476 $ 7,646,601
Net Assets:
Beginning of period 14,518,887 6,872,286
----------- -----------
End of period (including accumulated undistributed
net investment income of $0 and $0,
respectively) $19,577,363 $14,518,887
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
<PAGE>
America Income Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.04 $ 9.78 $10.18 $10.00
------- ------- ------ -----
Increase (decrease) from investment
operations:
Net investment income $ 0.27 $ 0.54 $ 0.52 $ 0.38
Net realized and unrealized gain
(loss) on investments 0.05 0.26 (0.40) 0.18
------- ------- ------ ------
Net increase from investment
operations $ 0.32 $ 0.80 $ 0.12 $ 0.56
Distributions to shareholders:
Net investment income (0.27) (0.54) (0.52) (0.38)
------- ------- ------ ------
Net increase (decrease) in net
asset value $ 0.05 $ 0.26 $(0.40) $ 0.18
------- ------- ------ ------
Net asset value, end of period $ 10.09 $ 10.04 $ 9.78 $10.18
======= ======= ====== ======
Total return* 3.23% 8.44% 1.30% 5.68%
Ratio of net expenses to average net
assets 1.06%**+ 1.26%+ 1.31%+ 1.12%**+
Ratio of net investment income to
average net assets 5.43%**+ 5.46%+ 5.25%+ 5.22%**+
Portfolio turnover rate 47%** 11% 60% 96%**
Net assets, end of period
(in thousands) $19,577 $14,519 $6,872 $3,514
Ratio assuming no waiver of
management fees and assumption
of expenses by PMC and no
reduction for fees paid indirectly:
Net expenses 1.06%** 1.43% 2.24% 11.86%**
Net investment income (loss) 5.43%** 5.29% 4.32% (5.52)%**
Ratio assuming waiver of
management fees and assumption
of expenses by PMC and reduction
for fees paid indirectly:
Net expenses 1.04%** 1.23% 1.25% 0.99%**
Net investment income 5.45%** 5.49% 5.31% 5.34%**
</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.
85
<PAGE>
Money Market Portfolio
Schedule of Investments - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 74.8%
$ 500,000 Abbott Laboratories, 5.5%, 7/1/98 $ 500,000
800,000 American Express Credit Corp., 5.51%, 7/8/98 799,143
640,000 Amoco Co., 5.44%, 7/13/98 638,839
727,000 Associates Corp., 5.51%, 7/7/98 726,332
525,000 AVCO Financial Services Inc., 5.45%, 7/22/98 523,331
591,000 BancOne Corp., 5.48%, 8/13/98 587,132
895,000 Bell Atlantic Financial Services Inc., 5.52%, 8/4/98 890,334
664,000 BellSouth Capital Funding Corp., 5.48%, 8/12/98 659,755
500,000 Chevron Oil Corp., 5.5%, 7/23/98 498,319
695,000 The Coca-Cola Co., 5.45%, 8/19/98 689,845
649,000 Deere (John) Credit Corp., 5.5%, 9/2/98 642,753
625,000 Ford Motor Credit Corp., 5.51%, 7/20/98 623,182
720,000 Gannett Co., 5.45%, 7/13/98 718,692
555,000 General Electric Capital Corp., 5.51%, 8/4/98 552,112
710,000 General Motors Acceptance Corp., 5.55%, 7/24/98 707,483
576,000 Heinz (H.J.) Co., 5.49%, 7/2/98 575,912
630,000 IBM Credit Corp., 5.5%, 7/23/98 627,883
725,000 Penney (J.C.) Funding Corp., 5.49%, 8/14/98 720,135
975,000 Norwest Financial Inc., 6.03%, 7/2/98 974,837
800,000 Pitney Bowes Credit Corp., 5.52%, 7/20/98 797,669
480,000 Proctor & Gamble Co., 5.45%, 8/21/98 476,294
753,000 Prudential Funding Corp., 5.59%, 7/9/98 752,065
680,000 Texaco Inc., 5.83%, 7/28/98 677,195
700,000 Toys "R" Us Inc., 5.48%, 7/6/98 699,467
885,000 TransAmerica Finance Corp., 5.53%, 8/10/98 879,698
-----------
TOTAL COMMERCIAL PAPER $16,938,407
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 8.9%
500,000 Federal Farm Credit Bank, 5.46%, 7/1/98 $ 500,000
500,000 Federal Farm Credit Bank, 5.5%, 9/1/98 500,000
500,000 Federal Farm Credit Bank, 5.51%, 8/3/98 500,000
500,000 Federal Farm Credit Bank, 5.55%, 10/1/98 500,000
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 2,000,000
-----------
REPURCHASE AGREEMENT - 16.3%
3,700,000 Chase Manhattan Bank, 7/1/98, 5.5%, repurchase price of
$3,700,000 plus accrued interest on 7/1/98, collateralized by
$3,709,000 U.S. Treasury Notes, 6.375%, 4/30/99 $ 3,700,000
-----------
TOTAL REPURCHASE AGREEMENT $ 3,700,000
-----------
TOTAL INVESTMENT IN SECURITIES - 100.0% $22,638,407
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
86
<PAGE>
Money Market Portfolio
Balance Sheet
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in securities, at value based on amortized cost $22,638,407
Cash 79,437
Interest receivable 14,236
Other 1,096
-----------
Total assets $22,733,176
-----------
Liabilities:
Payables--
Investment securities purchased $ 500,000
Fund shares repurchased 55,261
Due to affiliates 12,414
Accrued expenses 17,412
-----------
Total liabilities $ 585,087
-----------
Net Assets:
Fund shares $22,148,089
-----------
Total net assets $22,148,089
===========
Net Asset Value Per Share:
(Unlimited number of shares authorized)
Based on $22,148,089/22,148,089 shares $ 1.00
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
87
<PAGE>
Money Market Portfolio
Statement of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Interest $435,199
--------
Expenses:
Management fees $38,750
Transfer agent fees 745
Accounting 17,865
Custodian fees 11,160
Professional fees 6,679
Printing 3,114
Fees and expenses of nonaffiliated trustees 339
Miscellaneous 5,421
-------
Total expenses $ 84,073
Less management fees waived by Pioneering Management Corporation (8,905)
Less fees paid indirectly (480)
--------
Net expenses $ 74,688
--------
Net investment income $360,511
--------
Net increase in net assets resulting from operations $360,511
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
88
<PAGE>
Money Market Portfolio
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1998 and the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
------------- -----------------
<S> <C> <C>
From Operations:
Net investment income $ 360,511 $ 569,693
------------ ------------
Net increase in net assets resulting from operations $ 360,511 $ 569,693
------------ ------------
Distributions to Shareholders:
Net investment income ($0.02 and $0.05 per share,
respectively) $ (360,511) $ (569,693)
------------ ------------
From Fund Share Transactions (at $1.00 per share):
Net proceeds from sale of shares $ 22,680,922 $ 39,298,007
Reinvestment of distributions 360,511 569,693
Cost of shares repurchased (14,632,682) (37,872,664)
------------ ------------
Net increase in net assets resulting from fund share
transactions $ 8,408,751 $ 1,995,036
------------ ------------
Net increase in net assets $ 8,408,751 $ 1,995,036
Net Assets:
Beginning of period 13,739,338 11,744,302
------------ ------------
End of period $ 22,148,089 $ 13,739,338
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
89
<PAGE>
Money Market Portfolio
Financial Highlights
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1998 Year Ended Year Ended March 1, 1995 to
(unaudited) December 31, 1997 December 31, 1996 December 31, 1995
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------
Increase from investment operations:
Net investment income $ 0.02 $ 0.05 $ 0.04 $ 0.04
------- ------- ------- ------
Distributions to shareholders:
Net investment income (0.02) (0.05) (0.04) (0.04)
------- ------- ------- ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======
Total return* 2.30% 4.64% 4.51% 4.35%
Ratio of net expenses to average net
assets 0.96%**+ 1.00%+ 0.97%+ 0.81%**+
Ratio of net investment income to
average net assets 4.62%**+ 4.55%+ 4.43%+ 5.00%**+
Net assets, end of period
(in thousands) $22,148 $13,739 $11,744 $3,416
Ratios assuming no waiver of fees
and assumption of expenses by
PMC and no reduction for fees paid
indirectly:
Net expenses 1.08%** 1.17% 1.29% 8.34%**
Net investment income (loss) 4.50%** 4.38% 4.11% (2.53)%**
Ratios assuming waiver of fees and
assumption of expenses by PMC
and reduction for fees paid
indirectly:
Net expenses 0.96%** 0.99% 0.96% 0.74%**
Net investment income 4.62%** 4.56% 4.44% 5.07%**
</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.
+ Ratios assuming no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
90
<PAGE>
Notes to Financial Statements - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies - Pioneer Variable
Contracts Trust (the Trust) is a Delaware business trust registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Trust consists of ten separate portfolios (collectively, the
Portfolios): International Growth Portfolio, Capital Growth Portfolio, Growth
Shares Portfolio, Real Estate Growth Portfolio, Growth and Income Portfolio,
Equity-Income Portfolio, Balanced Portfolio, Swiss Franc Bond Portfolio,
America Income Portfolio, and Money Market Portfolio. Shares of each Portfolio
may be only purchased by insurance companies for the purpose of funding
variable annuity or variable life insurance contracts.
Each Portfolio has its own distinct investment objective. International
Growth Portfolio seeks long-term capital growth. Capital Growth Portfolio seeks
capital growth. Growth Shares Portfolio seeks appreciation of capital. Real
Estate Growth Portfolio pursues long-term capital growth, with income as a
secondary objective. Growth and Income Portfolio seeks reasonable income and
growth of capital. Equity-Income Portfolio seeks current income and long-term
capital growth. Balanced Portfolio's investment objectives are capital growth
and current income. Swiss Franc Bond Portfolio invests to approximate the
performance of the Swiss franc relative to the U.S. dollar while earning
reasonable income. America Income Portfolio seeks as high a level of current
income as is 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 Portfolio's shares are determined as of
such times.
Fixed income securities are valued at prices supplied by independent
pricing services, which consider such factors as Treasury spreads, yields,
maturities and ratings, and valuations may be supplemented by dealers and other
sources, as required. Market discount and premium are accreted and amortized
daily on a straight-line basis.
Securities for which market quotations are not readily available are valued
at their fair values as determined by, or under the direction of, the Board of
Trustees. Dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio is informed of the ex-dividend data
in the exercise of reasonable diligence. Interest 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.
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 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.
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
91
<PAGE>
Notes to Financial Statements - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
and also qualify for long-term capital gain or loss treatment for tax purposes.
In addition, net realized gains on securities in certain countries give rise to
capital gains taxes. It is the Trust's policy to provide a reserve against net
unrealized gains for capital gains taxes on certain foreign securities held by
the Trust. During the six months ended June 30, 1998, no capital gains taxes
realized on the sale of certain foreign securities were paid.
B. Foreign Currency Translation - The books and records of the Portfolios are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
among other things, the net realized gains and losses on foreign currency
contracts, disposition of foreign currencies, and the difference between the
amount of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in market
price of those securities but are included with the net realized and unrealized
gain or loss on investments.
C. Forward Foreign Currency Contracts - Certain Portfolios are authorized to
enter into forward foreign currency contracts (contracts) for the purchase or
sale of a specific foreign currency at a fixed price on a future date as a
hedge or cross-hedge against either specific investment transactions
(settlement hedges) or portfolio positions (portfolio hedges). All contracts
are marked to market daily at the applicable exchange rates, and any resulting
unrealized gains or losses are recorded in the Portfolios' financial
statements. The Portfolios record realized gains and losses at the time a
portfolio hedge is offset by entry into a closing transaction or extinguished
by delivery of the currency. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of the
contract and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar (see Note 5).
D. Taxes - It is the Trust's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if any, to
its shareholders. Therefore, no federal income tax provision is required. In
addition to the requirements of the Internal Revenue Code, the Trust may also
be required to pay local taxes on net realized capital gains in certain
countries. The required capital gains taxes, if any, are determined in
accordance with local tax laws. In determining daily net asset value, the Trust
estimates the reserve for capital gains taxes, if any, associated with net
unrealized gains on certain portfolio securities. The estimated reserve for
capital gains taxes, if any, is based on the holding periods of such securities
and the related tax rates, tax loss carryforward (if applicable) and other such
factors. During the six months ended June 30, 1998, 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 federal 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 Portfolio as a reduction to the cost basis
of the securities held.
E. Fund Shares - The Portfolios record sales and repurchases of their fund
shares on trade date. Net losses, if any, as a result of cancellations are
absorbed by Pioneer Funds Distributor, Inc. (PFD), the principal underwriter
for the Trust and an indirect subsidiary of 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 Trust'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.
92
<PAGE>
Notes to Financial Statements - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
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%
Growth Shares Portfolio 0.65%
Real Estate Growth Portfolio 1.00%
Growth and Income Portfolio 0.65%
Equity-Income Portfolio 0.65%
Balanced Portfolio 0.65%
Swiss Franc Bond Portfolio 0.65%
America Income Portfolio 0.55%
Money Market Portfolio 0.50%
</TABLE>
PMC has agreed not to impose a portion of its management fees and to assume
other operating expenses for certain Portfolios to the extent necessary to limit
expenses of each Portfolio to the following percentage of its average daily net
assets:
<TABLE>
<CAPTION>
Expense Limitation as a
Percentage of each Portfolio's
Portfolio Average Daily Net Assets
- --------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio 1.50%
Growth Shares Portfolio 1.25%
Real Estate Growth Portfolio 1.25%
Growth and Income Portfolio 1.25%
Swiss Franc Bond Portfolio 1.25%
America Income Portfolio 1.25%
Money Market Portfolio 1.00%
</TABLE>
In addition, under the management agreements, certain other services and
costs, including accounting, regulatory reporting and insurance premiums, are
paid by the Portfolios. At June 30, 1998, the following amounts were payable to
PMC related to management fees and certain other services:
<TABLE>
<CAPTION>
Portfolio Amount
- --------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio $57,611
Capital Growth Portfolio 75,070
Growth Shares Portfolio 24,359
Real Estate Growth Portfolio 40,382
Growth and Income Portfolio 21,779
Equity-Income Portfolio 98,099
Balanced Portfolio 16,214
Swiss Franc Bond Portfolio 16,601
America Income Portfolio 12,272
Money Market Portfolio 12,140
</TABLE>
93
<PAGE>
Notes to Financial Statements - June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
3. Transfer Agent - Pioneering Services Corporation (PSC), a wholly owned
subsidiary of PGI, provides substantially all transfer agent and shareholder
services to the Trust at negotiated rates. At June 30, 1998 the following
transfer agent fees payable to PSC were included in due to affiliates:
<TABLE>
<CAPTION>
Portfolio Amount
- ----------------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio $107
Capital Growth Portfolio 207
Growth Shares Portfolio 598
Real Estate Growth Portfolio 87
Growth and Income Portfolio 293
Equity-Income Portfolio 97
Balanced Portfolio 83
Swiss Franc Bond Portfolio 80
America Income Portfolio 492
Money Market Portfolio 274
</TABLE>
4. Expense Reductions - The Trust has entered into certain expense offset
arrangements resulting in a reduction in the Portfolios' total expenses. For
the six months ended June 30, 1998, the Portfolios' expenses were reduced under
such arrangements as follows:
<TABLE>
<CAPTION>
Portfolio Amount
- ----------------------------------------------------------------------------------------
<S> <C>
International Growth Portfolio $ 639
Capital Growth Portfolio 801
Growth Shares Portfolio 1,471
Real Estate Growth Portfolio 509
Growth and Income Portfolio 1,444
Equity-Income Portfolio 292
Balanced Portfolio 826
Swiss Franc Bond Portfolio 1,248
America Income Portfolio 1,652
Money Market Portfolio 480
</TABLE>
5. Forward Foreign Currency Contracts - At June 30, 1998, certain Portfolios
had entered into various contracts that obligate the Portfolios to deliver
currencies at specified future dates. At the maturity of a contract, the
Portfolios must make delivery of the foreign currency. Alternatively, prior to
the settlement date of a portfolio hedge, the Portfolio may close out such
contracts by entering into an offsetting hedge contract. As of June 30, 1998,
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 Loss
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHF 5,125,000 $3,564,100 8/17/98 $3,401,965 $(162,135)
</TABLE>
Included in the Swiss Franc Bond Portfolio's accumulated net realized loss
on forward currency contracts and other assets and liabilities denominated in
foreign currencies is $17,553, which represents the realized loss on closed but
unsettled portfolio hedges totaling $1,000,000.
The International Growth Portfolio's gross forward foreign currency
settlement contracts receivable and payable were $348,961 and $350,427,
respectively, resulting in a net payable of $1,466.
94
<PAGE>
<PAGE>
<PAGE>
<PAGE>
[Pioneer logo]
PIONEER VISION(SM)
PIONEER VISION 2(SM)
VARIABLE ANNUITY
Pioneer Variable Contracts Trust
Officers
John F. Cogan, Jr., Chairman and President
David D. Tripple, Executive Vice President
Stephen G. Kasnet, Vice President
William H. Keough, Treasurer
Joseph P. Barri, Secretary
Trustees
John F. Cogan, Jr.
Richard H. Egdahl, M.D.
Marguerite A. Piret
David D. Tripple
Stephen K. West
Investment Adviser
Pioneering Management Corporation
Custodian
Brown Brothers Harriman & Co.
Legal Counsel
Hale and Dorr LLP
Issuer
Allmerica Financial Life Insurance and Annuity Company, Contract Form A3025-96
In New York and Hawaii, issued by First Allmerica Financial Life Insurance
Company,
Contract Form A3025-96 GRC
General Distributor
Allmerica Investments, Inc.
440 Lincoln Street
Worcester, MA 01653
This report must be preceded or accompanied by a prospectus for Pioneer Vision
and/or Pioneer Vision 2 Variable Annuity, which includes more information about
charges and expenses. Please read the prospectus carefully before you invest or
send money.
0898-5440
(C) Pioneer Funds Distributor, Inc.
