As filed with the Securities and Exchange Commission on October 19, 2004
File No. 333-118431
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. ______
(Check appropriate box or boxes)
PIONEER VARIABLE CONTRACTS TRUST
(on behalf of its Portfolios:
Pioneer Bond VCT Portfolio
Pioneer Fund VCT Portfolio
Pioneer Growth Opportunities VCT Portfolio
Pioneer Mid Cap Value VCT Portfolio
Pioneer Money Market VCT Portfolio
Pioneer Small Cap Value II VCT Portfolio)
(Exact Name of Registrant as Specified in Charter)
(617) 742-7825
(Area Code and Telephone Number)
60 State Street, Boston, Massachusetts 02109
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
Dorothy E. Bourassa, Esq.
Pioneer Investment Management, Inc.
60 State Street
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copies to: David C. Phelan, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is due because of reliance on Section 24(f) of the Investment Company Act of
1940, which permits registration of an indefinite number of securities.
Title of Securities Being Registered: Shares of beneficial interest of the
Registrant.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment, which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall be effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
COMBINED PROXY STATEMENT OF
SAFECO RESOURCE SERIES TRUST
(the "Safeco Trust" or "your Trust")
SAFECO BOND PORTFOLIO
SAFECO CORE EQUITY PORTFOLIO
SAFECO GROWTH OPPORTUNITIES PORTFOLIO
SAFECO MONEY MARKET PORTFOLIO
SAFECO MULTI-CAP CORE PORTFOLIO
SAFECO SMALL-CAP VALUE PORTFOLIO
(each a series of Safeco Resource Series Trust, and each "your Safeco Portfolio"
and collectively, the "Safeco Portfolios")
4854 154th Place N.E., Redmond, WA 98052
PROSPECTUS
FOR CLASS I SHARES OF
PIONEER VARIABLE CONTRACTS TRUST
(the "Pioneer Trust")
PIONEER BOND VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
(each a series of Pioneer Variable Contracts Trust, and each a "Pioneer
Portfolio" and collectively, the "Pioneer Portfolios")
NOTICE OF SPECIAL MEETING OF SHAREOWNERS
SCHEDULED FOR DECEMBER 8, 2004
To the owners of variable annuity or life insurance contracts:
You are being asked to vote on the proposals listed below on the enclosed voting
instruction card. Your vote will instruct the insurance company that issued your
contract how to vote the shares of the Safeco Portfolio attributable to your
contract at the special meeting of shareowners.
A joint special meeting of shareowners (the "Meeting") for each of the Safeco
Portfolios will be held at the offices of Safeco Mutual Fund, King Auditorium,
4854 154th Place N.E., Redmond, WA 98052, on December 8, 2004 at 2:00 p.m.,
local time, to consider the following:
1. With respect to each Safeco Portfolio, a proposal to approve an Agreement
and Plan of Reorganization. Under the Agreement and Plan of Reorganization,
your Safeco Portfolio will transfer all of its assets to a series of the
Pioneer Trust (each a "Pioneer Portfolio"), an investment company managed
by Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio. Some of the Pioneer Portfolios are
existing mutual funds with substantially similar investment objectives and
similar investment policies as your Safeco Portfolio. In the case of
certain Safeco Portfolios, the Pioneer Portfolio is a newly organized
series with a substantially similar investment objective and policies as
your Safeco Portfolio. Class I shares of the applicable Pioneer Portfolio
will be distributed to your Safeco Portfolio's shareowners in proportion to
the relative net asset value of their share holdings on the closing date of
the reorganization. The Pioneer Portfolio also will assume your Safeco
Portfolio's liabilities that are included in the calculation of your Safeco
Portfolio's net assets at the closing. Your Safeco Portfolio will then be
dissolved. As a result of the reorganization you will become shareowners of
the Pioneer Portfolio. Your board of trustees recommends that you vote FOR
this proposal.
2. With respect to each Safeco Portfolio, a proposal to approve an interim
investment advisory agreement between your Safeco Portfolio and Pioneer.
This agreement provides for the management of your Safeco Portfolio's
assets from August 2, 2004, when the advisory agreement between your Safeco
Portfolio and Safeco Asset Management Company, each Portfolio's
1
investment adviser, ("SAM") terminated. This interim investment advisory
agreement has the same terms, other than its duration, as the agreement
between your Safeco Portfolio and SAM. Your board of trustees recommends
that you vote FOR this proposal.
3. Any other business that may properly come before the Meeting.
Shareowners of record as of the close of business on October 8, 2004 are
entitled to vote at the Meeting and any related follow-up meetings.
Whether or not you expect to attend the Meeting, please complete and return the
enclosed proxy card. If shareowners do not return their proxies in sufficient
numbers, your Safeco Portfolio may be required to make additional solicitations.
By order of the Board of Trustees,
[Name]
[Title]
October [ ], 2004
2
COMBINED PROXY STATEMENT OF
SAFECO RESOURCE SERIES TRUST
(the "Safeco Trust" or "your Trust")
SAFECO BOND PORTFOLIO
SAFECO CORE EQUITY PORTFOLIO
SAFECO GROWTH OPPORTUNITIES PORTFOLIO
SAFECO MONEY MARKET PORTFOLIO
SAFECO MULTI-CAP CORE PORTFOLIO
SAFECO SMALL-CAP VALUE PORTFOLIO
(each a series of Safeco Resource Series Trust, and each "your Safeco Portfolio"
and collectively, the "Safeco Portfolios")
The address and telephone number of each Safeco Portfolio is 4854 154th Place
N.E., Redmond, WA 98052 and 1-877-796-3872.
PROSPECTUS
FOR CLASS I SHARES OF
PIONEER VARIABLE CONTRACTS TRUST
(the "Pioneer Trust")
PIONEER BOND VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
(each a series of Pioneer Variable Contracts Trust, and each a "Pioneer
Portfolio" and collectively, the "Pioneer Portfolios")
The address and telephone number of each Pioneer Portfolio is 60 State Street,
Boston, Massachusetts 02109 and 1-800-622-3265 or 1-800-225-6292.
This combined proxy statement and prospectus (the "Proxy Statement/Prospectus"),
dated October 19, 2004, is being furnished to shareowners of the Safeco
Portfolios listed above in connection with the solicitation by the board of
trustees (the "Board, or the "Trustees") of the Safeco Trust of proxies to be
used at a joint meeting of shareowners (the "Meeting") to be held at the offices
of Safeco Mutual Funds, King Auditorium, 4854 154th Place N.E., Redmond, WA
98052, on December 8, 2004 at 2:00 p.m. (local time). The Proxy
Statement/Prospectus contains information you should know before voting on (i)
the approval of a proposed Agreement and Plan of Reorganization (each a "Plan")
between each Safeco Portfolio and a corresponding Pioneer Portfolio providing
for the reorganization of each Safeco Portfolio into a corresponding Pioneer
Portfolio (each a "Reorganization"), and (ii) the approval of an interim
investment advisory agreement for each Safeco Portfolio. The following table
indicates (a) the corresponding Pioneer Portfolio that each Safeco Portfolio
shareowner would receive shares of if each Plan is approved, (b) which Safeco
Portfolio shareowners may vote on which proposals and (c) on what page of this
Proxy Statement/Prospectus the discussion regarding each proposal begins.
Although each Reorganization is similar in structure, you should read carefully
the specific discussion regarding your Safeco Portfolio's Reorganization.
SHARES OF THE PIONEER PORTFOLIOS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SEC. THE SEC HAS NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN ANY PIONEER PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
3
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Safeco Portfolio Pioneer Portfolio Shareowners Entitled to Vote Page
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Proposal 1(a) Safeco Bond Portfolio Pioneer Bond VCT Portfolio Safeco Bond Portfolio shareowners 8
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Proposal 1(b) Safeco Core Equity Pioneer Fund VCT Portfolio Safeco Core Equity Portfolio 17
Portfolio shareowners
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Proposal 1(c) Safeco Growth Pioneer Growth Opportunities Safeco Growth Opportunities Portfolio 25
Opportunities Portfolio VCT Portfolio shareowners
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Proposal 1(d) Safeco Money Market Pioneer Money Market VCT Safeco Money Market Portfolio 33
Portfolio Portfolio shareowners
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Proposal 1(e) Safeco Multi-Cap Core Pioneer Mid Cap Value VCT Safeco Multi-Cap Core Portfolio 41
Portfolio Portfolio shareowners
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Proposal 1(f) Safeco Small-Cap Value Pioneer Small Cap Value II Safeco Small-Cap Value Portfolio 50
Portfolio VCT Portfolio shareowners
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Proposal 2 (a)-(f) Each Portfolio Not applicable Shareowners of each Portfolio voting 61
separately as to the proposal that
affects their Portfolio
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TABLE OF CONTENTS
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Page
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INTRODUCTION 3
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PROPOSAL 1(a) - SAFECO BOND PORTFOLIO 8
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PROPOSAL 1(b) - SAFECO CORE EQUITY PORTFOLIO 17
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PROPOSAL 1(c) - SAFECO GROWTH OPPORTUNITIES PORTFOLIO 25
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PROPOSAL 1(d) - SAFECO MONEY MARKET PORTFOLIO 33
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PROPOSAL 1(e) - SAFECO MULTI-CAP CORE PORTFOLIO 41
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PROPOSAL 1(f) - SAFECO SMALL-CAP VALUE PORTFOLIO 50
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TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION 59
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TAX STATUS OF EACH REORGANIZATION 60
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PROPOSAL 2(a)-(f)- APPROVAL OF AN INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER 61
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VOTING RIGHTS AND REQUIRED VOTE 63
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ADDITIONAL INFORMATION ABOUT THE PIONEER PORTFOLIOS 63
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FINANCIAL HIGHLIGHTS 65
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INFORMATION CONCERNING THE MEETING 69
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OWNERSHIP OF SHARES OF THE PORTFOLIOS 71
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EXPERTS 73
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AVAILABLE INFORMATION 73
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EXHIBIT A-1 - FORM OF AGREEMENT AND PLAN OF REORGANIZATION (C/D REORGANIZATION) A-1
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EXHIBIT A-2 - FORM OF AGREEMENT AND PLAN OF REORGANIZATION (F REORGANIZATION) A-25
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EXHIBIT B - FORM OF INTERIM INVESTMENT ADVISORY AGREEMENT B-1
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EXHIBIT C - ADDITIONAL INFORMATION REGARDING PIONEER C-1
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EXHIBIT D - PORTFOLIO MANAGER'S DISCUSSION OF PERFORMANCE D-1
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The Proxy Statement/Prospectus sets forth the information about the Pioneer
Portfolio that a prospective investor ought to know before investing and should
be retained for future reference. Additional information about each Pioneer
Portfolio has been filed with the Securities and Exchange Commission ("SEC") and
is available upon oral or written request and without charge. See below on
"Where to Get More Information" on each Portfolio.
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Where to Get More Information
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The Safeco Portfolios' prospectus dated April 30, 2004 as Available to you free of charge by calling 1-800-796-3872. The
supplemented August 3, 2004. prospectus, which is also on file with the SEC, is incorporated by
reference into this Proxy Statement and Prospectus.
The Safeco Portfolios' annual report dated December 31, Available to you free of charge by calling 1-800-796-3872. Also on
2003 and semiannual report dated June 30, 2004. file with the SEC. See "Available Information." These reports are
incorporated by reference into this Proxy Statement/Prospectus.
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Each Pioneer Portfolio's current prospectus, and any Available to you free of charge by calling 1-800-225-6292. These
supplements (as applicable), and each Pioneer Portfolio's prospectuses and reports are also on file with the SEC. These
most recent annual and semiannual reports to shareowners. prospectuses and reports are incorporated by reference into this
Proxy Statement/Prospectus.
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A statement of additional information for this Proxy Available to you free of charge by calling 1-800-225-6292. Also on
Statement/Prospectus, dated October 19, 2004 (the "SAI") file with the SEC. This SAI is incorporated by reference into this
contains additional information about your Safeco Proxy Statement/Prospectus.
Portfolios and the Pioneer Portfolios. The SAI is not
incorporated by reference into this Proxy
Statement/Prospectus.
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To ask questions about this Proxy Statement/Prospectus. Call your Safeco Portfolio's toll-free telephone number:
1-800-796-3872.
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Background to the Reorganizations
Safeco Asset Management Company ("SAM"), the Safeco Portfolios' investment
adviser until August 2, 2004, was a subsidiary of Safeco Corporation, a
multi-line insurance company. On August 2, 2004, Symetra Financial Corporation
("Symetra") acquired certain assets from Safeco Corporation, including all of
the capital stock of SAM. While reviewing the operations of SAM in anticipation
of that transaction, Symetra determined that engaging in the business of
investment adviser to the Safeco Portfolios was not a core business that it
intended to continue. After investigating and discussing several alternatives
for ongoing investment management of the Safeco Portfolios with the Trustees,
Symetra conducted a search for a new investment adviser for the Safeco
Portfolios. Ultimately, Symetra decided to recommend to the Board that Pioneer
Investment Management, Inc. ("Pioneer") be hired to manage the Safeco Portfolios
on an interim basis until the Reorganizations occur and the Safeco Portfolios be
reorganized into similar mutual funds managed by Pioneer.
The Board met at a series of meetings in July 2004. At these meetings your
Trustees received and evaluated materials regarding Pioneer and the Pioneer
Portfolios, including the performance record and expense structure of each of
the Pioneer Portfolios, the impact of the proposed Reorganizations on the Safeco
Portfolios' shareowners, and the quality of the services offered by Pioneer. At
these meetings, the Trustees met with representatives of Pioneer. In addition to
these general factors, the Trustees also considered these and other factors
specifically in the context of each Reorganization. On July 30, 2004, the Board,
including all of the Trustees who are not interested persons of SAM (the
"Independent Trustees"), unanimously voted to approve each of the
Reorganizations. In approving the Reorganizations, the Board determined that the
Reorganizations were in the best interests of the Safeco Portfolios' shareowners
and that the interests of the existing Safeco Portfolios' shareowners will not
be diluted as a result of the Reorganizations.
Pioneer believes that it can offer favorable long-term investment performance
and enhanced shareowner services to the Safeco Portfolios' shareowners. The
Reorganizations will, by combining the assets of two mutual funds and, by being
part of a family of funds with greater distribution capabilities, offer the
potential for increased economies of scale. Increased economies of scale have
the potential of benefiting the shareowners of your Safeco Portfolios and the
Pioneer Portfolios by spreading fixed costs
5
over a larger asset base and reducing expenses on a per share basis. There can
be no assurance that such economies of scale will be realized.
Why the Trustees are Recommending the Reorganizations
The Trustees believe that reorganizing your Safeco Portfolio into a portfolio
with a substantially similar investment objective and similar investment
policies that is part of the Pioneer family of funds offers you potential
benefits. These potential benefits and considerations include:
o SAM, the investment adviser to each of the Safeco Portfolios until
August 2, 2004, was acquired by Symetra. Symetra informed the Board
that it was not interested in continuing to provide investment
advisory services to the Safeco Portfolios. Therefore, a change in
your Safeco Portfolio's investment adviser was necessary;
o The track record of Pioneer in managing the Pioneer Portfolios as
compared to the historical performance of the Safeco Portfolios;
o The resources of Pioneer, including its infrastructure in shareowner
services;
o The opportunity to be part of a significantly larger family of funds,
with additional product offerings and enhanced shareowner servicing
options; and
o Pioneer's commitment until December 10, 2006, or such later date that
is the second anniversary of the day on which each Reorganization
closes (the "Closing Date"), to limit the expenses (excluding
extraordinary expenses) of the Class I shares of each Pioneer
Portfolio.
How Each Reorganization will Work
o Each Safeco Portfolio will transfer all of its assets to a
corresponding Pioneer Portfolio. Each Pioneer Portfolio will assume
the corresponding Safeco Portfolio's liabilities that are included in
the calculation of such Safeco Portfolio's net asset value on the
Closing Date.
o Each Pioneer Portfolio will issue Class I shares to the corresponding
Safeco Portfolio in amounts equal to the aggregate net asset value of
that Safeco Portfolio's shares. Shareowners of your Safeco Portfolio
will receive Class I shares of the corresponding Pioneer Portfolio.
These shares will be distributed to shareowners in proportion to the
relative net asset value of their share holdings on the Closing Date.
On the Closing Date, shareowners will hold the shares of the Pioneer
Portfolio with the same aggregate net asset value as the shares of
your Safeco Portfolio that you held immediately prior to the
Reorganization.
o Each Safeco Portfolio will be dissolved after the Closing Date.
o Pioneer acts as investment adviser to each Pioneer Portfolio. Until
December 10, 2006, or such later date that is the second anniversary
of the Closing Date, Pioneer has agreed to limit each Pioneer
Portfolio's expenses (excluding extraordinary expenses) for Class I
shares. Pioneer is not required to limit any expenses after December
10, 2006, or such later date that is the second anniversary of the
Closing Date.
o The Reorganizations are intended to result in no income, gain or loss
being recognized for federal income tax purposes to any of the Pioneer
Portfolios, the Safeco Portfolios or the shareowners of the Safeco
Portfolios.
o There is no guarantee that your variable contract sponsor will make
the Pioneer Portfolios available to its contract holders even if the
Reorganizations are approved by the shareowners of the Safeco
Portfolios. If the corresponding Pioneer Portfolio is not available as
an investment option under your contract on the date of the
Reorganization, you will have to allocate the money in your Safeco
Portfolio to a different investment option that is available under
your contract.
Who is Pioneer
Pioneer is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended, and acts as investment adviser to mutual funds and
institutional accounts. Pioneer or its predecessors have been managing mutual
funds since 1928 and at June 30, 2004 had, together with its affiliates, over
$35 billion in assets under management. Pioneer is an indirect, wholly-owned
subsidiary of UniCredito Italiano S.p.A., an Italian Bank.
Who Bears the Expenses Associated with the Reorganizations
Pioneer and Symetra will pay all out of pocket expenses of the Safeco Portfolios
and the Pioneer Portfolios associated with the Reorganizations, including, but
not limited to: (1) the expenses associated with the preparation, printing and
mailing of any
6
shareowner communications, including this Proxy Statement/Prospectus, and any
filings with the SEC and other governmental authorities in connection with the
Reorganizations; (2) the fees and expenses of any proxy solicitation firm
retained in connection with the Reorganizations; (3) the legal fees and expenses
incurred by the Safeco Portfolios in connection with the Reorganizations; and
(4) the Trustees' fees and out of pocket expenses incurred as a result of the
Reorganizations.
Will Pioneer and Symetra Benefit from the Reorganizations
Pioneer will benefit from managing a larger pool of assets. Pioneer is also
acquiring certain assets associated with SAM's mutual funds and institutional
account advisory business. In consideration for the acquisition of these assets
and certain covenants from Symetra and SAM, including their assistance in
facilitating the Reorganizations and their obligation to indemnify Pioneer
against certain liabilities, Pioneer has agreed to pay Symetra up to $30
million. This amount is subject to downward adjustment if the net assets of the
Safeco Portfolios (together with assets in certain other accounts) are less than
$2.6 billion.
Why is an Interim Investment Advisory Agreement being Voted On
Having determined to recommend the Reorganizations, the Trustees elected to
appoint Pioneer as investment adviser to each Safeco Portfolio until the closing
of the Reorganizations given that Symetra had indicated that it did not wish to
continue to offer investment advisory services to the Safeco Portfolios.
Under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), shareowners must approve any new investment advisory agreement for a
Safeco Portfolio. However, Rule 15a-4 under the Investment Company Act permits
the Board to appoint an adviser on an interim basis without prior shareowner
approval of the investment advisory agreement with that adviser if the new
adviser agrees to provide such services on the same terms as the previous
adviser. An adviser may act on such an interim basis for a period of 150 days.
Because Pioneer will be making the payment to Symetra discussed above, any fees
that Pioneer would be entitled to under the interim investment advisory
agreement will be held in escrow until shareowner approval of that agreement is
obtained. If shareowners of a Safeco Portfolio do not approve the interim
investment advisory agreement, Pioneer will not receive the fee under the
current investment advisory agreement with SAM but instead would be paid a fee
based upon Pioneer's cost in managing the Portfolio. If the Reorganizations and
the interim investment advisory agreements are not approved by December 30,
2004, Pioneer will no longer provide advisory services to the Safeco Portfolios,
unless an extension of the 150-day period is permitted by a rule or independent
position of the staff of the SEC. If both the Reorganization and appointment of
Pioneer are approved, the interim investment advisory agreement will continue in
effect until the closing of the Reorganization
What Happens if a Reorganization is not Approved
If a Reorganization is not approved, the Board will consider what alternative
action to take. Such action could include liquidating the Safeco Portfolio or
seeking SEC relief to permit Pioneer to serve as investment adviser beyond the
150 day limit and continuing to solicit proxies with respect to the
Reorganization.
Who is Eligible to Vote
If you are the owner of a variable annuity or variable life insurance contract
(a "contract owner"), the insurance company that issued your contract is the
record owner of shares of the Safeco Portfolios. By completing and returning the
enclosed voting instruction card, you will instruct the insurance company how to
vote the shares of the Safeco Portfolio attributable to your contract.
Shareowners of record on October 8, 2004 are entitled to attend and vote at the
Meeting or any adjournment of the Meeting. On each proposal, all shareowners of
a Safeco Portfolio will vote together as a single class. Each share is entitled
to one vote. Shares represented by properly executed proxies, unless revoked
before or at the Meeting, will be voted according to shareowners' instructions.
If you sign a proxy but do not fill in a vote, your shares will be voted to
approve the Agreement and Plan of Reorganization and the interim investment
advisory agreement with Pioneer. If any other business comes before the Meeting,
your shares will be voted at the discretion of the persons named as proxies.
7
Safeco Bond Portfolio and
Pioneer Bond VCT Portfolio
PROPOSAL 1(a)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement/Prospectus, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Bond Portfolio and Pioneer Bond VCT Portfolio have substantially similar
investment objectives and similar investment policies. However, the investment
strategies pursued by Pioneer and SAM may differ as discussed in the table below
under "Investment strategies." The Portfolios are managed by a new investment
adviser, Pioneer, and a different portfolio management team. In addition,
Pioneer Bond VCT Portfolio invests primarily in bonds that are investment grade
whereas Safeco Bond Portfolio does not have such limitation and is subject to
risks of investing in below investment grade securities.
Comparison of Safeco Bond Portfolio to the Pioneer Bond VCT Portfolio
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Safeco Bond Portfolio Pioneer Bond VCT Portfolio
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Business A series of Safeco Resource Series Trust, a A newly created series of Pioneer Variable Contracts
diversified open-end management investment Trust, a diversified open-end management investment
company organized as a Delaware statutory trust. company organized as a Delaware statutory trust.
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Net assets as of $47.8 million None. The Pioneer Bond VCT Portfolio is newly
June 30, 2004 created and does not expect to commence investment
operations until the Reorganization occurs.
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Investment advisers and Investment Adviser (until August 2, 2004): Investment Adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Manager:
Greg Card (since 2004) Kenneth J. Taubes
CFA, Assistant Vice President, SAM Senior Vice President, Pioneer
Joined Pioneer in 1998
Tim Hokari (since 2004) Investment Professional since 1982
Assistant Vice President, SAM
Lesley Fox (since 2004)
Assistant Vice President, SAM
Nancy McFadden (since 2004)
Fixed Income Analyst, SAM
Currently Pioneer is acting as investment adviser to
the Portfolio. The portfolio managers of the Pioneer
Portfolio, as indicated in the next column, currently
manage Safeco Bond Portfolio.
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Investment objective Safeco Bond Portfolio seeks to provide as high Pioneer Bond VCT Portfolio seeks to provide current
a level of current income as is consistent with income from an investment grade portfolio with due
the relative stability of capital. regard to preservation of capital and prudent
investment risk.
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Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
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8
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Safeco Bond Portfolio Pioneer Bond VCT Portfolio
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Primary investment Under normal circumstances, Safeco Bond Normally, Pioneer VCT Portfolio will invest at
policy Portfolio invests at least 80% of its net least 80% of its net assets in:
assets (plus any borrowings for investment
purposes) in bonds, most of which are o Debt securities issued or guaranteed by the
medium-term. U.S. government or its agencies and
instrumentalities,
o Debt securities, including convertible debt,
or corporate and other issuers rated at
least investment grade at the time of
investment, and comparably rated commercial
paper,
o Cash and cash equivalents, certificates of
deposit, repurchase agreement maturing in
one week or less and bankers' acceptances
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Investment strategies SAM historically analyzed each security it Pioneer will consider both broad economic and issuer
considered for purchase on a stand-alone basis specific factors in selecting a portfolio designed
and on how the security fits in with other to achieve the Portfolio's investment objective.
assets of the Portfolio. SAM historically considered:
o The price of the security relative to In assessing the appropriate maturity, rating and
its rating and market sector sector weighting of the Portfolio, Pioneer will
o Structural features, such as an consider a variety of factors that are expected to
issuer's right to buy the bond back at a influence economic activity and interest rates.
stated price (a "call"), or the Portfolio's These factors include fundamental economic
right to require the issuer to buy the bond indicators, Federal Reserve monetary policy and the
back at a stated price (a "put") relative value of the U.S. dollar compared to other
o The effect the security might have on currencies.
the existing diversification of Portfolio
assets and allocation among various market Once Pioneer determines the preferable portfolio
sectors characteristics, Pioneer selects individual
o The effect the security might have on securities based on the terms of the securities,
the yield and sensitivity to interest rate liquidity and rating, and sector and issuer
changes of the Portfolio's assets overall diversification.
SAM would sell a security if: Pioneer will also employ fundamental research and
o A different sector of the market was due diligence to assess an issuer's credit quality,
more attractive taking into account financial condition and
o SAM was concerned about an issuer's profitability, future capital needs, potential for
credit risk change in rating, industry outlook, the competitive
o The security becomes fully valued environment and management ability. In making these
o Cash was needed to meet shareowner portfolio decisions, Pioneer relies on the
redemptions knowledge, experience and judgment of its staff who
have access to a wide variety of research.
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Other investments Each Portfolio may invest up to 50% of its assets in mortgage-related securities, including Government
National Mortgage Association ("GNMA") securities, mortgage pass-through securities issued by governmental
and non-governmental issuers and collateralized mortgage obligations ("CMOs") that are rated in the top
four investment grades.
Each Portfolio may invest significantly in debt securities of the following sectors: domestic industrials,
domestic utilities, supranationals, Yankee and foreign. Each Portfolio may also invest in below
investment-grade debt securities.
Each Portfolio may purchase "when-issued" or "delayed-delivery" securities, and may purchase or sell
securities on a "forward commitment" basis.
====================================================================================================================================
Foreign Securities Safeco Bond Portfolio may invest up to 20% of Pioneer Bond VCT Portfolio may invest up to 15% of
its assets in foreign securities which are its total assets in equity and debt securities of
listed on a national exchange, including non-U.S. corporate issuers and in debt securities of
investments in American Depositary Receipts. non-U.S. government issuers. The Portfolio will not
invest more than 5% of its total assets in the
securities of emerging markets issuers.
====================================================================================================================================
9
====================================================================================================================================
Safeco Bond Portfolio Pioneer Bond VCT Portfolio
====================================================================================================================================
Temporary defensive Safeco Bond Portfolio may hold cash or invest Pioneer Bond VCT Portfolio may invest part or all of
strategies in high-quality, short-term securities issued its assets in securities with remaining maturities
by an agency or instrumentality of the U.S. of less than one year, cash equivalents or may hold
government, high-quality commercial paper, cash for temporary defensive purposes, including
certificates of deposit, shares of no-load, during periods of unusual cash flows.
open-end money market funds, or repurchase
agreements as a temporary defensive measure when
market conditions so warrant.
====================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act and each Portfolio is subject
to diversification requirements under the Internal Revenue Code of 1986, as amended (the "Code").
====================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
====================================================================================================================================
Restricted and illiquid If immediately after and as a result of such Pioneer Bond VCT Portfolio will not invest more than
securities action the value of the following securities, 15% of its net assets in illiquid and other
in the aggregate, would exceed 15% of Safeco securities that are not readily marketable.
Bond Portfolio's net assets, the Portfolio will Repurchase agreement maturing in more than seven
not (i) purchase securities for which there is days will be included for purposes of the foregoing
no readily available market, (ii) purchase time limit. Securities subject to restrictions on resale
deposits maturing in more than seven days, under the Securities Act of 1933 ("1933 Act") are
(iii) purchase over-the-counter (OTC) options considered illiquid unless they are eligible for
or hold assets set aside to cover OTC options resale pursuant to Rule 144A or another exemption
written by the Portfolio, (iv) enter into from the registration requirements of the 1933 Act
repurchase agreements maturing in more than and are determined to be liquid by Pioneer.
seven days, or (v) invest in interests in real
estate investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
====================================================================================================================================
Borrowing Safeco Bond Portfolio may borrow money (i) from Pioneer Bond VCT Portfolio may not borrow money,
banks or (ii) by engaging in reverse repurchase except the Portfolio may: (a) borrow from banks or
agreements. The Portfolio will not commit to through reverse repurchase agreements in an amount
additional securities purchases if total up to 33 1/3% of the Portfolio's total assets
outstanding borrowings are equal to 5% or more (including the amount borrowed); (b) to the extent
of total assets. permitted by applicable law, borrow up to an
additional 5% of the Portfolio's assets for
temporary purposes; (c) obtain such short-term
credits as are necessary for the clearance of
Portfolio transactions; (d) purchase securities on
margin to the extent permitted by applicable law;
and (e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
====================================================================================================================================
Lending Safeco Bond Portfolio may lend securities to Pioneer Bond VCT Portfolio may not make loans,
qualified institutional investors with a value except that the Portfolio may (i) lend portfolio
of up to 33% of the Portfolio's total assets. securities in accordance with the Portfolio's
investment policies, (ii) enter into repurchase
agreements, (iii) purchase all or a portion of an
issue of publicly distributed debt securities,
bank loan participation interests, bank
certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the
purchase is made upon the original issuance of the
securities, (iv) participate in a credit facility
whereby the Portfolio may directly lend to and
borrow money from other affiliated Portfolios to
the extent permitted under the Investment Company
Act or an exemption therefrom, and (v) make loans
in any other manner consistent with applicable
law, as amended and interpreted or modified from
time to time by any regulatory authority having
jurisdiction.
====================================================================================================================================
10
====================================================================================================================================
Safeco Bond Portfolio Pioneer Bond VCT Portfolio
====================================================================================================================================
Derivative instruments Safeco Bond Portfolio may not purchase Pioneer Bond VCT Portfolio may use futures and
securities on margin. However, the Portfolio options on securities, indices and currencies,
may (i) obtain short-term credits as necessary forward currency exchange contracts and other
to clear its purchases and sales of securities derivatives. The Portfolio does not use derivatives
and (ii) make margin deposits in connection as a primary investment technique and generally
with its use of financial options and futures, limits their use to hedging. However, the Portfolio
forward and spot currency contracts, swap may use derivatives for a variety of non-principal
transactions and other financial contracts or purposes, including:
derivative instruments. o As a hedge against adverse changes in stock
market prices, interest rates or currency
exchange rates
o As a substitute for purchasing or selling
securities
o To increase the Portfolio's return as a
non-hedging strategy that may be considered
speculative
====================================================================================================================================
Other investment As described above, the Portfolios have substantially similar investment strategies and policies.
policies and Certain of the non-principal investment policies and restrictions are different. For a more complete
restrictions discussion of each Portfolio's other investment policies and fundamental and non-fundamental investment
restrictions, see the SAI.
====================================================================================================================================
Buying, Selling and Exchanging Shares
====================================================================================================================================
Sales charges Shares of the Safeco Bond Portfolio are not The Class I shares of Pioneer Bond VCT Portfolio you
subject to any sales charges. receive in the Reorganization will not be subject to
any sales charge.
====================================================================================================================================
Management and other Until August 2, 2004, Safeco Bond Portfolio Pioneer Bond Portfolio will pay Pioneer a
fees paid SAM an investment advisory and management management fee equal to 0.50% of the Portfolio's
fee equal to 0.74% of the Portfolio's average average daily net assets.
daily net assets.
Since August 2, 2004, such fee has In addition, the Portfolio will reimburse Pioneer
been paid into an escrow account and for certain fund accounting and legal expenses
the escrowed fee will be paid to Pioneer if incurred on behalf of the Portfolio.
shareowners approve the interim investment
advisory agreement.
Pioneer has agreed until December 10, 2006 to
For the fiscal year ended December 31, 2003, limit the expenses (excluding extraordinary
the Portfolio's annual operating expenses were expenses) of the Class I shares of the Portfolio
0.86% of the Portfolio's average daily net assets. to 0.62% of the average daily net assets
attributable to Class I.
====================================================================================================================================
Distribution and Shares of Safeco Bond Portfolio and Class I shares of Pioneer Bond VCT Portfolio are not subject to a
service (12b-1) fee Rule 12b-1 fee.
====================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of the
Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment by
the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time, and
each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be refused
if, in the investment adviser's opinion, they are of a size or frequency that would disrupt the
management of the Portfolio.
====================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the Portfolio
receives the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus.
====================================================================================================================================
11
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has substantially the same investment objective, primary
investment policies and strategies, the Portfolios are subject to similar
principal risks.
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco Bond Portfolio Pioneer Bond VCT Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Even though Safeco Bond Portfolio seeks a high level of current Even though Pioneer Bond VCT Portfolio seeks current income,
income, you could lose money on your investment or not make as you could lose money on your investment, or the Portfolio
much if you invested elsewhere if: could fail to generate current income, if:
o Interest rates go up, causing the value of debt o Interest rates go up, causing the value of the
securities in the Portfolio to go down Portfolio's investments to decline
o Below investment grade securities generally have o The issuer of a security owned by the Portfolio
greater volatility, reduced liquidity and a much higher defaults on its obligation to pay principal and/or
risk of repayment default interest or has its credit rating downgraded
o Prepayment fluctuations during periods of declining o During periods of declining interest rates, the
interest rates may decrease the overall investment issuer of a security may exercise its option to
returns of the Portfolio prepay principal earlier than scheduled, forcing the
Portfolio to reinvest in lower yielding securities.
o Risks associated with mortgage-backed securities, such This is known as call or prepayment risk
as interest rate risk and prepayment risk may be
amplified if the investment is in a collateralized
mortgage obligation o During periods of rising interest rates, the average life
of certain types of securities may be extended
o Yankee sector bonds carry the risk of nationalization because of slower than expected principal payments.
of the issuer, confiscatory taxation by the foreign This may lock in a below market interest rate,
government and establishment of controls by the foreign increase the security's duration (the estimated
government that would inhibit the remittance due to the period until the security is paid in full) and reduce
Portfolio the value of the security. This is known as extension risk
o Eurodollar bonds are subject to the risk that a foreign
government might prevent dollar denominated funds from o Pioneer's judgment about the attractiveness, relative
flowing across its borders value or potential appreciation of a particular
sector, security or investment strategy proves to be
o To the extent the Portfolio owns bonds denominated in incorrect
foreign currencies, it could lose money as a result of
unfavorable currency exchange rates o To the extent that the Portfolio invests in high yield
securities, its exposure to the credit risks
associated with such security may be greater, its
income and net asset value may be more volatile and it
may be more difficult to achieve preservation of
principal
o Government sponsored entities such as the
Federal Home Loan Mortgage Corporation (Freddie Mac),
the Federal National Mortgage Association (FNMA) and
the Federal Home Loan Banks (FHLBs), although
chartered or sponsored by Congress, are not funded by
Congressional appropriations and the debt and
mortgage-backed securities issued by them are neither
guaranteed nor issued by the U.S. government.
o To the extent the Portfolio invests significantly in
mortgage-backed securities, its exposure to prepayment
and extension risks may be greater than if it invested
in other fixed income securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in the Portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Portfolio.
12
Past Performance
Set forth below is performance information for Safeco Bond Portfolio. The bar
chart shows how Safeco Bond Portfolio's total return has varied from year to
year for each full calendar year. The table shows the average annual total
return for Safeco Bond Portfolio over time compared with a broad-based
securities market index. The Portfolio's returns in the bar chart and table are
net of annual operating expenses, but do not reflect any additional charges and
expenses that may be imposed by the variable insurance product or the qualified
retirement plan through which you invest. If such charges and expenses were
included, performance would be lower. Past performance does not indicate future
results. Pioneer Bond VCT Portfolio has not commenced investment operations.
Safeco Bond Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 -2.95
1995 17.87
1996 0.54
1997 8.41
1998 8.90
1999 -3.95
2000 11.79
2001 7.28
2002 7.79
2003 3.28
*During the period shown in the bar chart, your Safeco Portfolio's highest
quarterly return was 5.96% for the quarter ended June 30, 1995, and the lowest
quarterly return was -3.15% for the quarter ended March 31, 1994.
Safeco Bond Portfolio
Average Annual Total Returns as of December 31, 2003
1 Year 5 Years 10 Years
------ ------- --------
Safeco Bond Portfolio 3.28% 5.09% 5.70%
Lehman Brothers Aggregate Bond Index(1) 4.10% 6.62% 6.95%
(reflects no deduction for fees or expenses)
- ---------------------
(1)The Lehman Brothers Aggregate Bond Index, an unmanaged index of securities
from the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and Asset-Backed Securities Index, is for reference only
and does not mirror the Portfolio's investments.
The most recent portfolio manager's discussion for Safeco Bond Portfolio is
attached as Exhibit D.
13
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Safeco Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Bond VCT
Portfolio, the estimated expenses. Future expenses may be greater or less.
===============================================================================================
Shareowner transaction fees (paid Pioneer Bond VCT
directly from your investment) Safeco Bond Portfolio Portfolio Class I Shares
===============================================================================================
Redemption fees for shares held less None None
than 30 days
===============================================================================================
Sales charge or deferred sales charge None None
===============================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
===============================================================================================
Management fee 0.74% 0.50%
===============================================================================================
Distribution and service (12b-1) fee None None
===============================================================================================
Other expenses 0.12% 0.23%
===============================================================================================
Total Portfolio operating expenses 0.86% 0.73%
===============================================================================================
Expense reduction None 0.11% (1)
===============================================================================================
Net Portfolio operating expenses 0.86% 0.62%
===============================================================================================
(1) Pioneer has agreed until December 10, 2006 to limit the expenses (excluding
extraordinary expenses) of the Class I shares of Pioneer Bond VCT Portfolio to
0.62% of average daily net assets.
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Bond VCT Portfolio. The examples are for comparison purposes
only and are not a representation of either Portfolio's actual expenses or
returns, either past or future.
======================================================================
Example
======================================================================
Safeco Bond Portfolio
======================================================================
======================================================================
Year 1 $88
======================================================================
Year 3 $274
======================================================================
Year 5 $477
======================================================================
Year 10 $1,061
======================================================================
Pioneer Bond VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $63
======================================================================
Year 3 $211
======================================================================
Year 5 $384
======================================================================
Year 10 $885
======================================================================
14
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Bond Portfolio. The Trustees considered the following matters, among
others, in approving the proposal.
First, SAM, the investment adviser to your Safeco Portfolio until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it was not
interested in continuing to provide investment advisory services to the Safeco
Portfolios. Consequently, a change in your Safeco Portfolio's investment adviser
was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Third, the lower advisory fee that will be payable to Pioneer than the advisory
fee paid by your Safeco Portfolio to SAM.
Fourth, Pioneer's commitment to limit the expenses of Class I shares as
described above. In addition, the estimated expenses of Pioneer Bond VCT
Portfolio are lower than the expenses of your Safeco Portfolio.
Fifth, the Class I shares of Pioneer Bond VCT Portfolio received in the
Reorganization will provide Safeco Bond Portfolio shareowners with exposure to
substantially the same investment product as they currently have.
Sixth, Pioneer's willingness to create similar portfolios where necessary to
provide a reorganization alternative for each of the Safeco Portfolios.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustees' fees and expenses incurred as a
result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganizations."
The board of trustees of Pioneer Bond VCT Portfolio also considered that the
Reorganization presents an excellent opportunity for the Pioneer Bond VCT
Portfolio to acquire investment assets without the obligation to pay commissions
or other transaction costs that a fund normally incurs when purchasing
securities. This opportunity provides an economic benefit to Pioneer Bond VCT
Portfolio and its shareowners.
15
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
===================================================================================================================
Pioneer Bond VCT Portfolio
Safeco Bond Portfolio Class I Shares Combined Fund (Pro Forma
June 30, 2004 June 30, 2004* as of June 30, 2004)
===================================================================================================================
Net Assets (in thousands) $47,820 N/A $47,820
===================================================================================================================
Net Asset Value Per Share $11.24 N/A $11.24
===================================================================================================================
Shares Outstanding 4,256,000 N/A 4,256,000
===================================================================================================================
* Pioneer Bond VCT Portfolio is newly created has not yet commenced operations.
It is impossible to predict how many shares of Pioneer Bond VCT Portfolio will
actually be received and distributed by your Portfolio on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Bond VCT Portfolio's shares that will actually be received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Portfolio. Similarly,
the board of trustees of Pioneer Bond VCT Portfolio, including its Independent
Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of Pioneer Bond VCT Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
16
Safeco Core Equity Portfolio and
Pioneer Fund VCT Portfolio
PROPOSAL 1(b)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Core Equity Portfolio and Pioneer Fund VCT Portfolio have substantially
similar investment objectives and similar investment policies. However, the
investment strategies pursued by Pioneer and SAM may differ as discussed in the
table below under "Investment strategies." The Portfolios are managed by a new
investment adviser, Pioneer, and a different portfolio management team.
Comparison of Safeco Core Equity Portfolio to the Pioneer Fund VCT Portfolio
===================================================================================================================================
Safeco Core Equity Portfolio Pioneer Fund VCT Portfolio
===================================================================================================================================
Business A series of Safeco Resource Series Trust, a A series of Pioneer Variable Contracts Trust, a
diversified open-end management investment company diversified open-end management investment company
organized as a Delaware statutory trust. organized as a Delaware statutory trust.
===================================================================================================================================
Net assets as of $306.9 million $260.3 million
June 30, 2004
===================================================================================================================================
Investment advisers and Investment Adviser (until August 2, 2004): Investment Adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Richard D. Meagley (since 1995) John A. Carey
CFA, Vice President, SAM Executive Vice President, Pioneer
Joined Pioneer in 2001
Investment Professional since 1979
Darcy McLaren (since 2003)
CFA, Vice President, SAM Walter Hunnewell, Jr.
Vice President, Pioneer
Joined Pioneer in 1979
Currently Pioneer is acting as investment adviser
Investment Professional since 1985 to the Portfolio.
The portfolio managers of the Pioneer Portfolio, as
indicated in the next column, currently manage your
Safeco Portfolio.
===================================================================================================================================
Investment objective Safeco Core Equity Portfolio seeks long-term growth Pioneer Fund VCT Portfolio seeks reasonable income
of capital and reasonable current income. and capital growth.
===================================================================================================================================
Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
===================================================================================================================================
Primary investment Under normal circumstances, the Portfolio invests The Portfolio invests the major portion of its
policy at least 80% of its net assets (plus any borrowings assets in equity securities, primarily of U.S.
for investment purposes) in equity securities and, issuers. For purposes of the Portfolio's investment
to a much lesser extent, invests in equity-related policies, equity securities include common stocks,
securities. convertible debt and other equity instruments, such
as depositary receipts, warrants, rights, interests
in estate investment trusts (REITS) and preferred
stocks.
===================================================================================================================================
17
===================================================================================================================================
Safeco Core Equity Portfolio Pioneer Fund VCT Portfolio
===================================================================================================================================
Investment strategies Safeco Core Equity Portfolio invests primarily in Pioneer uses a "value" style of management and
stocks of larger, established companies that: seeks securities selling at reasonable prices or
substantial discounts to their underlying values
o Are proven performers and then holds these securities until the market
o Have predictable earnings growth over a values reflect their intrinsic values. Pioneer
three- to five-year outlook looks at the following factors in selecting
o Have good value relative to earnings investments: favorable expected returns relative to
prospects perceived risk; above average potential for
earnings and revenue growth; low market valuations
To a lesser extent, the Portfolio buys stocks the relative to earnings forecast, book value, cash
investment adviser believes will benefit from a flow and sales; a sustainable competitive advantage
specific short-term earnings catalyst, such as a such as a brand name, customer base, proprietary
cost-cutting program or company restructure. technology or economies of scale.
===================================================================================================================================
Other investments Safeco Core Equity Portfolio may invest in Pioneer Fund VCT Portfolio may invest up to 25% of
securities convertible into common stock, but less its total assets in REITs.
than 35% of its total assets will be invested in
such securities. The Portfolio may invest up to 10% of its total
assets in equity securities of non-U.S. corporate
The Portfolio may invest up to 20% of its assets in issuers and debt securities of non-U.S. corporate
foreign securities which are listed on a national and government issuers. The Portfolio will not
exchange, including investments in American invest more than 5% of its total assets in
Depositary Receipts. securities of emerging markets issuers.
The Portfolio may invest the balance of its assets
in debt securities of corporate and government
issuers. Generally, the Portfolio acquires debt
securities that are rated investment grade, but
the Portfolio may invest up to 5% of its net
assets in below investment grade debt securities
issued by both U.S. and non-U.S. corporate and
government issuers, including below investment
grade convertible debt securities. The Portfolio
invests in debt securities when Pioneer believes
that they are consistent with the Portfolio's
investment objective by offering the potential for
reasonable income and capital growth, to diversity
the Portfolio or for greater liquidity.
===================================================================================================================================
Temporary defensive Safeco Core Equity Portfolio may hold cash or Pioneer Fund VCT Portfolio may invest all or part
strategies invest in high-quality, short-term securities of its assets in securities with remaining
issued by an agency or instrumentality of the U.S. maturities of less than one year, cash equivalents
government, high-quality commercial paper, or may hold cash.
certificates of deposit, shares of no-load,
open-end money market funds, or repurchase
agreements as a temporary defensive measure
when market conditions so warrant.
===================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act and each
Portfolio is subject to diversification requirements under the Code.
===================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
===================================================================================================================================
Restricted and illiquid If immediately after and as a result of such action Pioneer Fund VCT Portfolio will not invest more
securities the value of the following securities, in the than 15% of its net assets in illiquid and other
aggregate, would exceed 15% of Safeco Core Equity securities that are not readily marketable.
Portfolio's net assets, the Portfolio will not (i) Repurchase agreements maturing in more than seven
purchase securities for which there is no readily days will be included for purposes of the foregoing
available market, (ii) purchase time deposits limit. Securities subject to restrictions on resale
maturing in more than seven days, (iii) purchase under the 1933 Act are considered illiquid unless
over-the-counter (OTC) options or hold assets set they are eligible for resale pursuant to Rule 144A
aside to cover OTC options written by the Portfolio, or another exemption from the registration
(iv) enter into repurchase agreements maturing
in more
===================================================================================================================================
18
===================================================================================================================================
Safeco Core Equity Portfolio Pioneer Fund VCT Portfolio
===================================================================================================================================
Borrowing Safeco Core Equity Portfolio may borrow money (i) Pioneer Fund VCT Portfolio may not borrow money,
from banks, or (ii) by engaging in reverse except the Portfolio may: (a) borrow from banks or
repurchase agreements. The Portfolio will not through reverse repurchase agreements in an amount
commit to additional securities purchases if total up to 33 1/3% of the Portfolio's total assets
outstanding borrowings are equal to 5% or more of (including the amount borrowed); (b) to the extent
total assets. permitted by applicable law, borrow up to an
additional 5% of the Portfolio's assets for
temporary purposes; (c) obtain such short-term
credits as are necessary for the clearance of
Portfolio transactions; (d) purchase securities on
margin to the extent permitted by applicable law;
and (e) engage in transactions in mortgage dollar
rolls that are accounted for as financings.
===================================================================================================================================
Lending Safeco Core Equity Portfolio may lend securities to Pioneer Fund VCT Portfolio may not make loans,
qualified institutional investors with a value of except that the Portfolio may (i) lend portfolio
up to 33% of the Portfolio's total assets. securities in accordance with the Portfolio's
investment policies, (ii) enter into repurchase
agreements, (iii) purchase all or a portion of an
issue of publicly distributed debt securities,
bank loan participation interests, bank
certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the
purchase is made upon the original issuance of the
securities, (iv) participate in a credit facility
whereby the Portfolio may directly lend to and
borrow money from other affiliated Portfolios to
the extent permitted under the Investment Company
Act or an exemption therefrom, and (v) make loans
in any other manner consistent with applicable
law, as amended and interpreted or modified from
time to time by any regulatory authority having
jurisdiction.
===================================================================================================================================
Derivative instruments Safeco Core Equity Portfolio may write put or call Pioneer Fund VCT Portfolio may use futures and
options if, as a result thereof, the aggregate options on securities, indices and currencies,
value of the assets underlying all such options forward currency exchange contracts and other
does not exceed 25% of the Portfolio's net assets. derivatives. The Portfolio does not use derivatives
as a primary investment technique and generally
The Portfolio may purchase put or call options on limits their use to hedging. However, the Portfolio
futures contracts if, as a result thereof, the may use derivatives for a variety of non-principal
aggregate premiums paid on all options or options purposes, including:
on futures contracts do not exceed 20% of the o As a hedge against adverse changes in
Portfolio's net assets. stock market prices, interest rates or currency
exchange rates
The Portfolio may enter into any futures contract o As a substitute for purchasing or selling
or option on a futures contract, if as a result securities
thereof, the aggregate margin deposits and premiums o To increase the Portfolio's return as a
required on all such instruments does not exceed 5% non-hedging strategy that may be considered
of the Portfolio's net assets. speculative
The Portfolio may not purchase securities on margin.
However, the Portfolio may (i) obtain short-term
credits as necessary to clear its purchases and sales
of securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
===================================================================================================================================
Other investment policies As described above, the Portfolios have substantially principal investment strategies and
and restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a
more complete discussion of each Portfolio's other investment policies and fundamental and
non-fundamental investment restrictions, see the SAI.
===================================================================================================================================
Buying, Selling and Exchanging Shares
===================================================================================================================================
Sales charges Shares of Safeco Core Equity Portfolio are not The Class I shares of Pioneer Fund VCT Portfolio you
subject to any sales charges. receive in the Reorganization will not be subject to
any sales charge.
===================================================================================================================================
19
===================================================================================================================================
Safeco Core Equity Portfolio Pioneer Fund VCT Portfolio
===================================================================================================================================
Management and other fees Until August 2, 2004, Safeco Core Equity Portfolio Pioneer Fund VCT Portfolio pays Pioneer a
paid SAM an investment advisory and management fee management fee equal to 0.65% of the Portfolio's
equal to 0.74% of the Portfolio's average daily net average daily net assets.
assets. Since August 2, 2004, such fee has been paid
into an escrow account and the escrowed fee During its most recent fiscal year, Pioneer Fund
will be paid to Pioneer if shareowners approve the VCT Portfolio paid an advisory fee at an average
interim investment advisory agreement. rate of 0.65% of average daily net assets.
===================================================================================================================================
For the fiscal year ended December 31, 2003, the In addition, Pioneer Fund VCT Portfolio reimburses
Portfolio's annual operating expenses were 0.80% of Pioneer for certain fund accounting and legal
the Portfolio's average daily net assets. expenses incurred on behalf of the Portfolio and
pays a separate shareowner servicing/transfer
agency fee to PIMSS, an affiliate of Pioneer.
For the fiscal year ended December 31, 2003, the
Portfolio's annual operating expenses for Class I
shares were 0.76% of the Portfolio's average daily
net assets.
Pioneer has agreed until December 10, 2006 to
limit expenses (excluding extraordinary expenses)
of the Class I shares of Pioneer Fund VCT
Portfolio to 0.80% of the average daily net assets
attributable to Class I.
===================================================================================================================================
Distribution and service Shares of Safeco Core Equity Portfolio and Class I of Pioneer Fund VCT Portfolio are not subject
(12b-1) fee to a Rule 12b-1 fee.
===================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of the
Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment by
the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time, and
each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be refused
if, in the investment adviser's opinion, they are of a size or frequency that would disrupt the
management of the Portfolio.
===================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the Portfolio
receives the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus.
===================================================================================================================================
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has a similar investment objective, primary investment
policies and strategies, the Portfolios are subject to the same principal risks.
You could lose money on your investment in either Portfolio or not make as much
as if you invested elsewhere if:
o The stock market goes down (this risk may be greater in the short term)
o Value stocks fall out of favor with investors
o The Portfolio's assets remain undervalued or do not have the potential value
originally expected
o Stocks selected for income do not achieve the same return as securities
selected for capital growth
Investments in the Portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Portfolio.
20
Past Performance
Set forth below is performance information for each Portfolio. The bar charts
show how each Portfolio's total return has varied from year to year for each
full calendar year. The tables show average annual total return for each
Portfolio over time compared with a broad-based securities market index. Each
Portfolio's returns in the bar chart and table are net of annual operating
expenses, but do not reflect any additional charges and expenses that may be
imposed by the variable insurance product or the qualified retirement plan
through which you invest. If such charges and expenses were included,
performance would be lower. Past performance does not indicate future results.
Safeco Core Equity Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 8.94
1995 28.63
1996 24.79
1997 24.85
1998 24.89
1999 9.94
2000 -10.79
2001 -9.38
2002 -25.91
2003 24.78
*During the period shown in the bar chart, your Portfolio's highest quarterly
return was 18.76% for the quarter ended December 31, 1998, and the lowest
quarterly return was -18.21% for the quarter ended September 30, 2002.
Pioneer Fund VCT Portfolio - Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1998 26.12
1999 15.91
2000 1.22
2001 -10.85
2002 -19.03
2003 23.76
*During the period shown in the bar chart, since it's inception on October
31,1997, Pioneer Fund VCT Portfolio's highest quarterly return was 21.04% for
the quarter ended December 31, 1998, and the lowest quarterly return was -17.28%
for the quarter ended September 30, 2002.
21
Average Annual Total Returns as of December 31, 2003
Since
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
Safeco Core Equity Portfolio 24.78% -5.44% 8.34% N/A
Pioneer Fund VCT Portfolio (1) 23.76% 0.94% N/A 5.53%
S&P 500 Index (2) 28.67% -0.57% 11.06% 4.73%
(reflects no deduction for fees or expenses)
- -------------------
(1) The Portfolio commenced operations on October 31, 1997.
(2) The S&P 500 Index, an unmanaged index measuring performance of 500 widely
held common stocks listed on the New York Stock Exchange, American Stock
Exchange and the over-the-counter market, is for reference only and does not
mirror the Portfolio's investments.
The most recent portfolio manager's discussion for Safeco Core Equity Portfolio
and Pioneer Fund VCT Portfolio are attached as Exhibit D.
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Safeco Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Fund VCT
Portfolio, the expenses of Pioneer Fund VCT Portfolio for the period ended
December 31, 2003. Future expenses may be greater or less.
========================================================================================================================
Shareowner transaction fees (paid Safeco Core Equity Pioneer Fund VCT Combined Fund
directly from your investment) Portfolio Portfolio Class I Shares (Pro Forma for the
fiscal year ended
December 31, 2003)
========================================================================================================================
Redemption fees for shares held less None None None
than 30 days
========================================================================================================================
Sales charge or deferred sales charge None None None
========================================================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
========================================================================================================================
Management fee 0.74% 0.65% 0.65%
========================================================================================================================
Distribution and service (12b-1) fee None None None
========================================================================================================================
Other expenses 0.06% 0.11% 0.11%
========================================================================================================================
Total Portfolio operating expenses 0.80% 0.76% 0.76%
========================================================================================================================
Expense reduction None None(1) None
========================================================================================================================
Net Portfolio operating expenses 0.80% 0.76% 0.76%
========================================================================================================================
(1) Pioneer has agreed that until December 10, 2006, Pioneer will limit the
expenses (excluding extraordinary expenses) of the Class I shares of Pioneer
Fund VCT Portfolio to 0.80% of average daily net assets.
22
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Fund VCT Portfolio. The examples are for comparison purposes
only and are not a representation of either Portfolio's actual expenses or
returns, either past or future.
======================================================================
Example
======================================================================
Safeco Core Equity Portfolio
======================================================================
======================================================================
Year 1 $82
======================================================================
Year 3 $255
======================================================================
Year 5 $444
======================================================================
Year 10 $990
======================================================================
Pioneer Fund VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $78
======================================================================
Year 3 $243
======================================================================
Year 5 $422
======================================================================
Year 10 $942
======================================================================
Combined Fund (Pro Forma)
======================================================================
Class I Shares
======================================================================
Year 1 $78
======================================================================
Year 3 $243
======================================================================
Year 5 $422
======================================================================
Year 10 $942
======================================================================
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Core Equity Portfolio. The Trustees considered the following matters,
among others, in approving the proposal.
First, SAM, the investment adviser to your Safeco Portfolio until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it was not
interested in continuing to provide investment advisory services to the Safeco
Portfolios. Consequently, a change in your Portfolio's investment adviser was
necessary.
Second, the investment performance of Pioneer Fund VCT Portfolio is comparable
to the historical investment performance of your Safeco Portfolio. For the one
and five year periods ended June 30, 2004, Class I shares of Pioneer Fund VCT
Portfolio had an average annual return of 17.84% and -0.70%, respectively,
compared to an average annual return of your Portfolio's shares of 14.45% and
5.44%, respectively, during the same periods. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institution and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Fourth, Pioneer Fund VCT Portfolio's lower advisory fee and lower operating
expenses, and Pioneer's commitment to limit the expenses of Class I shares as
described above. Pioneer Fund VCT Portfolio's expense ratio is lower than your
Safeco Portfolio's
23
expenses for the most recent fiscal year, and the expense limitation is no
higher than the expenses of your Portfolio for the most recent fiscal year.
Fifth, the Class I shares of Pioneer Fund VCT Portfolio received in the
Reorganization will provide Safeco Core Equity Portfolio shareowners with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustees' fees and expenses incurred as a
result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganizations."
The board of trustees of Pioneer Fund VCT Portfolio also considered that the
Reorganization presents an excellent opportunity for the Pioneer Fund VCT
Portfolio to acquire investment assets without the obligation to pay commissions
or other transaction costs that a fund normally incurs when purchasing
securities. This opportunity provides an economic benefit to Pioneer Fund VCT
Portfolio and its shareowners.
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
====================================================================================================================
Safeco Core Equity Pioneer Fund VCT Combined Fund
Portfolio Portfolio (Pro Forma as of
June 30, 2004 Class I Shares June 30, 2004)
June 30, 2004
====================================================================================================================
Net Assets (in thousands) $306,907 $149,565 $456,472
====================================================================================================================
Net Asset Value Per Share $22.78 $18.98 $18.98
====================================================================================================================
Shares Outstanding 13,470,000 7,880,000 24,050,000
====================================================================================================================
It is impossible to predict how many shares of Pioneer Fund VCT Portfolio will
actually be received and distributed by your Portfolio on the Reorganization
date. The table should not be relied upon to determine the amount of Pioneer
Fund VCT Portfolio's shares that will actually be received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Board of Trustees
determined that the Reorganization is in the best interests of your Portfolio.
Similarly, the board of trustees of Pioneer Fund VCT Portfolio, including its
Independent Trustees, approved the Reorganization. They also determined that the
Reorganization is in the best interests of the shareowners of Pioneer Fund VCT
Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
24
Safeco Growth Opportunities Portfolio and
Pioneer Growth Opportunities VCT Portfolio
PROPOSAL 1(c)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Growth Opportunities Portfolio and Pioneer Growth Opportunities VCT
Portfolio have substantially similar investment objectives and similar
investment policies. However, the investment strategies pursued by Pioneer and
SAM may differ as discussed in the table below under "Investment strategies."
The Portfolios are managed by a new investment adviser, Pioneer, and a different
portfolio management team.
Comparison of Safeco Growth Opportunities Portfolio to the Pioneer Growth Opportunities VCT Portfolio
===================================================================================================================================
Safeco Growth Opportunities Portfolio Pioneer Growth Opportunities VCT Portfolio
===================================================================================================================================
Business A series of Safeco Resource Series Trust, a A newly created series of Pioneer Variable Contracts
diversified open-end management investment Trust, a diversified open-end management investment
company organized as a Delaware statutory trust. company organized as a Delaware statutory trust.
===================================================================================================================================
Net assets as of $358.3 million None. The Pioneer Growth Opportunities VCT Portfolio
June 30, 2004 is newly created and does not expect to commence
investment operations until the Reorganization
occurs.
===================================================================================================================================
Investment advisers and Investment Adviser (until August 2, 2004): Investment Adviser:
portfolio managers SAM Pioneer
Portfolio Managers (since 2003 and until August Portfolio Managers:
2, 2004): John A. Carey
Jeffrey Schwartz Executive Vice President, Pioneer
CFA, Vice President, SAM Joined Pioneer in 2001
Investment Professional since 1979
Bill Whitlow
CFA, Vice President, SAM Walter Hunnewell, Jr.
Vice President, Pioneer
Currently Pioneer is acting as investment Joined Pioneer in 2001
adviser to the Portfolio. The portfolio managers Investment Professional since 1985
of the Pioneer Portfolio, as indicated in the
next column, currently manage your Safeco Andrew Acheson
Portfolio. Vice President, Pioneer
Joined Pioneer in 2001
Investment Professional since 1994
===================================================================================================================================
Investment objective Each Portfolio seeks growth of capital.
=========================================================================================================
Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
===================================================================================================================================
Primary investment To achieve its investment objective, under Pioneer Growth Opportunities VCT Portfolio invests
policy normal circumstances, Safeco Growth primarily in equity securities of companies that
Opportunities Portfolio invests most of its Pioneer considers to be reasonably priced or
assets in common stocks of companies its undervalued, and have above average earnings and
investment adviser considers to be reasonably revenue growth potential.
priced or undervalued, with above average
growth potential/
===================================================================================================================================
25
===================================================================================================================================
Safeco Growth Opportunities Portfolio Pioneer Growth Opportunities VCT Portfolio
===================================================================================================================================
Investment strategies When evaluating a stock to buy for Safeco Pioneer Growth Opportunities VCT Portfolio uses a
Growth Opportunities Portfolio, SAM "growth at a reasonable price" style of management
historically considered factors such as: and seeks to invest in securities of issuers with
o The strength of the company's balances above average potential for earnings and revenue
sheet growth that are also trading at attractive market
o The quality of the management team valuations. To select stocks, Pioneer employs
o The rate at which the company's quantitative analysis, due diligence and fundamental
earnings are projected to grow research, an evaluation of the issuer based on its
o Whether the company's stock may be financial statements and operations, utilizing a
trading at a discount relative to its bottom-up analytic style. Pioneer relies on the
industry peers or the overall market knowledge, experience and judgment of its staff who
have access to a wide variety of research. Pioneer
Safeco Growth Opportunities Portfolio would focuses on the quality and price of individual
sell a stock if: issuers, not on economic sector or market-timing
o Any of the above factors or other strategies.
relative-value indicators have
deteriorated Factors Pioneer looks for in selecting investments
o The stock becomes overvalued, for include:
example, as a result of overly optimistic |X| Strength of the company's balance sheet
earnings forecasts |X| Quality of the management team
o The stock price reaches a specific |X| Rate at which the company's revenues and
target earnings are projected to grow
o Changes in market value cause the |X| Whether the company's stock may be trading
Portfolio to hold a larger position in the at a discount relative to its industry peers or
stock than its investment adviser wants the overall market
o Other companies present more
attractive investment opportunities Pioneer generally sells a portfolio security when it
o Cash is needed to meet shareowner believes that the issuer no longer offers the
redemptions potential for above average earnings and revenue
growth. Pioneer makes that determination based
upon the same criteria it uses to select portfolio
securities.
===================================================================================================================================
Other investments Each Portfolio may invest in securities convertible into common stock, but less than 35% of its total
assets will be invested in such securities.
Each Portfolio may invest up to 20% of assets in foreign securities.
===================================================================================================================================
Safeco Growth Opportunities Portfolio may Pioneer Growth Opportunities VCT Portfolio may
invest up to 10% of its total assets in debt invest up to 5% of its total assets in debt
securities rated below investment grade. securities rated below investment grade, including
below investment grade convertible debt securities.
===================================================================================================================================
Temporary defensive Safeco Growth Opportunities Portfolio may hold Pioneer Growth Opportunities VCT Portfolio may
strategies cash or invest in high-quality, short-term invest all or part of its assets in securities with
securities issued by an agency or remaining maturities of less than one year, cash
instrumentality of the U.S. government, equivalents or may hold cash.
high-quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements as a
temporary defensive measure when market
conditions so warrant.
===================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act and each Portfolio is subject
to diversification requirements under the Code.
===================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
===================================================================================================================================
Restricted and illiquid If immediately after and as a result of such Pioneer Growth Opportunities VCT Portfolio will not
securities action the value of the following securities, invest more than 15% of its net assets in illiquid
in the aggregate, would exceed 15% of Safeco and other securities that are not readily
Growth Opportunities Portfolio's net assets, marketable. Repurchase agreements maturing in more
the Portfolio will not (i) purchase securities than seven days will be included for purposes of the
for which there is no readily available market, foregoing limit. Securities subject to restrictions
(ii) purchase time deposits maturing in more on resale under the 1933 Act, are considered
than seven days, (iii) purchase illiquid unless they are eligible for resale
over-the-counter (OTC) options or hold assets pursuant to Rule 144A or another exemption from the
set aside to cover OTC options written by the registration requirements of the 1933 Act and are
Portfolio, (iv) enter into repurchase determined to be liquid by Pioneer.
agreements maturing in more than seven days, or
(v) invest in interests in real estate
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
===================================================================================================================================
26
===================================================================================================================================
Safeco Growth Opportunities Portfolio Pioneer Growth Opportunities VCT Portfolio
===================================================================================================================================
Borrowing Safeco Growth Opportunities Portfolio may Pioneer Growth Opportunities VCT Portfolio may not
borrow money (i) from banks, or (ii) by borrow money, except the Portfolio may: (a) borrow
engaging in reverse repurchase agreements. The from banks or through reverse repurchase agreements
Portfolio will not commit to additional in an amount up to 33 1/3% of the Portfolio's total
securities purchases if total outstanding assets (including the amount borrowed); (b) to the
borrowings are equal to 5% or more of total extent permitted by applicable law, borrow up to an
assets. additional 5% of the Portfolio's assets for
temporary purposes; (c) obtain such short-term
credits as are necessary for the clearance of
Portfolio transactions; (d) the Portfolio may
purchase securities on margin to the extent
permitted by applicable law; and (e) engage in
transactions in mortgage dollar rolls that are
accounted for as financings.
===================================================================================================================================
Lending Safeco Growth Opportunities Portfolio may lend Pioneer Growth Opportunities VCT Portfolio may not
securities to qualified institutional investors make loans, except that the Portfolio may (i) lend
with a value of up to 33% of the Portfolio's portfolio securities in accordance with the
total assets. Portfolio's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or a
portion of an issue of publicly distributed debt
securities, bank loan participation interests,
bank certificates of deposit, bankers'
acceptances, debentures or other securities,
whether or not the purchase is made upon the
original issuance of the securities, (iv)
participate in a credit facility whereby the
Portfolio may directly lend to and borrow money
from other affiliated Portfolios to the extent
permitted under the Investment Company Act or an
exemption therefrom, and (v) make loans in any
other manner consistent with applicable law, as
amended and interpreted or modified from time to
time by any regulatory authority having
jurisdiction.
===================================================================================================================================
Derivative instruments Safeco Growth Opportunities Portfolio may write Pioneer Growth Opportunities VCT Portfolio may use
a put or call options if, as a result thereof, futures and options on securities, indices and
the aggregate value of the assets underlying currencies, forward currency exchange contracts and
all such options does not exceed 25% of the other derivatives. The Portfolio does not use
Portfolio's net assets. derivatives as a primary investment technique and
generally limits their use to hedging. However, the
The Portfolio may purchase a put or call Portfolio may use derivatives for a variety of
options or options on a futures contract if, as non-principal purposes, including:
a result thereof, the aggregate premiums paid o As a hedge against adverse changes in stock
on all options or options on futures contracts market prices, interest rates or currency exchange
held by the Portfolio do not exceed 20% of the rates
Portfolio's net assets. o As a substitute for purchasing or selling
securities
The Portfolio may enter into any futures o To increase the Portfolio's return as a
contract or option on futures contract if, as a non-hedging strategy that may be considered
result thereof, the aggregate margin deposits speculative
and premiums required on all such instruments do not
exceed 5% of the Portfolio's net assets.
The Portfolio may not purchase securities on margin.
However, the Portfolio may (i) obtain short-term
credits as necessary to clear its purchases and sales
of securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
===================================================================================================================================
27
===================================================================================================================================
Safeco Growth Opportunities Portfolio Pioneer Growth Opportunities VCT Portfolio
===================================================================================================================================
Other investment As described above, the Portfolios have substantially similar principal investment strategies and
policies and policies. Certain of the non-principal investment policies and restrictions are different. For a more
restrictions complete discussion of each Portfolio's other investment policies and fundamental and non-fundamental
investment restrictions, see the SAI.
===================================================================================================================================
Buying, Selling and Exchanging Shares
===================================================================================================================================
Sales charges Shares of the Portfolio are not subject to any The Class I shares of Pioneer Growth Opportunities
sales charges. VCT Portfolio you receive in the Reorganization will
not be subject to any sales charge.
===================================================================================================================================
Management and other Until August 2, 2004, Safeco Growth Pioneer Growth Opportunities VCT Portfolio will pay
fees Opportunities Portfolio paid SAM an investment Pioneer a management fee equal to 0.74% of the
advisory and management fee equal to 0.74% of Portfolio's average daily net assets.
the Portfolio's average daily net assets. Since
August 2, 2004, such fee has been paid to an In addition, the Portfolio will reimburse Pioneer
escrow account and the escrowed fee will be paid for certain fund accounting and legal expenses
to Pioneer if shareowners approve the interim incurred on behalf of the Portfolio.
investment advisory agreement.
Pioneer has agreed until December 10, 2006 to limit
For the fiscal year ended December 31, 2003, the the expenses (excluding extraordinary expenses) of
Portfolio's annual operating expenses were 0.80% the Class I shares of Pioneer Growth Opportunities
of the Portfolio's average daily net assets. VCT Portfolio to 0.79% of the average daily net
assets attributable to Class I.
===================================================================================================================================
Distribution and Shares of Safeco Growth Opportunities Portfolio and Class I shares of Pioneer Growth Opportunities VCT
service (12b-1) fee Portfolio are not subject to a Rule 12b-1 fee.
===================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of the
Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment by
the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time, and
each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be refused
if, in the investment adviser's opinion, they are of a size or frequency that would disrupt the
management of the Portfolio.
===================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the Portfolio
receives your request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus.
===================================================================================================================================
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has a similar investment objective, primary investment
policies and strategies, the Portfolios are subject to similar principal risks.
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco Growth Opportunities Portfolio Pioneer Growth Opportunities VCT Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
You could lose money on your investment in the Portfolio or not You could lose money on your investment in the Portfolio or
make as much as if you invested elsewhere if: not make as much as if you invested elsewhere if:
o The stock market goes down (this risk factor may be o The stock market goes down
greater in the short term) o Small company or growth stocks fall out of favor with
o Growth stocks fall out of favor with investors investors
o The Portfolio's investments do not have the growth o The portfolio's investments do not have the growth
potential originally expected potential originally expected
o The Portfolio's shares may be subject to frequent and
more significant changes in value than the stock market The Portfolio also has risks associated with investing in
in general due to the volatility of some of the smaller small companies. Compared to large companies, small companies,
companies in which it invests and the market for their equity securities, are likely to:
o During periods of market concern about inflation or
deflation, some securities in which the Portfolio
invests may become more volatile or decline in value
- -----------------------------------------------------------------------------------------------------------------------------------
28
- -----------------------------------------------------------------------------------------------------------------------------------
Investing in non-U.S. issuers may involve unique risks compared o Be more sensitive to changes in the economy, earnings
to investing in securities of U.S. issuers. These risks may results and investor expectations
include: o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Inadequate financial information o Be harder to sell at the times and prices Pioneer
o Smaller, less liquid and more volatile markets thinks appropriate
o Political and economic upheavals o Offer greater potential for gain or loss
Investing in non-U.S. issuers may involve unique
risks compared to investing in securities of U.S.
issuers. These risks are more pronounced to the
extent the portfolio invests in issuers in
countries with emerging markets or if the
portfolio invests significantly in one country.
These risks may include:
|X| Less information about non-U.S. issuers or
markets may be available due to less rigorous
disclosure or accounting standards or
regulatory practices
|X| Many non-U.S. markets are smaller, less liquid
and more volatile. In a changing market,
Pioneer might not be able to sell the
Portfolio's securities at times, in amounts
and at prices it considers reasonable
|X| Adverse effect of currency exchange rates or
controls on the value of the Portfolio's
investments
|X| The economies of non-U.S. countries may grow
at slower rates than expected or may
experience a downturn or recession
|X| Economic, political and social developments
may adversely affect the securities markets
|X| Withholding and other non-U.S. taxes may
decrease the Portfolio's return
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in the Portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Portfolio.
Past Performance
Set forth below is performance information for Safeco Growth Opportunities
Portfolio. The bar charts show how Safeco Growth Opportunities Portfolio's total
return has varied from year to year for each full calendar year. The tables show
average annual total return for Safeco Growth Opportunities Portfolio over time
compared with a broad-based securities market index. Safeco Growth Opportunities
Portfolio's returns in the bar chart and table are net of annual operating
expenses, but do not reflect any additional charges and expenses that may be
imposed by the variable insurance product or the qualified retirement plan
through which you invest. If such charges and expenses were included,
performance would be lower. Past performance does not indicate future results.
Pioneer Growth Opportunities VCT Portfolio has not commenced investment
operations.
Safeco Growth Opportunities Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 11.92
1995 41.00
1996 32.06
1997 44.55
1998 1.83
1999 5.63
2000 -6.15
2001 10.14
2002 -37.87
2003 42.94
*During the period shown in the bar chart, your Portfolio's highest quarterly
return was 33.87% for the quarter ended June 30, 2001, and the lowest quarterly
return was -27.53% for the quarter ended September 30, 2002.
29
Safeco Growth Opportunities Portfolio
Average Annual Total Returns as of December 31, 2003
1 Year 5 Years 10 Years
------ ------- --------
Safeco Growth Opportunities Portfolio 42.94% 1.02% 12.43%
Russell 2000 Index(1) 47.25% 7.13% 9.48%
(reflects no deduction for fees or expenses)
- -----------------------
(1) The Russell 2000 Index, an unmanaged index of 2,000 small capitalization
U.S. stocks, is for reference only and does not mirror the Portfolio's
investments.
The most recent portfolio manager's discussion for Safeco Growth Opportunities
Portfolio is attached as Exhibit D.
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Safeco Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Growth
Opportunities VCT Portfolio, the estimated expenses. Future expenses may be
greater or less.
============================================================================================
Pioneer Growth
Shareowner transaction fees (paid Safeco Growth Opportunities VCT
directly from your investment) Opportunities Portfolio
Portfolio Class I Shares
============================================================================================
Redemption fees for shares held less None None
than 30 days
============================================================================================
Sales charge or deferred sales charge None None
============================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
============================================================================================
Management fee 0.74% 0.74%
============================================================================================
Distribution and service (12b-1) fee None None
============================================================================================
Other expenses 0.06% 0.06%
============================================================================================
Total Portfolio operating expenses 0.80% 0.80%
============================================================================================
Expense reduction None 0.01(1)
============================================================================================
Net Portfolio operating expenses 0.80% 0.79%
============================================================================================
(1) Pioneer has agreed until December 10, 2006 to limit the expenses (excluding
extraordinary expenses) of the Class I shares of Pioneer Growth Opportunities
VCT Portfolio to 0.79% of average daily net assets.
30
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Growth Opportunities VCT Portfolio. The examples are for
comparison purposes only and are not a representation of either Portfolio's
actual expenses or returns, either past or future.
======================================================================
Example
======================================================================
Safeco Growth Opportunities Portfolio
======================================================================
======================================================================
Year 1 $82
======================================================================
Year 3 $255
======================================================================
Year 5 $444
======================================================================
Year 10 $990
======================================================================
Pioneer Growth Opportunities VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $81
======================================================================
Year 3 $253
======================================================================
Year 5 $442
======================================================================
Year 10 $988
======================================================================
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Growth Opportunities Portfolio. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to Safeco Growth Opportunities Portfolio
until August 2, 2004, was acquired by Symetra. Symetra informed the Trustees
that it was not interested in continuing to provide investment advisory services
to the Safeco Portfolios. Consequently, a change in your Portfolio's investment
adviser was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Third, Pioneer's commitment to limit the expenses of Class I shares as described
above. This expense ratio is the same as the expense ratio for your Portfolio
for the most recent semi-annual period ended June 30, 2004.
Fourth, the Class I shares of Pioneer Growth Opportunities VCT Portfolio
received in the Reorganization will provide Safeco Growth Opportunities
Portfolio shareowners with exposure to substantially the same investment product
as they currently have.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustees' fees and expenses incurred as a
result of the Reorganizations.
Fifth, Pioneer's willingness to create similar portfolios where necessary to
provide a reorganization alternative for each of the Safeco Portfolios.
31
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganizations."
The board of trustees of Pioneer Growth Opportunities VCT Portfolio also
considered that the Reorganization presents an excellent opportunity for the
Pioneer Growth Opportunities VCT Portfolio to acquire investment assets without
the obligation to pay commissions or other transaction costs that a fund
normally incurs when purchasing securities. This opportunity provides an
economic benefit to Pioneer Growth Opportunities VCT Portfolio and its
shareowners.
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
===================================================================================================================
Pioneer Growth
Safeco Growth Opportunities Opportunities VCT
Portfolio Portfolio* Combined Fund
June 30, 2004 Class I Shares (Pro Forma as of June 30,
June 30, 2004 2004)
===================================================================================================================
Net Assets (in thousands) $358,322 N/A $358,322
===================================================================================================================
Net Asset Value Per Share $21.19 N/A $21.19
===================================================================================================================
Shares Outstanding 16,906,000 N/A 16,906,000
===================================================================================================================
* Pioneer Growth Opportunities VCT Portfolio is newly created and has not yet
commenced operations.
It is impossible to predict how many shares of Pioneer Growth Opportunities VCT
Portfolio will actually be received and distributed by your Portfolio on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Growth Opportunities VCT Portfolio's shares that will actually be
received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Board of Trustees
determined that the Reorganization is in the best interests of your Portfolio.
Similarly, the board of trustees of Pioneer Growth Opportunities VCT Portfolio,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer Growth
Opportunities VCT Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
32
Safeco Money Market Portfolio and
Pioneer Money Market VCT Portfolio
PROPOSAL 1(d)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Money Market Portfolio and Pioneer Money Market VCT Portfolio have
substantially similar investment objectives and similar investment policies.
However, the investment strategies pursued by Pioneer and SAM may differ as
discussed in the table below under "Investment strategies." The Portfolios are
managed by a new investment adviser, Pioneer, and a different portfolio
management team.
Comparison of Safeco Money Market Portfolio to the Pioneer Money Market VCT Portfolio
====================================================================================================================================
Safeco Money Market Portfolio Pioneer Money Market VCT Portfolio
===================================================================================================================================
Business A series of Safeco Resource Series Trust, a A series of Pioneer Variable Contracts Trust, a
diversified open-end management investment diversified open-end management investment
company organized as a Delaware statutory trust. company organized as a Delaware statutory trust.
===================================================================================================================================
Net assets as of June $24.9 million $29.2 million
30, 2004
===================================================================================================================================
Investment advisers Investment Adviser (until August 2, 2004): Investment Adviser:
and portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Manager:
Lesley Fox (since 2000) Kenneth J. Taubes
Assistant Vice President, SAM Senior Vice President, Pioneer
Joined Pioneer in 1998
Cathleen Beauchamp (since 2004) Investment Professional since 1982
CFA
Currently Pioneer is acting as investment adviser to
the Portfolio. The portfolio managers of the Pioneer
Portfolio, as indicated in the next column, currently
manage your Safeco Portfolio.
===================================================================================================================================
Investment objective Safeco Money Market Portfolio seeks as high a Pioneer Money Market VCT Portfolio seeks current
level of current income as is consistent with the income consistent with preservation of capital
preservation of capital and liquidity through and providing liquidity.
investment in high-quality money market instruments
maturing in 13 months or less.
===================================================================================================================================
Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
===================================================================================================================================
33
====================================================================================================================================
Safeco Money Market Portfolio Pioneer Money Market VCT Portfolio
===================================================================================================================================
Primary investment Safeco Money Market Portfolio may invest in: Pioneer Money Market VCT Portfolio invests in
policy o Commercial paper of both domestic and high-quality, U.S. dollar denominated money
foreign issuers market securities including those issued by:
o Negotiable and non-negotiable o U.S. and foreign banks and savings and
certificates of deposit, bankers' acceptances, loan associations with total assets in excess
and other short-term obligations of U.S. and of $10 billion
foreign banks o Corporate issuers
o Repurchase agreements in which the o The U.S. government and its agencies and
Portfolio buys securities at one price and instrumentalities
simultaneously agrees to sell them back at a o Multinational organizations such as the
higher price World Bank
o Variable and floating rate instruments that change
interest rates periodically to keep their market
value near par
o U.S. government securities
o Taxable municipal bonds
===================================================================================================================================
Investment strategies Safeco Money Market Portfolio will purchase only Pioneer Money Market VCT Portfolio invests
high-quality securities with remaining maturities exclusively in securities with a maximum
of 397 days or less. The portfolio will maintain remaining maturity of 397 days and maintains a
a dollar-weighted average portfolio maturity of dollar-weighted average portfolio maturity of 90
no more than 90 days. days or less.
Pioneer complies with the rating, maturity and
diversification requirements applicable to money
market funds. With those limits, Pioneer's
assessment of broad economic factors that are
expected to affect economic activity and interest
rates influences its securities selection.
===================================================================================================================================
Other investments Safeco Money Market Portfolio may invest in: Pioneer Money Market VCT Portfolio may invest
o Restricted securities that are exempt more than 25% of its total assets in U.S.
from registration requirements and eligible government securities and obligations of U.S.
for resale to qualified institutional banks.
investors, such as mutual funds, under Rule
144A or Section 4(2) The Portfolio may invest in any money market
o Corporate obligations such as publicly instrument that is a permissible investment for a
traded bonds and notes money market fund under the rules of the SEC,
o Mortgage-backed securities including commercial paper, certificates of
o When-issued and delayed delivery deposit, time deposits, bankers' acceptances,
securities whose terms and conditions, mortgaged-backed and asset-backed securities,
including price, are fixed by the issuer, repurchase agreements, municipal obligations and
but are to be issued and delivered against other short-term debt securities.
payment in the future, typically 30 to 45
days after the date of commitment. The Portfolio may not, except with respect to
investments in obligations of (a) the U.S.
The Portfolio will limit its investment in government, its agencies, authorities or
municipal obligations the interest on which is instrumentalities and (b) domestic banks,
payable from the revenues of similar types of purchase any security if, as a result (i) more
projects to less than 25% of the Portfolio's than 5% of the assets of the Portfolio would be
total assets. As a matter of operating policy, invested in the securities of any one issuer, or
"similar types of projects" may include sports, (ii) more than 25% of its assets would be
convention or trade show facilities; airports or invested in a particular industry.
mass transportation; sewage or solid waste
disposal facilities; or air and water pollution
control projects.
The Portfolio will limit its investment in securities
whose issuers are located in the same state to less
than 25% of the Portfolio's assets.
The Portfolio may invest up to 25% of its total assets
in the "first tier securities" of a single issuer for
up to three business days after purchase.
The Portfolio may not invest more than 5% of its total
assets in second tier securities. In addition, the
Portfolio may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the
second tier securities of a single issuer.
===================================================================================================================================
34
====================================================================================================================================
Safeco Money Market Portfolio Pioneer Money Market VCT Portfolio
===================================================================================================================================
Temporary defensive Safeco Money Market Portfolio may hold cash as a Pioneer Money Market VCT Portfolio invests all of
strategies temporary defensive measure when market its assets in money market investments that are
conditions so warrant. eligible investments under Rule 2a-7 under the
Investment Company Act.
===================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act, and each Portfolio is subject
to diversification requirements under the Code.
===================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
===================================================================================================================================
Restricted and If immediately after and as a result of such Pioneer Money Market VCT Portfolio will not
illiquid securities action the value of the following securities, in invest more than 10% of its net assets in
the aggregate, would exceed 10% of Safeco Money illiquid and other securities that are not
Market Portfolio's net assets, the Portfolio will readily marketable. Repurchase agreements
not (i) purchase securities for which there is no maturing in more than seven days will be included
readily available market, (ii) purchase time for purposes of the foregoing limit. Securities
deposits maturing in more than seven days, (iii) subject to restrictions on resale under the 1933
purchase over-the-counter (OTC) options or hold Act are considered illiquid unless they are
assets set aside to cover OTC options written by eligible for resale pursuant to Rule 144A or
the Portfolio, (iv) enter into repurchase another exemption from the registration
agreements maturing in more than seven days, or requirements of the 1933 Act and are determined
(v) invest in interests in real estate investment to be liquid by Pioneer.
trusts which are not readily marketable or
interests in real estate limited partnerships
which are not listed or traded on the NASDAQ
Stock Market.
===================================================================================================================================
Borrowing Safeco Money Market Portfolio may borrow money Pioneer Money Market VCT Portfolio may not borrow
(i) from banks or (ii) by engaging in reverse money, except from banks to meet redemptions in
repurchase agreements. The Portfolio will not amounts not exceeding 33 1/3% (taken at the lower
commit to additional securities purchases if of cost or current value) of its total assets
total outstanding borrowings are equal to 5% or (including the amount borrowed). The Portfolio
more of total assets. does not intend to borrow money during the coming
year, and will do so only as a temporary measure
for extraordinary purposes or to facilitate
redemptions. The Portfolio will not purchase
securities while any borrowings are outstanding.
===================================================================================================================================
Lending Safeco Money Market Portfolio may not make loans, Pioneer Money Market VCT Portfolio may not make
provided that this restriction does not prevent loans to any person, except by (i) the purchase
the Portfolio from purchasing debt obligations, of a debt obligation in which the portfolio is
entering into repurchase agreements, loaning its permitted to invest and (ii) engaging in
assets to broker-dealers or institutional repurchase agreements.
investors and investing in loans, including
assignment and participation interests.
===================================================================================================================================
Derivative instruments Safeco Money Market Portfolio may not purchase Pioneer Money Market VCT Portfolio may not (i)
securities on margin. However, the Portfolio may make short sales of securities; (ii) purchase
(i) obtain short-term credits as necessary to securities on margin; and (iii) write, purchase
clear its purchases and sales of securities and or otherwise invest in any put, call, straddle or
(ii) make margin deposits in connection with its spread option or buy or sell real estate,
use of financial options and futures, forward and commodities or commodity futures contracts or
spot currency contracts, swap transactions and invest in oil, gas or mineral exploration or
other financial contracts or derivative development programs.
instruments.
===================================================================================================================================
Other investment As described above, the Portfolios have substantially similar principal investment strategies and
policies and policies. Certain of the non-principal investment policies and restrictions are different. For a more
restrictions complete discussion of each Portfolio's other investment policies and fundamental and non-fundamental
investment restrictions, see the SAI.
===================================================================================================================================
Buying, Selling and Exchanging Shares
===================================================================================================================================
Sales charges Shares of Safeco Money Market Portfolio are not The Class I shares of Pioneer Money Market VCT
subject to any sales charge. Portfolio you receive in the Reorganization will
not be subject to any sales charge.
===================================================================================================================================
35
====================================================================================================================================
Safeco Money Market Portfolio Pioneer Money Market VCT Portfolio
===================================================================================================================================
Management and other Until August 2, 2004, Safeco Money Market Pioneer Money Market VCT Portfolio pays Pioneer a
fees Portfolio paid SAM an investment advisory and management fee equal to 0.50% of the Portfolio's
management fee equal to 0.65% of the Portfolio's average daily net assets.
average daily net assets. Since August 2, 2004, such
fee has been paid to an escrow account and During its most recent fiscal year, Pioneer Money
the escrowed fee will be paid to Pioneer if Market VCT Portfolio paid an advisory fee at an
shareowners approve the interim investment average rate of 0.50% of average daily net assets.
advisory agreement.
===================================================================================================================================
For the fiscal year ended December 31, 2003, the In addition, Pioneer Money Market VCT Portfolio
Portfolio's annual operating expenses were 0.84% reimburses Pioneer for certain fund accounting
of the Portfolio's average daily net assets. and legal expenses incurred on behalf of the
Portfolio and pays a separate shareowner
servicing/transfer agency fee to PIMSS, an
affiliate of Pioneer.
For the fiscal year ended December 31, 2003, the
Portfolio's annual operating expenses for Class I
shares were 0.72% of the Portfolio's average daily
net assets.
Pioneer has agreed until December 10, 2006 to
limit the expenses (excluding extraordinary
expenses) of the Class I shares of the Portfolio
to 0.90% of the average daily net assets
attributable to Class I.
===================================================================================================================================
Distribution and Shares of Safeco Money Market Portfolio and Class I shares of Pioneer Money Market VCT Portfolio are
service (12b-1) fee not subject to a Rule 12b-1 fee.
===================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of
the Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment
by the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time,
and each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be
refused if, in the investment adviser's opinion, they are of a size or frequency that would disrupt
the management of the Portfolio.
===================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the
Portfolio receives the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus. You can also sell your shares by contacting the
Portfolio directly if your account is registered in your name.
===================================================================================================================================
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has a similar investment objective, primary investment
policies and strategies, the Portfolios are subject to the same principal risks.
You could lose money on your investment in either Portfolio or not make as much
as if you invested elsewhere if:
o Interest rates go up causing the value of the Portfolio's investment to
decline
o The issuer of a security owned by the Portfolio defaults on its obligation
to pay principal and/or interest or has its credit rating downgraded
o Pioneer's judgment about the credit quality, attractiveness or relative
value or a particular security proves to be incorrect
36
Past Performance
Set forth below is performance information for each Portfolio. The bar charts
show how each Portfolio's total return has varied from year to year for each
full calendar year. The tables show average annual total return for each
Portfolio over time compared with a broad-based securities market index. Each
Portfolio's returns in the bar chart and table are net of annual operating
expenses, but do not reflect any additional charges and expenses that may be
imposed by the variable insurance product or the qualified retirement plan
through which you invest. If such charges and expenses were included,
performance would be lower. Past performance does not indicate future results.
Safeco Money Market Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 3.65
1995 5.56
1996 4.94
1997 5.08
1998 4.95
1999 4.63
2000 5.82
2001 3.75
2002 1.53
2003 0.5
*During the period shown in the bar chart, your Portfolio's highest quarterly
return was 1.53% for the quarter ended December 31, 2000, and the lowest
quarterly return was 0.07% for the quarter ended December 31, 2003.
Pioneer Money Market VCT Portfolio - Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996 4.51
1997 4.64
1998 4.68
1999 4.38
2000 5.71
2001 3.39
2002 1.19
2003 0.56
*During the period shown in the bar chart, since inception on March 1, 1995,
Pioneer Money Market VCT Portfolio's highest quarterly return was 1.47% for the
quarter ended December 31, 2000, and the lowest quarterly return was 0.10% for
the quarter ended September 30, 2003.
Average Annual Total Returns and 7-Day Yield as of December 31, 2003
Since 7-day
1 Year 5 Years 10 Years Inception Yield
------ ------- -------- --------- -----
Safeco Money Market Portfolio 0.50% 3.23% 4.03% N/A 0.28%
Pioneer Money Market VCT Portfolio, Class I Shares(1) 0.56% 3.03% N/A 3.77% 0.47%
90-day U.S. Treasury Bill 1.03% 3.34% 4.18% 4.13% N/A
(reflects no deduction for fees or expenses)
__________________
(1) The Pioneer Money Market VCT Portfolio commenced operations on March 1,
1995.
The most recent portfolio manager's discussion for Safeco Money Market Portfolio
and Pioneer Money Market VCT Portfolio is attached as Exhibit D.
37
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Money
Market VCT Portfolio, the expenses of Pioneer Money Market VCT Portfolio for the
period ended December 31, 2003. Future expenses may be greater or less.
======================================================================================================================
Pioneer Money Market Combined Fund
VCT Portfolio (Pro Forma for the
Shareowner transaction fees (paid Safeco Money Market Class I Shares fiscal year ended
directly from your investment) Portfolio December 31, 2003)
======================================================================================================================
Redemption fees for shares held less None None None
than 30 days
======================================================================================================================
Sales charge or deferred sales charge None None None
======================================================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
======================================================================================================================
Management fee 0.65% 0.50% 0.50%
======================================================================================================================
Distribution and service (12b-1) fee None None None
======================================================================================================================
Other expenses 0.19% 0.22% 0.22%
======================================================================================================================
Total Portfolio operating expenses 0.84% 0.72% 0.72%
======================================================================================================================
Expense reduction None None (1) None
======================================================================================================================
Net Portfolio operating expenses 0.84% 0.72% 0.72%
======================================================================================================================
(1) Pioneer has agreed until December 10, 2006 to limit the expenses (excluding
extraordinary expenses) of the Class I shares of Pioneer Money Market VCT
Portfolio to 0.90% of average daily net assets.
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Money Market VCT Portfolio. The examples are for comparison
purposes only and are not a representation of either Portfolio's actual expenses
or returns, either past or future.
======================================================================
Example
======================================================================
Safeco Money Market Portfolio
======================================================================
======================================================================
Year 1 $86
======================================================================
Year 3 $268
======================================================================
Year 5 $466
======================================================================
Year 10 $1,037
======================================================================
Pioneer Money Market VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $74
======================================================================
Year 3 $230
======================================================================
Year 5 $401
======================================================================
Year 10 $894
======================================================================
Combined Fund (Pro Forma)
======================================================================
Class I Shares
======================================================================
Year 1 $74
======================================================================
Year 3 $230
======================================================================
Year 5 $401
======================================================================
Year 10 $894
======================================================================
38
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Money Market Portfolio. The Trustees considered the following matters,
among others, in approving the proposal.
First, SAM, the investment adviser to Safeco Money Market Portfolio until August
2, 2004, was acquired by Symetra. Symetra informed the Trustees that it was not
interested in continuing to provide investment advisory services to the Safeco
Portfolios. Consequently, a change in your Portfolio's investment adviser was
necessary.
Second, the investment performance of Pioneer Money Market VCT Portfolio is
comparable to the historical investment performance of your Portfolio. For the
one and five year periods ended June 30, 2004, Class I shares of Pioneer Money
Market VCT Portfolio had an average annual return of 0.46% and 2.68%,
respectively, compared to an average annual return of your Portfolio's shares of
0.32% and 2.82%, respectively, during the same period. In addition, the Trustees
considered the track record of Pioneer in managing equity and fixed income
mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Fourth, Pioneer Money Market VCT Portfolio's advisory fee that will be payable
and its total operating expenses are lower than your Portfolio's advisory fee
and total operating expenses for the most recent fiscal year. In addition,
Pioneer's commitment to limit the expenses of Class I shares as described above.
Fifth, the Class I shares of Pioneer Money Market VCT Portfolio received in the
Reorganization will provide Safeco Money Market Portfolio shareowners with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustees' fees and expenses incurred as a
result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganizations."
The board of trustees of Pioneer Money Market VCT Portfolio also considered that
the Reorganization presents an excellent opportunity for the Pioneer Money
Market VCT Portfolio to acquire investment assets without the obligation to pay
commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Money Market VCT Portfolio and its shareowners.
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
==========================================================================================================================
Pioneer Money Market VCT
Portfolio
Safeco Money Market Class I Shares Combined Fund
Portfolio June 30, 2004 (Pro Forma
June 30, 2004 as of June 30, 2004)
==========================================================================================================================
Net Assets (in thousands) $24,898 $29,179 $54,077
==========================================================================================================================
Net Asset Value Per Share $1.00 $1.00 $1.00
==========================================================================================================================
Shares Outstanding 24,898,000 29,190,000 54,088,000
==========================================================================================================================
39
It is impossible to predict how many shares of Pioneer Money Market VCT
Portfolio will actually be received and distributed by your Portfolio on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Money Market VCT Portfolio's shares that will actually be received
and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Board of Trustees
determined that the Reorganization is in the best interests of your Portfolio.
Similarly, the board of trustees of Pioneer Money Market VCT Portfolio,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer Money
Market VCT Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
40
Safeco Multi-Cap Core Portfolio and
Pioneer Mid Cap Value VCT Portfolio
PROPOSAL 1(e)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Multi-Cap Core Portfolio and Pioneer Mid Cap Value VCT Portfolio have
substantially similar investment objectives and similar investment policies.
However, the investment strategies pursued by Pioneer and SAM may differ as
discussed in the table below under "Investment strategies." The Portfolios are
managed by a new investment adviser, Pioneer, and a different portfolio
management team.
Comparison of Safeco Multi-Cap Core Portfolio to the Pioneer Mid Cap Value VCT Portfolio
===================================================================================================================================
Safeco Multi-Cap Core Portfolio Pioneer Mid Cap Value VCT Portfolio
===================================================================================================================================
Business A series of Safeco Resource Series Trust, a A series of Pioneer Variable Contracts Trust, a
diversified open-end management investment diversified open-end management investment company
company organized as a Delaware statutory trust. organized as a Delaware statutory trust.
===================================================================================================================================
Net assets as of $50.6 million $598 million
June 30, 2004
===================================================================================================================================
Investment advisers and Investment Adviser (until August 2, 2004): Investment Adviser:
portfolio managers SAM Pioneer
Portfolio Managers (until August 2, 2004): Portfolio Managers:
Bill Whitlow (since 1997) J. Rodman Wright
CFA, Vice President, SAM Senior Vice President, Pioneer
Joined Pioneer in 1994
Brian Clancy (since 2003) Investment professional since 1988
CFA, Equity Analyst
Sean Gavin
Currently Pioneer is acting as investment adviser Vice President, Pioneer
to the Portfolio. The portfolio managers of the Joined Pioneer in 2002
Pioneer Portfolio, as indicated in the next column,
currently manage your Safeco Portfolio.
===================================================================================================================================
Investment objective Safeco Multi-Cap Core Portfolio seeks long-term Pioneer Mid Cap Value VCT Portfolio seeks capital
growth of capital. appreciation by investing in a diversified portfolio
of securities consisting primarily of common stocks.
===================================================================================================================================
Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
===================================================================================================================================
41
===================================================================================================================================
Safeco Multi-Cap Core Portfolio Pioneer Mid Cap Value VCT Portfolio
===================================================================================================================================
Primary investment Under normal circumstances, Safeco Multi-Cap Normally, Pioneer Mid Cap Value VCT Portfolio
policy Core Portfolio invests in a blend of growth and invests at least 80% of its total assets in equity
value-oriented stocks of companies of any size. securities of mid-size companies, that is companies
with market values within the range of market values
of companies included in the Russell Midcap Value
Index.
The Portfolio focuses on issuers with
capitalizations within the $1 billion to $10
billion range, and that range will change
depending on market conditions.
The equity securities in which the Portfolio
principally invests are common stocks, preferred
stocks, depositary receipts and convertible debt,
but the Portfolio may invest in other types of
equity securities to a lesser extent, such as
warrants and rights.
===================================================================================================================================
Investment strategies When evaluating a stock to buy for Safeco Pioneer uses a "value" approach to select Pioneer
Multi-Cap Core Portfolio, the Portfolio's Mid Cap Value VCT Portfolio's investments. Pioneer
adviser looks for: seeks securities selling at substantial discounts to
o Faster earnings growth than their their underlying values and then holds these
competitors securities until the market values reflect their
o Low price-to-earnings ratios when intrinsic values.
compared to competitors
o A share price that represents good Pioneer evaluates a security's potential value,
value including the attractiveness of its market
o Potential for long-term appreciation valuation, based on the company's assets and
prospects for earnings growth. Pioneer evaluates
the issuer based on its financial statements and
operations, employing a bottom-up analytic style.
Factors Pioneer looks for in selecting investments
include:
o Favorable expected returns relative to
perceived risk
o Management with demonstrated ability and
commitment to the company
o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that have
been through difficult periods
o Estimated private market value in excess of
current stock price
o Whether the issuer's industry has strong
fundamentals, such as increasing or sustainable
demand and barriers to entry
===================================================================================================================================
Other investments Safeco Multi-Cap Core Portfolio may invest in Pioneer Mid Cap Value VCT Portfolio may invest up to
index futures as a cash management technique 25% of its total assets in equity and debt
in order to keep fully invested. securities of non-U.S. issuers. The Portfolio will
not invest more than 5% of its total assets in the
The Portfolio may invest up to 20% of its securities of emerging markets issuers.
assets in foreign securities which are listed
on a national exchange, including investments The Portfolio may invest up to 20% of its total
in American Depositary Receipts. assets in debt securities of corporate and
government issuers. Generally the Portfolio
acquires debt securities that are investment
grade, but the Portfolio may invest up to 5% of
its net assets in below investment grade
convertible debt securities issued by both U.S.
and non-U.S. issuers. The Portfolio invests in
debt securities when Pioneer believes they are
consistent with the Portfolio's investment
objective by offering the potential for capital
appreciation, to diversify the Portfolio's
portfolio for greater liquidity.
===================================================================================================================================
42
===================================================================================================================================
Safeco Multi-Cap Core Portfolio Pioneer Mid Cap Value VCT Portfolio
===================================================================================================================================
Temporary defensive Safeco Multi-Cap Core Portfolio may hold cash Pioneer Mid Value VCT Portfolio invests all or
strategies or invest in high-quality, short-term part of its assets in securities with remaining
securities issued by an agency or maturities of less than one year, cash equivalents
instrumentality of the U.S. government, or may hold cash.
high-quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements as a
temporary defensive measure when market
conditions so warrant.
===================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act and each Portfolio is subject
to diversification requirements under the Code.
===================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
===================================================================================================================================
Restricted and illiquid If immediately after and as a result of such Pioneer Mid Value VCT Portfolio will not invest
securities action the value of the following securities, more than 15% of its net assets in illiquid and
in the aggregate, would exceed 15% of the other securities that are not readily marketable.
Portfolio's net assets, Safeco Multi-Cap Core Repurchase agreements maturing in more than seven
Portfolio will not (i) purchase securities for days will be included for purposes of the foregoing
which there is no readily available market, limit. Securities subject to restrictions on resale
(ii) purchase time deposits maturing in more under the 1933 Act are considered illiquid unless
than seven days, (iii) purchase they are eligible for resale pursuant to Rule 144A
over-the-counter (OTC) options or hold assets or another exemption from the registration
set aside to cover OTC options written by the requirements of the 1933 Act and are determined to
Portfolio, (iv) enter into repurchase be liquid by Pioneer.
agreements maturing in more than seven days,
or (v) invest in interests in real estate
investment trusts which are not readily
marketable or interests in real estate limited
partnerships which are not listed or traded on
the NASDAQ Stock Market.
===================================================================================================================================
Borrowing Safeco Multi-Cap Core Portfolio may borrow Pioneer Mid Cap Value VCT Portfolio may not borrow
money (i) from banks or (ii) by engaging in money, except from banks to meet redemptions in
reverse repurchase agreements. The Portfolio amounts not exceeding 33 1/3% (taken at the lower of
will not commit to additional securities cost or current value) of its for total assets
purchases if total outstanding borrowings are (including the amount borrowed). The extraordinary
equal to 5% or more of total assets. Portfolio does not intend to borrow money during the
coming year, and will do so only as a temporary
measure for extraordinary purposes or to
facilitate redemptions. The Portfolio will not
purchase securities while any borrowings are
outstanding.
===================================================================================================================================
Lending Safeco Multi-Cap Core Portfolio may lend Pioneer Mid Cap Value VCT Portfolio may not make
securities to qualified institutional investors loans to any person, except by (i) the purchase of a
with a value of up to 33% of the Portfolio's debt obligation in which the Portfolio is permitted
total assets. to invest and (ii) engaging in repurchase
agreements.
===================================================================================================================================
Derivative instruments Safeco Multi-Cap Core Portfolio may not Pioneer Mid Cap Value VCT Portfolio may not (i) make
purchase securities on margin. However, the short sales of securities; (ii) purchase securities
Portfolio may (i) obtain short-term credits as on margin; and (iii) write, purchase or otherwise
necessary to clear its purchases and sales of invest in any put, call, straddle or spread option
securities and (ii) make margin deposits in or buy or sell real estate, commodities or commodity
connection with its use of financial options futures contracts or invest in oil, gas or mineral
and futures, forward and spot currency exploration or development programs.
contracts, swap transactions and other
financial contracts or derivative instruments.
The Portfolio will not write a put or call option if,
as a result thereof, the aggregate value of the assets
underlying all such options would exceed 20% of the
Portfolio's net assets.
===================================================================================================================================
43
===================================================================================================================================
Safeco Multi-Cap Core Portfolio Pioneer Mid Cap Value VCT Portfolio
===================================================================================================================================
The Portfolio will not purchase a put or call
option or option on a futures contract if, as a
result thereof, the aggregate premiums paid on all
options or options on futures contracts held by
the Portfolio would exceed 20% of the Portfolio's
net assets.
The Portfolio will not enter into any futures contract
or option on futures contract if, as a result thereof,
the aggregate margin deposits and premiums required on
all such instruments would exceed 5% of the
Portfolio's net assets.
===================================================================================================================================
Other investment and As described above, the Portfolios have substantially similar principal investment strategies and
policies restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a more
complete discussion of each Portfolio's other investment policies and fundamental and non-fundamental
investment restrictions, see the SAI.
===================================================================================================================================
Buying, Selling and Exchanging Shares
===================================================================================================================================
Sales charges Shares of the Portfolio are not subject to any The Class I shares of Pioneer Mid Cap Value VCT
sales charges. Portfolio you receive in the Reorganization will not
be subject to any sales charge.
===================================================================================================================================
Management and other Until August 2, 2004, Safeco Multi-Cap Core Pioneer Mid Cap Value VCT Portfolio pays Pioneer a
fees Portfolio paid SAM an investment advisory and management fee equal to 0.65% of the Portfolio's
management fee equal to 0.74% of the average daily net assets.
Portfolio's average daily net assets. Since
August 2, 2004, such fee has been paid to an In addition, the Portfolio reimburses Pioneer for
escrow account and the escrowed fee will be certain fund accounting and legal expenses incurred
paid to Pioneer if shareowners approve the on behalf of the Portfolio.
interim investment advisory agreement.
Pioneer has agreed until December 10, 2006 to limit
For the fiscal year ended December 31, 2003, the the expenses (excluding extraordinary expenses) of
Portfolio's annual operating expenses were the Class I shares of the Portfolio to 0.88% of the
0.88% of the Portfolio's average daily net average daily net assets attributable to Class I.
assets.
===================================================================================================================================
Distribution and Shares of Safeco Multi-Cap Core Portfolio and Class I shares of Pioneer Mid Cap Value VCT Portfolio are
service (12b-1) fee not subject to a Rule 12b-1 fee.
===================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of the
Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment by
the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time, and
each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be refused
if, in the investment adviser's opinion, they are of a size or frequency that would disrupt the
management of the Portfolio.
===================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the Portfolio
receives the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus.
===================================================================================================================================
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has a similar investment objective, primary investment
policies and strategies, the Portfolios are subject to the same principal risks.
You could lose money on your investment in either Portfolio or not make as much
as if you invested elsewhere if:
o The stock market goes down (this risk may be greater in the short term)
o Mid-size or value stocks fall out of favor with investors
o The Portfolio's assets remain undervalued or do not have the potential
value originally expected
44
Each Portfolio also has risks associated with investing in mid-size companies.
Compared to large companies, mid-size companies, and the market for their equity
securities, are likely to:
o Be more sensitive to changes in earnings results and investor
expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the times and prices the investment adviser thinks
appropriate
o Offer greater potential for gain and loss
Investing in non-U.S. issuers may involve unique risks compared to investing in
securities of U.S. issuers. These risks may include:
o Less information about non-U.S. issuers or markets may be available due
to less rigorous disclosure or accounting standards or regulatory
practices
o Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, the investment adviser may not be able to sell the
Portfolio's securities at times, in amounts and at prices it considers
reasonable
o Adverse effect of currency exchange rates or controls on the value of
the Portfolio's investments
o The economies of non-U.S. countries may grow at slower rates than
expected or may experience a downturn or recession
o Economic, political and social developments may adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the Portfolio's return
Investments in the Portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Portfolio.
Past Performance
Set forth below is performance information for each Portfolio. The bar charts
show how each Portfolio's total return has varied from year to year for each
full calendar year. The tables show average annual total return for each
Portfolio over time compared with a broad-based securities market index. Each
Portfolio's returns in the bar chart and table are net of annual operating
expenses, but do not reflect any additional charges and expenses that may be
imposed by the variable insurance product or the qualified retirement plan
through which you invest. If such charges and expenses were included,
performance would be lower. Past performance does not indicate future results.
Safeco Multi-Cap Core Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994 3.65
1995 7.42
1996 12.44
1997 31.02
1998 2.89
1999 54.62
2000 -14.93
2001 -10.64
2002 -24.02
2003 45.46
*During the period shown in the bar chart, your Portfolio's highest quarterly
return was 34.35% for the quarter ended December 31, 1999, and the lowest
quarterly return was -21.06% for the quarter ended September 30, 2001.
45
Pioneer Mid Cap Value VCT Portfolio - Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996 15.03
1997 24.69
1998 -4.02
1999 13.13
2000 18
2001 6.49
2002 -11.21
2003 37.48
*During the period shown in the bar chart, since its inception on March 1, 1995,
Pioneer Mid Cap Value VCT Portfolio's highest quarterly return was 17.33% for
the quarter ended June 30, 2003, and the lowest quarterly return was -20.94% for
the quarter ended September 30, 1998.
Safeco Multi-Cap Core Portfolio
Average Annual Total Returns as of December 31, 2003
1 Year 5 Years 10 Years
------ ------- --------
Safeco Multi-Cap Core Portfolio 45.46% 5.37% 8.17%
Russell 3000 Index (1) 31.04% 0.36% 10.77%
(reflects no deduction for fees or expenses)
S&P 500 Index (1) 28.67% -0.57% 11.06%
(reflects no deduction for fees or expenses)
- -------------------
(1) The Russell 3000 Index, an unmanaged index of the 3,000 largest U.S.
companies based on market capitalization, and the S&P 500 Index, an
unmanaged index of 500 stocks, are for reference only and do not mirror the
Portfolio's investments.
Pioneer Mid Cap Value VCT Portfolio
Average Annual Total Returns as of December 31, 2003
Since
1 Year 5 Years Inception
------ ------- ---------
Pioneer Mid Cap Value VCT Portfolio, Class I Shares(1) 37.48% 11.64% 12.34%
Russell Midcap Value Index(2) 38.07% 8.73% 14.17%
(reflects no deduction for fees or expenses)
(1) Pioneer Mid Cap Value VCT Portfolio commenced operations on March 1, 1995.
(2) The Russell Midcap Value Index, an unmanaged index measuring the performance
of those Russell Midcap companies with lower price-to-book ratios and lower
forecasted growth values, is for reference only and does not mirror the
Portfolio's investments.
The most recent portfolio manager's discussion of Safeco Multi-Cap Core
Portfolio and Pioneer Mid Cap Value VCT Portfolio are attached as Exhibit D.
46
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Mid Cap
Value VCT Portfolio, the expenses of Pioneer Mid Cap Value VCT Portfolio for the
period ended December 31, 2003. Future expenses may be greater or less.
================================================================================================================================
Shareowner transaction fees (paid Pioneer Mid Cap Value VCT Combined Fund
directly from your investment) Safeco Multi-Cap Core Portfolio Class I Shares (Pro Forma for the fiscal
Portfolio year ended December 31,
2003)
================================================================================================================================
Redemption fees for shares held less None None None
than 30 days
================================================================================================================================
Sales charge or deferred sales charge None None None
================================================================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
================================================================================================================================
Management fee 0.74% 0.65% 0.65%
================================================================================================================================
Distribution and service (12b-1) fee None None None
================================================================================================================================
Other expenses 0.14% 0.11% 0.18%
================================================================================================================================
Total Portfolio operating expenses 0.88% 0.76% 0.83%
================================================================================================================================
Expense reduction None None (1) None (1)
================================================================================================================================
Net Portfolio operating expenses 0.88% 0.76% 0.83%
================================================================================================================================
(1) Pioneer has agreed until December 10, 2006 to limit the expenses (excluding
extraordinary expenses) of the Class I shares of Pioneer Mid Cap Value VCT
Portfolio to 0.88% of average daily net assets.
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Mid Cap Value VCT Portfolio. The examples are for comparison
purposes only and are not a representation of either Portfolio's actual expenses
or returns, either past or future.
======================================================================
Example
======================================================================
Safeco Multi-Cap Core Portfolio
======================================================================
======================================================================
Year 1 $90
======================================================================
Year 3 $281
======================================================================
Year 5 $488
======================================================================
Year 10 $1,084
======================================================================
Pioneer Mid Cap Value VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $78
======================================================================
Year 3 $243
======================================================================
Year 5 $422
======================================================================
Year 10 $942
======================================================================
Combined Fund (Pro Forma)
======================================================================
Class I Shares
======================================================================
Year 1 $85
======================================================================
Year 3 $265
======================================================================
Year 5 $460
======================================================================
Year 10 $1,025
======================================================================
47
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Multi-Cap Core Portfolio. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to Safeco Multi-Cap Core Portfolio until
August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it
was not interested in continuing to provide investment advisory services to the
Safeco Portfolios. Consequently, a change in your Portfolio's investment adviser
was necessary.
Second, the investment performance of Pioneer Mid Cap Value VCT Portfolio is
comparable to the historical investment performance of your Portfolio. For the
one and five year periods ended June 30, 2004, Class I shares of Pioneer Mid Cap
Value VCT Portfolio had an average annual return of 32.23% and 10.11%,
respectively, compared to an average annual return of your Portfolio's shares of
25.92% and 2.76%, respectively, during the same periods. In addition, the
Trustees considered the track record of Pioneer in managing equity and fixed
income mutual funds.
Third, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Fourth, Pioneer Mid Cap Value VCT Portfolio's lower advisory fees and operating
expenses than your Portfolio's advisory fees and operating expenses for the most
recent fiscal year. In addition, Pioneer's commitment to limit the expenses of
Class I shares as described above. This expense ratio is the same as the expense
ratio of your Portfolio.
Fifth, the Class I shares of Pioneer Mid Cap Value VCT Portfolio received in the
Reorganization will provide Safeco Multi-Cap Core Portfolio shareowners with
exposure to substantially the same investment product as they currently have.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustee fees and expenses incurred as a result
of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganizations."
The board of trustees of Pioneer Mid Cap Value VCT Portfolio also considered
that the Reorganization presents an excellent opportunity for the Pioneer Mid
Cap Value VCT Portfolio to acquire investment assets without the obligation to
pay commissions or other transaction costs that a fund normally incurs when
purchasing securities. This opportunity provides an economic benefit to Pioneer
Mid Cap Value VCT Portfolio and its shareowners.
48
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
===================================================================================================================
Pioneer Mid Cap Value VCT
Safeco Multi-Cap Core Portfolio Combined Fund
Portfolio Class I Shares (Pro Forma
June 30, 2004 June 30, 2004 as of June 30, 2004)
===================================================================================================================
Net Assets (in thousands) $50,632 $198,767 $249,399
===================================================================================================================
Net Asset Value Per Share $19.63 $21.99 $21.99
===================================================================================================================
Shares Outstanding 2,579,000 9,037,285 11,339,786
===================================================================================================================
It is impossible to predict how many shares of Pioneer Mid Cap Value VCT
Portfolio will actually be received and distributed by your Portfolio on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Mid Cap Value VCT Portfolio's shares that will actually be received
and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Board of Trustees
determined that the Reorganization is in the best interests of your Portfolio.
Similarly, the board of trustees of Pioneer Mid Cap Value VCT Portfolio,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer Mid Cap
Value VCT Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
49
Safeco Small-Cap Value Portfolio and
Pioneer Small Cap Value II VCT Portfolio
PROPOSAL 1(f)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in this
Proxy Statement/Prospectus or incorporated herein. You should read carefully the
entire Proxy Statement, including the form of Agreement and Plan of
Reorganization attached as Exhibit A because they contain details that are not
in the summary.
Safeco Small-Cap Value Portfolio and Pioneer Small Cap Value II VCT Portfolio
have substantially similar investment objectives and similar investment
policies. However, the investment strategies pursued by Pioneer and SAM may
differ as discussed in the table below under "Investment strategies." The
Portfolios are managed by a new investment adviser, Pioneer, and a different
portfolio management team.
Comparison of Safeco Small-Cap Value Portfolio to the Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Safeco Small-Cap Value Portfolio Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Business A series of Safeco Resource Series Trust, a A newly created series of Pioneer Variable
diversified open-end management investment company Contracts Trust, a diversified open-end management
organized as a Delaware statutory trust. investment company organized as a Delaware
statutory trust.
===================================================================================================================================
Net assets as of $46.4 million None. Pioneer Small Cap Value II VCT Portfolio is
June 30, 2004 newly created and does not expect to commence
investment operations until the Reorganization
occurs.
===================================================================================================================================
Investment advisers and Investment Adviser (until August 2, 2004): Investment Adviser:
portfolio managers SAM Pioneer
Portfolio Manager (until August 2, 2004): Portfolio Managers:
Greg Eisen (since 1997) David M. Adams
CFA, Assistant Vice President, SAM Vice President, Pioneer
Joined Pioneer in 1994
Currently Pioneer is acting as investment adviser to Investment Professional since 1992
the Portfolio. The portfolio managers of the Pioneer
Portfolio, as indicated in the next column, John McPherson
currently manage your Safeco Portfolio. Assistant Portfolio Manager, Pioneer
Joined Pioneer in 2002
===================================================================================================================================
Investment objective Safeco Small-Cap Value Portfolio seeks Pioneer Small Cap Value II VCT Portfolio seeks
long-term growth of capital through investing capital growth.
primarily in small-sized companies.
===================================================================================================================================
Each Portfolio provides written notice to shareowners at least 60 days prior to any change to its
investment objective as described above.
===================================================================================================================================
50
===================================================================================================================================
Safeco Small-Cap Value Portfolio Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Primary investment Under normal circumstances, Safeco Small-Cap Pioneer Small Cap Value II VCT Portfolio will
policy Value Portfolio invests at least 80% of its net normally invest at least 80% of its net assets in
assets (plus any borrowings for investment equity securities of small companies. Small
purposes) in equity and equity-related companies are those with market values, at the time
securities of companies with total market of investment, that do not exceed the greater of the
capitalization at the time of investment of market capitalization of the largest company within
less than $1.5 billion. the Russell 2000 Index or the 3-year rolling average
of the market capitalization of the largest
company within the Russell 2000 Index as measured
at the end of the preceding month. The Russell
2000 Index measures the performance of the 2,000
smallest companies in the Russell 3000 Index. The
size of the companies in the Index changes with
market conditions and the composition of the
index. Pioneer monitors the Portfolio so that,
under normal circumstances, the capitalization
range of the Portfolio is consistent with the
inclusion of the Portfolio in the Lipper Small-Cap
category. For purposes of the Portfolio's
investment policies, equity securities include
common stocks, convertible debt and other equity
instruments, such as depositary receipts,
warrants, rights, interests in real estate
investment trusts (REITs) and preferred stocks.
===================================================================================================================================
Investment strategies When evaluating a stock to buy for Safeco Pioneer uses a "value" approach to select Pioneer
Small-Cap Value Portfolio, SAM looked for Small Cap Value II Portfolio's investments. Pioneer
companies having one or more of the following seeks securities selling at substantial discounts to
characteristics: their underlying values and then holds these
o Long-term potential for above-average securities until the market values reflect their
or improving earnings growth intrinsic values.
o Involvement in new or innovative
products or services Pioneer evaluates a security's potential value,
o A share price that represents good including the attractiveness of its market
relative value as determined by valuation,based on the company's assets and
price-to-earnings ratio or other commonly prospects for earnings and revenue growth. Factors
used valuation measures Pioneer looks for in selecting investments include:
o Above average potential for earnings and
revenue growth
o Favorable expected returns relative to
perceived risks
o Management with demonstrated ability and
commitment to the company
o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that have
been through difficult periods
o Low debt levels relative to equity
o Issuer's industry has strong fundamentals,
such as increasing or sustainable demand and
barriers to entry
===================================================================================================================================
Other investments Safeco Small-Cap Value Portfolio may invest in Pioneer Small Cap Value II Portfolio may invest up
securities convertible into common stock, but to 25% of its total assets in REITs.
less than 35% of its total assets will be invested
in such securities.
The Portfolio may invest in securities of Canadian
issuers to the same extent as securities of U.S.
The Portfolio may invest up to 20% of its issuers.
assets in foreign securities which are listed
on a national exchange, including investments The Portfolio may invest up to 5% of its total
in American Depositary Receipts. assets in equity and debt securities of other
non-U.S. issuers, including securities of emerging
market issuers.
The Portfolio may invest up to 20% of its total
assets in debt securities of corporate and
government issuers. The Portfolio may invest up to
5% of its net assets in below investment grade
debt securities issued by both U.S. and non-U.S.
issuers, including below investment grade
convertible debt securities.
===================================================================================================================================
51
===================================================================================================================================
Safeco Small-Cap Value Portfolio Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Temporary defensive Safeco Small-Cap Value Portfolio may hold cash Pioneer Small Cap Value II Portfolio may invest all
strategies or invest in high-quality, short-term or part of its assets in securities with remaining
securities issued by an agency or maturities of less than one year, cash equivalents
instrumentality of the U.S. government, or may hold cash.
high-quality commercial paper, certificates of
deposit, shares of no-load, open-end money
market funds, or repurchase agreements as a
temporary defensive measure when market
conditions so warrant.
===================================================================================================================================
Diversification Each Portfolio is diversified for the purpose of the Investment Company Act and each Portfolio is subject
to diversification requirements under the Code.
===================================================================================================================================
Industry concentration Each Portfolio may not invest more than 25% of its assets in any one industry.
===================================================================================================================================
Restricted and illiquid If immediately after and as a result of such Pioneer Small Cap Value II Portfolio will not invest
securities action the value of the following securities, more than 15% of its net assets in illiquid and
in the aggregate, would exceed 15% of the other securities that are not readily marketable.
Portfolio's net assets, Safeco Small-Cap Value Repurchase agreements maturing in more than seven
Portfolio will not (i) purchase securities for days will be included for purposes of the foregoing
which there is no readily available market, limit. Securities subject to restrictions on resale
(ii) purchase time deposits maturing in more under the 1933 Act are considered illiquid unless
than seven days, (iii) purchase they are eligible for resale pursuant to Rule 144A
over-the-counter (OTC) options or hold assets or another exemption from the registration
set aside to cover OTC options written by the requirements of the 1933 Act and are determined to
Portfolio, (iv) enter into repurchase be liquid by Pioneer.
agreements maturing in more than seven days, or
(v) invest in interests in REITs which are not
readily marketable or interests in real estate
limited partnerships which are not listed or
traded on the NASDAQ Stock Market.
===================================================================================================================================
Borrowing Safeco Small-Cap Value Portfolio may borrow Pioneer Small Cap Value II Portfolio may not borrow
money (i) from banks or (ii) by engaging in money in amounts exceeding 10% of the Portfolio's
reverse repurchase agreements. The Portfolio total assets (including the amount borrowed) taken
will not commit to additional securities at market value.
purchases if total outstanding borrowings are
equal to 5% or more of total assets.
===================================================================================================================================
Lending Safeco Small-Cap Value Portfolio may lend Pioneer Small Cap Value II Portfolio may not make
securities to qualified institutional investors loans, except that the Portfolio may (i) lend
with a value of up to 33% of the Portfolio's portfolio securities in accordance with the
total assets. Portfolio's investment policies, (ii) enter into
repurchase agreements, (iii) purchase all or a
portion of an issue of publicly distributed debt
securities, bank loan participation interests,
bank certificates of deposit, bankers'
acceptances, debentures or other securities,
whether or not the purchase is made upon the
original issuance of the securities, (iv)
participate in a credit facility whereby the
Portfolio may directly lend to and borrow money
from other affiliated Portfolios to the extent
permitted under the Investment Company Act or an
exemption therefrom, and (v) make loans in any
other manner consistent with applicable law, as
amended and interpreted or modified from time to
time by any regulatory authority having
jurisdiction.
===================================================================================================================================
52
===================================================================================================================================
Safeco Small-Cap Value Portfolio Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Derivative instruments Safeco Small-Cap Value Portfolio may write put Pioneer Small Cap Value II Portfolio may use futures
or call options if, as a result thereof, the and options on securities, indices and currencies,
aggregate value of the assets underlying all forward currency contracts and other derivatives.
such options does not exchange exceed 25% of The Portfolio does not use derivatives as a primary
the Portfolio's net assets. investment technique and generally limits their use
to hedging. However, the Portfolio may use
The Portfolio may purchase put or call options derivatives for a variety of non-principal purposes,
on futures contracts if, as a result thereof, including:
the aggregate premiums paid on all options or o As a hedge against adverse changes in stock
options on futures contracts do not exceed 20% market prices, interest rates or currency exchange
of the Portfolio's net assets. rates
o As a substitute for purchasing or selling
The Portfolio may enter into any futures securities
contract or option on a futures contract, if as a o To increase the Portfolio's return as a
result thereof, the aggregate margin deposits and non-hedging strategy that may be considered
premiums required on all such instruments does not speculative
exceed 5% of the Portfolio's net assets.
The Portfolio may not purchase securities on margin.
However, the Portfolio may (i) obtain short-term
credits as necessary to clear its purchases and sales
of securities, and (ii) make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
===================================================================================================================================
Other investment and As described above, the Portfolios have substantially similar principal investment strategies and
policies restrictions policies. Certain of the non-principal investment policies and restrictions are different. For a more
complete discussion of each Portfolio's other investment policies and fundamental and non-fundamental
investment restrictions, see the SAI.
===================================================================================================================================
Buying, Selling and Exchanging Shares
===================================================================================================================================
Sales charges Shares of Safeco Small-Cap Value Portfolio are The Class I shares of Pioneer Small Cap Value II VCT
not subject to any sales charges. Portfolio you receive in the Reorganization will not
be subject to any sales charge.
===================================================================================================================================
Management and other Until August 2, 2004, Safeco Small-Cap Value Pioneer Small Cap Value II VCT Portfolio will pay
fees Portfolio paid SAM an investment advisory and Pioneer a management fee equal to 0.75% of the
management fee equal to 0.85% of the Portfolio's Portfolio's average daily net assets.
average daily net assets. Since August 2, 2004, such
fee has been paid to an In addition, the Portfolio will reimburse Pioneer
escrow account and the escrowed fee will be for certain fund accounting and legal expenses
paid to Pioneer if shareowners approve the incurred on behalf of the Portfolio and pays a
interim investment advisory agreement. separate shareowner servicing/transfer agency fee to
PIMSS, an affiliate of Pioneer.
For the fiscal year ended December 31, 2003,
the Portfolio's annual operating expenses were Pioneer has agreed until December 10, 2006 to limit
1.05% of the Portfolio's average daily net the expenses (excluding extraordinary expenses) of
assets. the Class I shares of the Portfolio to 1.01% of the
average daily net assets attributable to Class I.
===================================================================================================================================
Distribution and Shares of Small-Cap Value Portfolio and Class I shares of Pioneer Small Cap Value II VCT Portfolio are
service (12b-1) fee not subject to a Rule 12b-1 fee.
===================================================================================================================================
Buying shares Each Portfolio may sell its shares directly to separate accounts established and maintained by
insurance companies for the purpose of funding variable contracts and to qualified plans. Shares of the
Portfolios are sold at net asset value. Investments in a Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the investment by
the Portfolio. The offering of shares of either Portfolio may be suspended for a period of time, and
each Portfolio reserves the right to reject any specific purchase order. Purchase orders may be refused
if, in the investment adviser's opinion, they are of a size or frequency that would disrupt the
management of the Portfolio.
===================================================================================================================================
53
===================================================================================================================================
Safeco Small-Cap Value Portfolio Pioneer Small Cap Value II VCT Portfolio
===================================================================================================================================
Selling shares Shares of each Portfolio will be sold at net asset value per share next calculated after the Portfolio
receives your request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable contract, as
described in your variable contract's prospectus.
===================================================================================================================================
Comparison of Principal Risks of Investing in the Portfolios
Because each Portfolio has a similar investment objective, primary investment
policies and strategies, the Portfolios are subject to the same principal risks.
Even though each Portfolio seeks capital appreciation, you could lose money on
your investment in either Portfolio or not make as much as if you invested
elsewhere if:
o The stock market goes down (this risk may be greater in the short term)
o Small company or value stocks fall out of favor with investors
o The Portfolio's assets remain undervalued or do not have the potential
value originally expected
Each Portfolio also has risks associated with investing in small companies.
Compared to large companies, small companies, and the market for their equity
securities, are likely to:
o Be more sensitive to changes in the economy, earnings results and
investor expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the time and prices Pioneer thinks appropriate
o Offer greater potential for gain and loss
Investments in the Portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. You could lose money by investing in either Portfolio.
Past Performance
Set forth below is performance information for Safeco Small-Cap Value Portfolio.
The bar chart shows how Safeco Small-Cap Value Portfolio's total return has
varied from year to year for each full calendar year. The table shows average
annual total return for Safeco Small-Cap Value Portfolio over time compared with
a broad-based securities market index. Safeco Small-Cap Value Portfolio's
returns in the bar chart and table are net of annual operating expenses, but do
not reflect any additional charges and expenses that may be imposed by the
variable insurance product or the qualified retirement plan through which you
invest. If such charges and expenses were included, performance would be lower.
Past performance does not indicate future results. Pioneer Small Cap Value II
Portfolio has not commenced investment operations.
Safeco Small-Cap Value Portfolio
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1998 -19.95
1999 15.4
2000 -6.02
2001 21.15
2002 -4.56
2003 42.78
*During the period shown in the bar chart, your Portfolio's highest quarterly
return since its inception in 1997 was 26.56% for the quarter ended December 31,
1999, and the lowest quarterly return was -33.79% for the quarter ended
September 30, 1998.
54
Safeco Small-Cap Value Portfolio
Average Annual Total Returns as of December 31, 2003
Since
1 Year 5 Years Inception (1)
------ ------- -------------
Safeco Small-Cap Value Portfolio 42.78% 12.35% 9.57%
Russell 2000 Value Index (2) 46.03% 12.28% 12.35%
(reflects no deduction for fees or expenses)
- -----------------
(1) The Portfolio commenced operations on April 30, 1997.
(2) The Russell 2000 Value Index, an unmanaged index measuring the
value-oriented stocks in the Russell 2000 Index of small-capitalization of U.S.
stocks, is for reference only and does not mirror the Portfolio's investments.
The most recent portfolio manager's discussion of Safeco Small-Cap Value
Portfolio is attached as Exhibit D.
The Portfolios' Fees and Expenses
Shareowners of both Portfolios pay various fees and expenses, either directly or
indirectly. The tables below show the fees and expenses that you would pay if
you were to buy and hold shares of each Portfolio. The expenses in the tables
appearing below are based on (i) for your Portfolio, the expenses of your
Portfolio for the period ended December 31, 2003 and (ii) for Pioneer Small Cap
Value II VCT Portfolio, the estimated expenses. Future expenses may be greater
or less.
===============================================================================================
Pioneer Small Cap Value
Shareowner transaction fees (paid II VCT
directly from your investment) Safeco Small-Cap Portfolio Portfolio
Class I Shares
===============================================================================================
Redemption fees for shares held less None None
than 30 days
===============================================================================================
Sales charge or deferred sales charge None None
===============================================================================================
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
===============================================================================================
Management fee 0.85% 0.75%
===============================================================================================
Distribution and service (12b-1) fee None None
===============================================================================================
Other expenses 0.20% 0.27%
===============================================================================================
Total Portfolio operating expenses 1.05% 1.02%
===============================================================================================
Expense reduction None 0.01%(1)
===============================================================================================
Net Portfolio operating expenses 1.05% 1.01%
===============================================================================================
(1) Pioneer has agreed until December 10, 2006 to limit the expenses (excluding
extraordinary expenses) of the Class I shares of Pioneer Small Cap Value II VCT
Portfolio to 1.01% of average daily net assets.
55
The hypothetical example below helps you compare the cost of investing in each
Portfolio. It assumes that: (a) you invest $10,000 in each Portfolio for the
time periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each Portfolio's gross operating
expenses remain the same, and (e) the expense limitations are in effect for two
years for Pioneer Small Cap Value II VCT Portfolio. The examples are for
comparison purposes only and are not a representation of either Portfolio's
actual expenses or returns, either past or future.
======================================================================
Example
======================================================================
Safeco Small-Cap Value Portfolio
======================================================================
======================================================================
Year 1 $107
======================================================================
Year 3 $334
======================================================================
Year 5 $579
======================================================================
Year 10 $1,283
======================================================================
Pioneer Small Cap Value II VCT Portfolio
======================================================================
Class I Shares
======================================================================
Year 1 $103
======================================================================
Year 3 $323
======================================================================
Year 5 $561
======================================================================
Year 10 $1,246
======================================================================
Reasons for the Proposed Reorganization
The Trustees believe that the proposed Reorganization is in the best interests
of Safeco Small-Cap Value Portfolio. The Trustees considered the following
matters, among others, in approving the proposal.
First, SAM, the investment adviser to Safeco Small-Cap Value Portfolio until
August 2, 2004, was acquired by Symetra. Symetra informed the Trustees that it
was not interested in continuing to provide investment advisory services to the
Safeco Portfolios. Consequently, a change in your Portfolio's investment adviser
was necessary.
Second, the resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in assets.
Pioneer is part of the global asset management group of UniCredito Italiano
S.p.A., one of the largest banking groups in Italy, providing investment
management and financial services to mutual funds, institutions and other
clients. As of June 30, 2004, assets under management of UniCredito Italiano
S.p.A. were approximately $151 billion worldwide. Shareowners of your Portfolio
would become part of a significantly larger family of funds that offers a more
diverse array of investment options and enhanced shareowner account options. The
Pioneer family of mutual funds offers over 62 funds, including domestic and
international equity and fixed income funds and a money market fund that will be
available to your Portfolio's shareowners through exchanges. In addition,
Pioneer offers shareowners additional options for their accounts, including the
ability to transact and exchange shares over the telephone or online and the
ability to access account values and transaction history in all of the
shareowner's direct accounts in the Pioneer Funds over the telephone or online.
Third, Pioneer Small Cap Value II VCT Portfolio's lower advisory fees and
commitment to limit the expenses of Class I shares as described above.
Fourth, the Class I shares of Pioneer Small Cap Value II VCT Portfolio received
in the Reorganization will provide Safeco Small-Cap Portfolio shareowners with
exposure to substantially the same investment product as they currently have.
Fifth, Pioneer's willingness to create similar portfolios where necessary to
provide a reorganization alternative for each of the Safeco Portfolios.
Pioneer and Symetra will pay all expenses of the Safeco Portfolios and the
Pioneer Portfolios associated with the Reorganizations, including, but not
limited to: (1) the expenses associated with the preparation, printing and
mailing of any shareowner communications, including this Proxy
Statement/Prospectus, and any filings with the SEC and other governmental
authorities in connection with the Reorganizations; (2) the fees and expenses of
any proxy solicitation firm retained in connection with the Reorganizations; (3)
the legal fees and expenses incurred by the Safeco Portfolios in connection with
the Reorganizations; and (4) the Trustees' fees and expenses incurred as a
result of the Reorganizations.
The Trustees considered that Pioneer and Symetra will benefit from the
Reorganization. See "Background to the Reorganization."
56
The board of trustees of Pioneer Small Cap Value II VCT Portfolio also
considered that the Reorganization presents an excellent opportunity for the
Pioneer Small Cap Value II VCT Portfolio to acquire investment assets without
the obligation to pay commissions or other transaction costs that a fund
normally incurs when purchasing securities. This opportunity provides an
economic benefit to Pioneer Small Cap Value II VCT Portfolio and its
shareowners.
Capitalization
The following table sets forth the capitalization of each Portfolio as of June
30, 2004.
===================================================================================================================
Pioneer Small Cap Value
II VCT Combined Fund
Safeco Small-Cap Value Portfolio* (Pro Forma
Portfolio Class I Shares as of June 30, 2004)
June 30, 2004 June 30, 2004
===================================================================================================================
Net Assets (in thousands) $ 46,365 N/A $46,365
===================================================================================================================
Net Asset Value Per Share $ 18.35 N/A $ 18.35
===================================================================================================================
Shares Outstanding 2,527,000 N/A 2,527,000
===================================================================================================================
* Pioneer Small Cap Value II VCT Portfolio is newly created and has not yet
commenced operations.
It is impossible to predict how many shares of Pioneer Small Cap Value II VCT
Portfolio will actually be received and distributed by your Portfolio on the
Reorganization date. The table should not be relied upon to determine the amount
of Pioneer Small-Cap Value II VCT Portfolio's shares that will actually be
received and distributed.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Board of Trustees
determined that the Reorganization is in the best interests of your Portfolio.
Similarly, the board of trustees of Pioneer Small Cap Value II VCT Portfolio,
including its Independent Trustees, approved the Reorganization. They also
determined that the Reorganization is in the best interests of Pioneer Small Cap
Value II VCT Portfolio.
The Trustees recommend that the shareowners of your Safeco Portfolio vote FOR
the proposal to approve the Agreement and Plan of Reorganization.
57
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION
The Reorganizations
o Each Reorganization is scheduled to occur at 4:00 p.m., Eastern time, on
December 10, 2004, unless your Safeco Portfolio and the corresponding
Pioneer Portfolio agree in writing to a later date. Your Safeco
Portfolio will transfer all of its assets to the corresponding Pioneer
Portfolio. The corresponding Pioneer Portfolio will assume your Safeco
Portfolio's liabilities that are included in the calculation of your
Safeco Portfolio's net asset value on the Closing Date of the
Reorganization. The net asset value of both Portfolios will be computed
as of 4:00 p.m., Eastern time, on the Closing Date of the
Reorganization.
o The corresponding Pioneer Portfolio will issue, to your Safeco
Portfolio, Class I shares with an aggregate net asset value equal to the
net assets attributable to your Safeco Portfolio's shares. These shares
will immediately be distributed to your Safeco Portfolio's shareowners
in proportion to the relative net asset value of their holdings of your
Safeco Portfolio's shares on the Closing Date of the Reorganization. As
a result, your Safeco Portfolio's shareowners will end up as Class I
shareowners of the corresponding Pioneer Portfolio.
o After the distribution of shares, your Safeco Portfolio will be
liquidated and dissolved.
o The Reorganization is not intended to result in income, gain or loss
being recognized for federal income tax purposes and will not take place
unless both Portfolios receive a satisfactory opinion concerning the tax
consequences of the Reorganization from Wilmer Cutler Pickering Hale and
Dorr LLP, counsel to the Pioneer Portfolios.
Agreement and Plan of Reorganization
The shareowners of your Safeco Portfolio are being asked to approve an Agreement
and Plan of Reorganization (the "Plan"), substantially in the forms of Exhibits
A-1 and A-2. The description of the Plan contained herein is qualified in its
entirety by the attached copies, as appropriate.
Conditions to Closing each Reorganization. The obligation of each Pioneer
Portfolio to consummate each Reorganization is subject to the satisfaction of
certain conditions, including your Safeco Portfolio's performance of all of its
obligations under the Plan, the receipt of certain documents and financial
statements from your Safeco Portfolio and the receipt of all consents, orders
and permits necessary to consummate the Reorganization (see Sections 7 and 8 of
the Plan, attached as Exhibits A-1 and A-2).
The obligations of both Portfolios are subject to the approval of the Plan by
the necessary vote of the outstanding shares of your Safeco Portfolio, in
accordance with the provisions of your Safeco Portfolio's trust instrument and
by-laws. The Portfolios' obligations are also subject to the receipt of a
favorable opinion of Wilmer Cutler Pickering Hale and Dorr LLP as to the federal
income tax consequences of each Reorganization. (see Section 8.5 of the Plan,
attached as Exhibits A-1 and A-2).
Termination of Agreement. The board of either your Safeco Portfolio or the
corresponding Pioneer Portfolio may terminate the Plan (even if the shareowners
of your Safeco Portfolio have already approved it) at any time before the
Reorganization date, if that board believes in good faith that proceeding with
the Reorganization would no longer be in the best interests of shareowners.
58
TAX STATUS OF EACH REORGANIZATION
Each Reorganization is not intended to result in income, gain or loss being
recognized for United States federal income tax purposes and will not take place
unless both Portfolios involved in the Reorganization receive a satisfactory
opinion from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Pioneer
Portfolios, substantially to the effect that each Reorganization will be a
"reorganization" within the meaning of Section 368(a) of the Code.
As a result, for federal income tax purposes:
o No gain or loss will be recognized by your Safeco Portfolio upon (1) the
transfer of all of its assets to the Pioneer Portfolio as described in this
Proxy Statement/Prospectus or (2) the distribution by your Safeco Portfolio
of Pioneer Portfolio shares to your Safeco Portfolio's shareowners;
o No gain or loss will be recognized by the Pioneer Portfolio upon the receipt
of your Safeco Portfolio's assets solely in exchange for the issuance of
Pioneer Portfolio shares to your Safeco Portfolio and the assumption of your
Safeco Portfolio's liabilities by the corresponding Pioneer Portfolio;
o The basis of the assets of your Safeco Portfolio acquired by the
corresponding Pioneer Portfolio will be the same as the basis of those
assets in the hands of your Safeco Portfolio immediately before the
transfer;
o The tax holding period of the assets of your Safeco Portfolio in the hands
of the corresponding Pioneer Portfolio will include your Safeco Portfolio's
tax holding period for those assets;
o Shareowners will not recognize gain or loss upon the exchange of their
shares of your Safeco Portfolio solely for the Pioneer Portfolio shares as
part of the Reorganization;
o The basis of the Pioneer Portfolio shares received by shareowners in the
Reorganization will be the same as the basis of their shares of your Safeco
Portfolio surrendered in exchange; and
o The tax holding period of the Pioneer Portfolio shares shareowners receive
will include the tax holding period of the shares of your Safeco Portfolio
surrendered in the exchange, provided that ~hareowners held the shares of
the Safeco Portfolio as capital assets on the date of the exchange.
In rendering such opinions, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of your Safeco Portfolio and
the Pioneer Portfolio.
No tax ruling has been or will be received from the Internal Revenue Service
("IRS") in connection with the Reorganizations. An opinion of counsel is not
binding on the IRS or a court, and no assurance can be given that the IRS would
not assert, or a court would not sustain, a contrary position.
You should consult your tax adviser for the particular tax consequences to you
of the transaction, including the applicability of any state, local or foreign
tax laws.
59
PROPOSALS 2(a)-(f)
APPROVAL OF AN INTERIM INVESTMENT ADVISORY AGREEMENT WITH PIONEER
Background
Having determined to recommend the Reorganizations, the Trustees appointed
Pioneer as investment adviser to each Portfolio commencing August 2, 2004 given
that Symetra had indicated that it did not wish to continue to offer investment
advisory services to the Safeco Portfolios. If both the Reorganizations and the
interim investment advisory agreements with Pioneer are approved, the interim
investment advisory agreements will continue in effect until the Closing Date of
the Reorganization.
Interim Investment Advisory Agreement
Under the Investment Company Act, shareowners must approve any new investment
advisory agreement for the Portfolios. However, Rule 15a-4 under the Investment
Company Act permits your trustees to appoint an adviser on an interim basis
without prior shareowner approval if the new adviser agrees to provide such
services on the same terms as the previous adviser and approval of that
investment advisory agreement with that adviser. An adviser may act on such an
interim basis for a period of 150-days. Because Pioneer will be making the
payment to Symetra discussed under "Background to the Reorganizations", any fees
that Pioneer would be entitled to under the interim investment advisory
agreement will be held in escrow by the Portfolio until shareowners approval of
the agreement is obtained. If shareowners of a Safeco Portfolio do not approve
the interim advisory agreement, Pioneer will not receive the fee under the
current investment advisory agreement with SAM but instead would be paid a fee
based upon Pioneer's cost in managing the Portfolio. During this period prior to
the meeting, the Portfolios will be managed as separate Portfolios and will not
be combined with a Pioneer Portfolio. During this period, you also will not be
able to exchange your shares in a Portfolio for shares of a Pioneer Portfolio.
If the appointment of Pioneer as interim investment adviser is not approved by
December 30, 2004, Pioneer will no longer provide advisory services to the
Portfolios, unless an extension of the 150 day period is permitted by a rule or
independent position of the staff of the SEC.
The interim investment advisory agreement incorporates the terms of the advisory
agreement with SAM that terminated August 2, 2004 (the "Safeco Advisory
Agreement"), which are discussed below. The form of interim investment advisory
agreement is attached as Exhibit B.
Reasons for Approving the Interim Investment Advisory Agreement and Board's
Recommendation
The Trustees recommend that the shareowners of the Safeco Portfolios approve the
interim investment advisory agreements. In determining to appoint Pioneer as
investment adviser on an interim basis, the Trustees considered many of the same
factors on which the recommendation to approve the Reorganizations are based.
These factors include:
o SAM, the investment adviser to the Safeco Portfolios until August 2,
2004, was acquired by Symetra. Symetra informed the Trustees that it was
not interested in continuing to provide investment advisory services to
the Safeco Portfolios. Consequently, a change in your Portfolio's
investment management was necessary.
o The resources of Pioneer. At June 30, 2004, Pioneer managed over 62
investment companies and accounts with approximately $35 billion in
assets. Pioneer is part of the global asset management group of
UniCredito Italiano S.p.A., one of the largest banking groups in Italy,
providing investment management and financial services to mutual funds,
institutions, and other clients. As of June 30, 2004, assets under
management by UniCredito Italiano S.p.A. were approximately $151 billion
worldwide.
o The track record of Pioneer in managing other investment companies with
similar strategies.
o Pioneer's willingness to proceed with the Reorganizations and to limit
expenses of the Portfolios as discussed above.
60
o Pioneer's investment process, style and philosophy with respect to
equity and fixed income investing.
o The expertise of John Carey as portfolio manager of Pioneer Fund VCT
Portfolio and the head of equity investments at Pioneer.
o The expertise and experience of Kenneth Taubes as portfolio manager of
several of Pioneer's bond funds and the head of fixed income investments
at Pioneer.
o Pioneer's willingness to act as investment adviser to each of the
Portfolios.
61
Safeco Advisory Agreement
The following is a summary of the material terms of the Safeco Advisory
Agreement.
Services. Under the terms of the Safeco Advisory Agreement, SAM managed the
Portfolios' investments and business affairs, subject to the supervision of the
Board of Trustees. At its expense, SAM provided office space and all necessary
office facilities, equipment and personnel for managing the investments of the
Portfolios.
Compensation. As compensation under the Safeco Advisory Agreement, each
Portfolio paid SAM an annual fee based on a percentage of the Portfolio's
average daily net assets, calculated each business day and paid monthly, as
listed in the table below.
========================================================================
Portfolio Annual Fee
========================================================================
Safeco Bond Portfolio 0.74%
========================================================================
Safeco Core Equity Portfolio 0.74%
========================================================================
Safeco Growth Opportunities Portfolio 0.74%
========================================================================
Safeco Money Market Portfolio 0.65%
========================================================================
Safeco Multi-Cap Core Portfolio 0.74%
========================================================================
Safeco Small-Cap Value Portfolio 0.85%
========================================================================
The table below shows gross advisory fees paid by each Portfolio during the
fiscal year ended December 31, 2003:
==================================================================================
Safeco Bond Portfolio $393,000
Advisory Fee
==================================================================================
Safeco Core Equity Portfolio
Advisory Fee $2,117,000
==================================================================================
Safeco Growth Opportunities Portfolio
Advisory Fee $1,999,000
==================================================================================
Safeco Money Market Portfolio
Advisory Fee $182,000
==================================================================================
Safeco Multi-Cap Core Portfolio
Advisory Fee $319,000
==================================================================================
Safeco Small-Cap Value Portfolio
Advisory Fee $256,000
==================================================================================
Limitation of Liability. The Safeco Advisory Agreement provides that SAM shall
not be subject to liability to the Portfolios or to any shareowner of the
Portfolios for any loss suffered by a Portfolio or its shareowners from or as a
consequence of any act or omission of SAM, or of any of the partners, employees
or agents of SAM, in connection with or pursuant to the Agreement, except by
reason of willful misfeasance, bad faith or gross negligence on the part of SAM
in the performance of its duties or by reason of reckless disregard by SAM of
its obligations and duties under the Agreement.
62
VOTING RIGHTS AND REQUIRED VOTE
Each share of your Safeco Portfolio is entitled to one vote and each fractional
share shall be entitled to a proportionate fractional vote. A quorum is required
to conduct business at the Meeting. With respect to each Safeco Portfolio, the
presence in person or by proxy of one-third of the outstanding shares of a
Portfolio entitled to cast votes at the Meeting will constitute a quorum with
respect to that Portfolio. The favorable vote of a majority of outstanding
voting securities of the applicable Safeco Portfolio is required for each of
Proposals 1(a)-(f). A majority of the outstanding voting securities of the
applicable Safeco Portfolio is also required for each of Proposals 2(a)-(f).
Under the Investment Company Act, the vote of a majority of the outstanding
voting securities means the affirmative vote of the lesser of (i) 67% or more of
the shares of the applicable Portfolio represented at the meeting, if at least
50% of all outstanding shares of the Portfolio are represented at the meeting,
or (ii) 50% or more of the outstanding shares of the Portfolio entitled to vote
at the meeting.
===================================================================================================================================
Shares Quorum Voting
===================================================================================================================================
In General All shares "present" in Shares "present" in person will be voted in person at the Meeting.
person or by proxy are Shares present by proxy will be voted in accordance with
counted towards a quorum. instructions.
===================================================================================================================================
Broker Non-Vote (where the Considered "present" at Broker non-votes do not count as a vote "for" and effectively result
underlying holder has not Meeting for purposes of in a vote "against" Proposals 1(a)-(f), and Proposal 2(a)-(f) if
voted and the broker does quorum. less than 50% of the outstanding shares are present at the Meeting
not have discretionary
authority to vote the shares)
===================================================================================================================================
Proxy with No Voting Considered "present" at Voted "for" the proposal.
Instruction (other than Meeting for purposes of
Broker Non-Vote) quorum.
===================================================================================================================================
Vote to Abstain Considered "present" at Abstentions do not constitute a vote "for" and effectively result in
Meeting for purposes of a vote "against" Proposals 1(a)-(f), and Proposal 2(a)-(f) if less
quorum. than 50% of the outstanding shares are present at the Meeting.
===================================================================================================================================
ADDITIONAL INFORMATION ABOUT THE PIONEER PORTFOLIOS
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Portfolio. Pioneer is
an indirect, wholly owned subsidiary of UniCredito Italiano S.p.A., one of the
largest banking groups in Italy. Pioneer is part of the global asset management
group providing investment management and financial services to mutual funds,
institutional and other clients. As of June 30, 2004, assets under management
were approximately $151 billion worldwide, including over $35 billion in assets
under management by Pioneer. Pioneer's main office is at 60 State Street,
Boston, Massachusetts 02109. Pioneer's U.S. mutual fund investment history
includes creating one of the first mutual funds in 1928.
The board of trustees of the Pioneer Portfolios is responsible for overseeing
the performance of each of Pioneer Portfolio's investment adviser and
subadviser, if any, and determining whether to approve and renew the Portfolio's
investment advisory agreement and the subadvisory agreements.
Pioneer has received an order (the "Exemptive Order") from the SEC that permits
Pioneer, subject to the approval of the Pioneer Portfolios' board of trustees,
to hire and terminate a subadviser or to materially modify an existing
subadvisory agreement for a Pioneer Portfolio without shareowner approval.
Pioneer retains the ultimate responsibility to oversee and recommend the hiring,
termination and replacement of any subadviser. To the extent that the SEC adopts
a rule that would supersede the Exemptive Order, Pioneer and the Pioneer
Portfolios intend to rely on such rule to permit Pioneer, subject to the
approval of the Pioneer Portfolios' board of trustees and any other applicable
conditions of the rule, to hire and terminate a subadviser or to materially
modify an existing subadvisory agreement for a Pioneer Portfolio without
shareowner approval.
63
Buying, Exchanging and Selling Shares of the Pioneer Portfolios
Net Asset Values
Each Pioneer Portfolio's net asset value is the value of its portfolio of
securities plus any other assets minus its operating expenses and any other
liabilities. Each Pioneer Portfolio calculates a net asset value for each class
of shares every day the New York Stock Exchange is open when regular trading
closes (normally 4:00 p.m. Eastern time).
Each Pioneer Portfolio generally values its portfolio securities using closing
market prices or readily available market quotations. When closing market prices
or market quotations are not available or are considered by Pioneer to be
unreliable, the portfolio uses a security's fair value. Fair value is the
valuation of a security determined on the basis of factors other than market
value in accordance with procedures approved by the Pioneer Portfolios'
trustees. The Portfolio also may use the fair value of a security, including a
non-U.S. security, when Pioneer determines that the closing market price on the
primary exchange where the security is traded no longer accurately reflects the
value of the security due to factors affecting one or more relevant securities
markets or the specific issuer. The use of fair value pricing by the Portfolio
may cause the net asset value of its shares to differ from the net asset value
that would be calculated using closing market prices. International securities
markets may be open on days when the U.S. markets are closed. For this reason,
the value of any international securities owned by the Portfolio could change on
a day when insurance companies or qualified plans cannot buy or sell shares of
the Portfolio. In connection with making fair valuations of the value of fixed
income securities, the Portfolio's trustees may use a pricing matrix. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, which is a method of estimating market value.
The interests of variable contracts and qualified plans investing in the
Portfolios could conflict due to differences of tax treatment and other
considerations. The Pioneer Portfolios currently do not foresee any
disadvantages to investors arising out of the fact that each Portfolio may offer
its shares to insurance company separate accounts that serve as the investment
mediums for their variable contracts or that each Portfolio may offer its shares
to qualified plans. Nevertheless, the Portfolios' trustees intend to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should be taken in response
to such conflicts. If such a conflict were to occur, one or more insurance
companies' separate accounts or qualified plans might be required to withdraw
their investments in one or more portfolios and shares of another Portfolio may
be substituted. This might force a portfolio to sell securities at
disadvantageous prices. In addition, the trustees may refuse to sell shares of
any Portfolio to any separate account or qualified plan or may suspend or
terminate the offering of shares of any Portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareowners of
the Portfolio.
Insurance companies and plan fiduciaries are required to notify a Pioneer
Portfolio if the tax status of their separate account or qualified plan is
revoked or challenged by the Internal Revenue Service. The Portfolio may redeem
any account of any shareowner whose qualification as a diversified segregated
asset account or a qualified plan satisfying the requirements of Treasury
Regulation ss.1.817-5 is revoked or challenged. The Portfolio will not treat an
investor as a qualified plan for this purpose unless the investor is among the
categories specifically enumerated in Revenue Ruling 94-62, 1994-2 C.B. 164. An
insurance company separate account or qualified plan whose tax status is revoked
or challenged by the Internal Revenue Service may be liable to the Portfolios or
the adviser for losses incurred by the Portfolios or the adviser as a result of
such action.
Selling
Shares of a Pioneer Portfolio may be sold on any business day. Pioneer Portfolio
shares are sold at net asset value next determined after receipt by the
Portfolio of a redemption request in good order from the insurance company as
described in the prospectus of the insurance company's variable contract. Sale
proceeds will normally be forwarded by bank wire to the selling insurance
company on the next business day after receipt of the sales instructions by a
Pioneer Portfolio but in no event later than 7 days following receipt of
instructions. Each Pioneer Portfolio may suspend transactions in shares or
postpone payment dates when trading on the New York Stock Exchange is closed or
restricted, when the SEC determines an emergency or other circumstances exist
that make it impracticable for the Portfolio to sell or value its investments.
You can obtain more free information about the Pioneer Portfolios by writing to
Pioneer Investment Management Shareowner Services, Inc., 60 State Street,
Boston, Massachusetts 02109. You may also call 1-800-225-6292.
Taxes
Class I shares of each Pioneer Portfolio are held by life insurance company
separate accounts that fund variable annuity or life insurance contracts or by
certain qualified plans. Owners of variable contracts should read the prospectus
for their insurance company's variable contract for a discussion of the tax
status of a variable contract, including the tax consequences of withdrawals or
other payments, and should keep all statements received from the insurance
company or the Pioneer Portfolios to assist in personal recordkeeping.
64
Under the Code, a Pioneer Portfolio's dividends and distributions of net
short-term capital gain in excess of net long-term capital loss to insurance
company separate accounts or qualified plans generally are treated as ordinary
income; distributions to those accounts of net long-term capital gain in excess
of net short-term capital loss are generally treated as long-term capital gain.
For U.S. federal income tax purposes, dividends and capital gain distributions
are treated as received by the insurance company or the qualified plan rather
than by the owner of the variable contract or the plan participant. Insurance
companies and qualified plans should consult their own tax advisers regarding
the tax treatment of dividend and capital gain distributions they receive from
any Pioneer Portfolio.
Each Pioneer Portfolio is treated as a separate entity for U.S. federal income
tax purposes and either has elected, or will elect, to be treated and intends to
qualify each year as a regulated investment company under Subchapter M of the
Code. Each Pioneer Portfolio must satisfy certain requirements relating to the
sources of its income, diversification of its assets and distribution of its
income to shareowners to qualify as a regulated investment company. As a
regulated investment company, each Pioneer Portfolio generally will not be
subject to U.S. federal income tax on any net investment income and net realized
capital gains that are distributed to its shareowners as required under the
Code.
In addition, each Pioneer Portfolio also meets certain diversification
requirements imposed by the Code on separate accounts of insurance companies
relating to the tax-deferred status of variable contracts. The failure of a
qualified plan to be or remain qualified could cause the insurance company
separate account to fail to meet such diversification requirements. More
specific information on these diversification requirements is contained in the
insurance company's separate account prospectus and the statement of additional
information for the Pioneer Portfolio.
FINANCIAL HIGHLIGHTS
The following tables show the financial performance for the past five fiscal
years (or the period during which the Pioneer Portfolio has been in operation,
if less than five years) and for the most recent semi-annual period for each
Pioneer Portfolio which has investment operations. Certain information reflects
financial results for a single Pioneer Portfolio share. "Total return" shows how
much an investment in a Portfolio would have increased or decreased during each
period, assuming you had reinvested all dividends and other distributions. The
financial highlights for each fiscal year ended on or after December 31, 2002
have been audited by Ernst & Young LLP, each Pioneer Portfolio's independent
registered public accounting firm, as stated in their reports incorporated by
reference in this registration statement. For fiscal years prior to December 31,
2002, the financial highlights of the Pioneer Portfolios were audited by Arthur
Anderson LLP. The information for any semi-annual period has not been audited.
65
PIONEER FUND VCT PORTFOLIO
PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/04 ENDED ENDED ENDED ENDED ENDED
CLASS I (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- ------- ----------- -------- --------- --------- ---------- ----------
Net asset value, beginning of period $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70 $ 19.76
Increase (decrease) from investment operations:
Net investment income $ 0.10 $ 0.20 $ 0.19 $ 0.17 0.18 0.16
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.28 3.41 (3.81) (2.57) 0.10 2.97
--------- -------- --------- --------- --------- ---------
Net increase (decrease) from investment $ 0.38 $ 3.61 $ (3.62) $ (2.40) $ 0.28 $ 3.13
operations
Distributions to shareowners:
Net investment income (0.10) (0.19) (0.18) (0.17) (0.18) (0.17)
Net realized gain -- -- -- (1.02) (0.13) (0.02)
Net increase (decrease) in net asset value $ 0.28 $ 3.42 $ (3.80) $ (3.59) $ (0.03) $ 2.94
--------- -------- --------- --------- --------- ---------
Net asset value, end of period $ 18.98 $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70
========= ======== ========= ========= ========= =========
Total return* 2.04% 23.76% (19.03)% (10.85)% 1.22% 15.91%
========= ======== ========= ========= ========= =========
Ratios/Supplemental Data
Ratio of net expenses to average net assets+ 0.71%** 0.76% 0.80% 0.74% 0.69% 0.70%
Ratio of net investment income to average
net assets+ 1.03%** 1.16% 1.09% 0.83% 0.78% 0.82%
Portfolio turnover rate 25%** 11% 11% 7% 37% 8%
Net assets, end of period (in thousands) $149,565 $154,839 $141,892 $199,160 $222,107 $204,927
Ratios with no waiver of management fees and
assumption of expenses by PIM and
no reduction for fees paid indirectly:
Net expenses 0.71%** 0.76% 0.80% 0.74% 0.69% 0.70%
Net investment income (loss) 1.03%** 1.16% 1.09% 0.83% 0.78% 0.82%
* 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
+ Ratios with no reduction for fees paid indirectly.
66
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/04 ENDED ENDED ENDED ENDED ENDED
CLASS I (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- ------- ----------- -------- --------- --------- ---------- ----------
Net asset value, beginning of period $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26 $ 14.49
--------- --------- --------- --------- --------- ---------
Increase (decrease) from investment operations:
Net investment income $ 0.05 $ 0.14 $ 0.07 $ 0.07 $ 0.13 $ 0.13
Net realized and unrealized gain
(loss) on investments 1.76 5.45 (1.97) 1.06 2.62 1.77
--------- --------- --------- --------- --------- ---------
Net increase (decrease) from $ 1.81 $ 5.59 $ (1.90) $ 1.13 $ 2.75 $ 1.90
investment operations
Distributions to shareowners:
Net investment income (0.08) (0.06) (0.05) (0.10) (0.13) (0.13)
Net realized gain (0.21) -- (0.46) (1.47) (1.09) --
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in net asset
value $ 1.52 $ 5.53 $ (2.41) $ (0.44) $ 1.53 $ 1.77
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 21.99 $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26
========= ========= ========= ========= ========= =========
Total return* 8.85% 37.48% (11.21) % 6.49% 18.00% 13.13%
Ratio of net expenses to average net assets+ 0.71%** 0.76% 0.80% 0.79% 0.77% 0.76%
Ratio of net investment income (loss) to
average net assets+ 0.62%** 0.86% 0.46% 0.45% 0.63% 0.77%
Portfolio turnover rate 71%** 52% 68% 95% 85% 91%
Net assets, end of period (in thousands) $198,767 $170,237 $120,687 $128,340 $111,466 $120,526
Ratio with no waiver of management fees and
assumption of expenses by PIM and no
reduction for fees paid indirectly:
Net expenses 0.71%** 0.76% 0.80% 0.79% 0.77% 0.76%
Net investment income (loss) 0.62%** 0.86% 0.46% 0.45% 0.63% 0.77%
Ratio with waiver of management fees and
assumption of expenses by PIM and
reduction for fees paid indirectly:
Net expenses 0.71%** 0.76% 0.80% 0.79% 0.77% 0.76%
Net investment income (loss) 0.62%** 0.86% 0.46% 0.45% 0.63% 0.77%
========= ========= ========= ========= ========= =========
* 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
+ Ratios with no reduction for fees paid indirectly.
67
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/04 ENDED ENDED ENDED ENDED ENDED
CLASS I (Unaudited) 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
- ------- ----------- -------- --------- --------- ---------- ----------
Net asset value, beginning of period $ 1.00 $ 1.000 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Increase (decrease) from investment
operations:
Net investment income (loss) $0.003 $ 0.006 $ 0.01 $ 0.03 $ 0.06 $ 0.04
Distributions to shareowners:
Net investment income (0.003) (0.006) (0.01) (0.03) (0.06) (0.04)
Net asset value, end of period $ 1.00 $ 1.000 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======== ======== ========
Total return* 0.25% 0.56% 1.19% 3.39% 5.71% 4.38%
======= ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Ratio of net expenses to average net
assets+ 0.68%** 0.72% 0.78% 0.78% 0.76% 0.79%
Ratio of net investment income (loss)
to average net assets+ 0.49%** 0.58% 1.11% 3.16% 5.58% 4.34%
======= ======== ======== ======== ======== ========
Net assets, end of period (in thousands) $9,179 $34,736 $59,521 $49,545 $36,979 $37,347
======= ======== ======== ======== ======== ========
Ratios with no waiver of management fees and
assumption of expenses by Pioneer
and no reduction for fees paid indirectly:
Net expenses 0.72%** 0.72% 0.78% 0.78% 0.76% 0.79%
Net investment income (loss) 0.49%** 0.58% 1.11% 3.16% 5.58% 4.34%
Ratios with waiver of management fees and
assumption of expenses by Pioneer and
reduction for fees paid indirectly:
Net expenses 0.72%** 0.72% 0.78% 0.78% 0.75% 0.78%
Net investment income (loss) 0.49%** 0.58% 1.11% 3.16% 5.59% 4.35%
======= ======== ======== ======== ======== ========
* 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
+ Ratios with no reduction for fees paid indirectly.
68
INFORMATION CONCERNING THE MEETING
Voting by Contract Owners
Because the insurance company that issued your variable annuity or variable life
insurance contract is the owner of record of shares of the Portfolio, your vote
will instruct the insurance company how to vote the shares of the Portfolio
attributable to your contract. The insurance company will vote all of the shares
of the Portfolio which it holds that are not attributable to any contract in the
same proportion as the voting instructions received from its contract owners
with respect to the Portfolio. The insurance company will also vote those shares
for which no timely voting instruction was received from the contract owner in
the same proportion as the voting instructions timely received from its other
contract owners with respect to the Portfolio.
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax or in person by the Trustees and officers of your Safeco
Portfolio or its affiliates, including personnel of your Safeco Portfolio's
transfer agent, Pioneer Portfolios' investment adviser, Pioneer, Pioneer
Portfolios' transfer agent, PIMSS, or by broker-dealer firms. Georgeson
Shareholder Communications Corporation, 17 State Street, New York, NY 10004, has
been retained to provide proxy solicitation services to the Safeco Portfolios at
a cost of approximately $10,000. Pioneer and Symetra will bear the cost of such
solicitation.
Revoking Proxies
A Safeco Portfolio shareowner signing and returning a proxy has the power to
revoke it at any time before it is exercised:
o by filing a written notice of revocation with your Safeco Portfolio's
transfer agent, Safeco Services Corporation, at 4854 154th Place N.E.,
Redmond, WA 98052, or
o by returning a duly executed proxy with a later date before the time of
the Meeting, or
o if a shareowner has executed a proxy but is present at the Meeting and
wishes to vote in person, by notifying the secretary of your Safeco
Portfolio (without complying with any formalities) at any time before it
is voted.
Being present at the Meeting alone does not revoke a previously executed and
returned proxy.
Outstanding Shares and Quorum
Only shareowners of record on October 8, 2004 (the "record date") are entitled
to notice of and to vote at the Meetings. The presence in person or by proxy by
one-third of the outstanding shares of a Safeco Portfolio entitled to cast votes
at the Meeting will constitute a quorum.
As of the record date, the following number of shares of each Safeco Portfolio
were outstanding.
====================================================================================
Portfolio Shares Outstanding
====================================================================================
Safeco Bond Portfolio 4,107,570
====================================================================================
Safeco Core Equity Portfolio 13,076,962
====================================================================================
Safeco Growth Opportunities Portfolio 16,556,500
====================================================================================
Safeco Money Market Portfolio 22,806,310
====================================================================================
Safeco Multi-Cap Core Portfolio 2,465,077
====================================================================================
Safeco Small-Cap Value Portfolio 2,733,116
====================================================================================
Other Business
Your Safeco Portfolio's Board of trustees knows of no business to be presented
for consideration at the Meetings other than Proposals 1(a)-(f) and 2(a)-(f). If
other business is properly brought before a Meeting, proxies will be voted
according to the best judgment of the persons named as proxies.
69
Adjournments
If, by the time scheduled for a Meeting, a quorum of shareowners of a Safeco
Portfolio is not present or if a quorum is present but sufficient votes "for"
the proposals have not been received, the persons named as proxies may propose
the Meeting with respect to one or more of the Portfolios to another date and
time, and the Meeting may be held as adjourned within a reasonable time after
the date set for the original Meeting for that Safeco Portfolio without further
notice. Any such adjournment will require the affirmative vote of a majority of
the votes cast on the question in person or by proxy at the session of the
Meeting to be adjourned. The persons named as proxies will vote all proxies in
favor of the adjournment that voted in favor of the proposal or that abstained.
They will vote against such adjournment those proxies required to be voted
against the proposal. Broker non-votes will be disregarded in the vote for
adjournment. If the adjournment requires setting a new record date or the
adjournment is for more than 120 days from the original Meeting (in which case
the Board of Trustees of your Safeco Portfolio will set a new record date), your
Safeco Portfolio will give notice of the adjourned meeting to its shareowners.
Telephone Voting
In addition to soliciting proxies by mail, by fax or in person, your Safeco
Portfolio may also arrange to have votes recorded by telephone by officers and
employees of your Safeco Portfolio or by personnel of the adviser or transfer
agent or a third party solicitation firm. The telephone voting procedure is
designed to verify a shareowner's identity, to allow a shareowner to authorize
the voting of shares in accordance with the shareowner's instructions and to
confirm that the voting instructions have been properly recorded. If these
procedures were subject to a successful legal challenge, these telephone votes
would not be counted at the Meeting. Your Safeco Portfolio has not obtained an
opinion of counsel about telephone voting, but is currently not aware of any
challenge.
o A shareowner will be called on a recorded line at the telephone number
in the Safeco Portfolio's account records and will be asked to provide
the shareowner's social security number or other identifying
information.
o The shareowner will then be given an opportunity to authorize proxies to
vote his or her shares at the Meeting in accordance with the
shareowner's instructions.
o To ensure that the shareowner's instructions have been recorded
correctly, the shareowner will also receive a confirmation of the voting
instructions by mail.
o A toll-free number will be available in case the voting information
contained in the confirmation is incorrect.
o If the shareowner decides after voting by telephone to attend the
Meeting, the shareowner can revoke the proxy at that time and vote the
shares at the Meeting.
Internet Voting
You will also have the opportunity to submit your voting instructions via the
Internet by utilizing a program provided through a vendor. Voting via the
Internet will not affect your right to vote in person if you decide to attend
the Meeting. Do not mail the proxy card if you are voting via the Internet. To
vote via the Internet, you will need the "control number" that appears on your
proxy card. These Internet voting procedures are designed to authenticate
shareowner identities, to allow shareowners give their voting instructions, and
to confirm that shareowners instructions have been recorded properly. If you are
voting via the Internet you should understand that there may be costs associated
with electronic access, such as usage charges from Internet access providers and
telephone companies that must be borne by you.
o Read the Proxy Statement and have your proxy card at hand.
o Go to the Internet site listed on your proxy card.
o Enter control number found on your proxy card.
o Follow the simple instructions on the Internet site. Please call
[__________________] at [1-800-________] if you have any problems.
o To insure that your instructions have been recorded correctly you will
receive a confirmation of your voting instructions immediately after
your submission and also by e-mail if chosen.
Shareowners' Proposals
Your Safeco Portfolio is not required, and does not intend, to hold meetings of
shareowners each year. Instead, meetings will be held only when and if required.
Any shareowners desiring to present a proposal for consideration at the next
meeting for shareowners must submit the proposal in writing, so that it is
received by your Safeco Portfolio to Safeco Mutual Funds,
70
Attention: Legal Department, 4854 154th Place N.E., Redmond, WA 98052, within a
reasonable time before any meeting. If the Reorganization is completed, your
Safeco Portfolio will not hold another shareowner meeting.
Appraisal Rights
If the Reorganization of your Safeco Portfolio is approved at the Meeting,
shareowners of your Safeco Portfolio will not have the right to dissent and
obtain payment of the fair value of their shares because the exercise of
appraisal rights is subject to the forward pricing requirements of Rule 22c-1
under the Investment Company Act, which supersede state law. Shareowners of your
Safeco Portfolio, however, have the right to redeem their Portfolio shares at
net asset value until the closing date of the Reorganization. After the
Reorganization, shareowners of your Safeco Portfolios will hold shares of the
corresponding Pioneer Portfolio which may also be redeemed at net asset value
subject to deferred sales charges (if any).
OWNERSHIP OF SHARES OF THE PORTFOLIOS
Safeco Portfolios
To the knowledge of your Safeco Portfolio, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Portfolios.
===================================================================================================================================
Actual Percentage
Fund/Class Shareowner Name and Address owned
===================================================================================================================================
Safeco Bond Portfolio Symetra Life Insurance Company 99.96%
===================================================================================================================================
Safeco Core Equity Portfolio Symetra Life Insurance Company 82.27%
===================================================================================================================================
American United Life Insurance Company 10.94%
===================================================================================================================================
Safeco Growth Opportunities
Portfolio Symetra Life Insurance Company 62.77%
===================================================================================================================================
American United Life Insurance Company 26.94%
===================================================================================================================================
Safeco Money Market Portfolio
Symetra Life Insurance Company 99.93%
===================================================================================================================================
===================================================================================================================================
Safeco Multi-Cap Core
Portfolio Symetra Life Insurance Company 99.99%
===================================================================================================================================
===================================================================================================================================
Safeco Small-Cap Value
Portfolio Symetra Life Insurance Company 87.83%
===================================================================================================================================
Great-West Life & Annuity Insurance Company -
Schwab 11.37%
===================================================================================================================================
Principal shareowners of a Safeco Portfolio may control the outcome of a
shareowner vote. However, on each proposal or sub-proposal, Symetra or other
companies controlled by Symetra will vote any shares of each Safeco Portfolio
that it owns pro rata in accordance with the vote cast by shareowners of the
applicable Portfolio.
As of December 31, 2003, the Trustees and officers of your Safeco Portfolio, as
a group, owned in the aggregate less than 1% of the outstanding shares of your
Safeco Portfolio.
Pioneer Portfolios
To the knowledge of each Pioneer Portfolio, as of September 30, 2004, the
following persons owned of record or beneficially 5% or more of the outstanding
shares of each of the Pioneer Portfolios.
71
=========================================================================================================
Actual Percentage
Fund/Class Shareowner Name and Address owned
=========================================================================================================
Pioneer Fund VCT
Portfolio
=========================================================================================================
Class I Allmerica Financial Life Co 92.84%
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002
=========================================================================================================
Aetna Life Insurance & Annuity Co. 5.84%
ING Fund Operations
151 Farmington Avenue
Hartford, CT 06156
=========================================================================================================
Class II Allmerica Financial Life Co 10.22%
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002
=========================================================================================================
Travelers Life & Annuity Company 13.16%
PO Box 990027
Hartford, CT 06199-0027
=========================================================================================================
ING USA Annuity & Life Insurance Co. 64.78%
ING Fund Operations
151 Farmington Avenue
Hartford, CT 06156
=========================================================================================================
Pioneer Money Market
VCT Portfolio
=========================================================================================================
Class I Allmerica Financial Life Co 96.38%
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002
=========================================================================================================
Pioneer Mid Cap Value
VCT Portfolio
=========================================================================================================
Class I Allmerica Financial Life Co 46.76%
Attn: Separate Accounting
440 Lincoln St.
Worcester, MA 01653-0002
=========================================================================================================
United Of Omaha Life Ins. Co. 12.43%
Attn: Product Accounting & Reporting
Mutual of Omaha Plaza
Omaha, NE 68175-0001
=========================================================================================================
Aetna Life Insurance & Annuity Co. 32%
ING Fund Operations
151 Farmington Avenue
Hartford, CT 06156-0001
=========================================================================================================
Security Life of Denver Ins. Co. 6.11%
ING Variable Annuities
ING Fund Operations
151 Farmington Avenue
Hartford, CT 06156-0001
=========================================================================================================
Class II ING USA Annuity & Life Insurance Co. 91.51%
ING Fund Operations
151 Farmington Avenue
Hartford, CT 06156
=========================================================================================================
As of December 31, 2003, the trustees and officers of each Pioneer Portfolio
owned less than 1% of the outstanding shares of the Pioneer Portfolio.
EXPERTS
Safeco Portfolios
The financial statements and financial highlights of each Safeco Portfolio
incorporated by reference in the Safeco Resource Series Trust's Annual Report at
and for the year ended December 31, 2003, have been audited by Ernst & Young
LLP, independent registered public accounting firm, as set forth in their report
thereon incorporated by reference into this registration statement. Such
financial statements and financial highlights are incorporated herein by
reference in reliance on such report given on the authority of such firm as
experts in accounting and auditing.
72
Pioneer Portfolios
The financial statements and financial highlights of each Pioneer Portfolio
incorporated by reference in the Pioneer Variable Contracts Trust's Annual
Report at and for the year ended December 31, 2003, have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set forth in their
report thereon incorporated by reference into this registration statement. Such
financial statements and financial highlights are incorporated herein by
reference in reliance on such report given on the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Safeco Portfolios and the Pioneer Portfolios are subject to the
informational requirements of the Securities Exchange Act of 1934 and the
Investment Company Act and file reports, Proxy Statements and other information
with the SEC. These reports, Proxy Statements and other information filed by the
Portfolios can be inspected and copied (for a duplication fee) at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C.
Copies of these materials can also be obtained by mail from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, copies of these documents may be viewed on-screen
or downloaded from the SEC's Internet site at http://www.sec.gov.
73
Exhibit A-1 - Form of Agreement and Plan of Reorganization (C/D Reorganization)
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
[Form For C/D Reorganizations]
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this []day
of October, 2004, by and between Pioneer Variable Contracts Trust, a Delaware
statutory trust (the "Acquiring Trust"), on behalf of its series [name of
Pioneer Portfolio] (the "Acquiring Portfolio"), with its principal place of
business at 60 State Street, Boston, Massachusetts 02109, and Safeco Resource
Series Trust, a Delaware statutory trust (the "Safeco Trust"), on behalf of its
series [name of Safeco Portfolio] (the "Acquired Portfolio"), with its principal
place of business at 5069 154th Place N.E., Redmond, Washington 98052. The
Acquiring Portfolio and the Acquired Portfolio are sometimes referred to
collectively herein as the "Portfolios" and individually as a "Portfolio."
This Agreement is intended to be and is adopted as a plan of a "reorganization"
as defined in Section 368(a)(1)(C/D) of the United States Internal Revenue Code
of 1986, as amended (the "Code") and the Treasury Regulations thereunder. The
reorganization (the "Reorganization") will consist of (1) the transfer of all of
the assets of the Acquired Portfolio to the Acquiring Portfolio in exchange
solely for (A) the issuance of Class I shares of beneficial interest of the
Acquiring Portfolio (collectively, the "Acquiring Portfolio Shares" and each, an
"Acquiring Portfolio Share") to the Acquired Portfolio, and (B) the assumption
by the Acquiring Portfolio of the liabilities of the Acquired Portfolio that are
included in the calculation of net asset value ("NAV") on the closing date of
the Reorganization (the "Closing Date") (collectively, the "Assumed
Liabilities"), and (2) the distribution by the Acquired Portfolio, on or
promptly after the Closing Date as provided herein, of the Acquiring Portfolio
Shares to the shareholders of the Acquired Portfolio in liquidation and
dissolution of the Acquired Portfolio, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered investment
companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Portfolio is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust and the Board of Trustees of
the Acquiring Trust have determined that the Reorganization is in the best
interests of the Acquired Portfolio shareholders and the Acquiring Portfolio
shareholders, respectively, and is not dilutive of the interests of those
shareholders.
NOW, THEREFORE, in consideration of the premises of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO IN EXCHANGE FOR THE ACQUIRING
PORTFOLIO SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED PORTFOLIO.
1.1 Subject to the terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Portfolio will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired Assets")
to the Acquiring Portfolio free and clear of all liens
A-1
and encumbrances (other than those arising under the Securities Act of 1933, as
amended (the "Securities Act"), liens for taxes not yet due and contractual
restrictions on the transfer of the Acquired Assets) and the Acquiring Portfolio
agrees in exchange therefor: (i) to issue to the Acquired Portfolio the number
of Acquiring Portfolio Shares, including fractional Acquiring Portfolio Shares,
with an aggregate NAV equal to the NAV of the Acquired Portfolio, as determined
in the manner set forth in Paragraphs 2.1 and 2.2; and (ii) to assume the
Assumed Liabilities. Such transactions shall take place at the Closing (as
defined in Paragraph 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Portfolio's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Portfolio or the Safeco Trust in respect of the Acquired
Portfolio, all other intangible property owned by the Acquired Portfolio,
originals or copies of all books and records of the Acquired Portfolio, and all
other assets of the Acquired Portfolio on the Closing Date. The Acquiring
Portfolio shall also be entitled to receive (or, to the extent agreed upon
between the Safeco Trust and the Acquiring Trust, be provided access to) copies
of all records that the Safeco Trust is required to maintain under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
the rules of the Securities and Exchange Commission (the "Commission")
thereunder to the extent such records pertain to the Acquired Portfolio.
(b) The Acquired Portfolio has provided the Acquiring Portfolio with a list of
all of the Acquired Portfolio's securities and other assets as of the date of
execution of this Agreement, and the Acquiring Portfolio has provided the
Acquired Portfolio with a copy of the current fundamental investment policies
and restrictions and fair value procedures applicable to the Acquiring
Portfolio. The Acquired Portfolio reserves the right to sell any of such
securities or other assets before the Closing Date (except to the extent sales
may be limited by representations of the Acquired Portfolio contained herein and
made in connection with the issuance of the tax opinion provided for in
Paragraph 8.5 hereof).
1.3 The Acquired Portfolio will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Safeco Trust shall liquidate the Acquired Portfolio and
distribute pro rata to its shareholders of record, determined as of the close of
regular trading on the New York Stock Exchange on the Closing Date (the
"Acquired Portfolio Shareholders"), the Acquiring Portfolio Shares received by
the Acquired Portfolio pursuant to Paragraph 1.1 hereof. Each Acquired Portfolio
Shareholder shall receive such number of Acquiring Portfolio Shares that have an
aggregate NAV equal to the aggregate NAV of the shares of beneficial interest of
the Acquired Portfolio (the "Acquired Portfolio Shares") held of record by such
Acquired Portfolio Shareholder on the Closing Date. Such liquidation and
distribution will be accomplished by the Safeco Trust instructing the Acquiring
Trust to transfer the Acquiring Portfolio Shares then credited to the account of
the Acquired Portfolio on the books of the Acquiring Portfolio to open accounts
on the share records of the Acquiring Portfolio established and maintained by
the Acquiring Portfolio's transfer agent in the names of the Acquired Portfolio
Shareholders and representing the respective pro rata number of the Acquiring
Portfolio Shares due the Acquired Portfolio Shareholders. The Safeco Trust shall
promptly provide the Acquiring Trust with
A-2
evidence of such liquidation and distribution. All issued and outstanding
Acquired Portfolio Shares will simultaneously be cancelled on the books of the
Acquired Portfolio, and the Acquired Portfolio will be dissolved. The Acquiring
Portfolio shall not issue certificates representing the Acquiring Portfolio
Shares in connection with such exchange.
1.5 Ownership of Acquiring Portfolio Shares will be shown on the books of the
Acquiring Portfolio's transfer agent for its Class I shares. Any certificates
representing ownership of Acquired Portfolio Shares that remain outstanding on
the Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Portfolio Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Portfolio Shares in a
name other than the registered holder of the Acquired Portfolio Shares on the
books of the Acquired Portfolio as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Portfolio
Shares are to be issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Portfolio for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Portfolio Shares and the NAV of the Acquired
Portfolio shall, in each case, be determined as of the close of business (4:00
p.m., Boston time) on the Closing Date (the "Valuation Time"). The NAV of each
Acquiring Portfolio Share shall be computed by Pioneer Investment Management,
Inc. (the "Acquiring Portfolio Adviser") in the manner set forth in the
Acquiring Trust's Declaration of Trust (the "Declaration"), or By-Laws, and the
Acquiring Portfolio's then-current prospectus and statement of additional
information. The NAV of the Acquired Portfolio shall be computed by Safeco Asset
Management, Inc. (the "Acquired Portfolio Administrator") by calculating the
value of the Acquired Assets and by subtracting therefrom the amount of the
liabilities of the Acquired Portfolio on the Closing Date included on the
Statement of Assets and Liabilities of the Acquired Portfolio delivered pursuant
to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and
liabilities to be valued in the manner set forth in the Acquired Portfolio's
then current prospectus and statement of additional information. The Acquiring
Portfolio Adviser shall confirm to the Acquiring Portfolio the NAV of the
Acquired Portfolio.
2.2 The number of Acquiring Portfolio Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by the Acquiring Portfolio Adviser by
dividing the NAV of the Acquired Portfolio, as determined in accordance with
Paragraph 2.1, by the NAV of each Acquiring Portfolio Share, as determined in
accordance with Paragraph 2.1.
2.3 The Acquiring Portfolio and the Acquired Portfolio shall cause the Acquiring
Portfolio Adviser and the Acquired Portfolio Administrator, respectively, to
deliver a copy of its valuation
A-3
report to the other party at Closing. All computations of value shall be made by
the Acquiring Portfolio Adviser and the Acquired Portfolio Administrator in
accordance with its regular practice as pricing agent for the Acquiring
Portfolio and the Acquired Portfolio, respectively.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be [December 8, 2004], or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or at such other place as the
parties may agree.
3.2 Portfolio securities that are held other than in book-entry form in the name
of State Street Bank and Trust Company (the "Acquired Portfolio Custodian") as
record holder for the Acquired Portfolio shall be presented by the Acquired
Portfolio to Brown Brothers Harriman & Co. (the "Acquiring Portfolio Custodian")
for examination no later than three business days preceding the Closing Date.
Such portfolio securities shall be delivered by the Acquired Portfolio to the
Acquiring Portfolio Custodian for the account of the Acquiring Portfolio on the
Closing Date, duly endorsed in proper form for transfer, in such condition as to
constitute good delivery thereof in accordance with the custom of brokers, and
shall be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof. Portfolio securities held of
record by the Acquired Portfolio Custodian in book-entry form on behalf of the
Acquired Portfolio shall be delivered by the Acquired Portfolio Custodian
through the Depository Trust Company to the Acquiring Portfolio Custodian and by
the Acquiring Portfolio Custodian recording the beneficial ownership thereof by
the Acquiring Portfolio on the Acquiring Portfolio Custodian's records. Any cash
shall be delivered by the Acquired Portfolio Custodian transmitting immediately
available funds by wire transfer to the Acquiring Portfolio Custodian the cash
balances maintained by the Acquired Portfolio Custodian and the Acquiring
Portfolio Custodian crediting such amount to the account of the Acquiring
Portfolio.
3.3 The Acquiring Portfolio Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring Portfolio on
the Closing Date, and (b) all necessary transfer taxes including all applicable
federal and state stock transfer stamps, if any, have been paid, or provision
for payment has been made in conjunction with the delivery of portfolio
securities as part of the Acquired Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading
or trading thereon shall be restricted or (b) trading or the reporting of
trading on such exchange or elsewhere is disrupted so that accurate appraisal of
the NAV of the Acquiring Portfolio Shares or the Acquired Portfolio pursuant to
Paragraph 2.1 is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
A-4
3.5 The Acquired Portfolio shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding status and certificates of the Acquired Portfolio
Shareholders and the number and percentage ownership of outstanding Acquired
Portfolio Shares owned by each Acquired Portfolio Shareholder as of the
Valuation Time, certified by the President or a Secretary of the Safeco Trust
and its Treasurer, Secretary or other authorized officer (the "Shareholder
List") as being an accurate record of the information (a) provided by the
Acquired Portfolio Shareholders, (b) provided by the Acquired Portfolio
Custodian, or (c) derived from the Safeco Trust's records by such officers or
one of the Safeco Trust's service providers. The Acquiring Portfolio shall issue
and deliver to the Acquired Portfolio a confirmation evidencing the Acquiring
Portfolio Shares to be credited on the Closing Date, or provide evidence
satisfactory to the Acquired Portfolio that such Acquiring Portfolio Shares have
been credited to the Acquired Portfolio's account on the books of the Acquiring
Portfolio. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts or other documents as
such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on behalf of
the Acquired Portfolio, represents, warrants and covenants to the Acquiring
Portfolio, which representations, warranties and covenants will be true and
correct on the date hereof and on the Closing Date as though made on and as of
the Closing Date, as follows:
(a) The Acquired Portfolio is a series of the Safeco Trust. The Safeco Trust is
a statutory trust validly existing and in good standing under the laws of
the State of Delaware and has the power to own all of its properties and
assets and, subject to approval by the Acquired Portfolio's shareholders,
to perform its obligations under this Agreement. The Acquired Portfolio is
not required to qualify to do business in any jurisdiction in which it is
not so qualified or where failure to qualify would subject it to any
material liability or disability. Each of the Safeco Trust and the Acquired
Portfolio has all necessary federal, state and local authorizations to own
all of its properties and assets and to carry on its business as now being
conducted;
(b) The Safeco Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Safeco Trust is not in violation of, and the execution and delivery of
this Agreement and the performance of its obligations under this Agreement
in respect of the Acquired Portfolio will not result in a violation of, any
provision of the Safeco Trust's Trust Instrument or By-Laws or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquired Portfolio to which the Safeco Trust is a party or
by which the Acquired Portfolio or any of its assets are bound;
(d) No litigation or administrative proceeding or investigation of or before
any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Portfolio or any of the Acquired
Portfolio's properties or assets. The Acquired
A-5
Portfolio knows of no facts which might form the basis for the institution
of such proceedings. Neither the Safeco Trust nor the Acquired Portfolio is
a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially adversely affects the
Acquired Portfolio's business or its ability to consummate the transactions
contemplated herein or would be binding upon the Acquiring Portfolio as the
successor to the Acquired Portfolio;
(e) The Acquired Portfolio has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of
securities entered into in the ordinary course of business and consistent
with its obligations under this Agreement) which will not be terminated at
or prior to the Closing Date and no such termination will result in
liability to the Acquired Portfolio (or the Acquiring Portfolio);
(f) The statement of assets and liabilities of the Acquired Portfolio, and the
related statements of income and changes in NAV, as of and for the fiscal
year ended December 31, 2003, have been audited by Ernst & Young LLP,
independent registered public accounting firm, and are in accordance with
generally accepted accounting principles ("GAAP") consistently applied and
fairly reflect, in all material respects, the financial condition of the
Acquired Portfolio as of such date and the results of its operations for
the period then ended, and all known liabilities, whether actual or
contingent, of the Acquired Portfolio as of the date thereof are disclosed
therein. The Statement of Assets and Liabilities will be in accordance with
GAAP consistently applied and will fairly reflect, in all material
respects, the financial condition of the Acquired Portfolio as of such date
and the results of its operations for the period then ended. Except for the
Assumed Liabilities, the Acquired Portfolio will not have any known or
contingent liabilities on the Closing Date. No significant deficiency,
material weakness, fraud, significant change or other factor that could
significantly affect the internal controls of the Acquired Portfolio has
been disclosed or is required to be disclosed in the Acquired Portfolio's
reports on Form N-CSR to enable the chief executive officer and chief
financial officer or other officers of the Acquired Portfolio to make the
certifications required by the Sarbanes-Oxley Act, and no deficiency,
weakness, fraud, change, event or other factor exists that will be required
to be disclosed in the Acquiring Portfolio's Form N-CSR after the Closing
Date;
(g) Since December 31, 2003, except as specifically disclosed in the Acquired
Portfolio's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the
period ended June 30, 2004, there has not been any material adverse change
in the Acquired Portfolio's financial condition, assets, liabilities,
business or prospects, or any incurrence by the Acquired Portfolio of
indebtedness, except for normal contractual obligations incurred in the
ordinary course of business or in connection with the settlement of
purchases and sales of portfolio securities. For the purposes of this
subparagraph (g) (but not for any other purpose of this Agreement), a
decline in NAV per Acquired Portfolio Share arising out of its normal
investment operations or a decline in market values of securities in the
Acquired Portfolio's portfolio or a decline in net assets of the Acquired
Portfolio as a result of redemptions shall not constitute a material
adverse change;
A-6
(h) (A) For each taxable year of its operation since its inception, the
Acquired Portfolio has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company. The Acquired Portfolio will
qualify as such as of the Closing Date and will satisfy the diversification
requirements of Section 851(b)(3) of the Code without regard to the last
sentence of Section 851(d) of the Code. The Acquired Portfolio has not
taken any action, caused any action to be taken or caused any action to
fail to be taken which action or failure could cause the Acquired Portfolio
to fail to qualify as a regulated investment company under the Code. To the
knowledge of Safeco Trust, (i) the Acquired Portfolio does not have, and
has not ever had, any shareholder that is not a segregated asset account
within the meaning of Treasury Regulation Section 1.817-5(e) or an entity
referred to in (and holding its shares in compliance with the terms of)
Treasury Regulation Section 1.817-5(f)(3)(i), (ii), or (iii); (ii) no
public investor is participating or has ever participated in the Acquired
Portfolio through such a segregated asset account other than through
purchase of a variable contract within the meaning of Treasury Regulation
Section 1.817-5(f)(2)(i)(B); and (iii) the Acquired Portfolio satisfies,
and at all times during its existence has satisfied, the diversification
requirements contained in Treasury Regulation Section 1.817-5(b)(1), (2),
or (3);
(B) Within the times and in the manner prescribed by law, the Acquired
Portfolio has properly filed on a timely basis all Tax Returns (as defined
below) that it was required to file, and all such Tax Returns were complete
and accurate in all respects. The Acquired Portfolio has not been informed
by any jurisdiction that the jurisdiction believes that the Acquired
Portfolio was required to file any Tax Return that was not filed; and the
Acquired Portfolio does not know of any basis upon which a jurisdiction
could assert such a position;
(C) The Acquired Portfolio has timely paid, in the manner prescribed
by law, all Taxes (as defined below), which were due and payable or which
were claimed to be due;
(D) All Tax Returns filed by the Acquired Portfolio constitute
complete and accurate reports of the respective Tax liabilities and all
attributes of the Acquired Portfolio or, in the case of information returns
and payee statements, the amounts required to be reported, and accurately
set forth all items required to be included or reflected in such returns;
(E) The Acquired Portfolio has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquired Portfolio has not been notified that any examinations
of the Tax Returns of the Acquired Portfolio are currently in progress or
threatened, and no deficiencies have been asserted or assessed against the
Acquired Portfolio as a result of any audit by the Internal Revenue Service
or any state, local or foreign taxing authority, and, to its knowledge, no
such deficiency has been proposed or threatened;
(G) The Acquired Portfolio has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquired
Portfolio is not and has never
A-7
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. The
Acquired Portfolio is not a party to any Tax allocation, sharing, or
indemnification agreement;
(H) The unpaid Taxes of the Acquired Portfolio for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Statement
of Assets and Liabilities, rather than in any notes thereto (the "Tax
Reserves"). All Taxes that the Acquired Portfolio is or was required by law
to withhold or collect have been duly withheld or collected and, to the
extent required, have been timely paid to the proper governmental agency;
(I) The Acquired Portfolio has delivered to the Acquiring Portfolio or
made available to the Acquiring Portfolio complete and accurate copies of
all Tax Returns of the Acquired Portfolio, together with all related
examination reports and statements of deficiency for all periods not closed
under the applicable statutes of limitations and complete and correct
copies of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending
ruling requests and any similar documents submitted by, received by or
agreed to by or on behalf of the Acquired Portfolio. The Acquired Portfolio
has disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code;
(J) The Acquired Portfolio has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo) a
change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquired Portfolio
will not be required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date under Section 481(c) of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign income Tax law) executed on
or prior to the Closing Date; (iii) installment sale or open transaction
disposition made on or prior to the Closing Date; or (iv) prepaid amount
received on or prior to the Closing Date;
(K) The Acquired Portfolio has not taken or agreed to take any action,
and is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there will
be) no liens on the assets of the Acquired Portfolio relating to or
attributable to Taxes, except for Taxes not yet due and payable;
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(M) The Tax bases of the assets of the Acquired Portfolio are
accurately reflected on the Acquired Portfolio's Tax books and records;
(N) The Acquired Portfolio has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code which
has not been previously recaptured in full as provided in Sections
904(f)(2) and/or 904(f)(3) of the Code;
(O) The Acquired Portfolio is not a party to a gain recognition
agreement under Section 367 of the Code;
(P) The Acquired Portfolio does not own any interest in an entity that
is characterized as a partnership for income tax purposes;
(Q) The Acquired Portfolio's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except as
set forth on Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social
security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use,
severance, stamp, occupation, windfall profits, customs, duties, franchise
and other taxes imposed by the United States of America or any state, local
or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or
dispute thereof; and "Tax Returns" shall mean all reports, returns,
declarations, statements or other information required to be supplied to a
governmental or regulatory authority or agency, or to any other person, in
connection with Taxes and any associated schedules or work papers produced
in connection with such items;
(i) All issued and outstanding Acquired Portfolio Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable by the Acquired Portfolio. All of the issued and
outstanding Acquired Portfolio Shares will, at the time of Closing, be held
of record by the persons and in the amounts set forth in the Shareholder
List submitted to the Acquiring Portfolio pursuant to Paragraph 3.5 hereof.
The Acquired Portfolio does not have outstanding any options, warrants or
other rights to subscribe for or purchase any Acquired Portfolio Shares,
nor is there outstanding any security convertible into any Acquired
Portfolio Shares;
(j) At the Closing Date, the Acquired Portfolio will have good and marketable
title to the Acquired Assets, and full right, power and authority to sell,
assign, transfer and deliver the Acquired Assets to the Acquiring
Portfolio, and, upon delivery and payment for the Acquired Assets, the
Acquiring Portfolio will acquire good and marketable title thereto,
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subject to no restrictions on the full transfer thereof, except such
restrictions as might arise under the Securities Act;
(k) The Safeco Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action on the part of the Safeco Trust's Board of Trustees, and, subject to
the approval of the Acquired Portfolio's shareholders, assuming due
authorization, execution and delivery by the Acquiring Portfolio, this
Agreement will constitute a valid and binding obligation of the Acquired
Portfolio, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished by the Acquired Portfolio to the Acquiring
Portfolio for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in connection
with the transactions contemplated hereby and any information necessary to
compute the total return of the Acquired Portfolio shall be accurate and
complete and shall comply in all material respects with federal securities
and other laws and regulations applicable thereto;
(m) The information included in the proxy statement (the "Proxy Statement")
forming part of the Acquiring Portfolio's Registration Statement on Form
N-14 filed in connection with this Agreement (the "Registration Statement")
that has been furnished in writing by the Acquired Portfolio to the
Acquiring Portfolio for inclusion in the Registration Statement, on the
effective date of that Registration Statement and on the Closing Date, will
conform in all material respects to the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Investment Company Act and the rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading;
(n) Upon the effectiveness of the Registration Statement, no consent, approval,
authorization or order of any court or governmental authority is required
for the consummation by the Safeco Trust or the Acquired Portfolio of the
transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Portfolio Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquiring Portfolio;
(p) The prospectus and statement of additional information of the Acquired
Portfolio, and any amendments or supplements thereto, furnished to the
Acquiring Portfolio, did not as of their dates or the dates of their
distribution to the public contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which such
statements were made, not misleading;
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(q) The Acquired Portfolio currently complies in all material respects with,
and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment
Company Act, the Securities Act, the Exchange Act, state "Blue Sky" laws
and all other applicable federal and state laws or regulations. The
Acquired Portfolio currently complies in all material respects with, and
since its organization has complied in all material respects with, all
investment objectives, policies, guidelines and restrictions and any
compliance procedures established by the Safeco Trust with respect to the
Acquired Portfolio. All advertising and sales material used by the Acquired
Portfolio complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act,
the Investment Company Act, the rules and regulations of the Commission,
and, to the extent applicable, the Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD") and any applicable
state regulatory authority. All registration statements, prospectuses,
reports, proxy materials or other filings required to be made or filed with
the Commission, the NASD or any state securities authorities by the
Acquired Portfolio have been duly filed and have been approved or declared
effective, if such approval or declaration of effectiveness is required by
law. Such registration statements, prospectuses, reports, proxy materials
and other filings under the Securities Act, the Exchange Act and the
Investment Company Act (i) are or were in compliance in all material
respects with the requirements of all applicable statutes and the rules and
regulations thereunder and (ii) do not or did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not false or misleading;
(r) Neither the Acquired Portfolio nor, to the knowledge of the Acquired
Portfolio, any "affiliated person" of the Acquired Portfolio has been
convicted of any felony or misdemeanor, described in Section 9(a)(1) of the
Investment Company Act, nor, to the knowledge of the Acquired Portfolio,
has any affiliated person of the Acquired Portfolio been the subject, or
presently is the subject, of any proceeding or investigation with respect
to any disqualification that would be a basis for denial, suspension or
revocation of registration as an investment adviser under Section 203(e) of
the Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"), or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section
15 of the Exchange Act, or for disqualification as an investment adviser,
employee, officer or director of an investment company under Section 9 of
the Investment Company Act; and
(s) The tax representation certificate to be delivered by Safeco Trust on
behalf of the Acquired Portfolio to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Portfolio Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on behalf
of the Acquiring Portfolio, represents, warrants and covenants to the Acquired
Portfolio, which
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representations, warranties and covenants will be true and correct on the date
hereof and on the Closing Date as though made on and as of the Closing Date, as
follows:
(a) The Acquiring Portfolio is a series of the Acquiring Trust. The Acquiring
Trust is a statutory trust duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Acquiring Trust has
the power to own all of its properties and assets and to perform the
obligations under this Agreement. The Acquiring Portfolio is not required
to qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material
liability or disability. Each of the Acquiring Trust and the Acquiring
Portfolio has all necessary federal, state and local authorizations to own
all of its properties and assets and to carry on its business as now being
conducted;
(b) The Acquiring Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in
full force and effect;
(c) The Acquiring Portfolio's registration statement on Form N-1A that will be
in effect on the Closing Date, and the prospectus and statement of
additional information of the Acquiring Portfolio included therein, will
conform in all material respects with the applicable requirements of the
Securities Act and the Investment Company Act and the rules and regulations
of the Commission thereunder, and did not as of the effective date thereof
and will not as of the Closing Date contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(d) The Registration Statement, the Proxy Statement and statement of additional
information with respect to the Acquiring Portfolio, and any amendments or
supplements thereto in effect on or prior to the Closing Date included in
the Registration Statement (other than written information furnished by the
Acquired Portfolio for inclusion therein, as covered by the Acquired
Portfolio's warranty in Paragraph 4.1(m) hereof) will conform in all
material respects to the applicable requirements of the Securities Act and
the Investment Company Act and the rules and regulations of the Commission
thereunder. Neither the Registration Statement nor the Proxy Statement
(other than written information furnished by the Acquired Portfolio for
inclusion therein, as covered by the Acquired Portfolio's warranty in
Paragraph 4.1(m) hereof) includes or will include any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) The Acquiring Trust is not in violation of, and the execution and delivery
of this Agreement and performance of its obligations under this Agreement
will not result in a violation of, any provisions of the Declaration of
Trust or by-laws of the Acquiring Trust or any material agreement,
indenture, instrument, contract, lease or other undertaking with respect to
the Acquiring Portfolio to which the Acquiring Trust is a party or by which
the Acquiring Portfolio or any of its assets is bound;
A-12
(f) No litigation or administrative proceeding or investigation of or before
any court or governmental body is currently pending or threatened against
the Acquiring Portfolio or any of the Acquiring Portfolio's properties or
assets. The Acquiring Portfolio knows of no facts which might form the
basis for the institution of such proceedings. Neither the Acquiring Trust
nor the Acquiring Portfolio is a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body which
materially adversely affects the Acquiring Portfolio's business or its
ability to consummate the transactions contemplated herein;
(g) The statement of assets and liabilities of the Acquiring Portfolio, and the
related statements of income and changes in NAV, as of and for the fiscal
year ended December 31, 2003 have been audited by Ernst & Young LLP,
independent registered public accounting firm, and are in accordance with
GAAP consistently applied and fairly reflect, in all material respects, the
financial condition of the Acquiring Portfolio as of such date and the
results of its operations for the period then ended, and all known
liabilities, whether actual or contingent, of the Acquiring Portfolio as of
the date thereof are disclosed therein;
(h) Since December 31, 2003, except as specifically disclosed in the Acquiring
Portfolio's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the
period ended June 30, 2004, there has not been any material adverse change
in the Acquiring Portfolio's financial condition, assets, liabilities,
business or prospects, or any incurrence by the Acquiring Portfolio of
indebtedness, except for normal contractual obligations incurred in the
ordinary course of business or in connection with the settlement of
purchases and sales of portfolio securities. For the purposes of this
subparagraph (h) (but not for any other purpose of this Agreement), a
decline in NAV per Acquiring Portfolio Share arising out of its normal
investment operations or a decline in market values of securities in the
Acquiring Portfolio's portfolio or a decline in net assets of the Acquiring
Portfolio as a result of redemptions shall not constitute a material
adverse change;
(i) (A) For each taxable year of its operation since its inception, the
Acquiring Portfolio has met, and for the current taxable year it will meet,
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will qualify as such as of
the Closing Date and will satisfy the diversification requirements of
Section 851(b)(3) of the Code without regard to the last sentence of
Section 851(d) of the Code. The Acquiring Portfolio has not taken any
action, caused any action to be taken or caused any action to fail to be
taken which action or failure could cause the Acquiring Portfolio to fail
to qualify as a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the
Acquiring Portfolio has properly filed on a timely basis all Tax Returns
that it was required to file, and all such Tax Returns were complete and
accurate in all respects. The Acquiring Portfolio has not been informed by
any jurisdiction that the jurisdiction believes that the Acquiring
Portfolio was required to file any Tax Return that was not filed; and the
A-13
Acquiring Portfolio does not know of any basis upon which a jurisdiction
could assert such a position;
(C) The Acquiring Portfolio has timely paid, in the manner prescribed
by law, all Taxes that were due and payable or that were claimed to be due;
(D) All Tax Returns filed by the Acquiring Portfolio constitute
complete and accurate reports of the respective liabilities for Taxes and
all attributes of the Acquiring Portfolio or, in the case of information
returns and payee statements, the amounts required to be reported, and
accurately set forth all items required to be included or reflected in such
returns;
(E) The Acquiring Portfolio has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquiring Portfolio has not been notified that any
examinations of the Tax Returns of the Acquiring Portfolio are currently in
progress or threatened, and no deficiencies have been asserted or assessed
against the Acquiring Portfolio as a result of any audit by the Internal
Revenue Service or any state, local or foreign taxing authority, and, to
its knowledge, no such deficiency has been proposed or threatened;
(G) The Acquiring Portfolio has no actual or potential liability for
any Tax obligation of any taxpayer other than itself. The Acquiring
Portfolio is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated, combined
or unitary Tax Returns. The Acquiring Portfolio is not a party to any Tax
allocation, sharing, or indemnification agreement;
(H) The Acquiring Trust has delivered to Safeco Trust or made
available to Safeco Trust complete and accurate copies of all Tax Returns
of the Acquiring Portfolio, together with all related examination reports
and statements of deficiency for all periods not closed under the
applicable statutes of limitations and complete and correct copies of all
private letter rulings, revenue agent reports, information document
requests, notices of proposed deficiencies, deficiency notices, protests,
petitions, closing agreements, settlement agreements, pending ruling
requests and any similar documents submitted by, received by or agreed to
by or on behalf of the Acquiring Portfolio. The Acquiring Portfolio has
disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code;
(I) The Acquiring Portfolio has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo) a
change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquiring Portfolio
will not be required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date under Section 481(c) of the Code (or any
A-14
corresponding or similar provision of state, local or foreign income Tax
law); (ii) "closing agreement" as described in Section 7121 of the Code (or
any corresponding or similar provision of state, local or foreign income
Tax law) executed on or prior to the Closing Date; (iii) installment sale
or open transaction disposition made on or prior to the Closing Date; or
(iv) prepaid amount received on or prior to the Closing Date;
(J) The Acquiring Portfolio has not taken or agreed to take any
action, and is not aware of any agreement, plan or other circumstance, that
is inconsistent with the representations set forth in Annex A;
(K) The Acquiring Portfolio has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code which
has not been previously recaptured in full as provided in Sections
904(f)(2) and/or 904(f)(3) of the Code;
(L) The Acquiring Portfolio is not a party to a gain recognition
agreement under Section 367 of the Code; and
(M) The Acquiring Portfolio's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except as
set forth on Schedule 4.2;
(j) The Acquiring Portfolio currently complies, and at all times since its
organization has complied, in all material respects with the requirements
of, and the rules and regulations under, the Investment Company Act, the
Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquiring Portfolio
currently complies in all material respects with, and since its
organization has complied in all material respects with, all investment
objectives, policies, guidelines and restrictions and any compliance
procedures established by the Acquiring Trust with respect to the Acquiring
Portfolio. All advertising and sales material used by the Acquiring
Portfolio complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act,
the Investment Company Act, the rules and regulations of the Commission,
and, to the extent applicable, the Conduct Rules of the NASD and any
applicable state regulatory authority. All registration statements,
prospectuses, reports, proxy materials or other filings required to be made
or filed with the Commission, the NASD or any state securities authorities
by the Acquiring Portfolio have been duly filed and have been approved or
declared effective, if such approval or declaration of effectiveness is
required by law. Such registration statements, prospectuses, reports, proxy
materials and other filings under the Securities Act, the Exchange Act and
the Investment Company Act (i) are or were in compliance in all material
respects with the requirements of all applicable statutes and the rules and
regulations thereunder and (ii) do not or did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not false or misleading;
A-15
(k) The authorized capital of the Acquiring Portfolio consists of an unlimited
number of shares of beneficial interest, no par value per share. As of the
Closing Date, the Acquiring Portfolio will be authorized to issue an
unlimited number of shares of beneficial interest, no par value per share.
The Acquiring Portfolio Shares to be issued and delivered to the Acquired
Portfolio for the account of the Acquired Portfolio Shareholders pursuant
to the terms of this Agreement will have been duly authorized on the
Closing Date and, when so issued and delivered, will be duly and validly
issued, fully paid and non-assessable. The Acquiring Portfolio does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Portfolio shares, nor is there outstanding any
security convertible into any Acquiring Portfolio shares;
(l) The Acquiring Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action on the part of the Acquiring Trust's Board of Trustees, and,
assuming due authorization, execution and delivery by the Acquired
Portfolio, this Agreement will constitute a valid and binding obligation of
the Acquiring Portfolio, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to general
equity principles;
(m) The information to be furnished in writing by the Acquiring Portfolio or
the Acquiring Portfolio Adviser for use in applications for orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto or the requirements of any form for which its use is
intended, and shall not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the information provided
not misleading;
(n) No consent, approval, authorization or order of or filing with any court or
governmental authority is required for the execution of this Agreement or
the consummation of the transactions contemplated by the Agreement by the
Acquiring Portfolio, except for the registration of the Acquiring Portfolio
Shares under the Securities Act and the Investment Company Act;
(o) All of the issued and outstanding Acquiring Portfolio Shares have been
offered for sale and sold in conformity with all applicable federal and
state securities laws, except as may have been previously disclosed in
writing to the Acquired Portfolio;
(p) The prospectus and statement of additional information of the Acquiring
Portfolio, and any amendments or supplements thereto, furnished to the
Acquired Portfolio, did not as of their dates or the dates of their
distribution to the public contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which such
statements were made, not misleading;
A-16
(q) Neither the Acquiring Portfolio nor, to the knowledge of the Acquiring
Portfolio, any "affiliated person" of the Acquiring Portfolio has been
convicted of any felony or misdemeanor, described in Section 9(a)(1) of the
Investment Company Act, nor, to the knowledge of the Acquiring Portfolio,
has any affiliated person of the Acquiring Portfolio been the subject, or
presently is the subject, of any proceeding or investigation with respect
to any disqualification that would be a basis for denial, suspension or
revocation of registration as an investment adviser under Section 203(e) of
the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a
broker-dealer under Section 15 of the Exchange Act, or for disqualification
as an investment adviser, employee, officer or director of an investment
company under Section 9 of the Investment Company Act; and
(r) The tax representation certificate to be delivered by the Acquiring Trust
on behalf of the Acquiring Portfolio to the Safeco Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at Closing pursuant to Section 6.3 (the
"Acquiring Portfolio Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
5. COVENANTS OF THE PORTFOLIOS
5.1 The Acquired Portfolio will operate the Acquired Portfolio's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Portfolio's
shareholders to consider approval of this Agreement and act upon the matters set
forth in the Proxy Statement.
5.3 The Acquiring Portfolio will prepare the notice of meeting, form of proxy
and Proxy Statement (collectively, "Proxy Materials") to be used in connection
with such meeting, and will promptly prepare and file with the Commission the
Registration Statement. The Safeco Trust will provide the Acquiring Portfolio
with information reasonably requested for the preparation of the Registration
Statement in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Portfolio covenants that the Acquiring Portfolio Shares to be
issued hereunder are not being acquired by the Acquired Portfolio for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.5 The Acquired Portfolio will assist the Acquiring Portfolio in obtaining such
information as the Acquiring Portfolio reasonably requires concerning the
beneficial ownership of the Acquired Portfolio Shares.
A-17
5.6 Subject to the provisions of this Agreement, each Portfolio will take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.7 The Acquired Portfolio shall furnish to the Acquiring Portfolio on the
Closing Date a Statement of Assets and Liabilities of the Acquired Portfolio as
of the Closing Date setting forth the NAV (as computed pursuant to Paragraph
2.1) of the Acquired Portfolio as of the Valuation Time, which statement shall
be prepared in accordance with GAAP consistently applied and certified by the
Safeco Trust's Treasurer or Assistant Treasurer. As promptly as practicable, but
in any case within 30 days after the Closing Date, the Safeco Trust shall
furnish to the Acquiring Trust, in such form as is reasonably satisfactory to
the Acquiring Trust, a statement of the earnings and profits of the Acquired
Portfolio for federal income tax purposes, and of any capital loss carryovers
and other items that will be carried over to the Acquiring Portfolio under the
Code, and which statement will be certified by the Treasurer of the Safeco
Trust.
5.8 Neither Portfolio shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Portfolio, the
Acquired Portfolio Tax Representation Certificate and, with respect to the
Acquiring Portfolio, the Acquiring Portfolio Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date, each
of the Portfolios and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and will
not knowingly take any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken, which action or failure to act
could prevent the Reorganization from qualifying, as a reorganization under the
provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. Unless otherwise required pursuant to a "determination" within the meaning
of Section 1313(a) of the Code, the parties hereto shall treat and report the
transactions contemplated hereby as a reorganization within the meaning of
Section 368(a)(1)[insert (C) or (D), as applicable] of the Code and shall not
take any position inconsistent with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Portfolio shall use its commercially reasonable efforts to cause
it to qualify, and will not knowingly take any action, cause any action to be
taken, fail to take any action or cause any action to fail to be taken, which
action or failure to act could prevent it from qualifying as a regulated
investment company under the provisions of Subchapter M of the Code.
5.11 Each Portfolio shall prepare, or cause to be prepared, all of its Tax
Returns for taxable periods that end on or before the Closing Date and shall
timely file, or cause to be timely filed, all such Tax Returns. Each Portfolio
shall make any payments of Taxes required to be made by it with respect to any
such Tax Returns.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO
The obligations of the Acquired Portfolio to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring Portfolio of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Portfolio in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of the
Acquiring Portfolio contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the Closing
Date a certificate of the Acquiring Trust on behalf of the Acquiring Portfolio
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Safeco Trust and
dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, that each of the conditions to Closing in this
Article 6 have been met, and as to such other matters as the Safeco Trust shall
reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Portfolio shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Portfolio Tax Representation Certificate, satisfactory to the Safeco
Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Portfolio;
6.4 With respect to the Acquiring Portfolio, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Portfolio and, based upon such determination, shall
have approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable opinion as
to the due authorization of this Agreement by the Acquiring Fund and related
matters of Wilmer Cutler Pickering Hale and Dorr LLP, dated as of the Closing
Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
The obligations of the Acquiring Portfolio to complete the transactions provided
for herein shall be, at its election, subject to the performance by the Acquired
Portfolio of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following further conditions,
unless waived by the Acquiring Portfolio in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of the
Acquired Portfolio contained in this Agreement shall be true and correct as of
the date hereof and, except as they
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may be affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date;
7.2 The Safeco Trust shall have delivered to the Acquiring Portfolio the
Statement of Assets and Liabilities of the Acquired Portfolio pursuant to
Paragraph 5.7, together with a list of its portfolio securities showing the
federal income tax bases and holding periods of such securities, as of the
Closing Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer;
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the Closing
Date a certificate of the Safeco Trust on behalf of the Acquired Portfolio
executed in its name by its President or Vice President and a Treasurer or
Assistant Treasurer, in form and substance reasonably satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, that each of the
conditions to Closing in this Article 7 have been met, and as to such other
matters as the Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Portfolio shall have delivered to
the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired
Portfolio Tax Representation Certificate, satisfactory to the Acquiring Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex B, concerning certain tax-related matters
with respect to the Acquired Portfolio;
7.5 The Acquiring Trust shall have received at the Closing a favorable opinion
as to the due authorization of this Agreement by the Safeco Trust and related
matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in a form
reasonably satisfactory to Acquiring Trust; and
7.6 With respect to the Acquired Portfolio, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired Portfolio and, based upon such determination, shall have approved
this Agreement and the transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before the Closing
Date with respect to either party hereto, the other party to this Agreement
shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the Acquired Portfolio's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by the
Acquired Portfolio's shareholders shall have been delivered by the Acquired
Portfolio to the Acquiring Portfolio. Notwithstanding anything herein to the
contrary, neither party hereto may waive the conditions set forth in this
Paragraph 8.1;
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8.2 On the Closing Date, no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state Blue Sky and securities authorities) deemed necessary by
either party hereto to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of either party hereto,
provided that either party may waive any such conditions for itself;
8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have become
effective under the Securities Act and no stop orders suspending the
effectiveness of such Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act;
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering Hale
and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the effect
that for federal income tax purposes the acquisition by the Acquiring Portfolio
of the Acquired Assets solely in exchange for the issuance of Acquiring
Portfolio Shares to the Acquired Portfolio and the assumption of the Assumed
Liabilities by the Acquiring Portfolio, followed by the distribution by the
Acquired Portfolio, in liquidation of the Acquired Portfolio, of Acquiring
Portfolio Shares to the Acquired Portfolio Shareholders in exchange for their
Acquired Portfolio Shares and the termination of the Acquired Portfolio Shares,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code;
8.6 The Acquired Portfolio shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends paid
under Section 561 of the Code, all of its investment company taxable income (as
defined in Section 852(b)(2) of the Code determined without regard to Section
852(b)(2)(D) of the Code) for its taxable year ending on the Closing Date, all
of the excess of (i) its interest income excludable from gross income under
Section 103(a) of the Code over (ii) its deductions disallowed under Sections
265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date,
and all of its net capital gain (as such term is used in Sections 852(b)(3)(A)
and (C) of the Code), after reduction by any available capital loss
carryforward, for its taxable year ending on the Closing Date; and
8.7 The Acquiring Portfolio shall have made a distribution of capital gains to
its shareholders in November 2004 in accordance with its normal practices and
unless the Acquiring Portfolio distributes income monthly, the dividend
distribution that the Acquiring Portfolio normally would make in December of
2004 shall have been made to shareholders of record prior to the Closing.
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9. BROKERAGE FEES AND EXPENSES
9.1 Each party hereto represents and warrants to the other party hereto that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
9.2 The parties have been informed by Symetra Financial Corporation and the
Acquiring Portfolio Adviser -- and the parties have entered into this Agreement
in reliance on such information -- that such non-parties will pay all expenses
of the Portfolios associated with the Reorganization, including, the expenses
associated with the preparation, printing and mailing of any and all shareholder
notices, communications, proxy statements, and necessary filings with the SEC or
any other governmental authority in connection with the transactions
contemplated by this Agreement and the legal and Trustees' fees and expenses
incurred in connection with the Reorganization. Except for the foregoing, the
Acquiring Portfolio and the Acquired Portfolio shall each bear its own expenses
in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agrees that neither party has
made any representation, warranty or covenant not set forth herein or referred
to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the
entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith shall not survive
the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Acquiring
Trust and Safeco Trust. In addition, either party may at its option terminate
this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation, warranty,
covenant or agreement contained herein to be performed at or prior to the
Closing Date;
(b) because of a condition herein expressed to be precedent to the obligations
of the terminating party which has not been met and which reasonably
appears will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquiring
Portfolio's shareholders;
(d) by resolution of the Safeco Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquired
Portfolio's shareholders; or
A-22
(e) if the transactions contemplated by this Agreement shall not have occurred
on or prior to December 31, 2004 or such other date as the parties may
mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Portfolio, the Acquiring Trust, the Safeco
Trust or the Acquired Portfolio, or the trustees or officers of the Safeco
Trust, or the Acquiring Trust, but, subject to Paragraph 9.2, each party shall
bear the expenses incurred by it incidental to the preparation and carrying out
of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Safeco Trust
and the Acquiring Trust; provided, however, that following the meeting of the
Acquired Portfolio's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Portfolio Shares to be received by the Acquired Portfolio Shareholders
under this Agreement to their detriment without their further approval; provided
that nothing contained in this Section 12 shall be construed to prohibit the
parties from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquired Portfolio, c/o Symetra
Financial Corporation, 5069 154th Place, N.E., Seattle, Washington 98052,
Attention: Roger F. Harbin, with copies to R. Darrell Mounts, Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, DC
20036-1221, and to the Acquiring Portfolio, c/o Pioneer Investment Management,
Inc., 60 State Street, Boston, Massachusetts 02109, Attention: Dorothy E.
Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109, Attention: David C. Phelan.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without giving effect to conflict of
laws principles (other than Delaware Code Title 6 ss. 2708); provided that, in
the case of any conflict between those laws and the federal securities laws, the
latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or
A-23
obligations hereunder shall be made by either party without the prior written
consent of the other party hereto. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person, firm or
corporation, or other entity, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring Trust and the
Safeco Trust shall not be binding upon any of their respective trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
to the property of the Acquiring Portfolio or the Acquired Portfolio, as the
case may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the Acquiring
Trust and of the Safeco Trust and this Agreement has been executed by authorized
officers of the Acquiring Trust and the Safeco Trust, acting as such, and
neither such authorization by such trustees nor such execution and delivery by
such officers shall be deemed to have been made by any of them individually or
to imposed any liability on any of them personally, but shall bind only the
property of the Acquiring Portfolio and the Acquired Portfolio, as the case may
be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and attested by its Secretary or Assistant Secretary.
Attest: SAFECO RESOURCE SERIES TRUST
on behalf of
[SAFECO PORTFOLIO]
By:________________________ By:_______________________
Name: Name:
Title: Secretary Title: President
PIONEER VARIABLE CONTRACTS
TRUST on behalf of
Attest: [Pioneer Portfolio]
By:________________________ By:_______________________
Name: Name:
Title: Title:
A-24
Annex A
TAX REPRESENTATION CERTIFICATE OF
PIONEER VARIABLE CONTRACTS TRUST ON BEHALF OF [PIONEER PORTFOLIO]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
________________, 2004 between Pioneer Variable Contracts Trust, a Delaware
statutory trust ("Acquiring Trust"), on behalf of its series, [Pioneer
Portfolio] ("Acquiring Portfolio"), and Safeco Resource Series Trust, a Delaware
statutory trust, on behalf of its series, [Safeco Portfolio] ("Acquired
Portfolio") (the "Agreement"). Pursuant to the Agreement, Acquiring Portfolio
will acquire all of the assets of Acquired Portfolio in exchange solely for (i)
the assumption by Acquiring Portfolio of the Assumed Liabilities of Acquired
Portfolio and (ii) the issuance of Class I shares of beneficial interest of
Acquiring Portfolio (the "Acquiring Portfolio Shares") to Acquired Portfolio,
followed by the distribution by Acquired Portfolio, in liquidation of Acquired
Portfolio, of the Acquiring Portfolio Shares to the shareholders of Acquired
Portfolio and the termination of Acquired Portfolio (the foregoing together
constituting the "transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquiring Portfolio, hereby
certifies and represents that the following statements are true, complete and
correct and will be true, complete and correct on the date of the transaction
and thereafter as relevant. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquiring Portfolio is a series of the Acquiring Trust, a statutory
trust organized under the laws of the State of Delaware, and Acquiring Portfolio
is, and has been at all times, treated as a separate corporation for federal
income tax purposes.g
2. Neither Acquiring Portfolio nor any person "related" to Acquiring
Portfolio (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any
partnership of which Acquiring Portfolio or any such related person is a
partner, has any plan or intention to redeem or otherwise acquire any of the
Acquiring Portfolio Shares received by shareholders of Acquired Portfolio in the
transaction except in the ordinary course of Acquiring Portfolio's business in
connection with its legal obligation under Section 22(e) of the Investment
Company Act of 1940, as amended (the "1940 Act"), as a series of a registered
open-end investment company to redeem its own shares.
3. After the transaction, Acquiring Portfolio will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Portfolio or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) acquired from Acquired
Portfolio in the ordinary course of business.
4. Acquiring Portfolio has no plan or intention to sell or otherwise
dispose of any assets of Acquired Portfolio acquired in the transaction, except
for dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
5. Any expenses of Acquired Portfolio incurred in connection with the
transaction which are paid or assumed by Acquiring Portfolio will be expenses of
Acquired Portfolio solely and directly related to the transaction in accordance
with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquiring Portfolio will not pay or
assume the expenses, if any, incurred by any Acquired Portfolio Shareholders in
connection with the transaction.
6. There is no, and never has been any, indebtedness between Acquiring
Portfolio and Acquired Portfolio.
7. Acquiring Portfolio has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under the Code for each
taxable year since inception and qualifies for such treatment as of the time of
the Closing.
8. Acquiring Portfolio meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Portfolio is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Portfolio does not now own and has never owned, directly or
indirectly, any shares of Acquired Portfolio.
11. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares issued to Acquired Portfolio will be approximately
equal to the fair market value of the Acquired Assets, minus the Assumed
Liabilities. Acquiring Portfolio will not furnish any consideration in
connection with the acquisition of the Acquired Assets other than the assumption
of Assumed Liabilities and the issuance of such Acquiring Portfolio Shares.
12. Acquired Portfolio Shareholders [will/will not] be in control (within
the meaning of Sections 368(a)(2)(H)(i) and 304(c)(1) of the Code) of Acquiring
Portfolio after the transaction.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Funds becoming a member of the Pioneer
family of mutual funds, which, in the long term, is intended to result in lower
expenses and increased assets.
14. No Acquired Portfolio shareholder is acting as agent for Acquiring
Portfolio in connection with the transaction or approval thereof. Acquiring
Portfolio will not reimburse any Acquired Portfolio shareholder for Acquired
Portfolio Shares such shareholder may have purchased or for other obligations
such shareholder may have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock of Acquiring Fund.
* * * * *
2
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Portfolio. The undersigned
recognizes that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the
foregoing representations in evaluating the United States federal income tax
consequences of the transaction and rendering its opinion pursuant to Section
8.5 of the Agreement. If, prior to the date of the transaction, any of the
representations set forth herein ceases to be accurate, the undersigned agrees
to deliver immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written
notice to that effect.
PIONEER VARIABLE CONTRACTS
TRUST, on behalf of
[Pioneer Portfolio]
By:________________________________________
Name:______________________________________
Title:_____________________________________
Dated: _______________, 2004
3
Annex B
Tax Representation Certificate of
Safeco Resource Series Trust
on behalf of [Safeco Portfolio]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of
___________ , 2004 between Pioneer Variable Contracts Trust, a Delaware
statutory trust ("Acquiring Trust"), on behalf of its series [Pioneer Portfolio]
("Acquiring Portfolio"), and Safeco Resource Series Trust, a Delaware statutory
trust ("Safeco Trust"), on behalf of its series [Safeco Portfolio] ("Acquired
Portfolio") (the "Agreement"). Pursuant to the Agreement, Acquiring Portfolio
will acquire all of the assets of Acquired Portfolio in exchange solely for (i)
the assumption by Acquiring Portfolio of the Assumed Liabilities of Acquired
Portfolio; and (ii) the issuance of Class I shares of beneficial interest of
Acquiring Portfolio (the "Acquiring Portfolio Shares") to Acquired Portfolio,
followed by the distribution by Acquired Portfolio, in liquidation of Acquired
Portfolio, of the Acquiring Portfolio Shares to the shareholders of Acquired
Portfolio and the termination of Acquired Portfolio (the foregoing together
constituting the "transaction").
The undersigned officer of Safeco Trust, after consulting with its counsel,
auditors and tax advisers regarding the meaning of and factual support for the
following representations, on behalf of Acquired Portfolio, hereby certifies and
represents that the following statements are true, complete and correct and will
be true, complete and correct on the date of the transaction and thereafter as
relevant. Unless otherwise indicated, all capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Agreement.
1. Acquired Portfolio is a series of Safeco Trust, a statutory trust
organized under the laws of the State of Delaware, and Acquired Portfolio is,
and has been at all times, treated as a separate corporation for federal tax
purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares received by each shareholder that holds shares of
Acquired Portfolio (the "Acquired Portfolio Shares") will be approximately equal
to the fair market value of the Acquired Portfolio Shares with respect to which
such Acquiring Portfolio Shares are received, and the aggregate consideration
received by Acquired Portfolio shareholders in exchange for their Acquired
Portfolio Shares will be approximately equal to the fair market value of all of
the outstanding Acquired Portfolio Shares immediately prior to the transaction.
No property other than Acquiring Portfolio Shares will be distributed to
shareholders of Acquired Portfolio in exchange for their Acquired Portfolio
Shares, nor will any such shareholder receive cash or other property as part of
the transaction.
3. Neither Acquired Portfolio nor any person "related" to Acquired
Portfolio (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any
partnership in which Acquired Portfolio or any such related person is a partner,
has redeemed, acquired or
otherwise made any distributions with respect to any shares of Acquired
Portfolio as part of the transaction, or otherwise pursuant to a plan of which
the transaction is a part, other than redemptions and distributions made in the
ordinary course of Acquired Portfolio's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Portfolio,
there is no plan or intention on the part of the shareholders of Acquired
Portfolio to engage in any transaction with Acquired Portfolio, Acquiring
Portfolio, or any person treated as related to Acquired Portfolio or Acquiring
Portfolio under Treasury Regulation Section 1.368-1(e)(3) or any partnership in
which Acquired Portfolio, Acquiring Portfolio, or any person treated as related
to Acquired Portfolio or Acquiring Portfolio under Treasury Regulation Section
1.368-1(e)(3) is a partner involving the sale, redemption or exchange of any of
the Acquired Portfolio Shares or any of the Acquiring Portfolio Shares to be
received in the transaction, as the case may be, other than in the ordinary
course of Acquired Portfolio's business as a series of an open-end investment
company.
4. Pursuant to the transaction, Acquired Portfolio will transfer to
Acquiring Portfolio, and Acquiring Portfolio will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair market value
of the gross assets, Acquired Portfolio held immediately before the transaction.
For the purposes of the foregoing, any amounts Acquired Portfolio uses to pay
its transaction expenses and to make redemptions and distributions immediately
before the transaction (except (a) redemptions in the ordinary course of its
business required by section 22(e) of the Investment Company Act and (b)
regular, normal dividend distributions made to conform to its policy of
distributing all or substantially all of its income and gains to avoid the
obligation to pay federal income tax and/or the excise tax under Section 4982 of
the Code) will be included as assets it held immediately before the transaction.
5. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares issued to Acquired Portfolio will be approximately
equal to the fair market value of the Acquired Assets, minus the Assumed
Liabilities. Acquired Portfolio will not receive any consideration from
Acquiring Portfolio in connection with the acquisition of the Acquired Assets
other than the assumption of the Assumed Liabilities and the issuance of such
Acquiring Portfolio Shares.
6. The Assumed Liabilities assumed by Acquiring Portfolio plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Portfolio in the ordinary course of its business. Acquired Portfolio
is not aware of any liabilities of any kind other than the Assumed Liabilities.
7. As of the Closing Date, the adjusted basis and fair market value of the
Acquired Assets will equal or exceed the Assumed Liabilities for purposes of
Section 357(d) of the Code.
8. Acquired Portfolio currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted most
recently, but does not include a business that the corporation enters into as
part of a plan of reorganization. A significant part of the Acquired Assets will
be Acquired Portfolio's historic business assets within the meaning of Treasury
Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic
business assets are the assets used in its historic business), except for any
Acquired Portfolio assets that
2
may have been disposed of by the Acquired Fund after the Acquiring Portfolio
Adviser became the Investment Adviser to Acquired Portfolio on August 2, 2004.
9. Acquired Portfolio will distribute to its shareholders the Acquiring
Portfolio Shares it receives pursuant to the transaction, and its other
properties, if any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Portfolio incurred by it in connection with
the transaction will be only such expenses that are solely and directly related
to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired
Portfolio will not pay any expenses incurred by its shareholders in connection
with the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Portfolio and Acquired Portfolio.
12. Acquired Portfolio has properly elected to be a regulated investment
company under Subchapter M of the Code, has qualified for the special tax
treatment afforded regulated investment companies under Subchapter M of the Code
for each taxable year since inception, and qualifies as of the time of the
Closing.
13. Acquired Portfolio meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Portfolio is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Portfolio shareholders will not have dissenters' or appraisal
rights in the transaction.
16. The transaction is being undertaken for valid and substantial business
purposes, including facilitating the Acquired Portfolio's becoming a member of
the Pioneer family of mutual funds, which, in the long term, is intended to
result in lower expenses and increased assets.
17. Acquired Fund does not pay compensation to any shareholder-employee.
18. Acquired Fund has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock in Acquired Fund.
The undersigned officer of Safeco Trust is authorized to make all of the
representations set forth herein, and the undersigned is authorized to execute
this certificate on behalf of Acquired Portfolio. The undersigned recognizes
that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
3
SAFECO RESOURCE SERIES TRUST,
on behalf of
[SAFECO PORTFOLIO]
By:_______________________________
Name:_____________________________
Title:____________________________
4
Exhibit A-2 - Form of Agreement and Plan of Reorganization (F Reorganization)
-----------------------------------------------------------------------------
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
[Form For F Reorganizations]
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this xx day
of October, 2004, by and between Pioneer Variable Contracts Trust, a Delaware
statutory trust (the "Acquiring Trust"), on behalf of its series [name of
Pioneer Portfolio] (the "Acquiring Portfolio"), with its principal place of
business at 60 State Street, Boston, Massachusetts 02109, and Safeco Resource
Series Trust, a Delaware statutory trust (the "Safeco Trust"), on behalf of its
series [name of Safeco Portfolio] (the "Acquired Portfolio"), with its principal
place of business at 5069 154th Place N.E., Redmond, Washington 98052. The
Acquiring Portfolio and the Acquired Portfolio are sometimes referred to
collectively herein as the "Portfolios" and individually as a "Portfolio."
This Agreement is intended to be and is adopted as a plan of a "reorganization"
as defined in Section 368(a)(1)(F) of the United States Internal Revenue Code of
1986, as amended (the "Code") and the Treasury Regulations thereunder. The
reorganization (the "Reorganization") will consist of (1) the transfer of all of
the assets of the Acquired Portfolio to the Acquiring Portfolio in exchange
solely for (A) the issuance of Class I shares of beneficial interest of the
Acquiring Portfolio (collectively, the "Acquiring Portfolio Shares" and each, an
"Acquiring Portfolio Share") to the Acquired Portfolio, and (B) the assumption
by the Acquiring Portfolio of the liabilities of the Acquired Portfolio
(collectively, the "Assumed Liabilities"), and (2) the distribution by the
Acquired Portfolio, on or promptly after the closing date of the Reorganization
(the "Closing Date") as provided herein, of the Acquiring Portfolio Shares to
the shareholders of the Acquired Portfolio in liquidation and dissolution of the
Acquired Portfolio, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered investment
companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Portfolio is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust has determined that the
Reorganization is in the best interests of the Acquired Portfolio shareholders
and is not dilutive of the interests of those shareholders.
NOW, THEREFORE, in consideration of the premises of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO IN EXCHANGE FOR THE ACQUIRING
PORTFOLIO SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED PORTFOLIO.
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, the Acquired Portfolio will
transfer all of its assets as set forth in Paragraph 1.2 (the "Acquired Assets")
to the Acquiring Portfolio free and clear of all liens and encumbrances (other
than those arising under the Securities Act of 1933, as amended (the "Securities
Act"), liens for taxes not yet due and contractual restrictions on the transfer
of the
A-25
Acquired Assets) and the Acquiring Portfolio agrees in exchange therefor: (i) to
issue to the Acquired Portfolio the number of Acquiring Portfolio Shares,
including fractional Acquiring Portfolio Shares, equal to the number of shares,
including fractional shares, of beneficial interest in the Acquired Portfolio
(the "Acquired Portfolio Shares") then outstanding (which Acquired Portfolio
Shares shall have the same net asset value ("NAV") per share as such Acquired
Portfolio Shares); and (ii) to assume the Assumed Liabilities. Such transactions
shall take place at the Closing (as defined in Paragraph 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Portfolio's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Portfolio or the Safeco Trust in respect of the Acquired
Portfolio, all other intangible property owned by the Acquired Portfolio,
originals or copies of all books and records of the Acquired Portfolio, and all
other assets of the Acquired Portfolio on the Closing Date. The Acquiring
Portfolio shall also be entitled to receive (or, to the extent agreed upon
between the Safeco Trust and the Acquiring Trust, be provided access to) copies
of all records that the Safeco Trust is required to maintain under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
the rules of the Securities and Exchange Commission (the "Commission")
thereunder to the extent such records pertain to the Acquired Portfolio.
(b) The Acquired Portfolio has provided the Acquiring Portfolio with a
list of all of the Acquired Portfolio's securities and other assets as of the
date of execution of this Agreement, and the Acquiring Portfolio has provided
the Acquired Portfolio with a copy of the current fundamental investment
policies and restrictions and fair value procedures applicable to the Acquiring
Portfolio. The Acquired Portfolio reserves the right to sell any of such
securities or other assets before the Closing Date (except to the extent sales
may be limited by representations of the Acquired Portfolio contained herein and
made in connection with the issuance of the tax opinion provided for in
Paragraph 8.5 hereof).
1.3 The Acquired Portfolio will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Safeco Trust shall liquidate the Acquired Portfolio and
distribute pro rata to its shareholders of record, determined as of the close of
regular trading on the New York Stock Exchange on the Closing Date (the
"Acquired Portfolio Shareholders"), the Acquiring Portfolio Shares received by
the Acquired Portfolio pursuant to Paragraph 1.1 hereof. Each Acquired Portfolio
Shareholder shall receive the number of Acquiring Portfolio Shares equal to the
number of Acquired Portfolio Shares held of record by such Acquired Portfolio
Shareholder on the Closing Date. Such liquidation and distribution will be
accomplished by the Safeco Trust instructing the Acquiring Trust to transfer the
Acquiring Portfolio Shares then credited to the account of the Acquired
Portfolio on the books of the Acquiring Portfolio to open accounts on the share
records of the Acquiring Portfolio established and maintained by the Acquiring
Portfolio's transfer agent in the names of the Acquired Portfolio Shareholders
and representing the respective pro rata number of the Acquiring Portfolio
Shares due the Acquired Portfolio Shareholders. The Safeco Trust shall promptly
provide the Acquiring Trust with evidence of such liquidation and distribution.
All issued and outstanding Acquired Portfolio.
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Shares will simultaneously be cancelled on the books of the Acquired Portfolio,
and the Acquired Portfolio will be dissolved. The Acquiring Portfolio shall not
issue certificates representing the Acquiring Portfolio Shares in connection
with such exchange.
1.5 Ownership of Acquiring Portfolio Shares will be shown on the books of the
Acquiring Portfolio's transfer agent for its Class I shares. Any certificates
representing ownership of Acquired Portfolio Shares that remain outstanding on
the Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Portfolio Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Portfolio Shares in a
name other than the registered holder of the Acquired Portfolio Shares on the
books of the Acquired Portfolio as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Portfolio
Shares are to be issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Portfolio for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquired Portfolio and the NAV per Acquired Portfolio Shares
shall be computed as of the close of business (4:00 p.m., Boston time) on the
Closing Date (the "Valuation Time") by Safeco Asset Management, Inc. (the
"Acquired Portfolio Administrator") by calculating the value of the Acquired
Portfolio and by subtracting therefrom the amount of the liabilities of the
Acquired Portfolio on the on the Closing Date included on the face of the
Statement of Assets and Liabilities of the Acquired Portfolio delivered pursuant
to Paragraph 5.7 (the "Statement of Assets and Liabilities"), said assets and
liabilities to be valued in the manner set forth in the Acquired Portfolio's
then current prospectus and statement of additional information. The Acquiring
Portfolio Adviser shall confirm to the Acquiring Portfolio the NAV of the
Acquired Portfolio and the NAVE per Acquired Portfolio Share.
2.2 The Acquired Portfolio shall cause the Acquired Portfolio Administrator to
deliver a copy of its valuation report to the Acquiring Portfolio at Closing.
All computations of value shall be
A-27
made by the Acquired Portfolio Administrator in accordance with its regular
practice as pricing agent for the Acquired Portfolio.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 8, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or at such other place as the
parties may agree.
3.2 Portfolio securities that are held other than in book-entry form in the
name of State Street Bank and Trust Company (the "Acquired Portfolio Custodian")
as record holder for the Acquired Portfolio shall be presented by the Acquired
Portfolio to Brown Brothers Harriman & Co. (the "Acquiring Portfolio Custodian")
for examination no later than three business days preceding the Closing Date.
Such portfolio securities shall be delivered by the Acquired Portfolio to the
Acquiring Portfolio Custodian for the account of the Acquiring Portfolio on the
Closing Date, duly endorsed in proper form for transfer, in such condition as to
constitute good delivery thereof in accordance with the custom of brokers, and
shall be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof. Portfolio securities held of
record by the Acquired Portfolio Custodian in book-entry form on behalf of the
Acquired Portfolio shall be delivered by the Acquired Portfolio Custodian
through the Depository Trust Company to the Acquiring Portfolio Custodian and by
the Acquiring Portfolio Custodian recording the beneficial ownership thereof by
the Acquiring Portfolio on the Acquiring Portfolio Custodian's records. Any cash
shall be delivered by the Acquired Portfolio Custodian transmitting immediately
available funds by wire transfer to the Acquiring Portfolio Custodian the cash
balances maintained by the Acquired Portfolio Custodian and the Acquiring
Portfolio Custodian crediting such amount to the account of the Acquiring
Portfolio.
3.3 The Acquiring Portfolio Custodian shall deliver within one business day
after the Closing a certificate of an authorized officer stating that: (a) the
Acquired Assets have been delivered in proper form to the Acquiring Portfolio on
the Closing Date, and (b) all necessary transfer taxes including all applicable
federal and state stock transfer stamps, if any, have been paid, or provision
for payment has been made in conjunction with the delivery of portfolio
securities as part of the Acquired Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading
or trading thereon shall be restricted, or (b) trading or the reporting of
trading on such exchange or elsewhere is disrupted so that accurate appraisal of
the NAV of the the Acquired Portfolio pursuant to Paragraph 2.1 is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.5 The Acquired Portfolio shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding
A-28
status and certificates of the Acquired Portfolio Shareholders and the number
and percentage ownership of outstanding Acquired Portfolio Shares owned by each
Acquired Portfolio Shareholder as of the Valuation Time, certified by the
President or a Secretary of the Safeco Trust and its Treasurer, Secretary or
other authorized officer (the "Shareholder List") as being an accurate record of
the information (a) provided by the Acquired Portfolio Shareholders, (b)
provided by the Acquired Portfolio Custodian, or (c) derived from the Safeco
Trust's records by such officers or one of the Safeco Trust's service providers.
The Acquiring Portfolio shall issue and deliver to the Acquired Portfolio a
confirmation evidencing the Acquiring Portfolio Shares to be credited on the
Closing Date, or provide evidence satisfactory to the Acquired Portfolio that
such Acquiring Portfolio Shares have been credited to the Acquired Portfolio's
account on the books of the Acquiring Portfolio. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts or other documents as such other party or its counsel may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as set forth on Schedule 4.1 hereto, the Safeco Trust, on behalf of
the Acquired Portfolio, represents, warrants and covenants to the Acquiring
Portfolio, which representations, warranties and covenants will be true and
correct on the date hereof and on the Closing Date as though made on and as of
the Closing Date, as follows:
(a) The Acquired Portfolio is a series of the Safeco Trust. The Safeco
Trust is a statutory trust validly existing and in good standing under the laws
of the State of Delaware and has the power to own all of its properties and
assets and, subject to approval by the Acquired Portfolio's shareholders, to
perform its obligations under this Agreement. The Acquired Portfolio is not
required to qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would subject it to any material liability
or disability. Each of the Safeco Trust and the Acquired Portfolio has all
necessary federal, state and local authorizations to own all of its properties
and assets and to carry on its business as now being conducted;
(b) The Safeco Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Safeco Trust is not in violation of, and the execution and delivery
of this Agreement and the performance of its obligations under this Agreement in
respect of the Acquired Portfolio will not result in a violation of, any
provision of the Safeco Trust's Trust Instrument or By-Laws or any material
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquired Portfolio to which the Safeco Trust is a party or by
which the Acquired Portfolio or any of its assets are bound;
(d) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Portfolio or any of the Acquired Portfolio's
properties or assets. The Acquired Portfolio knows of no facts which might form
the basis for the institution of such proceedings. Neither the Safeco Trust nor
the Acquired Portfolio is a party to or subject to the provisions of any order,
A-29
decree or judgment of any court or governmental body which materially adversely
affects the Acquired Portfolio's business or its ability to consummate the
transactions contemplated herein or would be binding upon the Acquiring
Portfolio as the successor to the Acquired Portfolio;
(e) The Acquired Portfolio has no material contracts or other commitments
(other than this Agreement or agreements for the purchase and sale of securities
entered into in the ordinary course of business and consistent with its
obligations under this Agreement) which will not be terminated at or prior to
the Closing Date and no such termination will result in liability to the
Acquired Portfolio (or the Acquiring Portfolio);
(f) The statement of assets and liabilities of the Acquired Portfolio, and
the related statements of income and changes in NAV, as of and for the fiscal
year ended December 31, 2003 have been audited by Ernst & Young LLP, independent
registered public accounting firm, and are in accordance with generally accepted
accounting principles ("GAAP") consistently applied and fairly reflect, in all
material respects, the financial condition of the Acquired Portfolio as of such
date and the results of its operations for the period then ended, and all known
liabilities, whether actual or contingent, of the Acquired Portfolio as of the
date thereof are disclosed therein. The Statement of Assets and Liabilities will
be in accordance with GAAP consistently applied and will fairly reflect, in all
material respects, the financial condition of the Acquired Portfolio as of such
date and the results of its operations for the period then ended. Except for the
Assumed Liabilities, the Acquired Portfolio will not have any known or
contingent liabilities on the Closing Date. No significant deficiency, material
weakness, fraud, significant change or other factor that could significantly
affect the internal controls of the Acquired Portfolio has been disclosed or is
required to be disclosed in the Acquired Portfolio's reports on Form N-CSR to
enable the chief executive officer and chief financial officer or other officers
of the Acquired Portfolio to make the certifications required by the
Sarbanes-Oxley Act, and no deficiency, weakness, fraud, change, event or other
factor exists that will be required to be disclosed in the Acquiring Portfolio's
Form N-CSR after the Closing Date;
(g) Since December 31, 2003, except as specifically disclosed in the
Acquired Portfolio's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the period
ended June 30, 2004, there has not been any material adverse change in the
Acquired Portfolio's financial condition, assets, liabilities, business or
prospects, or any incurrence by the Acquired Portfolio of indebtedness, except
for normal contractual obligations incurred in the ordinary course of business
or in connection with the settlement of purchases and sales of portfolio
securities. For the purposes of this subparagraph (g) (but not for any other
purpose of this Agreement), a decline in NAV per Acquired Portfolio Share
arising out of its normal investment operations or a decline in market values of
securities in the Acquired Portfolio's portfolio or a decline in net assets of
the Acquired Portfolio as a result of redemptions shall not constitute a
material adverse change;
(h) (A) For each taxable year of its operation since its inception, the
Acquired Portfolio has met, and for the current taxable year it will meet, the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and will qualify as such as of the Closing Date and
will satisfy the diversification requirements of Section 851(b)(3) of the Code
without regard to the last sentence of Section 851(d) of the Code. The Acquired
Portfolio has not taken any action,
A-30
caused any action to be taken or caused any action to fail to be taken which
action or failure could cause the Acquired Portfolio to fail to qualify as a
regulated investment company under the Code. To the knowledge of Safeco Trust,
(i) the Acquired Portfolio does not have, and has not ever had, any shareholder
that is not a segregated asset account within the meaning of Treasury Regulation
Section 1.817-5(e) or an entity referred to in (and holding its shares in
compliance with the terms of) Treasury Regulation Section 1.817-5(f)(3)(i),
(ii), or (iii); (ii) no public investor is participating or has ever
participated in the Acquired Portfolio through such a segregated asset account
other than through purchase of a variable contract within the meaning of
Treasury Regulation Section 1.817-5(f)(2)(i)(B); and (iii) the Acquired
Portfolio satisfies, and at all times during its existence has satisfied, the
diversification requirements contained in Treasury Regulation Section
1.817-5(b)(1), (2), or (3);
(B) Within the times and in the manner prescribed by law, the Acquired
Portfolio has properly filed on a timely basis all Tax Returns (as defined
below) that it was required to file, and all such Tax Returns were complete and
accurate in all respects. The Acquired Portfolio has not been informed by any
jurisdiction that the jurisdiction believes that the Acquired Portfolio was
required to file any Tax Return that was not filed; and the Acquired Portfolio
does not know of any basis upon which a jurisdiction could assert such a
position;
(C) The Acquired Portfolio has timely paid, in the manner prescribed by
law, all Taxes (as defined below), which were due and payable or which were
claimed to be due;
(D) All Tax Returns filed by the Acquired Portfolio constitute complete and
accurate reports of the respective Tax liabilities and all attributes of the
Acquired Portfolio or, in the case of information returns and payee statements,
the amounts required to be reported, and accurately set forth all items required
to be included or reflected in such returns;
(E) The Acquired Portfolio has not waived or extended any applicable
statute of limitations relating to the assessment or collection of Taxes;
(F) The Acquired Portfolio has not been notified that any examinations of
the Tax Returns of the Acquired Portfolio are currently in progress or
threatened, and no deficiencies have been asserted or assessed against the
Acquired Portfolio as a result of any audit by the Internal Revenue Service or
any state, local or foreign taxing authority, and, to its knowledge, no such
deficiency has been proposed or threatened;
(G) The Acquired Portfolio has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquired Portfolio is not and
has never been a member of a group of corporations with which it has filed (or
been required to file) consolidated, combined or unitary Tax Returns. The
Acquired Portfolio is not a party to any Tax allocation, sharing, or
indemnification agreement;
A-31
(H) The unpaid Taxes of the Acquired Portfolio for tax periods through
the Closing Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Statement
of Assets and Liabilities, rather than in any notes thereto (the "Tax
Reserves"). All Taxes that the Acquired Portfolio is or was required by law
to withhold or collect have been duly withheld or collected and, to the
extent required, have been timely paid to the proper governmental agency;
(I) The Acquired Portfolio has delivered to the Acquiring Portfolio or
made available to the Acquiring Portfolio complete and accurate copies of
all Tax Returns of the Acquired Portfolio, together with all related
examination reports and statements of deficiency for all periods not closed
under the applicable statutes of limitations and complete and correct
copies of all private letter rulings, revenue agent reports, information
document requests, notices of proposed deficiencies, deficiency notices,
protests, petitions, closing agreements, settlement agreements, pending
ruling requests and any similar documents submitted by, received by or
agreed to by or on behalf of the Acquired Portfolio. The Acquired Portfolio
has disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code;
(J) The Acquired Portfolio has not undergone, has not agreed to
undergo, and is not required to undergo (nor will it be required as a
result of the transactions contemplated in this Agreement to undergo) a
change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481 of the Code. The Acquired Portfolio
will not be required to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date under Section 481(c) of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in Section 7121 of the Code (or any corresponding
or similar provision of state, local or foreign income Tax law) executed on
or prior to the Closing Date; (iii) installment sale or open transaction
disposition made on or prior to the Closing Date; or (iv) prepaid amount
received on or prior to the Closing Date;
(K) The Acquired Portfolio has not taken or agreed to take any action,
and is not aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in Annex B; -------
(L) There are (and as of immediately following the Closing there will
be) no liens on the assets of the Acquired Portfolio relating to or
attributable to Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Portfolio are
accurately reflected on the Acquired Portfolio's Tax books and records;
A-32
(N) The Acquired Portfolio has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code which
has not been previously recaptured in full as provided in Sections
904(f)(2) and/or 904(f)(3) of the Code;
(O) The Acquired Portfolio is not a party to a gain recognition
agreement under Section 367 of the Code;
(P) The Acquired Portfolio does not own any interest in an entity that
is characterized as a partnership for income tax purposes;
(Q) The Acquired Portfolio's Tax attributes are not limited under the
Code (including but not limited to any capital loss carry forward
limitations under Sections 382 or 383 of the Code and the Treasury
Regulations thereunder) or comparable provisions of state law, except as
set forth on Schedule 4.1; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social
security, business license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service, service use,
severance, stamp, occupation, windfall profits, customs, duties, franchise
and other taxes imposed by the United States of America or any state, local
or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or
dispute thereof; and "Tax Returns" shall mean all reports, returns,
declarations, statements or other information required to be supplied to a
governmental or regulatory authority or agency, or to any other person, in
connection with Taxes and any associated schedules or work papers produced
in connection with such items;
(i) All issued and outstanding Acquired Portfolio Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
nonassessable by the Acquired Portfolio. All of the issued and outstanding
Acquired Portfolio Shares will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the Shareholder List submitted to the
Acquiring Portfolio pursuant to Paragraph 3.5 hereof. The Acquired Portfolio
does not have outstanding any options, warrants or other rights to subscribe for
or purchase any Acquired Portfolio Shares, nor is there outstanding any security
convertible into any Acquired Portfolio Shares;
(j) At the Closing Date, the Acquired Portfolio will have good and
marketable title to the Acquired Assets, and full right, power and authority to
sell, assign, transfer and deliver the Acquired Assets to the Acquiring
Portfolio, and, upon delivery and payment for the Acquired Assets, the Acquiring
Portfolio will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, except such restrictions as might
arise under the Securities Act;
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(k) The Safeco Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Safeco Trust's Board of Trustees, and, subject to the
approval of the Acquired Portfolio's shareholders, assuming due authorization,
execution and delivery by the Acquiring Portfolio, this Agreement will
constitute a valid and binding obligation of the Acquired Portfolio, enforceable
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(l) The information to be furnished by the Acquired Portfolio to the
Acquiring Portfolio for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in connection with
the transactions contemplated hereby and any information necessary to compute
the total return of the Acquired Portfolio shall be accurate and complete and
shall comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(m) The information included in the proxy statement (the "Proxy Statement")
forming part of the Acquiring Portfolio's Registration Statement on Form N-14
filed in connection with this Agreement (the "Registration Statement") that has
been furnished in writing by the Acquired Portfolio to the Acquiring Portfolio
for inclusion in the Registration Statement, on the effective date of that
Registration Statement and on the Closing Date, will conform in all material
respects to the applicable requirements of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment
Company Act and the rules and regulations of the Commission thereunder and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading;
(n) Upon the effectiveness of the Registration Statement, no consent,
approval, authorization or order of any court or governmental authority is
required for the consummation by the Safeco Trust or the Acquired Portfolio of
the transactions contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Portfolio Shares have been
offered for sale and sold in conformity with all applicable federal and state
securities laws, except as may have been previously disclosed in writing to the
Acquiring Portfolio;
(p) The prospectus and statement of additional information of the Acquired
Portfolio and any amendments or supplements thereto, furnished to the Acquiring
Portfolio, did not as of their dates or the dates of their distribution to the
public contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which such statements were made, not
misleading;
(q) The Acquired Portfolio currently complies in all material respects
with, and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquired
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Portfolio currently complies in all material respects with, and since its
organization has complied in all material respects with, all investment
objectives, policies, guidelines and restrictions and any compliance procedures
established by the Safeco Trust with respect to the Acquired Portfolio. All
advertising and sales material used by the Acquired Portfolio complies in all
material respects with and has complied in all material respects with the
applicable requirements of the Securities Act, the Investment Company Act, the
rules and regulations of the Commission, and, to the extent applicable, the
Conduct Rules of the National Association of Securities Dealers, Inc. (the
"NASD") and any applicable state regulatory authority. All registration
statements, prospectuses, reports, proxy materials or other filings required to
be made or filed with the Commission, the NASD or any state securities
authorities by the Acquired Portfolio have been duly filed and have been
approved or declared effective, if such approval or declaration of effectiveness
is required by law. Such registration statements, prospectuses, reports, proxy
materials and other filings under the Securities Act, the Exchange Act and the
Investment Company Act (i) are or were in compliance in all material respects
with the requirements of all applicable statutes and the rules and regulations
thereunder and (ii) do not or did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they were
made, not false or misleading;
(r) The Acquired Portfolio has previously provided to the Acquiring
Portfolio (and at the Closing will provide an update through the Closing Date of
such information) data which supports a calculation of the Acquired Portfolio's
total return for all periods since the organization of the Acquired Portfolio.
Such data has been prepared in accordance in all material respects with the
requirements of the Investment Company Act and the regulations thereunder and
the rules of the NASD;
(s) Neither the Acquired Portfolio nor, to the knowledge of the Acquired
Portfolio, any "affiliated person" of the Acquired Portfolio has been convicted
of any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge of the Acquired Portfolio, has any affiliated
person of the Acquired Portfolio been the subject, or presently is the subject,
of any proceeding or investigation with respect to any disqualification that
would be a basis for denial, suspension or revocation of registration as an
investment adviser under Section 203(e) of the Investment Advisers Act of 1940,
as amended (the "Investment Advisers Act"), or Rule 206(4)-4(b) thereunder or of
a broker-dealer under Section 15 of the Exchange Act, or for disqualification as
an investment adviser, employee, officer or director of an investment company
under Section 9 of the Investment Company Act; and
(t) The tax representation certificate to be delivered by Safeco Trust on
behalf of the Acquired Portfolio to the Acquiring Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at the Closing pursuant to Paragraph 7.4 (the
"Acquired Portfolio Tax Representation Certificate") will not on the Closing
Date contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading.
4.2 Except as set forth on Schedule 4.2 hereto, the Acquiring Trust, on behalf
of the Acquiring Portfolio, represents, warrants and covenants to the Acquired
Portfolio, which
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representations, warranties and covenants will be true and correct on the date
hereof and on the Closing Date as though made on and as of the Closing Date, as
follows:
(a) The Acquiring Portfolio is a series of the Acquiring Trust. The Acquiring
Portfolio has not commenced operations and will not do so until the Closing. The
Acquiring Trust is a statutory trust duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Acquiring Trust has
the power to own all of its properties and assets and to perform the obligations
under this Agreement. The Acquiring Portfolio is not required to qualify to do
business in any jurisdiction in which it is not so qualified or where failure to
qualify would subject it to any material liability or disability. Each of the
Acquiring Trust and the Acquiring Portfolio has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry on its
business as now being conducted;
(b) The Acquiring Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Acquiring Portfolio's registration statement on Form N-1A that will
be in effect on the Closing Date, and the prospectus and statement of additional
information of the Acquiring Portfolio included therein, will conform in all
material respects with the applicable requirements of the Securities Act and the
Investment Company Act and the rules and regulations of the Commission
thereunder, and did not as of the effective date thereof and will not as of the
Closing Date contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(d) The Registration Statement, the Proxy Statement and statement of
additional information with respect to the Acquiring Portfolio, each dated [ ],
2004, and any amendments or supplements thereto in effect on or prior to the
Closing Date included in the Registration Statement (other than written
information furnished by the Acquired Portfolio for inclusion therein, as
covered by the Acquired Portfolio's warranty in Paragraph 4.1(m) hereof) will
conform in all material respects to the applicable requirements of the
Securities Act and the Investment Company Act and the rules and regulations of
the Commission thereunder. Neither the Registration Statement nor the Proxy
Statement (other than written information furnished by the Acquired Portfolio
for inclusion therein, as covered by the Acquired Portfolio's warranty in
Paragraph 4.1(m) hereof) includes or will include any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in a violation of, any provisions of the Declaration
of Trust or by-laws of the Acquiring Trust or any material agreement, indenture,
instrument, contract, lease or other undertaking with respect to the Acquiring
Portfolio to which the Acquiring Trust is a party or by which the Acquiring
Portfolio or any of its assets is bound;
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(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or threatened against
the Acquiring Portfolio or any of the Acquiring Portfolio's properties or
assets. The Acquiring Portfolio knows of no facts which might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring Portfolio is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially adversely
affects the Acquiring Portfolio's business or its ability to consummate the
transactions contemplated herein;
(g) The Acquiring Portfolio has no actual or potential liability for any
Tax obligation of any taxpayer other than itself. Acquiring Portfolio is not and
has never been a member of a group of corporations with which it has filed (or
been required to file) consolidated, combined or unitary Tax Returns. The
Acquiring Portfolio is not a party to any Tax allocation, sharing, or
indemnification agreement;
(h) The Acquiring Portfolio has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is inconsistent
with the representations set forth in Annex A;
(i) The Acquiring Portfolio currently complies, and at all times since its
organization has complied, in all material respects with the requirements of,
and the rules and regulations under, the Investment Company Act, the Securities
Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal
and state laws or regulations. The Acquiring Portfolio currently complies in all
material respects with, and since its organization has complied in all material
respects with, all investment objectives, policies, guidelines and restrictions
and any compliance procedures established by the Acquiring Trust with respect to
the Acquiring Portfolio. All advertising and sales material used by the
Acquiring Portfolio complies in all material respects with and has complied in
all material respects with the applicable requirements of the Securities Act,
the Investment Company Act, the rules and regulations of the Commission, and, to
the extent applicable, the Conduct Rules of the NASD and any applicable state
regulatory authority. All registration statements, prospectuses, reports, proxy
materials or other filings required to be made or filed with the Commission, the
NASD or any state securities authorities by the Acquiring Portfolio have been
duly filed and have been approved or declared effective, if such approval or
declaration of effectiveness is required by law. Such registration statements,
prospectuses, reports, proxy materials and other filings under the Securities
Act, the Exchange Act and the Investment Company Act (i) are or were in
compliance in all material respects with the requirements of all applicable
statutes and the rules and regulations thereunder and (ii) do not or did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not false or misleading;
(j) The authorized capital of the Acquiring Portfolio consists of an unlimited
number of shares of beneficial interest, no par value per share. As of the
Closing Date, the Acquiring Portfolio will be authorized to issue an unlimited
number of shares of beneficial interest, no par value per share. The Acquiring
Portfolio Shares to be issued and delivered to the Acquired Portfolio for the
account of the Acquired Portfolio Shareholders pursuant to the terms of this
Agreement will have been duly authorized on the Closing Date and, when so issued
and delivered, will be duly and validly issued, fully paid and non-assessable.
The Acquiring
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Portfolio does not have outstanding any options, warrants or other rights to
subscribe for or purchase any Acquiring Portfolio shares, nor is there
outstanding any security convertible into any Acquiring Portfolio shares, nor
will the Acquiring Portfolio have any issued or outstanding shares on or before
the Closing Date other than those issued to Pioneer Investment Management, Inc.
(the "Acquiring Portfolio Adviser") or one of its affiliates, which shares shall
be redeemed, for an amount equal to the price paid therefor, at or before the
Closing;
(k) The Acquiring Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Acquiring Trust's Board of Trustees, and, assuming due
authorization, execution and delivery by the Acquired Portfolio, this Agreement
will constitute a valid and binding obligation of the Acquiring Portfolio,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The information to be furnished in writing by the Acquiring Portfolio
or the Acquiring Portfolio Adviser for use in applications for orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations applicable
thereto or the requirements of any form for which its use is intended, and shall
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the information provided not misleading;
(m) No consent, approval, authorization or order of or filing with any
court or governmental authority is required for the execution of this Agreement
or the consummation of the transactions contemplated by the Agreement by the
Acquiring Portfolio, except for the registration of the Acquiring Portfolio
Shares under the Securities Act and the Investment Company Act;
(n) The prospectus and statement of additional information of the Acquiring
Portfolio and any amendments or supplements thereto, furnished to the Acquired
Portfolio, did not as of their dates or the dates of their distribution to the
public contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which such statements were made, not
misleading;
(o) Neither the Acquiring Portfolio nor, to the knowledge of the Acquiring
Portfolio, any "affiliated person" of the Acquiring Portfolio has been convicted
of any felony or misdemeanor, described in Section 9(a)(1) of the Investment
Company Act, nor, to the knowledge of the Acquiring Portfolio, has any
affiliated person of the Acquiring Portfolio been the subject, or presently is
the subject, of any proceeding or investigation with respect to any
disqualification that would be a basis for denial, suspension or revocation of
registration as an investment adviser under Section 203(e) of the Investment
Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section
15 of the Exchange Act, or for disqualification as
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an investment adviser, employee, officer or director of an investment company
under Section 9 of the Investment Company Act; and
(p) The tax representation certificate to be delivered by the Acquiring
Trust on behalf of the Acquiring Portfolio to the Safeco Trust and Wilmer Cutler
Pickering Hale and Dorr LLP at Closing pursuant to Section 6.3 (the "Acquiring
Portfolio Tax Representation Certificate") will not on the Closing Date contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading.
5. COVENANTS OF THE PORTFOLIOS
5.1 The Acquired Portfolio will operate the Acquired Portfolio's business in the
ordinary course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Portfolio's
shareholders to consider approval of this Agreement and act upon the matters set
forth in the Proxy Statement.
5.3 The Acquiring Portfolio will prepare the notice of meeting, form of proxy
and Proxy Statement (collectively, "Proxy Materials") to be used in connection
with such meeting, and will promptly prepare and file with the Commission the
Registration Statement. The Safeco Trust will provide the Acquiring Portfolio
with information reasonably requested for the preparation of the Registration
Statement in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Portfolio covenants that the Acquiring Portfolio Shares to be
issued hereunder are not being acquired by the Acquired Portfolio for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.5 The Acquired Portfolio will assist the Acquiring Portfolio in obtaining such
information as the Acquiring Portfolio reasonably requires concerning the
beneficial ownership of the Acquired Portfolio Shares.
5.6 Subject to the provisions of this Agreement, each Portfolio will take, or
cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.7 The Acquired Portfolio shall furnish to the Acquiring Portfolio on the
Closing Date a Statement of Assets and Liabilities of the Acquired Portfolio as
of the Closing Date setting forth the NAV of the Acquired Portfolio as of the
Valuation Time, which statement shall be prepared in accordance with GAAP
consistently applied and certified by the Safeco Trust's Treasurer or Assistant
Treasurer. As promptly as practicable, but in any case within 30 days after the
Closing Date, the Safeco Trust shall furnish to the Acquiring Trust, in such
form as is reasonably satisfactory to the Acquiring Trust, a statement of the
earnings and profits of the Acquired
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Portfolio for federal income tax purposes, and of any capital loss carryovers
and other items that will be carried over to the Acquiring Portfolio under the
Code, and which statement will be certified by the Treasurer of the Safeco
Trust.
5.8 Neither Portfolio shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Portfolio, the
Acquired Portfolio Tax Representation Certificate and, with respect to the
Acquiring Portfolio, the Acquiring Portfolio Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date, each
of the Portfolios and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and will
not knowingly take any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken, which action or failure to act
could prevent the Reorganization from qualifying, as a reorganization under the
provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. Unless otherwise required pursuant to a "determination" within the meaning
of Section 1313(a) of the Code, the parties hereto shall treat and report the
transactions contemplated hereby as a reorganization within the meaning of
Section 368(a)(1)(F) of the Code and shall not take any position inconsistent
with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Portfolio shall use its commercially reasonable efforts to cause
it to qualify, and will not knowingly take any action, cause any action to be
taken, fail to take any action or cause any action to fail to be taken, which
action or failure to act could prevent it from qualifying, as a regulated
investment company under the provisions of Subchapter M of the Code.
5.11 The Acquired Portfolio shall prepare, or cause to be prepared, all Tax
Returns of the Acquired Portfolio for taxable periods that end on or before the
Closing Date and shall timely file, or cause to be timely filed, all such Tax
Returns. The Acquired Portfolio shall make any payments of Taxes required to be
made by such Portfolio with respect to any such Tax Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO
The obligations of the Acquired Portfolio to complete the transactions provided
for herein shall be, at its election, subject to the performance by the
Acquiring Portfolio of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Portfolio in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of the
Acquiring Portfolio contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the Closing
Date a certificate of the Acquiring Trust on behalf of the Acquiring Portfolio
executed in its name by its
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President or Vice President and its Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Safeco Trust and dated as of the Closing Date,
to the effect that the representations and warranties of the Acquiring Trust
made in this Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement, that each of the conditions to closing in this Article 6 have been
met, and as to such other matters as the Safeco Trust shall reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Portfolio shall have
delivered to the Safeco Trust and Wilmer Cutler Pickering Hale and Dorr LLP an
Acquiring Portfolio Tax Representation Certificate, satisfactory to the Safeco
Trust and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex A, concerning certain tax-related matters
with respect to the Acquiring Portfolio;
6.4 With respect to the Acquiring Portfolio, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Portfolio and, based upon such determination, shall
have approved this Agreement and the transactions contemplated hereby; and
6.5 The Safeco Trust shall have received at the Closing a favorable opinion as
to authorization of this Agreement by the Acquiring Fund and related matters of
Wilmer Cutler Pickering Hale and Dorr LLP, dated as of the Closing Date, in a
form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
The obligations of the Acquiring Portfolio to complete the transactions provided
for herein shall be, at its election, subject to the performance by the Acquired
Portfolio of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following further conditions,
unless waived by the Acquiring Portfolio in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of the
Acquired Portfolio contained in this Agreement shall be true and correct as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Safeco Trust shall have delivered to the Acquiring Portfolio the
Statement of Assets and Liabilities of the Acquired Portfolio pursuant to
Paragraph 5.7, together with a list of its portfolio securities showing the
federal income tax bases and holding periods of such securities, as of the
Closing Date, certified by the Safeco Trust's Treasurer or Assistant Treasurer;
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the Closing
Date a certificate of the Safeco Trust on behalf of the Acquired Portfolio
executed in its name by its President or Vice President and a Treasurer or
Assistant Treasurer, in form and substance reasonably satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Safeco Trust contained in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions
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contemplated by this Agreement, that each of the conditions to Closing in this
Article 7 have been met, and as to such other matters as the Acquiring Trust
shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Portfolio shall have delivered to
the Acquiring Trust and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired
Portfolio Tax Representation Certificate, satisfactory to the Acquiring Trust
and Wilmer Cutler Pickering Hale and Dorr LLP, substantially in the form
attached to this Agreement as Annex B, concerning certain tax-related matters
with respect to the Acquired Portfolio;
7.5 The Acquiring Trust shall have received at the Closing a favorable opinion
as to the due authorization of this Agreement by the Safeco Trust and related
matters of Kirkpatrick & Lockhart LLP, dated as of the Closing Date, in a form
reasonably satisfactory to Acquiring Trust; and
7.6 With respect to the Acquired Portfolio, the Board of Trustees of the Safeco
Trust shall have determined that the Reorganization is in the best interests of
the Acquired Portfolio and, based upon such determination, shall have approved
this Agreement and the transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before the Closing
Date with respect to either party hereto, the other party to this Agreement
shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the Acquired Portfolio's shareholders in
accordance with the provisions of the Safeco Trust's Trust Instrument and
By-Laws, and certified copies of the resolutions evidencing such approval by the
Acquired Portfolio's shareholders shall have been delivered by the Acquired
Portfolio to the Acquiring Portfolio. Notwithstanding anything herein to the
contrary, neither party hereto may waive the conditions set forth in this
Paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state Blue Sky and securities authorities) deemed necessary by
either party hereto to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of either party hereto,
provided that either party may waive any such conditions for itself;
8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have become
effective under the Securities Act and no stop orders suspending the
effectiveness of such Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no
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investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act; and
8.5 The parties shall have received an opinion of Wilmer Cutler Pickering Hale
and Dorr LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the effect
that for federal income tax purposes the acquisition by the Acquiring Portfolio
of the Acquired Assets solely in exchange for the issuance of Acquiring
Portfolio Shares to the Acquired Portfolio and the assumption of the Assumed
Liabilities by the Acquiring Portfolio, followed by the distribution by the
Acquired Portfolio, in liquidation of the Acquired Portfolio, of Acquiring
Portfolio Shares to the Acquired Portfolio Shareholders in exchange for their
Acquired Portfolio Shares and the termination of the Acquired Portfolio, will
constitute a "reorganization" within the meaning of Section 368(a) of the Code
9. BROKERAGE FEES AND EXPENSES
9.1 Each party hereto represents and warrants to the other party hereto that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
9.2 The parties have been informed by Symetra Financial Corporation and the
Acquiring Portfolio Adviser - and the parties have entered into this Agreement
in reliance on such information - that such non-parties will pay all expenses of
the Portfolios associated with the Reorganization, including the expenses
associated with the preparation, printing and mailing of any and all shareholder
notices, communications, proxy statements, and necessary filings with the SEC or
any other governmental authority in connection with the transactions
contemplated by this Agreement and the legal fees of the Trustees and Trustees'
fees incurred in connection with the Reorganization. Except for the foregoing,
the Acquiring Portfolio and the Acquired Portfolio shall each bear its own
expenses in connection with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agrees that neither party has
made any representation, warranty or covenant not set forth herein or referred
to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the
entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith shall not survive
the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Safeco Trust. In addition, either party may at its
option terminate this Agreement at or prior to the Closing Date:
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(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or prior to
the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which reasonably
appears will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if
circumstances should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquiring
Portfolio's shareholders;
(d) by resolution of the Safeco Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make proceeding
with the Agreement not in the best interests of the Acquired Portfolio's
shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2004 or such other date as the parties may
mutually agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Portfolio, the Acquiring Trust, the Safeco
Trust or the Acquired Portfolio, or the trustees or officers of the Safeco
Trust, or the Acquiring Trust, but, subject to Paragraph 9.2, each party shall
bear the expenses incurred by it incidental to the preparation and carrying out
of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Safeco Trust
and the Acquiring Trust; provided, however, that following the meeting of the
Acquired Portfolio's shareholders called by the Safeco Trust pursuant to
Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Portfolio Shares to be received by the Acquired Portfolio Shareholders
under this Agreement to their detriment without their further approval; provided
that nothing contained in this Section 12 shall be construed to prohibit the
parties from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquired Portfolio, c/o Symetra
Financial Corporation, 5069 154th Place, N.E., Seattle, Washington 98052,
Attention: Roger F. Harbin, with copies to R. Darrell Mounts, Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second Floor, Washington, DC
20036-1221, and to the Acquiring Portfolio, c/o Pioneer Investment Management,
Inc., 60 State Street, Boston, Massachusetts 02109, Attention: Dorothy E.
Bourassa, Esq., with copies to Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109, Attention: David C. Phelan.
A-44
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without giving effect to conflict of
laws principles (other than Delaware Code Title 6 ss. 2708); provided that, in
the case of any conflict between those laws and the federal securities laws, the
latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by either party
without the prior written consent of the other party hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, or other entity, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring Trust and the
Safeco Trust shall not be binding upon any of their respective trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
to the property of the Acquiring Portfolio or the Acquired Portfolio, as the
case may be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the Acquiring
Trust and of the Safeco Trust and this Agreement has been executed by authorized
officers of the Acquiring Trust and the Safeco Trust, acting as such, and
neither such authorization by such trustees nor such execution and delivery by
such officers shall be deemed to have been made by any of them individually or
to imposed any liability on any of them personally, but shall bind only the
property of the Acquiring Portfolio and the Acquired Portfolio, as the case may
be, as provided in the trust instruments of the Acquiring Trust and the
Instrument of Trust of the Safeco Trust, respectively.
A-45
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and attested by its Secretary or Assistant Secretary.
Attest: SAFECO RESOURCE SERIES TRUST
on behalf of
[SAFECO PORTFOLIO]
By: By:
------------------------------- ------------------------------
Name: Name:
Title: Secretary Title: President
PIONEER VARIABLE CONTRACTS TRUST on
behalf of
Attest: [Pioneer Portfolio]
By: By:
---------------------- ----------------------
Name: Name:
Title: Title:
A-46
Annex A
TAX REPRESENTATION CERTIFICATE OF
PIONEER VARIABLE CONTRACTS TRUST
ON BEHALF OF [PIONEER PORTFOLIO]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of___ ,
2004 between Pioneer Variable Contracts Trust, a Delaware statutory trust (the
"Acquiring Trust"), on behalf of its series, [Pioneer Portfolio] ("Acquiring
Portfolio"), and Safeco Resource Series Trust, a Delaware statutory trust, on
behalf of its series [Safeco Portfolio] ("Acquired Portfolio") (the
"Agreement"). Pursuant to the Agreement, Acquiring Portfolio will acquire all of
the assets of Acquired Portfolio in exchange solely for (i) the assumption by
Acquiring Portfolio of the Assumed Liabilities of Acquired Portfolio, and (ii)
the issuance of Class I shares of beneficial interest of Acquiring Portfolio
(the "Acquiring Portfolio Shares") to Acquired Portfolio, followed by the
distribution by Acquired Portfolio, in liquidation of Acquired Portfolio, of the
Acquiring Portfolio Shares to the shareholders of Acquired Portfolio and the
termination of Acquired Portfolio (the foregoing together constituting the
"transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations on behalf of Acquiring Portfolio, hereby
certifies and represents that the following statements are true, complete and
correct and will be true, complete and correct on the date of the transaction
and thereafter as relevant. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. The Acquiring Fund's a series of the Acquiring Trust is a statutory
trust established under the laws of the State of Delaware, and Acquiring
Portfolio will be treated after the Closing as a separate corporation for
federal income tax purposes. Acquiring Portfolio was newly organized solely for
the purpose of effecting the transaction and continuing thereafter to operate as
a regulated investment company. Prior to the transaction, Acquiring Portfolio
did not and will not engage in any business activities. There shall be no shares
of Acquiring Portfolio issued and outstanding prior to the Closing Date other
than those issued to Pioneer Investment Management, Inc. or one of its
affiliates in connection with the creation of Acquiring Portfolio which shares
shall be redeemed, for an amount equal to the price paid therefore, at or before
the Closing.
2. Neither Acquiring Portfolio nor any person "related" to Acquiring
Portfolio (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any
partnership of which Acquiring Portfolio or any such related person is a
partner, has any plan or intention to redeem or otherwise acquire any of the
Acquiring Portfolio Shares received by shareholders of Acquired Portfolio in the
transaction except in the ordinary course of Acquiring Portfolio's business in
connection with its legal obligation under Section 22(e) of the Investment
Company Act of 1940, as amended (the "1940 Act"), as a series of a registered
open-end investment company to redeem its own shares.
3. After the transaction, Acquiring Portfolio will continue the historic
business (as defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired
Portfolio or will use a significant portion of the historic business assets (as
defined in Treasury Regulation Section 1.368-1(d)(3)) of Acquired Portfolio in a
business.
4. Acquiring Portfolio has no plan or intention to sell or otherwise
dispose of any assets of Acquired Portfolio acquired in the transaction, except
for dispositions made in the ordinary course of its business or to maintain its
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended ("the "Code").
5. Any expenses of Acquired Portfolio incurred in connection with the
transaction which are paid or assumed by Acquiring Portfolio will be expenses of
Acquired Portfolio solely and directly related to the transaction in accordance
with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquiring Portfolio will not pay or
assume the expenses, if any, incurred by any Acquired Portfolio Shareholders in
connection with the transaction.
6. There is no, and never has been any, indebtedness between Acquiring
Portfolio and Acquired Portfolio.
7. Acquiring Portfolio will qualify for the special tax treatment afforded
regulated investment companies under Subchapter M of the Code for all taxable
years ending after the date of the transaction.
8. Acquiring Portfolio meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
9. Acquiring Portfolio is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Portfolio does not now own and has never owned, directly or
indirectly, any shares of Acquired Portfolio.
11. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares issued to Acquired Portfolio will be approximately
equal to the fair market value of Acquired Assets minus the Assumed Liabilities.
Acquiring Portfolio will not furnish any consideration in connection with the
acquisition of the Acquired Assets other than the assumption of the Assumed
Liabilities and the issuance of such Acquiring Portfolio Shares.
12. Immediately following the transaction, the Acquired Portfolio
Shareholders will own all of the outstanding Acquiring Portfolio Shares, and
will own such shares solely by reason of their ownership of the Acquired
Portfolio Shares immediately prior to the transaction. Acquiring Portfolio has
no plan or intention to issue as part of the transaction any shares of Acquiring
Portfolio other than the Acquiring Portfolio Shares issued in exchange for the
Acquired Assets.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Portfolio's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
2
14. No Acquired Portfolio shareholder is acting as agent for Acquiring
Portfolio in connection with the transaction or approval thereof. Acquiring
Portfolio will not reimburse any Acquired Portfolio shareholder for Acquired
Portfolio Shares such shareholder may have purchased or for other obligations
such shareholder may have incurred.
15. Acquiring Portfolio has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock in Acquiring Portfolio.
* * * * *
The undersigned officer of Acquiring Trust is authorized to make all of the
representations set forth herein, and the undersigned is authorized to execute
this certificate on behalf of Acquiring Portfolio. The undersigned recognizes
that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
PIONEER VARIABLE CONTRACTS TRUST ON BEHALF OF
[PIONEER PORTFOLIO]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Dated:
3
Annex B
TAX REPRESENTATION CERTIFICATE OF
SAFECO RESOURCE SERIES TRUST
ON BEHALF OF [SAFECO PORTFOLIO]
This certificate is being delivered in connection with the transactions to
be effected pursuant to the Agreement and Plan of Reorganization made as of ,
2004 between Pioneer Variable Contracts Trust, a Delaware statutory trust on
behalf of its series, [Pioneer Portfolio] ("Acquiring Portfolio"), and Safeco
Resource Series Trust, a Delaware statutory trust ("Safeco Trust"), on behalf of
its series [Safeco Portfolio] ("Acquired Portfolio") (the "Agreement"). Pursuant
to the Agreement, Acquiring Portfolio will acquire all of the assets of Acquired
Portfolio in exchange solely for (i) the assumption by Acquiring Portfolio of
the Assumed Liabilities of Acquired Portfolio and (ii) the issuance of Class I
shares of beneficial interest of Acquiring Portfolio (the "Acquiring Portfolio
Shares") to Acquired Portfolio, followed by the distribution by Acquired
Portfolio, in liquidation of Acquired Portfolio, of the Acquiring Portfolio
Shares to the shareholders of Acquired Portfolio and the termination of Acquired
Portfolio (the foregoing together constituting the "transaction").
The undersigned officer of the Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Portfolio, hereby
certifies and represents that the following statements are true, complete and
correct and will be true, complete and correct on the date of the transaction
and thereafter as relevant. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.
1. Acquired Portfolio is a series of the Safeco Trust, a statutory trust
organized under the laws of the state of Delaware, and Acquired Portfolio is,
and has been at all times, treated as a separate corporation for federal tax
purposes.
2. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares received by each shareholder that holds shares of
Acquired Portfolio (the "Acquired Portfolio Shares") will be approximately equal
to the fair market value of the Acquired Portfolio Shares with respect to which
such Acquiring Portfolio Shares are received, and the aggregate consideration
received by Acquired Portfolio shareholders in exchange for their Acquired
Portfolio Shares will be approximately equal to the fair market value of all of
the outstanding Acquired Portfolio Shares immediately prior to the transaction.
No property other than Acquiring Portfolio Shares will be distributed to
shareholders of Acquired Portfolio in exchange for their Acquired Portfolio
Shares, nor will any such shareholder receive cash or other property as part of
the transaction.
3. Neither Acquired Portfolio nor any person "related" to Acquired
Portfolio (as defined in Treasury Regulation Section 1.368-1(e)(3)), nor any
partnership in which Acquired Portfolio or any such related person is a partner,
has redeemed, acquired or otherwise made any distributions with respect to any
shares of Acquired Portfolio as part of the transaction, or otherwise pursuant
to a plan of which the transaction is a part, other than redemptions and
distributions made in the ordinary course of Acquired Portfolio's business as a
series of an open-end investment company. To the best knowledge of management of
Acquired Portfolio, there is no plan or intention on the part of shareholders of
Acquired Portfolio to engage in any transaction with Acquired Portfolio,
Acquiring Portfolio, or any person treated as related to Acquired Portfolio or
Acquiring Portfolio under Treasury Regulation Section 1.368-1(e)(3) or any
partnership in which Acquired Portfolio, Acquiring Portfolio, or any person
treated as related to Acquired Portfolio or Acquiring Portfolio under Treasury
Regulation Section 1.368-1(e)(3) is a partner involving the sale, redemption or
exchange of any of the Acquired Portfolio Shares or any of the Acquiring
Portfolio Shares to be received in the transaction, as the case may be, other
than in the ordinary course of Acquired Portfolio's business as a series of an
open-end investment company.
4. In the transaction, Acquired Portfolio will transfer its assets to
Acquiring Portfolio, which will assume the Assumed Liabilities, such that
immediately following the transfer, Acquiring Portfolio will possess all of the
same assets and liabilities as were possessed by Acquired Portfolio immediately
prior to the transaction, except for assets used to pay expenses incurred in
connection with the transaction and assets distributed to shareholders in
redemption of their shares immediately preceding, or in contemplation of, the
transaction (other than redemptions and distributions made in the ordinary
course of Acquired Portfolio's business as an open-end investment company) which
assets constitute less than 1% of the net assets of Acquired Portfolio.
5. As of the date of the transaction, the fair market value of the
Acquiring Portfolio Shares issued to the Acquired Portfolio will be
approximately equal to the fair market value of the Acquired Assets minus the
Assumed Liabilities. Acquired Portfolio will not receive any consideration from
Acquiring Portfolio in connection with the acquisition of the Acquired Assets
other than the assumption of the Assumed Liabilities and the issuance of such
Acquiring Portfolio Shares.
6. The Assumed Liabilities assumed by Acquiring Portfolio plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Portfolio in the ordinary course of its business. Acquired Portfolio
is not aware of any liabilities of any kind other than the Assumed Liabilities.
7. As of the Closing Date, the adjusted basis and the fair market value of
the Acquired Assets will equal or exceed the Assumed Liabilities for purposes of
Section 357(d) of the Code.
8. Acquired Portfolio currently conducts its historic business within the
meaning of Treasury Regulation Section 1.368-1(d)(2), which provides that, in
general, a corporation's historic business is the business it has conducted most
recently, but does not include a business that the corporation enters into as
part of a plan of reorganization. A significant part of the Acquired Assets will
be Acquired Portfolio's historic business assets within the meaning of Treasury
Regulation Section 1.368-1(d)(3) (which provides that a corporation's historic
business assets are the assets used in its historic business), except for any
Acquired Portfolio assets that may have been disposed of by the Acquired Fund
after the Acquiring Portfolio Adviser became the investment adviser to Acquired
Portfolio on August 2, 2004.
2
9. Acquired Portfolio will distribute to its shareholders the Acquiring
Portfolio Shares it receives pursuant to the transaction, and its other
properties, if any, and will be liquidated promptly thereafter.
10. The expenses of Acquired Portfolio incurred by it in connection with
the transaction, if any, will be only such expenses that are solely and directly
related to the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187.
Acquired Portfolio will not pay any expenses incurred by its shareholders in
connection with the transaction.
11. There is no, and never has been any, indebtedness between Acquiring
Portfolio and Acquired Portfolio.
12. Acquired Fund has properly elected to be a regulated investment company
under Subchapter M of the Code, has qualified for the special tax treatment
afforded regulated investment companies under Subchapter M of the Code for each
taxable year since inception, and qualifies for such treatment as of the time of
the Closing.
13. Acquired Portfolio meets the requirements of an "investment company" in
Section 368(a)(2)(F) of the Code.
14. Acquired Portfolio is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholdee-employee.
16. Immediately following the transaction, Acquired Portfolio Shareholders
will own all of the outstanding Acquiring Portfolio Shares and will own such
shares solely by reason of their ownership of the Acquired Portfolio Shares
immediately prior to the transaction.
17. Acquired Portfolio shareholders will not have dissenters' or appraisal
rights in the transaction.
18. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
19. Acquired Portfolio has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock in Acquired Fund.
* * * * *
3
The undersigned officer of the Safeco Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquired Fund. The undersigned recognizes
that Wilmer Cutler Pickering Hale and Dorr LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Wilmer Cutler Pickering Hale and Dorr LLP a written notice to
that effect.
SAFECO RESOURCE SERIES TRUST, ON BEHALF OF
[SAFECO PORTFOLIO]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Dated:
4
Exhibit B - Form of Interim Investment Advisory Agreement
---------------------------------------------------------
AGREEMENT dated as of August 2, 2004, between Pioneer Investment
Management, Inc. ("Pioneer"), a Delaware corporation and a member of the
UniCredito Italiano Banking Group, Register of Banking Groups, and Safeco
Resource Series Trust, a Delaware statutory trust (the "Trust"), on behalf of
its series as listed on Exhibit 1, and amended from time to time (the
"Portfolios").
Whereas, Safeco Asset Management Company has acted as investment
adviser to each Portfolio pursuant to an Investment Advisory Agreement dated
September 30, 1993 (the "Prior Agreement").
Whereas, the Prior Agreement has been approved by the Board of Trustees
of the Trust and the shareowners of the Portfolio.
Whereas, the Prior Agreement is being terminated as a result of
assignment.
Whereas, the Board of Trustees has determined to appoint Pioneer as
investment adviser to the Fund.
Whereas, this Agreement is being entered into in reliance upon Rule
15a-4 under the Investment Company Act of 1940, as amended (the "Investment
Company Act").
Now therefore the Trust and Pioneer agree as follow:
Section 1. The Trust appoints Pioneer as investment adviser of the
Portfolios for the period and on the terms set forth herein. Pioneer accepts
such appointment.
Section 2. Pioneer and the Trust, on behalf of the Portfolio, hereby
agree that the provisions of the Prior Agreement (other than as to the term of
the Prior Agreement, the identity of the Adviser and the use of the "Safeco"
name) are incorporated herein by reference and made a part hereof as if
references to the Adviser were to Pioneer. Without limiting the forgoing,
Pioneer shall be entitled to the fee for its services provided for in the Prior
Agreement from (but exclusive of) the date hereof until the termination of this
Agreement, except as provided in Section 3 below.
Section 3. In the event that this Agreement is not approved by a
majority of the Trust's outstanding voting securities (as such term is used in
the Investment Company Act), Pioneer shall be entitled to a fee equal to the
cost to Pioneer of performing its services under this Agreement in lieu of the
fee provided for in Section 2. For purposes of this Agreement, Pioneer's costs
in providing the services under this Agreement shall be equal to the pro rata
portion of Pioneer's expenses for the term of this Agreement attributable to its
investment company advisory business, calculated as follows: Pioneer cost in
providing investment advisory services to its investment companies of the same
type (i.e., domestic equity, international, fixed income, money market)
multiplied by a fraction the numerator of which shall be the average daily net
assets of the Portfolio during the term of this Agreement and the denominator of
which shall be the average month end net assets under Pioneer's management of
all of its investment company clients.
Section 4. The compensation earned by Pioneer under Section 2 of this
Agreement shall be held in an interest bearing escrow account with the
Portfolio's custodian. If a majority of the outstanding voting securities
approves this Agreement prior to the end of its term, the amount in the escrow
account (including any interest earned) shall be paid to Pioneer. If a majority
of the outstanding voting securities do not approve this Agreement prior to the
end of its term, Pioneer shall be entitled to be paid, out of the escrow account
the lesser of (i) the amount in the escrow account (including any interest
earned on that amount while in escrow) and (ii) the fee provided for in Section
3 (plus any interest on that amount while in escrow), with any remaining amount
in the escrow account being returned to the Portfolio.
Section 5. This Agreement shall become effective on August 2, 2004.
Unless terminated as provided below, this Agreement shall remain in full force
and effect until the earliest of (i) the closing of the reorganization of the
Portfolio into [name of Pioneer Portfolio], (ii) approval of a Management
Contract between the Portfolio and Pioneer and (iii) a date that is the later of
150 days after the date of the termination of the Prior Agreement or such later
date as may be consistent with a rule or interpretive position (formal or
informal) of the staff of the Securities and Exchange Commission. This Agreement
may be terminated at any time without payment of penalty by vote of the Trustees
of the Trust or by vote of a majority of the outstanding voting securities of
the Portfolio. Pioneer may terminate this Agreement at any time without payment
of any penalty on not less than 60 days written notice to the Portfolio. This
Agreement shall automatically terminate upon its assignment as defined in the
Investment Company Act.
B-1
In witness whereof, the parties hereto have executed this Agreement as
the 2nd day of August 2004.
SAFECO RESOURCE SERIES TRUST
-----------------------------------
By: _______________________________
Its: ______________________________
PIONEER INVESTMENT MANAGEMENT, INC.
-----------------------------------
By: _______________________________
Its: ______________________________
B-2
Exhibit C - Additional Information Pertaining to Pioneer
--------------------------------------------------------
OWNERSHIP OF PIONEER.
Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano.
PORTFOLIO TRANSACTION POLICIES
All orders for the purchase or sale of portfolio securities are placed on behalf
of each Portfolio by Pioneer pursuant to authority contained in the Portfolio's
management contract. Pioneer seeks to obtain the best execution on portfolio
trades. The price of securities and any commission rate paid are always factors,
but frequently not the only factors, in judging best execution. In selecting
brokers or dealers, Pioneer considers various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability and financial condition of the dealer; the
dealer's execution services rendered on a continuing basis; and the
reasonableness of any dealer spreads. Transactions in non-U.S. equity securities
are executed by broker-dealers in non-U.S. countries in which commission rates
may not be negotiable (as such rates are in the U.S.).
Pioneer may select broker-dealers that provide brokerage and/or research
services to a Portfolio and/or other investment companies or other accounts
managed by Pioneer. In addition, consistent with Section 28(e) of the Exchange
Act, if Pioneer determines in good faith that the amount of commissions charged
by a broker-dealer is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Portfolio may pay commissions to
such broker-dealer in an amount greater than the amount another firm may charge.
Such services may include advice concerning the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or the purchasers or sellers of securities; providing stock
quotation services, credit rating service information and comparative fund
statistics; furnishing analyses, electronic information services, manuals and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and performance of accounts and particular investment
decisions; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Pioneer maintains a
listing of broker-dealers who provide such services on a regular basis. However,
because many transactions on behalf of a Portfolio and other investment
companies or accounts managed by Pioneer are placed with broker-dealers
(including broker-dealers on the listing) without regard to the furnishing of
such services, it is not possible to estimate the proportion of such
transactions directed to such dealers solely because such services were
provided. Pioneer believes that no exact dollar value can be calculated for such
services.
The research received from broker-dealers may be useful to Pioneer in rendering
investment management services to any of the Portfolios as well as other
investment companies or other accounts managed by Pioneer, although not all such
research may be useful to any of the Portfolios. Conversely, such information
provided by brokers or dealers who have executed transaction orders on behalf of
such other accounts may be useful to Pioneer in carrying out its obligations to
any of the Portfolios. The receipt of such research has not reduced Pioneer's
normal independent research activities; however, it enables Pioneer to avoid the
additional expenses which might otherwise be incurred if it were to attempt to
develop comparable information through its own staff.
In circumstances where two or more broker-dealers offer comparable prices and
executions, preference may be given to a broker-dealer which has sold shares of
a Portfolio as well as shares of other investment companies managed by Pioneer.
This policy does not imply a commitment to execute all portfolio transactions
through all broker-dealers that sell shares of the Portfolio.
None of the Portfolios used any brokers affiliated with Pioneer during its most
recently completed fiscal year in connection with its portfolio transactions.
C-1
SIMILAR FUNDS
Pioneer serves as the investment adviser to each Portfolio in the Pioneer family
of funds. The following table identifies other funds in the Pioneer Family of
Funds that have similar investment objectives to the Portfolios described in
this Proxy Statement and provides other information regarding the similar funds.
============================================================================================================
Pioneer Portfolio Net assets of Fund Management fee rate
(as of September 30, 2004) (as a percentage of average daily net assets)
============================================================================================================
Pioneer America Income Trust $199,641,365 0.50%
============================================================================================================
Pioneer Balanced Fund $44,418,013 0.65% of the Funds average net assets up to
$1 billion, 0.60% of the next $4 billion;
and 0.55% of the excess over $5 billion.
============================================================================================================
Pioneer Bond Fund $265,835,916 0.50%
============================================================================================================
Pioneer Cash Reserves Fund $478,165,700 0.40%
============================================================================================================
Pioneer Emerging Markets Fund $268,254,326 1.15%
============================================================================================================
Pioneer Equity Income Fund $874,304,393 0.60 of the funds average net assets up to
$10 billion and 0.575% on the assets over
$10 billion.
============================================================================================================
Pioneer Europe Fund $171,301,516 1.00% of the Funds average net assets up to
$300 million, 0.85% of the next $200 million
and 0.75% of the excess over $500 million.
============================================================================================================
Pioneer Europe Select Fund $6,725,644 1.00% of the Funds average net assets up to
$300 million, 0.85% of the next $200 million
and 0.75% of the excess over $500 million.
============================================================================================================
Pioneer Fund $6,131,707,342 0.60% +/- 10% depending on performance vs.
S&P 500 Index.
============================================================================================================
Pioneer Global High Yield Fund $145,376,065 0.70% of the Funds average net assets up to
$500 million, 0.65% of the next $500 million
and 0.60% of the excess over $1 billion.
============================================================================================================
Pioneer Growth Shares $663,767,737 0.70% of the Funds average net assets up to
$500 million, 0.65% of the next $500 million
and 0.625% of the excess over $1 billion.
+/- 10% depending on performance vs. Russell
1000 Index.
============================================================================================================
Pioneer High Yield Fund $7,811,801,182 0.70% of the Funds average net assets up to
$500 million, 0.65% of the next $500 million
and 0.60% of the excess over $1 billion.
============================================================================================================
Pioneer International Equity $36,478,202 1.00% of the Funds average net assets up to
Fund $300 million, 0.85% of the next $200 million
and 0.75% of the excess over $500 million.
============================================================================================================
Pioneer International Value Fund $130,773,125 1.00% of the Funds average net assets up to
$300 million, 0.85% of the next $200 million
and 0.75% of the excess over $500 million.
============================================================================================================
Pioneer Large Cap Growth Fund $1,694,987 0.75%
============================================================================================================
Pioneer Mid Cap Growth Fund $559,334,106 0.625% +/- .20% depending on performance vs.
S&P Mid Cap 400 Index.
============================================================================================================
Pioneer Mid Cap Value Fund $1,842,494,003 0.70% of the Funds average net assets up to
$500 million, 0.65% of the next $500 million
and 0.625% of the excess over $1 billion.
+/- .10% depending on performance vs.
Russell Mid Cap Value Index.
============================================================================================================
Pioneer Oak Ridge Large Cap $39,073,966 0.75% of the next $1 billion and 0.70% of
Growth Fund the excess over $1 billion.
============================================================================================================
Pioneer Oak Ridge Small Cap $47,438,259 0.85% of the next $1 billion and 0.80% of
Growth Fund the excess over $1 billion.
============================================================================================================
Pioneer Papp America-Pacific $20,219,066 0.75% of the next $1 billion and 0.70% of
Rim Fund the excess over $1 billion.
============================================================================================================
C-2
============================================================================================================
Pioneer Portfolio Net assets of Fund Management fee rate
(as of September 30, 2004) (as a percentage of average daily net assets)
============================================================================================================
Pioneer Papp Small and Mid Cap $40,835,919 0.85% of the next $1 billion and 0.80% of
Growth Fund the excess over $1 billion.
============================================================================================================
Pioneer Papp Stock Fund $43,972,353 0.75% of the next $1 billion and 0.70% of
the excess over $1 billion.
============================================================================================================
Pioneer Papp Strategic Growth $43,117,493 0.75% of the next $1 billion and 0.70% of
Fund the excess over $1 billion.
============================================================================================================
Pioneer Research Fund $18,315,138 0.75% of the next $1 billion and 0.70% of
the excess over $1 billion.
============================================================================================================
Pioneer Select Equity Fund $496,845 0.75%
============================================================================================================
Pioneer Short Term Income Fund $12,321,110 0.40%
============================================================================================================
Pioneer Small Cap Value Fund $517,033,022 0.85%
============================================================================================================
Pioneer Small Company Fund $186,036,475 0.85%
============================================================================================================
Pioneer Strategic Income Fund $572,112,159 0.60% of the Funds average net assets up to
$1 billion, 0.55% of the next $9 billion;
and 0.50% of the excess over $10 billion.
============================================================================================================
Pioneer Tax Free Income Fund $338,100,498 0.50% of the Funds average net assets up to
$250 million, 0.48% of the next $50 million;
and 0.45% of the excess over $300 million.
============================================================================================================
Pioneer Value Fund $3,788,405,005 0.60% +/- .10% depending on performance vs.
Lipper Growth and Income Fund Index.
============================================================================================================
Pioneer Variable Contracts Trust
============================================================================================================
Pioneer America Income VCT $44,418,013 0.55%
Portfolio
============================================================================================================
Pioneer Balanced VCT Portfolio $44,699,291 0.65%
============================================================================================================
Pioneer Equity Income VCT $874,304,393 0.65%
Portfolio
============================================================================================================
Pioneer Emerging Markets VCT $33,358,556 1.15%
Portfolio
============================================================================================================
Pioneer Europe VCT Portfolio $14,946,105 1.00%
============================================================================================================
Pioneer Fund VCT Portfolio $265,027,924 0.65%
============================================================================================================
Pioneer Growth Shares VCT $36,316,518 0.70%
Portfolio
============================================================================================================
Pioneer High Yield VCT Portfolio $109,597,617 0.65%
============================================================================================================
Pioneer International Value VCT $23,107,772 1.00%
Portfolio
============================================================================================================
Pioneer Mid Cap Value VCT $660,212,326 0.65%
Portfolio
============================================================================================================
Pioneer Money Market VCT $30,622,262 0.50%
Portfolio
============================================================================================================
Pioneer Oak Ridge Large Cap $2,528,521 0.75% of the next $1 billion and 0.70% of
Growth VCT Portfolio the excess over $1 billion.
============================================================================================================
Pioneer Papp America-Pacific $909,585 0.75% of the next $1 billion and 0.70% of
Rim VCT Portfolio the excess over $1 billion.
============================================================================================================
Pioneer Papp Small and Mid Cap $1,525,336 0.75% of the next $1 billion and 0.70% of
Growth VCT Portfolio the excess over $1 billion.
============================================================================================================
Pioneer Small Cap Value VCT $22,800,093 0.75%
Portfolio
============================================================================================================
Pioneer Small Company VCT $12,241,934 0.75%
Portfolio
============================================================================================================
Pioneer Strategic Income VCT $38,535,065 0.65%
Portfolio
============================================================================================================
Pioneer Value VCT Portfolio $7,738,878 0.75%
============================================================================================================
C-3
Exhibit D - Portfolio Manager's Performance
-------------------------------------------
Report From the Portfolio Managers
Safeco RST Bond Portfolio
As of June 30, 2004
How did the Portfolio perform?
For the six-month period ending June 30, 2004, the Safeco RST Bond Portfolio
slightly underperformed against its benchmark, the Lehman Aggregate Bond Index.
What factors impacted the Portfolio's performance?
The decline in interest rates over economic recovery concerns was the most
important factor in market performance during the first quarter. While interest
rates declined in the first quarter, they rose sharply during the second
quarter. The yield on the two-year Treasury rose by 110 basis points or 1.1%,
the five-year by 99 basis points or almost 1%, the 10-year by 75 basis points
and the 30-year by 52 basis points.
The Portfolio benefited from a relatively short duration of 4.38 versus the
Lehman Aggregate duration of 4.70. The Portfolio also benefited from an 11.9%
underweight in Treasury securities. Treasuries underperformed the most of any
sector during the second quarter.
The best performing fixed income sector during the second quarter was the
mortgage market. The Portfolio was hurt by the 5.2% underweight in mortgage
securities in the quarter. Also hurting the Portfolio was the 11.8% overweight
in corporate bonds, although the Portfolio was more overweighted in "A" rated
bonds, which performed slightly better than lower-rated "BBB" bonds.
What changes did you make to the Portfolio and why?
During the first quarter, we restructured the maturity profile of our Treasury
exposure. We laddered our Treasury holdings across the entire yield curve
offering the best roll and highest yield per unit of duration risk. We added
more Treasury inflation-protected securities. We increased our exposure to
callable agency securities to increase the portfolio's yield and to cushion the
blow from an eventual rise in rates.
Second quarter trading activity was aimed at maintaining our slightly short
duration and maintaining the mortgage-backed securities (MBS) allocation.
Specifically, the Portfolio used the cash from mortgage paydowns to purchase a
30-year 5.0% FNMA pass-through to maintain the allocation of MBS. The Portfolio
was also active in the Corporate bond sector, swapping a 30-year Target
Corporation bond for a similar maturity Treasury bond and tendering some 10-year
Wells Fargo bonds and investing the proceeds in Boeing and Petro-Canada.
Tim Hokari - Portfolio Manager
Lesley Fox - Portfolio Manager
Nancy McFadden, CFA - Portfolio Manager
Gregory Card, CFA - Portfolio Manager
D-1
Performance Overview
Safeco RST Bond Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Bond Portfolio 0.00% (0.31)% 5.90% 6.12%
Lehman Brothers Aggregate Bond Index 0.15% 0.32 % 6.95% 7.39%
* Not annualized.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
- -----------------------------------------------------------------------------------------------------------------------------------
[Graph showing Safeco RST Bond Portfolio's performance compared to the Lehman
Brothers Aggregate Bond Index for the period beginning 6/94 and ending 6/04.]
Investment Values:
Safeco RST Bond Portfolio = $18,109 at 6/04.
Lehman Brothers Aggregate Bond Index = $20,394 at 6/04.
The performance graph compares a hypothetical $10,000 investment in the
Portfolio to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Current Yield........................3.57%
Weighted Average Maturity.......5.58 years
[Pie Chart]
AAA: 64.9%
AA: 0.9%
BBB: 12.3%
Cash & Other: 4.4%
Percent of
BONDS BY TYPE Net Assets
--------------------------------------------- --------------
U.S. Government & Agency Obligations 27.1 %
Asset Backed Securities 1.4
U.S. Government Agency--Mortgage Backed
Securities 28.8
Collateralized Mortgage Obligations 4.5
Municipal Bonds 1.1
Corporate Bonds 32.7
Cash & Other 4.4
-------
100.0%
=======
D-2
Report From the Portfolio Managers
Safeco RST Core Equity Portfolio
As of June 30, 2004
How did the Portfolio perform?
The Safeco RST Core Equity Portfolio underperformed its benchmark Index, the S&P
500, for the six-month period ending June 30, 2004.
What factors impacted the Portfolio's performance?
Trends that hurt the Portfolio in the fourth quarter of 2003 continued. Cyclical
stocks, companies without earnings and lower quality companies continued to
perform better than the stocks in the Portfolio's benchmark.
During the first half of this year, virtually every sector had stocks that
performed well. Some of these stocks, such as Ball Corp., Illinois Tool Works
and Leggett & Platt performed well as the economy strengthened. Others like
Hartford Financial and Schlumberger performed well because trends in the
insurance and energy industries remain positive. Finally, others like Estee
Lauder, Harley Davidson, and PepsiCo are simply solid companies doing well.
The Portfolio had several poor performing stocks in the first half, including
some in the healthcare sector. In this sector, patent expirations (Abbott),
legal issues (Wyeth) and concerns regarding future growth rates (Amgen) weighed
on the stocks. The technology sector had several losers. Nokia is suffering from
newer entrants and its own product cycle. Texas Instruments and Applied
Materials remain volatile due to concerns regarding the strength and length of
the cycle in their end markets.
What changes did you make to the Portfolio and why?
Diversification is increasing - we added two utilities stocks. The largest
position sizes are decreasing: positions over 3% at year end are down to zero at
mid-year. The percentage of the Portfolio in its top-10 holdings is decreasing
(28.2% at year end versus 24% now) and the average market capitalization is
decreasing, achieved by reducing positions in Citigroup and Pfizer. The intent
of these moves is to improve the relative performance of the Portfolio.
At the same time we were doing the above we continued to look for the correct
buy and hold stocks for the Portfolio. Among those moves were adding to existing
positions Illinois Tool Works and Cardinal Health and initiating new positions,
such as in Sungard Data Systems and Best Buy.
We eliminated our position in Altria when it reached our price objective and our
position in PeopleSoft, because we found a better alternative.
Rich Meagley, CFA - Portfolio Manager/Equity Analyst
Darcy MacLaren, CFA - Portfolio Manager
D-3
Performance Overview & Highlights
Safeco RST Core Equity Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Core Equity Portfolio 1.92% 14.5% (5.44)% 8.43%
S&P 500 Index 3.46% 19.13% (2.20)% 11.82%
- -----------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
[Graph showing Safeco RST Core Equity Portfolio's performance compared to the
S&P 500 Index for the period beginning 6/94 and ending 6/04.]
Investment Values:
Safeco RST Core Equity Portfolio = $22,465 at 6/04.
S&P 500 = $30,563 at 6/04.
The performance graph compares a hypothetical $10,000 investment in the
Portfolio to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
WEIGHTINGS AS A PERCENT OF NET ASSETS
- -------------------------------------
[Pie chart]
Large - Common Stocks ($4 billion and above) = 97.2%
Medium - Common Stocks ($1.5 billion to $4 billion) = 0.8%
Cash & Other: 2.09%
Percent of Net Assets
TOP FIVE INDUSTRIES
- -----------------------------------------------------------------------------------------------
Pharmaceuticals 8.7 %
Diversified Banks 4.7
Integrated Oil & Gas 4.1
Industrial Machinery 4.1
Multi-Line Insurance 3.3
Percent of Net Assets
TOP TEN COMMON STOCK HOLDINGS
- -----------------------------------------------------------------------------------------------
Microsoft Corp. (Systems Software) 2.8%
General Electric Co. (Industrial Conglomerates) 2.7
Pfizer, Inc. (Pharmaceuticals) 2.6
Citigroup, Inc. (Other Diversified Financial Services) 2.6
Wells Fargo & Co. (Diversified Banks) 2.4
United Technologies Corp. (Aerospace & Defense) 2.3
Exxon Mobil Corp. (Integrated Oil & Gas) 2.3
American International Group, Inc. (Multi-Line Insurance) 2.2
Cisco Systems, Inc. (Communications Equipment) 2.1
Proctor & Gamble Co. (Household Products) 2.1
D-4
Report From the Portfolio Managers
Safeco RST Growth Opportunities Portfolio
As of June 30, 2004
How did the Portfolio perform?
For the six-month period ending June 30, 2004, the Portfolio has outperformed
its benchmark index, the Russell 2000 Index(R).
What factors impacted the Portfolio's performance?
The biggest factor affecting the Portfolio's strong performance has been from
stock selection. We have many stable, liquid and less volatile small-cap
holdings. Our view continues to be that earnings growth comparisons for many
companies will moderate as the economy continues to recover, thus we have
positioned the portfolio toward companies with sustainable growth in earnings.
Some of the Portfolio's outperformance was a result of 46% of the Portfolio
having a market capitalization of greater than $1 billion currently. This is the
segment of the market cap spectrum that we added to during late 2003. Year-to
date the Russell 2000 Index(R) sectors that contributed the most were producer
durables, consumer discretionary and healthcare - all overweighted sectors in
the Portfolio. Our underweight in technology helped as well.
What changes did you make to the Portfolio and why?
The turnover in the Growth Opportunities Portfolio remains quite low for a
small-cap portfolio as compared to the turnover of other portfolios of its type.
What this symbolizes is a management team with a long-term view of the
investments made in the portfolio. We continue to upgrade the quality of the
portfolio to more stable, more liquid and thereby less volatile stocks. We seek
high quality companies that have consistent growth in profits, strong return on
investor capital (or increasing), an ability to grow internally, and a seasoned
management team.
Jeffrey Schwartz, CFA - Portfolio Manager/Equity Analyst
Bill Whitlow, CFA - Portfolio Manager/Equity Analyst
D-5
Performance Overview & Highlights
Safeco RST Growth Opportunities Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Growth Opportunities Portfolio 9.00% 33.86% 3.83% 13.25%
Russell 2000 Index 6.76% 33.37% 6.63% 10.93%
* Not annualized.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
- --------------------------------------------------------------------------------
[Graph showing Safeco RST Growth Opportunity Portfolio's performance compared to
the Russell 2000 Index for the period beginning 6/94 and ending 6/04.]
Investment Values:
Safeco RST Growth Opportunities Portfolio = $34,696 at 6/04.
Russell 2000 Index = $28,210 at 6/04.
The performance graph compares a hypothetical $10,000 investment in the
Portfolio to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
WEIGHTINGS AS A PERCENT OF NET ASSETS
- -------------------------------------
[Pie chart]
Large - Common Stocks ($4 billion and above) = 3.0%
Warrants = 0.3%
Cash & Other = 2.7%
Indexed Securities = 6.4%
Medium - Common Stocks ($1.5 billion to $4 billion) = 34.9%
..Small - Common Stocks (Less than $1.5 billion) = 52.7%
Percent of
TOP FIVE INDUSTRIES Net Assets
- --------------------------------------------------------------------------
Thrifts & Mortgage Finance 5.2 %
Specialty Stores 5.1
Casinos & Gambling 4.3
Homebuilding 4.1
Health Care Services 3.8
Percent of
TOP TEN COMMON STOCK HOLDINGS Net Assets
- --------------------------------------------------------------------------
MICROS Systems, Inc. 2.9%
(Application Software)
Nu Skin Enterprises, Inc. (Class A). 2.6
(Personal Products)
PolyMedica Corp. 2.6
(Health Care Supplies)
Iron Mountain, Inc. 2.5
(Data Processing & Outsourced Services)
Station Casinos, Inc. 2.5
(Casinos & Gaming)
Websense, Inc. 2.5
(Internet Software & Services)
Old Dominion Freight Lines, Inc. 2.4
(Trucking)
American Healthways, Inc. 2.4
(Health Care Services)
Tektronix, Inc. 2.2
(Electronic Equipment Manufacturers)
Rent-A-Center, Inc. 2.2
(Specialty Stores)
D-6
Report From the Portfolio Managers
RST Money Market Portfolio
As of June 30, 2004
How did the Portfolio perform?
The 12-month return on the Portfolio was lower than the 3.2% year-over-year
increase in the Consumer Price Index (CPI) as of the end of June 2004.
What factors impacted the Portfolio's performance?
After a full year of the Federal Funds target rate of 1.00%, the Federal
Reserve's Open Market Committee (FOMC) finally raised the rate to 1.25% on June
30. The Fed Funds futures market anticipates a 0.25% rise in the rate at each of
the four remaining FOMC meetings in 2004 and even higher rates in 2005.
Much of the performance of the Portfolio can be attributed to the large holdings
(26%) of 7-day reset floating rate notes that reset off of 1-month London
inter-bank offer rate (LIBOR). LIBOR-based securities currently offer higher
rates than other available money market securities, and the frequent rate reset
of the notes captures higher rates more quickly in a rapidly rising rate
environment. Also contributing to the Portfolio's returns were the holdings of
longer-term corporate bonds purchased at relatively high yields on a steep money
market yield curve.
What changes did you make to the Portfolio and why?
We increased our allocation of floating rate notes. This has become our asset
class of choice because the spread is much higher than commercial paper.
Commercial paper remains one of the lowest-yielding assets in the prime money
markets.
After rates had risen significantly, we made a purchase of a Federal Home Loan
Bank (FHLB) 13-month maturity bond which is callable every three months and some
purchases of one-year bank and broker paper.
Lesley Fox - Portfolio Manager
Cathleen Beauchamp, CFA - Portfolio Manager/Taxable Fixed Income Analyst
Performance Overview & Highlights
Safeco RST Money Market Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Money Market Portfolio 0.16% 0.32% 2.82% 3.89%
* Not annualized.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Average Maturity.........64 Days
7 Day Yield.................................0.45%
D-7
Report From the Portfolio Managers
Safeco RST Multi-Cap Core Portfolio
As of June 30, 2004
How did the Portfolio perform?
For the six-month period ending June 30, 2004, the Safeco RST Multi-Cap Core
Portfolio outperformed its benchmark index, the Russell 3000 Index.
What factors impacted the Portfolio's performance?
The market posted a modest gain during the first half of the year as the
improving economy and strong corporate earnings outweighed investors' concerns
about rising rates, the conflict in Iraq and higher oil prices. During the
period small and mid-cap stocks outperformed large-cap stocks. In the first half
of this year, the Russell 2000 Index of small-cap stocks advanced 6.76% and the
Russell Mid-Cap Index advanced 6.67% versus a 3.3% rise in the Russell 1000
Index of large-cap issues. We would attribute our better performance in the
period to the Portfolio's high exposure to mid and small-cap stocks relative to
the benchmark.
What changes did you make to the Portfolio and why?
During the first half we continued our strategy of increasing diversification to
improve the risk/reward trade-off in the Portfolio. We added 17 new positions,
and deleted six, bringing our total number of names to 73. The additions were
mostly economically-sensitive companies in the mid-cap size range. The deletions
were all small-cap companies which had not been performing well. We continue to
seek a better balance among market capitalizations as we modestly reduce our
exposure to small-caps relative to our benchmark, the Russell 3000. Four of the
five top performers for the period, Coldwater Creek, Starbucks, Expeditors
International and Nordstrom, are cyclical companies. Our poor performers were
either companies that had company-specific problems, like Performance Food
Group, Intuit and Penwest Pharmaceutical, or stocks that retreated after a good
run, such as Primus Knowledge.
Bill Whitlow, CFA - Portfolio Manager/Equity Analyst
Brian Clancy, CFA - Portfolio Manager/Equity Analyst
D-8
Performance Overview & Highlights
Safeco RST Multi-Cap Core Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year 10 Year
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Multi-Cap Core Portfolio 4.97% 25.92% 2.76% 8.73%
Russell 3000 Index 3.59% 20.46% (1.07)% 11.66%
S&P 500 Index 3.46% 19.13% (2.20)% 11.82%
* Not annualized.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
- --------------------------------------------------------------------------------
[Graph showing Safeco RST Multi-Cap Core Portfolio's performance compared to the
Russell 3000 Index and S&P 500 Index for the period beginning 6/94 and ending
6/04.]
Investment Values:
Safeco RST Multi-Cap Core Portfolio = $23,085 at 6/04.
S&P 500 = $30,563 at 6/04.
Russell 3000 Index = $30,134 at 6/04.
The performance graph compares a hypothetical $10,000 investment in the
Portfolio to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
WEIGHTINGS AS A PERCENT OF NET ASSETS
[Pie chart]
Large - Common Stocks ($4 billion and above) = 58.3%
Medium - Common Stocks ($1.5 billion to $4 billion) = 17.6%
Small - Common Stocks (Less than $1.5 billion) = 23.0%
Cash & Other = 1.1%
TOP FIVE INDUSTRIES Percent of Net Assets
- ------------------------------------------------------------------------------------------
Diversified Banks 5.7%
Pharmaceuticals 5.2
Semiconductors 4.0
Oil & Gas Exploration & Production 3.7
Electronic Equipment Manufacturers 3.6
TOP TEN COMMON STOCK HOLDINGS Percent of Net Assets
- ------------------------------------------------------------------------------------------
StanCorp Financial Group, Inc. 2.5%
(Life & Health Insurance)
Tektronix, Inc. 2.5
(Electronic Equipment Manufacturers)
Starbucks Corp. 2.4
(Restaurants)
Expeditors International of Washington, Inc. 2.3
(Air Freight & Logistics)
Nordstrom, Inc. 2.3
(Department Stores)
Kroger Co. 2.2
(Food Retail)
Costco Wholesale Corp. 2.2
(Hypermarkets and Super Centers)
Pfitzer, Inc. 2.1
(Pharmaceuticals)
Microsoft Corp. 2.1
(Systems Software)
U.S. Bancorp (Diversified Banks) 2.0
D-9
Report From the Portfolio Manager
Safeco RST Small-Cap Value Portfolio
As of June 30, 2004
How did the Portfolio perform?
Overall the Portfolio slightly outperformed its benchmark, the Russell 2000
Value Index for the six-month period ending June 30, 2004. All the positive
contributions took place in the first quarter, and then the small cap market
seesawed down and up from April through June. In retrospect, the first few
months were a continuation of the "take off" phase of the market cycle that
began last March. The April/May timeframe saw the first significant correction
since that rally began.
What factors impacted the Portfolio's performance?
Market leadership by higher quality stocks has continued, following a trend that
began in the fourth quarter of last year. I define high quality as companies
with stock prices above $5 per share, with positive earnings, low P/E ratios
versus the universe, and market capitalization above $250 million.
This trend helped the Portfolio, since the Portfolio owns stocks all across the
small-cap-size spectrum and the weighted average tends towards the middle of the
small cap size range. Also, the Portfolio has less of its assets invested in
companies that are not currently more profitable than the index, and we didn't
have much exposure to under-$5 price stocks.
In early April, one single government report of job growth was all it took to
crystallize the market's worry that the Federal Reserve would start raising
short-term interest rates. This precipitated a fast and steep correction in the
Portfolio's most interest-rate-sensitive stocks. Those stocks have made a
partial recovery since then.
What changes did you make to the Portfolio and why?
I added new stocks which I believed were not discounting their full potential or
had not participated in the "lift off" phase of the early market cycle. From the
March 2003 bottom, the entire market experienced a "rising tide" effect. That
effect has run its course, and so I've tried to find stocks that represent value
opportunities in the traditional sense of the word.
For example, Pacer International was bought on price weakness after I had
multiple meetings with management to cement an understanding of their business.
Pacer arranges for the transportation of ocean freight containers by reselling
space on the railroads in a service called the Stack Train. They produce
significant free cash flow, but their service offering is aligned with the Union
Pacific and CSX railroads, and those companies are experiencing a period of poor
service quality that has temporarily hurt Pacer. In time I believe this will
change. However, Pacer's stock was down based on the current view of conditions,
not what they'll be in the future. The future is where I see the stock's
opportunity.
I also exited positions that I believe have run their course, or have taken a
turn for the worse. Examples of the former include the last of the utility
preferred stocks in the Portfolio. An example of the latter would be the company
Osteotech, which abandoned one of its product lines in January, calling into
doubt its growth prospects and valuation. I was fortunate to exit the stock
before the worst of the damage was done.
I continue to believe stocks with traditional "value" characteristics-in terms
of their overall valuation and free cash flow generation-are a successful
strategy to own for the long term. I am a believer in owning stocks that are
priced cheaper than the overall market, with sustainable businesses and cash
flows. I think the Portfolio is currently positioned this way.
Greg Eisen, CFA - Portfolio Manager/Equity Analyst
D-10
Performance Overview & Highlights
Safeco RST Small-Cap Value Portfolio
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return
for the periods ended June 30, 2004 Six Month* 1 Year 5 Year Since inception**
- -----------------------------------------------------------------------------------------------------------------------------------
Safeco RST Small-Cap Value Portfolio 7.94% 31.42% 15.60% 10.05%
Russell 2000 Value Index 7.83% 35.17% 12.82% 12.62%
* Not annualized.
** Graph and average annual return comparison begins April 30, 1997, the
inception date of the Portfolio.
Performance does not reflect the deduction, if any, for taxes or penalties or
any other fees associated with a loan, withdrawal, liquidation or other
distribution of all or part of any investment vehicle in which the Portfolio
is available as an underlying investment option.
- --------------------------------------------------------------------------------
[Graph showing Safeco RST Small-Cap Value Portfolio's performance compared to
the Russell 2000 Value Index for the period beginning 4/97 and ending 6/04.]
Investment Values:
Safeco RST Small-Cap Value Portfolio = $19,863 at 6/04.
Russell 2000 Value Index = $23,436 at 6/04.
The performance graph compares a hypothetical $10,000 investment in the
Portfolio to a hypothetical investment in a relevant market index. The index is
unmanaged and includes no operating expenses or transaction costs. Past
performance is not predictive of future results. Principal value may fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
WEIGHTINGS AS A PERCENT OF NET ASSETS
- -------------------------------------
[Pie chart]
Index Securities = 2.0%
Cash & Other = 2.3%
Mid Cap - Common Stocks ($1.5 billion to $4 billion) = 23.4%
Small Cap - Common Stocks (Under $1.5 billion) = (a) Large (over $750 million):
41.2%; (b) Medium ($250 to $750 million): 26.4%; and (c) Small (under $250
million): 4.7%
Percent of Net Assets
TOP FIVE INDUSTRIES
- ------------------------------------------------------------------------------------------
Real Estate Investment Trust 6.8%
Specialty Stores 6.6
Regional Banks 5.9
Trucking 5.4
Consumer Finance 5.0
TOP TEN COMMON STOCK HOLDINGS Percent of Net Assets
- ------------------------------------------------------------------------------------------
World Fuel Services Corp. 3.3%
(Integrated Oil & Gas)
Lone Star Technologies, Inc. 3.0
(Oil & Gas Equipment & Services)
Cash America International, Inc. 2.6
(Consumer Finance)
Imation Corp. 2.5
(Computer Storage & Peripherals)
Foot Locker, Inc. 2.5
(Specialty Stores)
AmeriCredit Corp. 2.4
(Consumer Finance)
Champion Enterprises, Inc. 2.4
(Homebuilding)
Hollywood Entertainment Corp. 2.4
(Specialty Stores)
Precision Castparts Corp. 2.3
(Diversified Metals & Mining)
Insight Enterprises, Inc. 2.3
(Catalog Retail)
D-11
PIONEER FUND VCT PORTFOLIO
Portfolio Update 6/30/04
Portfolio Diversification (As a percentage of total investment portfolio)
- -------------------------------------------------------------------------
[Pie chart]
U.S. Common Stocks = 94.7%
Depositary Receipts for International Stocks = 3.5%
International Common Stocks = 1.8%
Sector Distribution (As a percentage of equity holdings)
- --------------------------------------------------------
Financials = 17.1%
Information Technology = 13.9%
Consumer Discretionary = 13.0%
Health Care = 12.5%
Industrials = 12.3%
Consumer Staples = 11.9%
Energy = 8.2%
Materials = 5.7%
Telecommunication Services = 3.3%
Utilities = 2.1%
Five Largest Holdings (As a percentage of equity holdings)
- ----------------------------------------------------------
1. ChevronTexaco Corp. = 2.17%
2. Exxon Mobil Corp. = 2.11%
3. McGraw-Hill Co., Inc. = 1.93%
4. Target Corp. = 1.85%
5. SBC Communications, Inc. = 1.71%
Holdings will vary for other periods. This list excludes temporary cash and
derivative investments.
Performance Update 6/30/04
Prices and Distributions 6/30/04 12/31/03
Net Asset Value per Share $18.98 $18.70
Distributions per Share Short-Term Long-Term
(1/1/04 - 6/30/04) Dividends Capital Gains Capital Gains
$0.100 $ -- $ --
- -------------------------------------------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Fund VCT Portfolio at net asset value, compared to that of the S&P 500 Index.
Portfolio returns are based on net asset value and do not reflect any applicable
insurance fees or surrender charges.
[Graph showing performance of Pioneer Fund VCT Portfolio compared to the S&P 500
Index for the period beginning 10/97 and ending 6/04.]
Pioneer Fund VCT Portfolio = $14,200 at 6/04
S&P 500 Index = $13,764 at 6/04
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. Index returns assume reinvestment of dividends and,
unlike Portfolio returns, do not reflect any fees, expenses or sales charges.
Portfolio returns are based on net asset value and do not reflect any
annuity-related costs. You cannot invest directly in the Index.
D-12
Average Annual Total Returns
(As of June 30, 2004)
Net Asset Value
Life-of-Class 5.42%
(10/31/97)
5 Years -0.70%
1 Year 17.84%
All total returns shown assume reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site at www.pioneerfunds.com.
Portfolio performance does not reflect any variable contract fees, expenses or
sales charges. If they had been included, performance would have been lower. See
the pages that comprise the inside cover of this report for performance net of
any contract fees, expenses or sales charges.
Portfolio Management Discussion 6/30/04
In the following discussion, portfolio manager John Carey, reviews the
investment environment and the performance of Pioneer Fund VCT Portfolio over
the six months ended June 30, 2004.
Q: How did the Portfolio perform over the first six months of 2004?
A: Pioneer Fund VCT Portfolio recorded a positive total return of 2.04% at net
asset value in the six months ended June 30, 2004. The Standard & Poor's 500
Index showed a total return of 3.44% over the same period. Investors
appeared to be "rotating" out of more highly priced stocks and into shares
more moderately priced, with dividends and steadier earnings outlooks.
Q: Please discuss the Portfolio's performance versus the S&P 500 Index.
A: Our underperformance versus the S&P was attributable mainly to our stock
holdings in four sectors: information technology, materials, industrials and
telecommunications services. Our strongest positive contributors were our
investments in consumer discretionary, consumer staples and health care.
Taking first the negative contributors, our technology holdings showed an
overall decline of 1.59% versus the S&P sector gain of 0.44%. The main
culprits were our positions in Texas Instruments, Novellus Systems, Synopsys
and Nokia. After analyzing the different situations, we retained shares in
Texas Instruments and Nokia, but liquidated our positions in Novellus and
Synopsys. With regard to materials, where again we showed a negative return
(3.80%) versus a slight positive return (0.71%) for the S&P sector, the
largest factor was our position in Rio Tinto. In the case of the materials,
we believe that the fundamentals are strong for the group looking out at
least over the next couple of years and that it was mainly "profit taking"
behind the weak share prices. Perhaps, too, there was some concern about a
potential slow-down in the Chinese economy, which has been a prime user of
many raw materials as that country rapidly industrializes. Following our
evaluation of the "pros and cons," we retained Rio Tinto, a prominent
worldwide mining company, as well as our shares of other companies in the
sector.
Industrials presented a mixed picture, with our investments rising 5.13%
versus an increase for the sector of 7.42%. We had very good performance
from our railroad holding Norfolk Southern, but our capital-goods stocks
were more sluggish. Finally, in telecomm services, we did not own AT&T
Wireless, which received a premium take-over bid, but instead owned
BellSouth and SBC Communications, the companies in the joint venture,
Cingular, that made the bid. BellSouth and SBC both declined as investors
worried that they "overpaid."
On the bright side, we had some nice gains from stocks in consumer
discretionary, consumer staples and health care. They were, respectively,
John Wiley & Sons, publisher of scientific and technical books and journals
and also owner of the "For Dummies" imprint; Colgate-Palmolive, major brand
in toothpaste; and
D-13
Becton Dickinson, provider of medical supplies including disposable
syringes.
Q: What changes have you have made to the Portfolio so far this year?
A: We were fairly active during the six months, adding 18 positions and
eliminating 18. The combined effect of securities transactions and market
fluctuations produced overall increases for our weightings in the energy,
consumer discretionary, consumer staples, health care and financials
sectors; overall decreases for our weightings in industrials and information
technology; and no meaningful change for our weightings in materials,
telecommunications services and utilities. In energy, we initiated positions
in Apache, British Petroleum, Pioneer Natural Resources and Occidental
Petroleum and sold positions in Transocean, Royal Dutch Petroleum, and Shell
Transport & Trading. We believed that Transocean was fairy valued, and in
the cases of Royal Dutch and the allied Shell Transport we had developed
reservations about management in the wake of significant downward revisions
in oil and gas reserves estimates. On the other hand, we thought that
prospects were positive for the companies we added and that the larger
number of holdings would provide the portfolio with more diversification.
In consumer discretionary we invested in three companies we thought were
poised to do better with the stronger economy, Ford Motor, Liz Claiborne,
and Walt Disney, and sold two stocks that had been longer-term
disappointments, Dow Jones and Eastman Kodak. We also added Clorox,
formulator of bleaches and other household cleansers, and Estee Lauder,
cosmetics manufacturer, in consumer staples. Our health care additions were
among our most significant and included equipment makers Guidant and St.
Jude Medical, distributor Cardinal Health, and generic-drug companies Barr
Pharmaceuticals and Mylan Laboratories.
One of our purchases in financials proved to be particularly well timed, as
SouthTrust, a regional bank headquartered in Birmingham, Alabama, received a
generous acquisition offer from another bank, Wachovia, not long after we
had bought it. Another entry we made to the portfolio was U.S. Bancorp,
based in Minneapolis, Minnesota. In other sectors, we bought, in materials,
Ecolab, supplier of industrial and institutional cleaning chemicals, and, in
information technology, Apple Computer, survivor, against all odds, in the
personal-computer business as well as innovative producer of the very hot
iPod digital-music player. Along with the seven names already mentioned in
energy and consumer discretionary and (above) in information technology, we
deleted the following: Boeing, Lockheed Martin, Robert Half, Union Pacific,
Medco Health Solutions, Bank of America, Electronics Data Systems, BMC
Software, Cisco Systems, QUALCOMM and Altera.
Q: What is your outlook on the stock market and economy for the remainder of
2004?
A: At the midpoint of 2004, the market appears in disarray. Truth be told,
interest rates have not really moved very much at all, but there appears
great anxiety about greater moves to come. Inflation is not a current
problem, yet the high oil and raw-materials prices, as well as the prospect
of rising wages with growth in employment, provide the worriers a reason to
focus on the risk of inflation. Corporate earnings are generally very strong
and also strongly up from last year, but the expressed concern is with
respect to slowing of the impressive comparisons.
The market to us remains attractive, even if more moderately attractive then
it was in early 2003 when prices were much lower and the economy was still
just poised for its rebound rather then underway with the rebound as it is
currently. We see especially good values, however, among the good companies
with good long-term records in which we like to invest on your behalf and
which were relatively neglected by investors up until recently.
Betting which way the market might go on a short-term basis has never seemed
to us like a particularly fruitful endeavor. So our intention is, as always,
to stay invested over the coming months, and years, and to stay invested in
the solid kinds of companies we always aim to own in your Portfolio. Thank
you for your support.
Any information in this shareowner report regarding market or economic trends or
the factors influencing the Portfolio's historical or future performance are
statements of the opinion of Portfolio management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized. The Portfolio's investment adviser,
Pioneer Investment Management, Inc., reduced its management fee and certain
other expenses; otherwise, returns would have been lower.
D-14
PIONEER MONEY MARKET VCT PORTFOLIO
Portfolio and Performance Update 6/30/04
Short-term interest rates remained at 46-year lows during the first half of
2004, although the U.S. Federal Reserve Board finally signaled a shift in its
accommodative monetary policy on June 30 when it raised the key Fed Funds Rate
from 1.00% to 1.25%. Throughout the six months, Pioneer Money Market VCT
Portfolio maintained a $1 share price and provided modest current income
consistent with the low yields available in the money market. The Portfolio
invests exclusively in high-quality money market instruments issued by the U.S.
government and domestic corporations and banks. All issues have the highest
ratings from the two leading nationally recognized ratings organizations: A1 by
Standard & Poor's Investors Services and P1 by Moody's Investor Services.
(Ratings apply to underlying securities, not Fund shares.) In the following
discussion, Andrew D. Feltus reviews the investment environment and the
strategies that affected the Portfolio over the six months ended June 30, 2004.
Mr. Feltus is a member of Pioneer's Fixed Income Group, which is responsible for
the daily management of the Portfolio.
Q: How did the Portfolio perform during the first half of 2004?
A: For the six months ended June 30, 2004, Pioneer Money Market VCT Portfolio
had a total return of 0.25% at net asset value. On June 30, 2004, the
Portfolio's seven-day effective yield was 0.91%.
Q: What factors affected Portfolio performance?
A: Short-term interest rates remained at historically low levels over the past
six months. It was a period, however, in which evidence steadily accumulated
that the U.S. economy was recovering briskly. Growth Domestic Product (GDP),
for example, grew by an annual rate of 3.9% for the first three months. The
nation's industrial production increased by 5.6% since June 30, 2004, and
the economy added 1.4 million new jobs during the same 12 months. Evidence
of the economy's vibrancy became more persuasive during the six months,
especially after the Department of Labor released an unexpectedly strong
new-jobs report for March. Market interest rates began rising and
expectations grew that the Federal Reserve Board would finally shift from
its accommodative monetary policy and begin raising short-term interest
rates. The Fed confirmed those expectations on the final day of the
six-month period when it raised the influential Fed Funds Rate by
one-quarter of one percent and signaled that it was likely to raise the rate
further in subsequent months to head-off inflationary threats.
Q: Given this environment, what strategies did you pursue?
A: We held to our quality orientation in managing the Portfolio. While the
effective duration was 71 days on June 30, 2004, we expected to shorten
duration aggressively as the Federal Reserve began to raise rates. A
shorter-duration should give the Portfolio greater ability to invest in new,
higher-yielding securities as rates start to rise.
Q: What is your investment outlook?
A: We anticipate that while the Federal Reserve will continue to stimulate
continued economic growth, it is likely to raise short-term rates further
for the remainder of 2004 and at least the beginning of 2005. Given this
outlook, we expect to maintain a shorter duration to give us the flexibility
to capture additional yield as rates rise. However, we also expect to take a
more barbelled approach, with concentrations both in very short, one-to-two
month securities and in one-year maturities, where higher yields are
available. We also intend to consider opportunities to invest in
floating-rate notes, where we believe we can take advantage of higher yields
without assuming more risk.
D-15
Prices and Distributions 6/30/04 12/31/03
Net Asset Value per Share $1.00 $1.00
Distributions per Share Short-Term Long-Term
(1/1/04 - 6/30/04) Dividends Capital Gains Capital Gains
$0.0025 $ $
- -------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns
(As of June 30, 2004)
Net Asset Value
Life-of-Class 3.59%
(3/1/95)
5 Years 2.68%
1 Year 0.46%
All total returns shown assume reinvestment of distributions at net asset value.
* Portfolio performance does not reflect any variable contract fees, expenses
or sales charges. If they had been included, performance would have been
lower. See the pages that comprise the inside corer of this report for
performance net of any contract fees, expenses or sales charges.
Past performance does not guarantee future results. Returns and principal values
fluctuate so that your investment, when redeemed, may be worth more or less than
its original cost. The performance table does not reflect the deduction of taxes
that a shareowner would pay on distributions or the redemption of shares.
Any information in this shareowner report regarding market or economic trends or
the factors influencing the Portfolio's historical or future performance are
statements of the opinion of Portfolio management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
D-16
PIONEER MID CAP VALUE VCT PORTFOLIO
Portfolio Update 6/30/04
Portfolio Diversification (As a percentage of total investment portfolio)
- -------------------------------------------------------------------------
[Pie chart]
U.S. Common Stocks = 93.0%
Temporary Cash Investments = 6.0%
Depositary Receipts for International Stocks = 1.0%
Sector Distribution (As a percentage of equity holdings)
- --------------------------------------------------------
Financials = 21.7%
Consumer Discretionary = 15.6%
Industrials = 12.6%
Information Technology = 12.6%
Health Care = 9.6%
Materials = 8.5%
Energy = 6.6%
Utilities = 6.5%
Consumer Staples = 6.3%
Five Largest Holdings (As a percentage of equity holdings)
- ----------------------------------------------------------
1. Foot Locker, Inc. = 2.58%
2. Mattel, Inc. = 2.29%
3. W.W. Grainger, Inc. = 2.26%
4. Safeway, Inc. = 2.14%
5. CIGNA Corp. = 2.13%
Holdings will vary for other periods. This list excludes temporary cash and
derivative investments.
Performance Update 6/30/04
Prices and Distributions 6/30/04 12/31/03
Net Asset Value per Share $21.99 $20.47
Distributions per Share Short-Term Long-Term
(1/1/04 - 6/30/04) Dividends Capital Gains Capital Gains
$0.080 $ -- $0.2095
- --------------------------------------------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Mid Cap Value VCT Portfolio at net asset value, compared to that of the Russell
Midcap Value Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[Graph showing performance of Pioneer Mid Cap Value VCT Portfolio compared to
the Russell Midcap Value Index for the period beginning 3/95 and ending 6/04.]
Pioneer Mid Cap Value VCT Portfolio = $30,733 at 6/04
Russell Midcap Value Index = $33,910 at 6/04
Index comparison begins 2/28/95. The Russell Midcap Value Index measures the
performance of the value-oriented stocks in the Russell Midcap Index. 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 any index.
- --------------------------------------------------------------------------------
D-17
Average Annual Total Returns
(As of June 30, 2004)
Net Asset Value
Life-of-Class 12.66%
(3/1/95)
5 Years 10.11%
1 Year 32.23%
All total returns shown assume reinvestment of distributions at net asset value.
Performance data shown represents past performance. Past performance does not
guarantee future results. Assumes reinvestment of all distributions at net asset
value. Investment return and principal value fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance shown. For performance
data that is current to the most recent month-end, please call 1-800-225-6292 or
visit our web site at www.pioneerfunds.com.
Portfolio performance does not reflect any variable contract fees, expenses or
sales charges. If they had been included, performance would have been lower. See
the pages that comprise the inside cover of this report for performance net of
any contract fees, expenses or sales charges.
PORTFOLIO MANAGEMENT DISCUSSION 6/30/04
Despite interim volatility, stocks tended to gain over the first six months of
2004, riding on the tide of a strengthening economy and generally rising
corporate profitability. In the following interview, Rod Wright discusses the
market environment and portfolio strategies during the six months ended June 30,
2004. Mr. Wright is responsible for day-to-day portfolio supervision of Pioneer
Mid Cap Value VCT Portfolio.
Q: How did the Portfolio perform?
A: The Portfolio performed well. For six months ended June 30, 2004, the
Portfolio had a total return of 8.85% at net asset value, while the Russell
Midcap Value Index returned 7.17%.
Q: What were the principal factors that affected performance?
A: Despite a succession of fears that caused short-term market reversals,
stocks generally rose during the six months as evidence accumulated that the
economy was strengthening and that corporate earnings were increasing. The
rally that had driven the market for most of 2003 continued in early 2004
until March, when market interest rates spiked up on fears about the effects
of rising oil prices, the possibility of increasing inflationary pressure
and the likelihood that the Federal Reserve would tighten monetary policy.
Adding to the uncertainty was the anxiety over the continuing violence in
Iraq. In the final weeks of the period, however, the market rebounded again
in anticipation of good news about corporate earnings and the widening
expectation that the Federal Reserve would act gradually in raising
short-term rates, helping to sustain the economic recovery.
Q: What types of investments helped Portfolio performance?
A: Security selection was the primary factor, as stocks across the industry
spectrum contributed to performance. Stocks in the health care, financial
services, telecommunications and industrial sectors did well, while stocks
in basic materials, consumer staples and consumer discretionary sectors did
less well.
The top individual contributor was Charter One Financial, which was taken
over by Royal Bank of Scotland, at a substantial premium to its valuation.
Several other performance leaders were formerly out-of-favor companies whose
stock prices began appreciating as their earnings and business prospects
began to improve. They included: NCR, the technology conglomerate that began
turning around its business in time to benefit from an increase in corporate
capital spending; and Reliant Energy, an independent power producer and
energy merchant whose stock gained as a result of a corporate restructuring
and the sale of undervalued assets. The Portfolio also had success with
stocks such as Becton Dickinson, the medical supplies company, which
benefited from rising earnings and the introduction of new products, and
D-18
Providian, a credit-card issuer whose prospects began to improve under a
restructuring plan implemented by new management.
Q: Were there any disappointments?
A: We had a few. Investment Technology Group, a company specializing in
electronic trading operations, declined as it faced increased competition in
the financial markets. However, we continued to hold the stock because of
the value of its assets. We have sold our stake in another disappointment,
Seagate Technology, a manufacturer of disc drives, which became the victim
of industry overcapacity. Similarly, we also eliminated positions in two
disappointing mining stocks, Freeport-McMoRan and Newmont Mining, both of
which declined as the price of gold weakened.
Q: What is your investment outlook?
A: We think that the market trends will continue to be choppy, as a variety of
factors will weigh on investors' minds. However, the outlook for corporate
earnings is generally positive and companies are generating a great deal of
free cash flow. We intend to remain focused on our core discipline,
concentrating on investments in quality companies with reasonable stock
valuations.
Any information in this shareowner report regarding market or economic trends or
the factors influencing the Portfolio's historical or future performance are
statements of the opinion of Portfolio management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Mid-capitalization stocks may be subject to greater short-term price
fluctuations than securities of larger companies.
The Portfolio's investment adviser, Pioneer Investment Management, Inc., reduced
its management fee and certain other expenses; otherwise, returns would have
been lower.
D-19
PIONEER BOND VCT PORTFOLIO
PIONEER FUND VCT PORTFOLIO
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
(each a "Pioneer Portfolio" and each a separate series of
Pioneer Variable Contracts Trust)
STATEMENT OF ADDITIONAL INFORMATION
October 19, 2004
This Statement of Additional Information is not a Prospectus. It should be
read in conjunction with the related Proxy Statement and Prospectus (also dated
October 19, 2004) which covers Class I shares of the relevant Pioneer Portfolio,
a series of Pioneer Variable Contracts Trust, to be issued in exchange for
shares of the applicable Safeco Portfolio (as detailed below), each a series of
Safeco Resource Series Trust. Please retain this Statement of Additional
Information for further reference.
The Prospectus is available to you free of charge (please call
1-800-407-7298).
INTRODUCTION.................................................................2
EXHIBITS.....................................................................2
ADDITIONAL INFORMATION ABOUT EACH PIONEER PORTFOLIO..........................3
PORTFOLIO HISTORY......................................................3
DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENT RISKS..................3
MANAGEMENT OF THE PORTFOLIO............................................3
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................3
INVESTMENT ADVISORY AND OTHER SERVICES.................................3
BROKERAGE ALLOCATION AND OTHER PRACTICES...............................3
CAPITAL STOCK AND OTHER SECURITIES.....................................3
PURCHASE, REDEMPTION AND PRICING OF SHARES.............................3
TAXATION OF EACH PORTFOLIO.............................................3
UNDERWRITERS...........................................................4
CALCULATION OF PERFORMANCE DATA........................................4
FINANCIAL STATEMENTS...................................................4
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a Proxy Statement and Prospectus dated October 19, 2004
(the "Proxy Statement and Prospectus") relating to the proposed reorganizations:
1. Safeco Bond Portfolio into Pioneer Bond VCT Portfolio
2. Safeco Core Equity Portfolio into Pioneer Fund VCT Portfolio
3. Safeco Growth Opportunities Portfolio into Pioneer Growth
Opportunities VCT Portfolio
4. Safeco Money Market Portfolio into Pioneer Money Market VCT Portfolio
5. Safeco Multi-Cap Core Portfolio into Pioneer Mid Cap Value VCT
Portfolio
6. Safeco Small-Cap Value Portfolio into Pioneer Small Cap Value II VCT
Portfolio
Each Safeco Portfolio is a separate series of Safeco Resource Series Trust,
and each Pioneer Portfolio is a separate series of Pioneer Variable Contracts
Trust. The Proxy Statement and Prospectus is in connection with the solicitation
by the management of Safeco Resource Series Trust of proxies to be voted at a
Meeting of Shareholders of each Safeco Portfolio to be held on December 8, 2004.
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference, unless
otherwise indicated. Shareholders will receive a copy of each document that is
incorporated by reference upon any request to receive a copy of this Statement
of Additional Information.
1. Statement of additional information of Pioneer Variable Contracts Trust,
dated April 29, 2004 (the "SAI") (File No. 33-84546), as filed with the
Securities and Exchange Commission on April 29, 2004 (Accession No.
0001016964-04-000122) and June 1, 2004 (Post effective amendment no. 31)
(Accession no. 0001016964-04-000195) are incorporated herein by reference.
2. Preliminary statement of additional information of Pioneer Bond VCT
Portfolio, Pioneer Growth Opportunities VCT Portfolio and Pioneer Small Cap
Value II VCT Portfolio each a newly created series of Pioneer Variable
Contracts Trust, dated September 10, 2004 (the "SAI") (File No. 33-84546),
as filed with the Securities and Exchange Commission on September 10, 2004
(Accession No. 001016964-04-000386) is incorporated herein by reference.
3. Safeco Resource Series Trust's statement of additional information, dated
April 30, 2004 as revised August 19, 2004 (File No. 33-06547), as filed
with the Securities and Exchange Commission on April 29, 2004 (Accession
No. 0001047469-04-014236) is incorporated herein by reference.
3. Safeco Resource Series Trust's Annual Report for the fiscal year ended
December 31, 2003 (File No. 811-04717), as filed with the Securities and
Exchange Commission on February 25, 2004 (Accession No.
0001047469-04-005601) is incorporated herein by reference.
4. Safeco Resource Series Trust's Semi-Annual Report for the period ended June
30, 2004 (File No. 811-04717), as filed with the Securities and Exchange
Commission on August 25, 2004 (Accession No. 0001104659-04-025561) is
incorporated by reference.
5. Pro forma financial statements for the fiscal year ending December 31, 2003
and semi-annual period ending June 30, 2004 for the following:
Safeco Core Equity Portfolio into Pioneer Fund VCT Portfolio
Safeco Money Market Portfolio into Pioneer Money Market VCT Portfolio
-2-
Pro forma financial statements are not included for the following since the
Pioneer Portfolio is a newly created series of Pioneer Variable Contracts
Trust and does not have material assets or liabilities:
Safeco Bond Portfolio into Pioneer Bond VCT Portfolio
Safeco Growth Opportunities Portfolio into Pioneer Growth
Opportunities VCT Portfolio
Safeco Small-Cap Value Portfolio into Pioneer Small Cap Value II VCT
Portfolio
Pro forma financial statements are not applicable for Pioneer Mid Cap Value
VCT Portfolio because the net asset value of the Safeco Multi-Cap Core
Portfolio that will be acquired does not exceed ten percent of Pioneer Mid
Cap Value VCT Portfolio's net asset value.
ADDITIONAL INFORMATION ABOUT
EACH PIONEER PORTFOLIO
PORTFOLIO HISTORY
For additional information about Pioneer Variable Contracts Trust
generally and each Pioneer Portfolio and its histories, see "Fund History" in
the SAI.
DESCRIPTION OF EACH PORTFOLIO AND ITS INVESTMENT RISKS
For additional information about each Pioneer Portfolio's investment
objective, policies, risks and restrictions, see "Investment Policies, Risks and
Restrictions" in the SAI.
MANAGEMENT OF THE PORTFOLIO
For additional information about Pioneer Variable Contracts Trust's
Board of Trustees and officers, see "Trustees and Officers" in the SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For addition information on share ownership of each Pioneer Portfolio,
see "Annual Fee, Expense and Other Information."
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information on each Pioneer Portfolio, see "Investment
Adviser," "Custodian" and "Independent Auditors" in Pioneer Variable Contracts
Trust's SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about Pioneer Variable Contracts Trust and
each Pioneer Portfolio's brokerage allocation practices, see "Portfolio
Transactions" in the SAI.
CAPITAL STOCK AND OTHER SECURITIES
For additional information about the voting rights and other
characteristics of shares of beneficial interest of each Pioneer Portfolio and
Pioneer Variable Contracts Trust, see "Description of Shares" in the SAI.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of
shares of each Pioneer Portfolio, see "Pricing of Shares" in the SAI.
-3-
TAXATION OF THE FUND
For additional information about tax matters related to an investment
in each Pioneer Portfolio, see "Tax Status" in the SAI.
UNDERWRITERS
For additional information about the Pioneer Variable Contracts Trust's
principal, see "Principal Underwriter" in the SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of each
Pioneer Portfolio, see "Investment Results" in the SAI.
FINANCIAL STATEMENTS
For additional information on each Pioneer Portfolio, see "Financial
Statements" in Pioneer Variable Contracts Trust's SAI.
-4-
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited)
Safeco
Safeco Pioneer RST Core
Pioneer RST Core Fund VCT Equity Pro Forma
Fund VCT Equity Pro Forma Portfolio Portfolio Combined
Portfolio Portfolio Combined % of Net Market Market Market
Shares Shares Shares Assets Value (000's) Value (000's) Value (000's)
------ ------ ------ ------- ------------- ------------- -------------
COMMON STOCKS 96.6%
Energy 6.5%
Integrated Oil & Gas 5.4%
80,552 70,000 150,552 ChevronTexaco Corp. $ 6,959 $ 6,047 $ 13,006
22,272 22,272 ConocoPhillips $ 1,460 $ 1,460
107,438 212,000 319,438 Exxon Mobil Corp. $ 4,405 $ 8,692 $ 13,097
31,593 31,593 Royal Dutch Petroleum Co. $ 1,655 $ 1,655
23,956 23,956 Shell Transport & Trading Co. (A.D.R.) $ 1,079 $ 1,079
-------------------------------------
$ 15,558 $ 14,739 $ 30,297
-------------------------------------
Oil & Gas Drilling 0.3%
37,870 37,870 Smith International, Inc. * $ 1,572 $ 1,572
12,240 12,240 Transocean Offshore, Inc. * $ 294 $ 294
-------------------------------------
$ 1,866 $ 0 $ 1,866
-------------------------------------
Oil & Gas Equipment & Services 0.7%
76,500 76,500 Schlumberger, Ltd. $ 4,186 $ 4,186
-------------------------------------
Total Energy $ 17,424 $ 18,925 $ 36,349
-------------------------------------
Materials 3.1%
Aluminum 0.4%
60,153 60,153 Alcoa, Inc. $ 2,286 $ 2,286
-------------------------------------
Commodity Chemicals 0.5%
20,818 20,818 Air Products & Chemicals, Inc. $ 1,100 $ 1,100
34,836 34,836 E.I. du Pont de Nemours and Co. $ 1,599 $ 1,599
-------------------------------------
$ 2,698 $ 0 $ 2,698
-------------------------------------
-5-
Diversified Chemicals 0.2%
16,633 16,633 PPG Industries, Inc. $ 1,065 $ 1,065
-------------------------------------
Diversified Metals & Mining 1.2%
31,698 31,698 Phelps Dodge Corp. * $ 2,412 $ 2,412
147,818 147,818 Rio Tinto Plc $ 4,060 $ 4,060
-------------------------------------
$ 6,472 $ 0 $ 6,472
-------------------------------------
Industrial Gases 0.6%
82,000 82,000 Praxair, Inc. $ 3,132 $ 3,132
-------------------------------------
Paper Products 0.3%
57,800 57,800 Meadwestvaco Corp. $ 1,720 $ 1,720
-------------------------------------
Total Materials $ 14,241 $ 3,132 $ 17,373
-------------------------------------
Capital Goods 10.0%
Aerospace & Defense 1.6%
21,446 21,446 Boeing Co. $ 904 $ 904
35,045 35,045 General Dynamics Corp. $ 3,168 $ 3,168
31,175 31,175 Lockheed Martin Corp. $ 1,602 $ 1,602
32,000 32,000 Northrop Grumman Corp. $ 3,059 $ 3,059
-------------------------------------
$ 5,674 $ 3,059 $ 8,733
-------------------------------------
Electrical Component & Equipment 2.2%
16,633 42,000 58,633 Emerson Electric Co. $ 1,077 $ 2,720 $ 3,797
12,449 270,000 282,449 General Electric Co. $ 386 $ 8,365 $ 8,751
-------------------------------------
$ 1,463 $ 11,085 $ 12,548
-------------------------------------
Industrial Conglomerates 4.1%
18,621 48,000 66,621 Illinois Tool Works, Inc. $ 1,562 $ 4,028 $ 5,590
20,504 37,000 57,504 Johnson Controls, Inc. $ 2,381 $ 4,296 $ 6,677
28,246 84,500 112,746 United Technologies Corp. $ 2,677 $ 8,008 $ 10,685
-------------------------------------
$ 6,620 $ 16,332 $ 22,952
-------------------------------------
-6-
Industrial Machinery 2.1%
30,338 30,338 Caterpillar, Inc. $ 2,519 $ 2,519
40,000 40,000 Danaher Corp. $ 3,670 $ 3,670
45,297 45,297 Deere & Co. $ 2,947 $ 2,947
40,000 40,000 Ingersoll-Rand Co. (Class A) $ 2,715 $ 2,715
-------------------------------------
$ 5,465 $ 6,385 $ 11,850
-------------------------------------
Total Capital Goods $ 19,222 $ 36,861 $ 56,083
-------------------------------------
Commercial Services & Supplies 0.7%
Employment Services 0.3%
75,217 75,217 Robert Half International, Inc. * $ 1,756 $ 1,756
-------------------------------------
Office Services & Supplies 0.4%
42,473 42,473 Canon, Inc. (A.D.R.) $ 2,023 $ 2,023
-------------------------------------
Total Commercial Services & Supplies $ 3,779 $ 3,779
-------------------------------------
Transportation 1.6%
Airlines 0.4%
124,176 124,176 Southwest Airlines Co. $ 2,004 $ 2,004
-------------------------------------
Railroads 1.0%
36,301 36,301 Burlington Northern, Inc. $ 1,174 $ 1,174
131,812 131,812 Norfolk Southern Corp. $ 3,117 $ 3,117
13,468 13,468 Philadelphia Suburban Corp. $ 298 $ 298
14,332 14,332 Union Pacific Corp. $ 996 $ 996
-------------------------------------
$ 5,585 $ 5,585
-------------------------------------
Trucking 0.2%
15,274 15,274 United Parcel Service $ 1,139 $ 1,139
-------------------------------------
Total Transportation $ 8,728 $ 8,728
-------------------------------------
Automobiles & Components 1.5%
Automobile Manufacturers 0.9%
27,984 33,000 60,984 Paccar, Inc. $ 2,382 $ 2,809 $ 5,191
-------------------------------------
Motorcycle Manufacturers 0.6%
70,000 70,000 Harley-Davidson, Inc. $ 3,327 $ 3,327
-------------------------------------
Total Automobiles & Components $ 2,382 $ 6,136 $ 8,518
-------------------------------------
-7-
Consumer Durables & Apparel 1.3%
Home Furnishings 0.4%
97,000 97,000 Leggett & Platt, Inc. $ 2,098 $ 2,098
-------------------------------------
Housewares & Specialties 0.9%
67,000 67,000 Fortune Brands, Inc. $ 4,790 $ 4,790
-------------------------------------
Photographic Products 0.0%
8,369 8,369 Eastman Kodak Co. $ 215 $ 215
-------------------------------------
Total Consumer Durables & Apparel $ 215 $ 6,888 $ 7,103
-------------------------------------
Media 4.7%
Advertising 0.5%
32,012 32,012 Omnicom Group $ 2,796 $ 2,796
-------------------------------------
Movies & Entertainment 1.1%
215,000 215,000 Time Warner, Inc. * $ 3,868 $ 3,868
97,000 97,000 Walt Disney Co. $ 2,263 $ 2,263
-------------------------------------
$ 0 $ 6131 $ 6131
-------------------------------------
Publishing 3.1%
15,901 15,901 Dow Jones & Co., Inc. $ 793 $ 793
33,042 33,042 Elsevier NV $ 410 $ 410
36,405 69,000 105,405 Gannett Co. $ 3,246 $ 6,152 $ 9,398
106,300 106,300 John Wiley & Sons, Inc. $ 2,767 $ 2,767
57,119 57,119 McGraw-Hill Co., Inc. $ 3,994 $ 3,994
-------------------------------------
$ 11,209 $ 6,152 $ 17,361
-------------------------------------
Total Media $ 14,005 $ 12,283 $ 26,288
-------------------------------------
Retailing 4.0%
Department Stores 0.8%
64,000 64,000 Kohl's Corp. * $ 2,876 $ 2,876
48,045 48,045 May Department Stores Co. $ 1,397 $ 1,397
-------------------------------------
$ 1,397 $ 2,876 $ 4,273
-------------------------------------
-8-
General Merchandise Stores 1.7%
26,258 26,258 Family Dollar Stores, Inc. $ 942 $ 942
98,546 129,000 227,546 Target Corp. $ 3,784 $ 4,954 $ 8,738
-------------------------------------
$ 4,726 $ 4,954 $ 9,680
-------------------------------------
Home Improvement Retail 1.4%
165,000 165,000 Home Depot, Inc. $ 5,856 $ 5,856
35,673 35,673 Lowe's Companies, Inc. $ 1,976 $ 1,976
-------------------------------------
$ 1,976 $ 5,856 $ 7,832
-------------------------------------
Specialty Stores 0.1%
14,646 14,646 Barnes & Noble, Inc. * $ 481 $ 481
-------------------------------------
Total Retailing $ 8,580 $ 13,686 $ 22,266
-------------------------------------
Food & Drug Retailing 2.8%
Drug Retail 0.7%
101,579 101,579 Walgreen Co. $ 3,695 $ 3,695
-------------------------------------
Food Retail 0.5%
165,000 165,000 Kroger Co. * $ 3,054 $ 3,054
-------------------------------------
Food Distributors 0.4%
61,512 61,512 Sysco Corp. $ 2,290 $ 2,290
-------------------------------------
Hypermarkets & Supercenters 1.2%
35,987 89,000 124,987 Wal-Mart Stores, Inc. $ 1,909 $ 4,721 $ 6,630
-------------------------------------
Total Food & Drug Retailing $ 7,895 $ 7,775 $ 15,670
-------------------------------------
Food, Beverage & Tobacco 4.7%
Brewers 0.9%
91,000 91,000 Anheuser-Busch Companies, Inc. $ 4,794 $ 4,794
-------------------------------------
Packaged Foods & Meats 1.6%
63,291 63,291 Campbell Soup Co. $ 1,696 $ 1,696
33,058 33,058 General Mills, Inc. $ 1,498 $ 1,498
53,562 53,562 H.J. Heinz Co., Inc. $ 1,951 $ 1,951
20,295 20,295 Hershey Foods Corp. $ 1,563 $ 1,563
91,118 91,118 Sara Lee Corp. $ 1,978 $ 1,978
-------------------------------------
$ 8,686 $ 0 $ 8,686
-------------------------------------
-9-
Soft Drinks 1.8%
47,808 170,000 217,808 PepsiCo, Inc. $ 2,229 $ 7,925 $ 10,154
-------------------------------------
Tobacco 0.5%
47,000 47,000 Altria Group, Inc. $ 2,558 $ 2,558
-------------------------------------
Total Food, Beverage & Tobacco $ 10,914 $ 15,277 $ 26,191
-------------------------------------
Household & Personal Products 3.2%
Household Products 2.8%
48,227 48,227 Colgate-Palmolive Co. $ 2,414 $ 2,414
58,000 58,000 Kimberly-Clark Corp. $ 3,427 $ 3,427
31,907 67,000 98,907 Procter & Gamble Co. $ 3,187 $ 6,692 $ 9,879
-------------------------------------
$ 5,601 $ 10,119 $ 15,720
-------------------------------------
Personal Products 0.4%
52,000 52,000 Estee Lauder Cos., Inc. (Class A) $ 2,042 $ 2,042
-------------------------------------
Total Household & Personal Products $ 5,601 $ 12,161 $ 17,762
-------------------------------------
Health Care Equipment & Services 5.9%
Health Care Distributors 4.3%
43,205 159,000 202,205 Abbott Laboratories $ 2,013 $ 7,409 $ 9,422
52,000 52,000 Cardinal Health, Inc. $ 3,180 $ 3,180
68,103 92,500 160,603 Johnson & Johnson $ 3,518 $ 4,779 $ 8,297
100,000 100,000 McKesson Corp. $ 3,216 $ 3,216
-------------------------------------
$ 5,532 $ 18,584 $ 24,116
-------------------------------------
Health Care Equipment 1.3%
52,830 52,830 Becton, Dickinson & Co. $ 2,173 $ 2,173
31,593 31,593 Biomet, Inc. $ 1,150 $ 1,150
85,000 85,000 Medtronic, Inc. $ 4,132 $ 4,132
-------------------------------------
$ 3,324 $ 4,132 $ 7,456
-------------------------------------
Health Care Services 0.0%
6,054 6,054 Medco Health Solutions, Inc. * $ 206 $ 206
-------------------------------------
-10-
Managed Health Care 0.3%
12,763 12,763 United Healthcare Group, Inc. $ 743 $ 743
6,800 6,800 Wellpoint Health Networks Inc. * $ 660 $ 660
-------------------------------------
$ 1,402 $ 1,402
-------------------------------------
Total Health Care Equipment & Services $ 10,463 $ 22,716 $ 33,179
-------------------------------------
Pharmaceuticals & Biotechnology 6.6%
Biotechnology 0.8%
68,200 68,200 Amgen, Inc. * $ 4,215 $ 4,215
-------------------------------------
Pharmaceuticals 5.9%
32,221 40,000 72,221 Eli Lilly & Co. $ 2,266 $ 2,813 $ 5,079
49,900 49,900 Merck & Co., Inc. $ 2,305 $ 2,305
41,218 41,218 Novartis AG (A.D.R.) $ 1,891 $ 1,891
56,073 332,000 388,073 Pfizer, Inc. $ 1,981 $ 11,730 $ 13,711
13,704 13,704 Roche Holdings AG (A.D.R.) $ 1,379 $ 1,379
171,356 171,356 Schering-Plough Corp. $ 2,980 $ 2,980
126,000 126,000 Wyeth $ 5,349 $ 5,349
-------------------------------------
$ 12,803 $ 19,892 $ 32,695
-------------------------------------
Total Pharmaceuticals & Biotechnology $ 12,803 $ 24,107 $ 36,910
-------------------------------------
Banks 9.0%
Diversified Banks 3.7%
21,002 21,002 Bank of America Corp. $ 1,689 $ 1,689
10,000 10,000 Charter One Financial, Inc. $ 346 $ 346
100,000 100,000 Hibernia Corp. (Class A) $ 2,351 $ 2,351
207,000 207,000 U.S. Bancorp $ 6,164 $ 6,164
33,267 140,000 173,267 Wells Fargo & Co. $ 1,959 $ 8,245 $ 10,204
-------------------------------------
$ 3,994 $ 16,760 $ 20,754
-------------------------------------
Regional Banks 2.7%
59,000 59,000 Fifth Third Bancorp $ 3,487 $ 3,487
25,526 69,000 94,526 First Tennessee National Corp. $ 1,126 $ 3,043 $ 4,169
102,730 102,730 National City Corp. $ 3,487 $ 3,487
44,031 44,031 SunTrust Banks, Inc. $ 3,148 $ 3,148
17,470 17,470 Zions Bancorporation $ 1,071 $ 1,071
-------------------------------------
$ 8,832 $ 6,530 $ 15,362
-------------------------------------
-11-
Thrifts & Mortgage Finance 2.6%
83,000 83,000 Federal National Mortgage Association $ 6,230 $ 6,230
46,778 157,000 203,778 Washington Mutual, Inc. $ 1,877 $ 6,299 $ 8,176
-------------------------------------
$ 1,877 $ 12,529 $ 14,406
-------------------------------------
Total Banks $ 14,703 $ 35,819 $ 50,522
-------------------------------------
Diversified Financials 6.1%
Asset Management & Custody Banks 1.8%
78,146 78,146 The Bank of New York Co., Inc. $ 2,588 $ 2,588
33,372 33,372 Federated Investors, Inc. $ 980 $ 980
56,177 56,177 State Street Corp. $ 2,926 $ 2,926
73,648 73,648 T. Rowe Price Associates, Inc. $ 3,492 $ 3,492
-------------------------------------
$ 9,985 $ 0 $ 9,985
-------------------------------------
Consumer Finance 1.9%
34,418 105,000 139,418 American Express Co. $ 1,660 $ 5,064 $ 6,724
150,000 150,000 MBNA Corp. $ 3,728 $ 3,728
-------------------------------------
$ 1,660 $ 8,792 $ 10,452
-------------------------------------
Diversified Financial Markets 2.0%
226,000 226,000 Citigroup, Inc. $ 10,970 $ 10,970
-------------------------------------
Investment Banking & Brokerage 0.5%
44,670 44,670 Merrill Lynch & Co., Inc. $ 2,620 $ 2,620
-------------------------------------
Total Diversified Financials $ 14,265 $ 19,762 $ 34,027
-------------------------------------
Insurance 4.2%
Multi-Line Insurance 2.5%
33,581 139,000 172,581 American International Group, Inc. $ 2,226 $ 9,213 $ 11,439
40,000 40,000 Hartford Financial Services Group, Inc $ 2,361 $ 2,361
-------------------------------------
$ 2,226 $ 11,574 $ 13,800
-------------------------------------
Property & Casualty Insurance 1.7%
41,531 41,531 Chubb Corp. $ 2,828 $ 2,828
24,898 24,898 Safeco Corp. $ 969 $ 969
47,313 47,313 St. Paul Companies, Inc. $ 1,876 $ 1,876
235,000 235,000 Travelers Property Casualty Corp.
(Class A) * $ 3,943 $ 3,943
-------------------------------------
$ 5,674 $ 3,943 $ 9,617
-------------------------------------
Total Insurance $ 7,899 $ 15,517 $ 23,416
-------------------------------------
-12-
Software & Services 6.0%
Application Software 3.9%
32,325 32,325 Adobe Systems, Inc. $ 1,270 $ 1,270
36,405 36,405 BMC Software, Inc. * $ 679 $ 679
35,000 35,000 Intuit, Inc. * $ 1,852 $ 1,852
107,751 337,000 444,751 Microsoft Corp. $ 2,967 $ 9,281 $ 12,248
190,000 190,000 Oracle Corp. * $ 2,508 $ 2,508
23,434 23,434 Symantec Corp. * $ 812 $ 812
74,694 74,694 Synopsys, Inc. * $ 2,522 $ 2,522
-------------------------------------
$ 8,250 $ 13,641 $ 21,891
-------------------------------------
Data Processing & Outsourced Services 2.1%
35,464 74,000 109,464 Automatic Data Processing, Inc. $ 1,405 $ 2,931 $ 4,336
39,439 39,439 Computer Sciences Corp. * $ 1,744 $ 1,744
19,667 19,667 DST Systems, Inc. * $ 821 $ 821
38,498 38,498 Electronic Data Systems Corp. $ 945 $ 945
65,000 65,000 First Data Corp. $ 2,671 $ 2,671
22,963 22,963 Fiserv, Inc. * $ 907 $ 907
16,006 16,006 SunGard Data Systems, Inc. * $ 444 $ 444
-------------------------------------
$ 6,266 $ 5,602 $ 11,868
-------------------------------------
Total Software & Services $ 14,516 $ 19,243 $ 33,759
-------------------------------------
Technology Hardware & Equipment 6.5%
Communications Equipment 2.5%
39,648 260,000 299,648 Cisco Systems, Inc. * $ 963 $ 6,315 $ 7,278
170,200 170,200 Motorola, Inc. $ 2,395 $ 2,395
115,702 80,000 195,702 Nokia Corp (A.D.R.) $ 1,967 $ 1,360 $ 3,327
19,249 19,249 Qualcomm, Inc. $ 1,038 $ 1,038
-------------------------------------
$ 6,363 $ 7,675 $ 14,038
-------------------------------------
-13-
Computer Hardware 3.5%
54,922 124,000 178,922 Dell, Inc. * $ 1,865 $ 4,211 $ 6,076
20,609 20,609 Diebold, Inc. $ 1,110 $ 1,110
17,889 17,889 Hewlett-Packard Co. $ 411 $ 411
57,746 62,100 119,846 IBM Corp. $ 5,352 $ 5,755 $ 11,107
227,585 227,585 Sun Microsystems, Inc. * $ 1,022 $ 1,022
-------------------------------------
$ 9,760 $ 9,966 $ 19,726
-------------------------------------
Computer Storage & Peripherals 0.5%
195,000 195,000 EMC Corp. * $ 2,519 $ 2,519
-------------------------------------
Total Technology Hardware & Equipment $ 16,123 $ 20,160 $ 36,283
-------------------------------------
Semiconductors 4.6%
Semiconductor Equipment 1.2%
108,798 131,000 239,798 Applied Materials, Inc. * $ 2,443 $ 2,941 $ 5,384
34,732 34,732 Novellus Systems, Inc. * $ 1,460 $ 1,460
-------------------------------------
$ 3,903 $ 2,941 $ 6,844
-------------------------------------
Semiconductors 3.3%
18,307 18,307 Altera Corp. * $ 416 $ 416
114,028 223,000 337,028 Intel Corp. $ 3,672 $ 7,181 $ 10,853
110,900 140,000 250,900 Texas Instruments, Inc. $ 3,258 $ 4,113 $ 7,371
-------------------------------------
$ 7,346 $ 11,294 $ 18,640
-------------------------------------
Total Semiconductors $ 11,249 $ 14,235 $ 25,484
-------------------------------------
Telecommunication Services 2.8%
Integrated Telecommunication Services 2.8%
16,947 16,947 Alltel Corp. $ 789 $ 789
105,241 105,241 BellSouth Corp. $ 2,978 $ 2,978
85,000 85,000 CenturyTel, Inc. $ 2,773 $ 2,773
159,326 159,326 SBC Communications, Inc. $ 4,154 $ 4,154
144,000 144,000 Verizon Communications $ 5,052 $ 5,052
-------------------------------------
Total Telecommunication Services $ 7,921 $ 7,825 $ 15,746
-------------------------------------
-14-
Utilities 0.7%
Electric Utilities 0.5%
24,270 24,270 American Electric Power Co., Inc. $ 740 $ 740
26,363 26,363 Consolidated Edison, Inc. $ 1,134 $ 1,134
24,584 24,584 Southern Co. $ 744 $ 744
-------------------------------------
$ 2,618 $ 0 $ 2,618
-------------------------------------
Gas Utilities 0.3%
20,295 20,295 KeySpan Energy Corp. $ 747 $ 747
27,932 27,932 Vectren Corp. $ 689 $ 689
-------------------------------------
$ 1,435 $ 0 $ 1,435
-------------------------------------
Total Utilities $ 4,053 $ 0 $ 4,053
-------------------------------------
TOTAL COMMON STOCKS $226,981 $312,508 $539,489
Common Stocks (At Cost) -------------------------------------
$205,141 $235,411 $440,552
Common Stocks (At Cost) -------------------------------------
Principal Principal Principal
Amount Amount Amount
TEMPORARY CASH INVESTMENTS 6.0%
Repurchase Agreement 2.8%
UBS Warburg, Inc., 0.73%, Dated
$15,500,000 15,500,000 12/31/03, repurchase price of
$15,500,000 plus accrued interest on
1/2/04 collateralized by
$14,639,000
U.S. Treasury Bill, 6.75%, 5/15/05. $ 15,500 $ 15,500
-------------------------------------
Shares Shares Shares
------ ------ ------
Investment Companies 0.8%
4,759,461 4,759,461 AIM Short-Term Investments Co.
Liquid Assets Money Market
Portfolio (Institutional
Shares) $ 4,759 $ 4,759
-15-
Security Lending Collateral 2.4%
5,965,628 5,965,628 Securities Lending Investment Fund, $ 5,966 $ 5,966
1.02% State Street Navigator Securities
7,474,199 7,474,199 Lending Prime Portfolio $ 7,474 $ 7,474
-------------------------------------
$ 5,966 $ 7,474 $ 13,440
TOTAL TEMPORARY CASH INVESTMENTS $ 21,466 $ 12,233 $ 33,699
-------------------------------------
Temporary Cash Investments (At Cost) $ 21,466 $ 12,233 $ 33,699
TOTAL INVESTMENTS IN SECURITIES 102.6% $248,447 $324,741 $573,188
-------------------------------------
OTHER ASSETS AND LIABILITIES -2.6% $ -6,120 $ -8,427 $-14,547
-------------------------------------
TOTAL NET ASSETS 100.0% $242,327 $316,314 $558,641
=====================================
Total Investments at Cost $226,607 $247,644 $474,251
=====================================
Securities out on loan, at Market Value $ 5,797 $ 7,349 $ 13,146
(a) No adjustments are shown to the unaudited pro forma combined schedule of
investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer Fund VCT Portfolio to
comply with its prospectus restrictions. The foregoing sentence shall not
restrict in any way the ability of the investment adviser of either of the
funds from buying or selling securities in the normal course of such fund's
business and operations.
*Non-income producing security.
A.D.R. American Depository Receipt.
The accompanying notes are an integral part of these
pro forma financial statements.
-16-
Pioneer Fund VCT Portfolio
Pro Forma Statement of Assets and Liabilities
December 31, 2003
(unaudited) (Amounts in Thousands, except for per share data)
Safeco RST
Pioneer Fund Core Equity Pro Forma Pro Forma
VCT Portfolio Portfolio Adjustments Combined
------------- ----------- ----------- ---------
ASSETS:
Investment in securities, at value (Cost $226,607 and
$247,644, respectively) $ 248,446 $ 324,741 $ 573,187
Cash 152 - 152
Receivables -
Fund shares sold 157 191 348
Dividends, interest and foreign taxes withheld 286 453 739
Other 4 - 4
------------- ----------- ---------
Total assets $ 249,045 $ 325,385 $ 574,430
------------- ----------- ---------
LIABILITIES:
Payables -
Investment securities purchased $ 453 $ - $ 453
Fund shares repurchased 80 1,343 1,423
Upon Return of Securities Loaned 5,966 7,474 13,440
Due to affiliates 178 196 374
Accrued expenses 41 58 99
------------- ----------- ----------- ---------
Total liabilities $ 6,718 $ 9,071 - $ 15,789
------------- ----------- ----------- ---------
NET ASSETS:
Paid-in capital $ 254,615 $ 296,987 $ 551,602
Accumulated net realized loss on investments (34,127) (57,770) (91,897)
Net unrealized gain on investments and foreign
currencies transactions 21,839 77,097 98,936
------------- ----------- ----------- ---------
Total net assets $ 242,327 $ 316,314 - $ 558,641
============= =========== ----------- ---------
OUTSTANDING SHARES:
No par value, (Unlimited number of shares authorized)
Trust Shares - 14,152 (14,152) (a) -
============= =========== =========
Class I 8,282 - 16,915 (a) 25,197
============= =========== =========
Class II 4,689 - 4,689
============= =========== =========
NET ASSET VALUE PER SHARE:
Trust Shares $ - $ 22.35 $ -
============= =========== =========
Class I $ 18.70 $ $ 18.70
============= =========== =========
Class II $ 18.66 $ $ 18.66
============= =========== =========
(a) Trust Shares of Safeco RST Core Equity Portfolio is exchanged for new Class
I shares of Pioneer Fund VCT Portfolio.
See accompanying notes to pro forma financial statements.
-17-
Pioneer Fund VCT Portfolio
Pro Forma Statement of Operations
For the Year Ended December 31, 2003
(unaudited)
Pioneer Safeco RST
Fund VCT Core Equity Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
(000's) (000's) (000's) (000's)
--------- ----------- ----------- ---------
INVESTMENT INCOME:
Dividends $ 3,590 $ 4,953 $ 8,543
Interest 97 99 196
Securities Lending and Other Income 3 7 10
--------- ----------- ---------
Total investment income $ 3,690 $ 5,059 $ 8,749
EXPENSES:
Management fees $ 1,257 $ 2,117 $ (252) (b) $ 3,122
Transfer agent fees 3 - 3
Distribution fees
Class II 133 - 133
Administrative fees 70 - 80 (c) 150
Custodian fees 42 23 65
Professional fees 30 39 (39) (a) 30
Printing 51 72 123
Fees and expenses of nonaffiliated trustees 5 11 11 (a) 5
Miscellaneous 12 22 34
--------- ----------- ----------- ---------
Total expenses $ 1,603 $ 2,284 $ (222) $ 3,665
--------- ----------- ----------- ---------
Net investment income $ 2,087 $ 2,775 $ 222 $ 5,084
--------- ----------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from
Investments $ (8,525) $ (18,125) $ (26,650)
Change in net unrealized gain (loss) from
Investments and forward foreign currency
transactions $ 49,662 $ 79,592 $ 129,254
--------- ----------- ---------
Net gain on investments and forward currency
transactions $ 41,137 $ 61,467 $ 102,604
--------- ----------- ---------
Net increase in net assets resulting from
operations $ 43,224 $ 64,242 $ 107,688
========= =========== =========
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Fund VCT Portfolio's management
contract.
(c) Reflects increase due to a change in fee rates.
See accompanying notes to pro forma financial statements.
-18-
Pioneer Fund VCT Portfolio
Notes to Pro Forma Combining Financial Statements
12/31/03
(Unaudited)
1. General
The accompanying pro forma combining financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco RST Core
Equity Portfolio by Pioneer Fund VCT Portfolio.
Under the terms of an Agreement and Plan of Reorganization between Pioneer Fund
VCT Portfolio and Safeco RST Core Equity Portfolio, the combination will be
treated as a tax-free business combination and accordingly will be accounted for
by a method of accounting for tax-free mergers of investment companies. The
acquisition will be accomplished by an acquisition of the net assets of Safeco
RST Core Equity Portfolio in exchange for "Class I" shares of Pioneer Fund VCT
Portfolio at net asset value. The accompanying schedules of investments,
statements of assets and liabilities and the related statements of operations of
Pioneer Fund VCT Portfolio and Safeco RST Core Equity Portfolio have been
combined as of and for their most recent fiscal year ended December 31, 2003.
Adjustments have been made to expenses for duplicate services that would not
have been incurred if the merger took place on January 1, 2003. Following the
acquisition, the Pioneer Fund VCT Portfolio will be the accounting survivor. All
related acquisition costs will be borne by Pioneer Investment Management, Inc.
and Symetra.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer Fund VCT Portfolio and
Safeco RST Core Equity Portfolio included in their respective annual reports to
shareowners dated December 31, 2003.
2. 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 an open-end management
investment company. The Trust consists of sixteen separate portfolios
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio)
Pioneer Value VCT Portfolio (Value Portfolio)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Pioneer Fund VCT Portfolio is to seek reasonable
income and capital growth.
-19-
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 as of trade date. Net asset values for the
portfolio are computed once daily, on each day the New York Stock Exchange is
open, as of the close of regular trading on the Exchange. In computing the net
asset values, 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. Securities for which
market quotations are not readily available are valued at their fair values as
determined by, or under the direction of, the Trust's Board of Trustees. At
December 31, 2003, there were no securities fair valued.
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, including interest on income
bearing cash accounts, is recorded on the accrual basis. Temporary cash
investments are valued at amortized cost.
Gains and losses from sales on investments are calculated on the identified cost
method for both financial reporting and federal income tax purposes.
B. Futures Contracts
The Portfolio may enter into futures transactions to hedge against changes in
interest rates, securities prices, and currency rates or to seek to increase
total return. Upon entering into a futures contract, the Portfolio is required
to deposit with a broker an amount of cash or securities equal to the minimum
"initial margin" requirements of the associated futures exchange. Subsequent
payments for futures contracts ("variation margin") is paid or received by the
Portfolio, depending on the daily fluctuation in the value of the contracts, and
is recorded by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio realizes a gain or loss equal to the difference between
the opening and closing value of the contract. The use of futures contracts
involves, to varying degrees, elements of market risk which may exceed the
amounts recognized by the Portfolio.
Changes in the value of the contracts may not directly correlate to the changes
in the value of the underlying securities. These risks may decrease the
effectiveness of the Portfolio's hedging and trading strategies and potentially
result in a loss. As of December 31, 2003, Pioneer Fund VCT Portfolio had no
open contracts.
C. Foreign Currency Translation
The books and records of the Portfolio 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, 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.
D. Forward Foreign Currency Contracts
The Portfolio enters 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 Portfolio records 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
-20-
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.
E. Taxes
Each fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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 shareowners. Therefore, no
federal income tax provision is required.
The combined tax-basis capital loss carryforward of $91,595,745 includes a net
capital loss carryforward of $57,651,000 from the merger with Safeco RST Core
Equity Portfolio, the full use of which may be limited.
F. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of trade
date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD),
the principal underwriter for the Trust and a wholly owned indirect subsidiary
of UniCredito Italiano S.p.A. (UniCredito Italiano), $246,661 in commissions on
the sale of trust shares for the year ended December 31, 2003. Dividends and
distributions to shareowners are recorded on the ex-dividend date.
G. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers or
other institutional investors, with the Portfolios' custodian acting as the
lending agent. When entering into a loan, the Portfolio receives collateral
which is maintained by the custodian and earns income in the form of negotiated
lenders' fees. The Portfolio also continues to receive interest or dividends on
the securities loaned, and gain or loss in the fair value of the securities
loaned that may occur during the term of the loan, will be for account of the
Trust. The loans are secured by collateral of at least 102%, at all times, of
the fair value of the securities loaned. The fair value of the collateral will
be adjusted daily to reflect any price fluctuation in the value of the loaned
securities. The Trust has the right under the lending agreement to recover the
securities on loan from the borrower on demand. The Trust invests cash
collateral in temporary cash investments.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, 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 Portfolio's custodian, or subcustodian. The Trust's investment adviser,
Pioneer Investment Management, Inc. (PIM), is responsible for determining that
the value of the collateral remains at least equal to the repurchase price.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of the
Pioneer Fund VCT Portfolio that would have been issued at December 31, 2003, in
connection with the proposed acquisition. The number of the shares assumed to be
issued is equal to the net assets of Safeco RST Core Equity Portfolio, as of
December 31, 2003, divided by the net asset value per share of the Class I
shares of the Pioneer Fund VCT Portfolio as of December 31, 2003. The pro forma
number of shares outstanding (in thousands), by class, for the combined fund
consist of the following at December 31, 2003:
-21-
Shares of Additional Shares Total Outstanding
Fund Portfolio Assumed Issued In Shares
Class of Shares Pre-Combination Reorganization Post-Combination
--------------- --------------- -------------- ----------------
Class I 8,282 16,915 25,197
Class II 4,689 4,689
4. Management Agreement
PIM manages the Pioneer Fund VCT Portfolio, and is a wholly owned indirect
subsidiary of UniCredito Italiano. Management fees are calculated daily at the
annual rate of 0.65% of this Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2003, $354,290 would have
been payable to PIM related to management fees, administrative fees and certain
other services.
5. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredito Italiano provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in due
to affiliates is $534 in transfer agent fees that would have been payable to
PIMSS at December 31, 2003.
6. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$19,494 that would have been payable to PFD at December 31, 2003.
-22-
PRO FORMA
Schedule of Investments (a)
June 30, 2004
(Unaudited)
Safeco
Safeco Pioneer RST Core
Pioneer RST Core Fund VCT Equity Pro Forma
Fund VCT Equity Pro Forma Portfolio Portfolio Combined
Portfolio Portfolio Combined % of Net Market Market Market
Shares Shares Shares Assets Value (000's) Value (000's) Value (000's)
------ ------ ------ ------- ------------- ------------- -------------
COMMON STOCKS 97.3%
Energy 7.0%
Integrated Oil & Gas 4.9%
16,643 16,643 BP Amoco Plc. (A.D.R.) $ 892 $ $ 892
57,921 59,000 116,921 ChevronTexaco Corp. 5,451 5,553 11,004
24,727 24,727 ConocoPhillips 1,886 1,886
119,280 160,000 279,280 Exxon Mobil Corp. 5,297 7,106 12,403
36,993 36,993 Occidental Petroleum Corp. 1,791 1,791
----------------------------------------
$ 15,317 $ 12,659 $ 27,976
----------------------------------------
Oil & Gas Drilling 0.4%
42,044 42,044 Smith International, Inc. * $ 2,344 $ $ 2,344
----------------------------------------
Oil & Gas Equipment & Services 0.6%
51,500 51,500 Schlumberger, Ltd. 3,271 3,271
----------------------------------------
Oil & Gas Exploration & Production 1.1%
18,971 80,000 98,971 Apache Corp. $ 826 $ 3,484 $ 4,310
57,988 57,988 Pioneer Natural Resources Co. 2,034 2,034
----------------------------------------
$ 2,860 $ 3,484 $ 6,344
----------------------------------------
Total Energy $ 20,522 $ 19,414 $ 39,936
----------------------------------------
Materials 3.8%
Aluminum 0.3%
46,252 46,252 Alcoa, Inc. $ 1,528 $ $ 1,528
----------------------------------------
-23-
Commodity Chemicals 0.5%
23,113 23,113 Air Products & Chemicals, Inc. $ 1,212 $ $ 1,212
38,676 38,676 E.I. du Pont de Nemours and Co. 1,718 $ $ 1,718
----------------------------------------
$ 2,930 $ $ 2,930
----------------------------------------
Diversified Chemical 0.2%
18,467 18,467 PPG Industries, Inc. $ 1,154 $ $ 1,154
----------------------------------------
Diversified Metals & Mining 1.1%
32,924 32,924 Phelps Dodge Corp. * $ 2,552 $ $ 2,552
164,111 164,111 Rio Tinto Plc 3,950 3,950
----------------------------------------
$ 6,502 $ $ 6,502
----------------------------------------
Industrial Gases 0.6%
88,000 88,000 Praxair, Inc. $ $ 3,512 $ 3,512
----------------------------------------
Metal & Glass Containers 0.7%
52,000 52,000 Ball Corp. $ $ 3,747 $ 3,747
----------------------------------------
Paper Products 0.2%
43,199 43,199 Meadwestvaco Corp. $ 1,270 $ $ 1,270
----------------------------------------
Specialty Chemicals 0.2%
32,149 32,149 Ecolab, Inc. $ 1,019 $ $ 1,019
----------------------------------------
Total Materials $ 14,402 $ 7,259 $ 21,661
----------------------------------------
Capital Goods 9.9%
Aerospace & Defense 2.5%
38,908 38,908 General Dynamics Corp. $ 3,864 $ $ 3,864
54,000 54,000 Northrop Grumman Corp. 2,900 2,900
78,500 78,500 United Technologies Corp. 7,181 7,181
----------------------------------------
$ 3,864 $ 10,081 $ 13,945
----------------------------------------
Electrical Components & Equipment 2.3%
18,467 42,000 60,467 Emerson Electric Co. $ 1,174 $ 2,669 $ 3,843
26,633 260,000 286,633 General Electric Co. 863 8,424 9,287
----------------------------------------
$ 2,036 $ 11,093 $ 13,129
----------------------------------------
-24-
Industrial Conglomerates 2.9%
20,674 58,000 78,674 Illinois Tool Works, Inc. $ 1,982 $ 5,562 $ 7,544
45,528 63,000 108,528 Johnson Controls, Inc. 2,430 3,363 5,793
31,359 31,359 United Technologies Corp. 2,869 2,869
----------------------------------------
$ 7,281 $ 8,925 $ 16,206
----------------------------------------
Industrial Machinery 2.3%
33,682 33,682 Caterpillar, Inc. $ 2,676 $ $ 2,676
80,000 80,000 Danaher Corp. 4,148 4,148
50,290 50,290 Deere & Co. 3,527 3,527
40,000 40,000 Ingersoll-Rand Co. (Class A) 2,732 2,732
----------------------------------------
$ 6,203 $ 6,880 $ 13,083
----------------------------------------
Total Capital Goods $ 19,385 $ 36,979 $ 56,364
----------------------------------------
Commercial Services & Supplies 0.4%
Office Services & Supplies 0.4%
47,154 47,154 Canon, Inc. (A.D.R.) $ 2,518 $ $ 2,518
----------------------------------------
Total Commercial Services & Supplies $ 2,518 $ $ 2,518
----------------------------------------
Transportation 1.6%
Airlines 0.4%
137,864 137,864 Southwest Airlines Co. $ 2,312 $ $ 2,312
----------------------------------------
Railroads 0.9%
40,302 40,302 Burlington Northern, Inc. $ 1,413 $ $ 1,413
146,340 146,340 Norfolk Southern Corp. 3,881 3,881
----------------------------------------
$ 5,294 $ $ 5,294
----------------------------------------
Trucking 0.2%
16,958 16,958 United Parcel Service $ 1,275 $ $ 1,275
----------------------------------------
Total Transportation $ 8,881 $ $ 8,881
----------------------------------------
Automobiles & Components 2.4%
Automobile Manufacturers 1.6%
208,966 208,966 Ford Motor Corp. $ 3,270 $ $ 3,270
46,602 55,500 102,102 PACCAR, Inc. 2,702 3,219 5,921
----------------------------------------
$ 5,973 $ 3,219 $ 9,192
----------------------------------------
-25-
Motorcycle Manufacturers 0.8%
70,000 70,000 Harley-Davidson, Inc. $ $ 4,336 $ 4,336
----------------------------------------
Total Automobiles & Components $ 5,973 $ 7,555 $ 13,528
----------------------------------------
Media 4.0%
Advertising 0.5%
35,541 35,541 Omnicom Group $ 2,697 $ $ 2,697
----------------------------------------
Movies & Entertainment 0.7%
34,933 34,933 The Walt Disney Co. $ 890 $ $ 890
178,000 178,000 Time Warner, Inc. * 3,129 3,129
----------------------------------------
$ 890 $ 3,129 $ 4,019
----------------------------------------
Publishing 2.9%
46,390 46,390 Elsevier NV $ 653 $ $ 653
40,418 43,000 83,418 Gannett Co. 3,429 3,649 7,078
113,495 113,495 John Wiley & Sons, Inc. 3,632 3,632
63,415 63,415 McGraw-Hill Co., Inc. 4,856 $ $ 4,856
----------------------------------------
$ 12,570 $ 3,649 $ 16,219
----------------------------------------
Total Media $ 16,157 $ 6,778 $ 22,935
----------------------------------------
Retailing 5.4%
Apparel Retail 0.1%
19,973 19,973 Liz Claiborne, Inc. $ 719 $ $ 719
----------------------------------------
Computer & Electronics Retail 0.5%
60,000 60,000 Best Buy Co., Inc. $ $ 3,044 $ 3,044
----------------------------------------
Department Stores 0.9%
80,000 80,000 Kohl's Corp. * $ $ 3,382 $ 3,382
53,341 53,341 May Department Stores Co. 1,466 1,466
----------------------------------------
$ 1,466 $ 3,382 $ 4,848
----------------------------------------
-26-
General Merchandise Stores 2.7%
29,152 29,152 Family Dollar Stores, Inc. $ 887 $ $ 887
109,408 103,000 212,408 Target Corp. 4,647 4,374 9,021
99,000 99,000 Wal-Mart Stores, Inc. 5,223 5,223
----------------------------------------
$ 5,533 $ 9,597 $ 15,130
----------------------------------------
Home Improvement Retail 1.0%
110,000 110,000 Home Depot, Inc. $ $ 3,872 $ 3,872
39,604 39,604 Lowe's Companies, Inc. 2,081 2,081
----------------------------------------
$ 2,081 $ 3,872 $ 5,953
----------------------------------------
Specialty Stores 0.2%
25,229 25,229 Barnes & Noble, Inc. * $ 857 $ $ 857
----------------------------------------
Total Retailing $ 10,657 $ 19,895 $ 30,552
----------------------------------------
Food & Drug Retailing 2.2%
Drug Retail 0.7%
112,775 112,775 Walgreen Co. $ 4,084 $ $ 4,084
----------------------------------------
Food Distributors 0.6%
12,492 12,492 Cardinal Health, Inc. $ 875 $ $ 875
68,293 68,293 Sysco Corp. 2,450 2,450
----------------------------------------
$ 3,325 $ $ 3,325
----------------------------------------
Food Retail 0.6%
180,000 180,000 Kroger Co. * $ $ 3,276 $ 3,276
----------------------------------------
Hypermarkets & Supercenters 0.3%
30,854 30,854 Wal-Mart Stores, Inc. $ 1,628 $ $ 1,628
----------------------------------------
Total Food & Drug Retailing $ 9,036 $ 3,276 $ 12,312
----------------------------------------
Food, Beverage & Tobacco 4.1%
Brewers 0.8%
85,000 85,000 Anheuser-Busch Companies, Inc. $ $ 4,590 $ 4,590
----------------------------------------
-27-
Packaged Foods & Meats 1.7%
70,267 70,267 Campbell Soup Co. $ 1,889 $ $ 1,889
36,702 36,702 General Mills, Inc. 1,744 1,744
45,065 45,065 Hershey Foods Corp. 2,085 2,085
59,465 59,465 H.J. Heinz Co., Inc. 2,331 2,331
61,629 61,629 Sara Lee Corp. 1,417 1,417
----------------------------------------
$ 9,466 $ $ 9,466
----------------------------------------
Soft Drinks 1.6%
53,078 115,000 168,078 PepsiCo, Inc. $ 2,860 $ 6,196 $ 9,056
----------------------------------------
Total Food, Beverage & Tobacco $ 12,326 $ 10,786 $ 23,112
----------------------------------------
Household & Personal Products 3.7%
Household Products 3.3%
12,405 12,405 Clorox Co. $ 667 $ $ 667
53,543 53,543 Colgate-Palmolive Co. 3,130 3,130
19,005 19,005 Estee Lauder Co. 927 927
58,000 58,000 Kimberly-Clark Corp. 3,821 3,821
70,848 116,000 186,848 Procter & Gamble Co. 3,857 6,315 10,172
----------------------------------------
$ 8,581 $ 10,136 $ 18,717
----------------------------------------
Personal Products 0.4%
52,000 52,000 Estee Lauder Cos., Inc. (Class A) $ $ 2,537 $ 2,537
----------------------------------------
Total Household & Personal Products $ 8,581 $ 12,673 $ 21,254
----------------------------------------
Health Care Equipment & Services 6.6%
Health Care Distributors 4.2%
47,967 146,000 193,967 Abbott Laboratories $ 1,955 $ 5,951 $ 7,906
62,000 62,000 Cardinal Health, Inc. 4,343 4,343
75,610 78,500 154,110 Johnson & Johnson 4,211 4,373 8,584
89,000 89,000 McKesson Corp. 3,055 3,055
----------------------------------------
$ 6,167 $ 17,722 $ 23,889
----------------------------------------
Health Care Equipment 2.0%
58,653 58,653 Becton, Dickinson & Co. $ 3,038 $ $ 3,038
35,076 35,076 Biomet, Inc. 1,559 1,559
26,639 26,639 Guidant Corp. 1,489 1,489
85,000 85,000 Medtronic, Inc. 4,141 4,141
13,291 13,291 St. Jude Medical, Inc. * 1,005 1,005
----------------------------------------
$ 7,091 $ 4,141 $ 11,232
----------------------------------------
-28-
Managed Health Care 0.4%
20,042 20,042 United Healthcare Group, Inc. $ 1,248 $ $ 1,248
7,549 7,549 Wellpoint Health Networks, Inc. * 846 846
----------------------------------------
$ 2,093 $ $ 2,093
----------------------------------------
Total Health Care Equipment & Services $ 15,351 $ 21,863 $ 37,214
----------------------------------------
Pharmaceuticals & Biotechnology 6.4%
Biotechnology 0.7%
68,200 68,200 Amgen, Inc. * $ $ 3,722 $ 3,722
----------------------------------------
Pharmaceuticals 5.7%
33,785 33,785 Barr Laboratories, Inc. * $ 1,139 $ $ 1,139
35,772 40,000 75,772 Eli Lilly & Co. 2,501 2,796 5,297
55,400 55,400 Merck & Co., Inc. 2,632 2,632
67,544 67,544 Mylan Laboratories, Inc. 1,368 1,368
45,761 45,761 Novartis AG (A.D.R.) 2,036 2,036
62,253 233,000 295,253 Pfizer, Inc. 2,134 7,987 10,121
15,214 15,214 Roche Holdings AG (A.D.R.) * 1,508 1,508
145,764 145,764 Schering-Plough Corp. 2,694 2,694
154,000 154,000 Wyeth 5,569 5,569
----------------------------------------
$ 16,011 $ 16,352 $ 32,363
----------------------------------------
Total Pharmaceuticals & Biotechnology $ 16,011 $ 20,074 $ 36,085
----------------------------------------
Banks 8.3%
Diversified Banks 3.5%
32,784 32,784 Charter One Financial, Inc. $ 1,449 $ $ 1,449
100,000 100,000 Hibernia Corp. (Class A) 2,430 2,430
85,656 166,000 251,656 U.S. Bancorp 2,361 4,575 6,936
35,519 127,000 162,519 Wells Fargo & Co. 2,033 7,268 9,301
----------------------------------------
$ 5,842 $ 14,273 $ 20,115
----------------------------------------
Regional Banks 3.1%
59,000 59,000 Fifth Third Bancorp $ $ 3,173 $ 3,173
28,340 69,000 97,340 First Horizon National Corp. 1,289 3,137 4,426
114,053 114,053 National City Corp. 3,993 3,993
38,351 38,351 SouthTrust Corp. 1,488 1,488
47,329 47,329 SunTrust Banks, Inc. 3,076 3,076
19,396 19,396 Zions Bancorporation 1,192 1,192
----------------------------------------
$ 11,038 $ 6,310 $ 17,348
----------------------------------------
-29-
Thrifts & Mortgage Finance 1.7%
43,000 43,000 Federal National Mortgage Association $ $ 3,068 $ 3,068
64,028 100,000 164,028 Washington Mutual, Inc. 2,474 3,864 6,338
----------------------------------------
$ 2,474 $ 6,932 $ 9,406
----------------------------------------
Total Banks $ 19,354 $ 27,515 $ 46,869
----------------------------------------
Diversified Financials 5.9%
Asset Management & Custody Banks 2.0%
52,067 60,000 112,067 The Bank of New York Co., Inc. $ 1,535 $ 1,769 $ 3,304
37,051 37,051 Federated Investors Inc. 1,124 1,124
62,368 62,368 State Street Corp. 3,059 3,059
81,766 81,766 T. Rowe Price Associates, Inc. 4,121 4,121
----------------------------------------
$ 9,839 $ 1,769 $ 11,608
----------------------------------------
Consumer Finance 2.0%
38,211 98,000 136,211 American Express Co. $ 1,963 $ 5,035 $ 6,998
172,000 172,000 MBNA Corp. 4,436 4,436
----------------------------------------
$ 1,963 $ 9,471 $ 11,434
Diversified Financial Services 1.4%
170,000 170,000 Citigroup, Inc. $ $ 7,905 $ 7,905
----------------------------------------
Investment Banking & Brokerage 0.5%
49,593 49,593 Merrill Lynch & Co., Inc. $ 2,677 $ $ 2,677
----------------------------------------
Total Diversified Financials $ 14,479 $ 19,145 $ 33,624
----------------------------------------
Insurance 4.1%
Multi-Line Insurance 2.3%
37,283 96,000 133,283 American International Group, Inc. $ 2,658 $ 6,843 $ 9,501
50,000 50,000 Hartford Financial Services Group, Inc. 3,437 3,437
----------------------------------------
$ 2,658 $ 10,280 $ 12,938
----------------------------------------
-30-
Property & Casualty Insurance 1.9%
46,109 46,109 Chubb Corp. $ 3,144 $ $ 3,144
26,583 26,583 Safeco Corp. 1,170 1,170
52,652 101,849 154,501 St. Paul Travelers Companies, Inc. 2,135 4,129 6,264
----------------------------------------
$ 6,448 $ 4,129 $ 10,577
----------------------------------------
Total Insurance $ 9,105 $ 14,409 $ 23,514
----------------------------------------
Software & Services 5.7%
Application Software 2.9%
35,888 35,888 Adobe Systems, Inc. $ 1,669 $ $ 1,669
35,000 35,000 Intuit, Inc. * 1,350 1,350
119,628 303,000 422,628 Microsoft Corp. 3,417 8,654 12,071
26,017 26,017 Symantec Corp. * 1,139 1,139
----------------------------------------
$ 6,224 $ 10,004 $ 16,228
----------------------------------------
Data Processing & Outsourced Services 2.8%
39,373 66,000 105,373 Automatic Data Processing, Inc. $ 1,649 $ 2,764 $ 4,413
32,311 32,311 Computer Sciences Corp. * 1,500 1,500
21,836 21,836 DST Systems, Inc. * 1,050 1,050
85,000 85,000 First Data Corp. 3,784 3,784
25,494 25,494 Fiserv, Inc. * 991 991
32,184 125,000 157,184 SunGard Data Systems, Inc. * 837 3,250 4,087
----------------------------------------
$ 6,027 $ 9,798 $ 15,825
----------------------------------------
Total Software & Services $ 12,252 $ 19,802 $ 32,054
----------------------------------------
Technology Hardware & Equipment 5.8%
Communications Equipment 2.4%
274,000 274,000 Cisco Systems, Inc. * $ $ 6,494 $ 6,494
182,952 182,952 Motorola, Inc. 3,339 3,339
128,455 135,000 263,455 Nokia Corp (A.D.R.) 1,868 1,963 3,831
----------------------------------------
$ 5,207 $ 8,457 $ 13,664
----------------------------------------
Computer Hardware 3.1%
17,403 17,403 Apple Computer, Inc. * $ 566 $ $ 566
60,976 124,000 184,976 Dell, Inc. * 2,184 4,442 6,626
22,881 22,881 Diebold, Inc. 1,210 1,210
72,740 72,740 Hewlett-Packard Co. 1,535 1,535
24,634 50,100 74,734 IBM Corp. * 2,171 4,416 6,587
252,670 252,670 Sun Microsystems, Inc. * 1,097 1,097
----------------------------------------
$ 8,763 $ 8,858 $ 17,621
----------------------------------------
-31-
Computer Storage & Peripherals 0.3%
160,000 160,000 EMC Corp. * $ $ 1,824 $ 1,824
----------------------------------------
Total Technology Hardware & Equipment $ 13,970 $ 19,139 $ 33,109
----------------------------------------
Semiconductors 3.9%
Semiconductor Equipment 1.0%
120,790 181,000 301,790 Applied Materials, Inc. * $ 2,370 $ 3,551 $ 5,921
----------------------------------------
Semiconductors 2.8%
126,597 201,000 327,597 Intel Corp. $ 3,494 $ 5,548 $ 9,042
118,406 170,000 288,406 Texas Instruments, Inc. 2,864 4,111 6,975
----------------------------------------
$ 6,358 $ 9,659 $ 16,017
----------------------------------------
Total Semiconductors $ 8,728 $ 13,210 $ 21,938
----------------------------------------
Telecommunication Services 2.8%
Integrated Telecommunication Services 2.8%
18,815 18,815 Alltel Corp. $ 952 $ $ 952
116,841 116,841 BellSouth Corp. 3,064 3,064
85,000 85,000 CenturyTel, Inc. 2,553 2,553
176,887 176,887 SBC Communications, Inc. 4,290 4,290
144,000 144,000 Verizon Communications, Inc. 5,211 5,211
----------------------------------------
Total Telecommunication Services $ 8,306 $ 7,764 $ 16,070
----------------------------------------
Utilities 2.0%
Electric Utilities 1.6%
26,945 26,945 American Electric Power Co., Inc. $ 862 $ $ 862
29,268 29,268 Consolidated Edison, Inc. 1,164 1,164
90,000 90,000 Exelon Corp. 2,996 2,996
79,000 79,000 FirstEnergy Corp. 2,955 2,955
46,790 46,790 Southern Co. 1,364 1,364
----------------------------------------
$ 3,390 $ 5,951 $ 9,341
----------------------------------------
-32-
Gas Utilities 0.3%
22,532 22,532 KeySpan Energy Corp. $ 827 $ $ 827
31,011 31,011 Vectren Corp. 778 778
----------------------------------------
$ 1,605 $ $ 1,605
----------------------------------------
Water Utilities 0.1%
14,953 14,953 Aqua America, Inc. $ 300 $ $ 300
----------------------------------------
Total Utilities $ 5,295 $ 5,951 $ 11,246
----------------------------------------
Consumer Durables & Apparel 1.3%
Home Furnishings 0.4%
84,000 84,000 Leggett & Platt, Inc. $ $ 2,244 $ 2,244
----------------------------------------
Housewares & Specialties 0.9%
67,000 67,000 Fortune Brands, Inc. $ $ 5,054 $ 5,054
----------------------------------------
Total Consumer Durables & Apparel $ $ 7,298 $ 7,298
----------------------------------------
TOTAL COMMON STOCKS $ 251,287 $ 300,785 $ 552,073
----------------------------------------
Common Stocks (At Cost) $ 224,336 $ 223,989 $ 448,325
----------------------------------------
Principal Principal Principal
Amount Amount Amount
TEMPORARY CASH INVESTMENTS 3.3%
----------------------------------------
Repurchase Agreement 1.6%
----------------------------------------
$8,800,000 $8,800,000 UBS Warburg, Inc., 1.25%, dated 6/30/04,
repurchase price of $8,800,000 plus
accrued interest on 7/1/04
collateralized by $8,068,000 U.S.
Treasury Bill, 7.0%, 7/15/06 $ 8,800 $ $ 8,800
----------------------------------------
Shares Shares Shares
------ ------ -------
Investment Companies 1.6%
6,062,831 6,062,831 AIM Short-Term Investments Co.,
Liquid Assets Money Market Portfolio
(Institutional Shares) $ $ 6,063 $ 6,063
3,174,000 3,174,000 State Street Navigator Securities
Lending Prime Portfolio 3,174 3,174
----------------------------------------
$ $ 9,237 $ 9,237
----------------------------------------
-33-
Security Lending Collateral 0.1%
766,159 766,159 Securities Lending Investment Fund, 1.29% $ 766 $ $ 766
----------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS $ 9,566 $ 9,237 $ 18,803
----------------------------------------
Temporary Cash Investments (At Cost) $ 9,566 $ 9,237 $ 18,803
----------------------------------------
TOTAL INVESTMENT IN SECURITIES 100.6% $ 260,853 $ 310,022 $ 570,875
----------------------------------------
OTHER ASSETS AND LIABILITIES -0.6% $ (507) $ (3,115) $ (3,622)
----------------------------------------
TOTAL NET ASSETS 100.0% $ 260,346 $ 306,907 $ 567,253
========================================
Investments at Cost $ 233,902 $ 233,226 $ 467,128
========================================
Securities out on loan, at Market Value $ 751 $ 3,137 $ 3,888
========================================
* Non-income producing security.
(A.D.R.) American Depositary Receipt.
(a) No adjustments are shown to the unaudited pro forma combined schedule
of investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer Fund VCT
Portfolio to comply with its prospectus restrictions. The foregoing
sentence shall not restrict in any way the ability of the investment
adviser of either of the funds from buying or selling securities in
the normal course of such fund's business and operations.
The accompanying notes are an integral part of these financial statements.
-34-
Pioneer Fund VCT Portfolio
Pro Forma Statement of Assets and Liabilities
June 30, 2004
(unaudited) (Amounts in Thousands, except per share data)
Safeco
Pioneer RST Core
Fund VCT Equity Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
--------- --------- ----------- ---------
ASSETS:
Investment in securities, at value (Cost $233,902
and $233,226, respectively) $ 260,853 $ 310,022 $ 570,875
Cash 64 - 64
Receivables -
Fund shares sold 150 - 150
Dividends, interest and foreign taxes withheld 264 283 547
Other 1 - 1
--------- --------- ---------- ---------
Total assets $ 261,332 $ 310,305 $ 571,637
--------- --------- ---------- ---------
LIABILITIES:
Payables -
Investment securities purchased $ - $ - $ -
Fund shares repurchased 15 - 15
Dividends - - -
Upon return for securities loaned 766 3,174 3,940
Due to bank - - -
Due to affiliates 185 186 371
Accrued expenses 20 38 58
--------- --------- ---------- ---------
Total liabilities $ 986 $ 3,398 - $ 4,384
--------- --------- ---------- ---------
NET ASSETS:
Paid-in capital $ 268,907 $ 281,545 $ 550,452
Accumulated undistributed net investment income
(loss) (76) 1,173 1,097
Accumulated net realized loss (35,435) (52,606) (88,041)
Net unrealized gain on investments 26,950 76,795 103,745
--------- --------- ---------- ---------
Total net assets $ 260,346 $ 306,907 - $ 567,253
========= ========= ========== =========
OUTSTANDING SHARES:
(Unlimited number of shares authorized)
Trust Shares - 13,470 (13,470)(a) -
========= ========= ========== =========
Class I 7,880 - 16,170(a) 24,050
========= ========= ========== =========
Class II 5,850 - 5,850
========= ========= ========== =========
NET ASSET VALUE PER SHARE:
Trust Shares $ - $ 22.78 $ 18.98
========= ========= ========== =========
Class I $ 18.98 $ - $ 18.98
========= ========= ========== =========
Class II $ 18.94 $ - $ 18.94
========= ========= ========== =========
(a) Trust Shares of Safeco RST Core Equity Portfolio is exchanged for Class I
shares of Pioneer Fund VCT Portfolio.
The accompanying notes are an integral part of these financial statements.
-35-
Pioneer Fund VCT Portfolio
Pro Forma Statement of Operations
For the Year Ended June 30, 2004
(unaudited) (Amounts in Thousands)
Safeco
Pioneer RST Core
Fund VCT Equity Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
--------- --------- ----------- ---------
INVESTMENT INCOME:
Dividends $ 3,955 $ 4,912 $ 8,867
Interest 109 66 175
Income from securities loaned, net and Other
Income 6 4 10
--------- --------- ----------- ---------
Total investment income $ 4,070 $ 4,982 $ 9,052
EXPENSES:
Management fees $ 1,505 $ 2,276 $ (245) (b) $ 3,536
Transfer agent fees 2 - 2
Distribution fees (Class II) 206 - 206
Administrative fees 41 - 87 (c) 128
Custodian fees 44 25 69
Professional fees 43 43 (43) (a) 43
Printing 3 75 78
Fees and expenses of nonaffiliated trustees 4 12 (12) (a) 4
Miscellaneous 9 31 40
--------- --------- ----------- ---------
Total expenses $ 1,857 $ 2,462 $ (213) $ 4,106
--------- --------- ----------- ---------
Net investment income $ 2,213 $ 2,520 $ 213 $ 4,946
--------- --------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments $ (2,707) $ 8,276 $ - $ 5,569
Forward foreign currency contracts and other
assets (3) - - (3)
Change in net unrealized gain from:
Investments 36,334 30,377 - 66,711
--------- --------- ----------- ---------
Net gain on investments and foreign currency
transactions $ 33,624 $ 38,653 $ - $ 72,277
--------- --------- ----------- ---------
Net increase in net assets resulting from
operations $ 35,837 $ 41,173 $ 213 $ 77,223
--------- --------- ----------- ---------
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Fund VCT Portfolio's management
contract.
(c) Reflects increase due to a change in fee rates.
The accompanying notes are an integral part of these financial statements.
-36-
Pioneer Fund VCT Portfolio
Notes to Pro Forma Combining Financial Statements
6/30/04
(Unaudited)
1. General
The accompanying pro forma combining financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco RST Core
Equity Portfolio by Pioneer Fund VCT Portfolio.
Under the terms of an Agreement and Plan of Reorganization of Pioneer Fund VCT
Portfolio and Safeco RST Core Equity Portfolio, the combination will be treated
as a tax-free business combination and accordingly will be accounted for by a
method of accounting for tax-free mergers of investment companies. The
acquisition will be accomplished by an acquisition of the net assets of Safeco
RST Core Equity Portfolio in exchange for "Class I" shares of Pioneer Fund VCT
Portfolio at net asset value. The accompanying schedules of investments,
statements of assets and liabilities and the related statements of operations of
Pioneer Fund VCT Portfolio and Safeco RST Core Equity Portfolio have been
combined as of and for their most recent semiannual date June 30, 2004.
Adjustments have been made to expenses for duplicate services that would not
have been incurred if the merger took place on July 1, 2003. Following the
acquisition, the Pioneer Fund VCT Portfolio will be the accounting survivor. All
related acquisition costs will be borne by Pioneer Investment Management, Inc.
and Symetra.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer Fund VCT Portfolio and
Safeco RST Core Equity Portfolio included in their respective semiannual reports
to shareowners dated June 30, 2004.
2. 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 an open-end management
investment company. The Trust consists of nineteen separate portfolios
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio)
Pioneer Value VCT Portfolio (Value Portfolio)
Pioneer Papp America Pacific Rim VCT Portfolio (Papp America Pacific Rim
Portfolio)
Pioneer Papp Small & Mid Cap Growth VCT Portfolio (Papp Small & Mid Cap Growth
Portfolio)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth
Portfolio)
-37-
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Pioneer Fund VCT Portfolio is to seek reasonable
income and capital growth.
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 as of trade date. Net asset values for the
portfolio are computed once daily, on each day the New York Stock Exchange is
open, as of the close of regular trading on the Exchange. In computing the net
asset values, 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. Securities for which
market quotations are not readily available are valued at their fair values as
determined by, or under the direction of, the Trust's Board of Trustees. At June
30, 2004, there were no securities fair valued.
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, including interest on income
bearing cash accounts, is recorded on the accrual basis. Temporary cash
investments are valued at amortized cost.
Gains and losses from sales on investments are calculated on the identified cost
method for both financial reporting and federal income tax purposes.
B. Futures Contracts
The Portfolios may enter into futures transactions to hedge against changes in
interest rates, securities prices, and currency rates or to seek to increase
total return. Upon entering into a futures contract, the Portfolios are required
to deposit with a broker an amount of cash or securities equal to the minimum
"initial margin" requirements of the associated futures exchange. Subsequent
payments for futures contracts ("variation margin") are paid or received by the
Portfolios, depending on the daily fluctuation in the value of the contracts,
and are recorded by the Portfolios as unrealized gains or losses. When the
contract is closed, the Portfolios realize a gain or loss equal to the
difference between the opening and closing value of the contract. The use of
futures contracts involves, to varying degrees, elements of market risk which
may exceed the amounts recognized by the Portfolios.
Changes in the value of the contracts may not directly correlate to the changes
in the value of the underlying securities. These risks may decrease the
effectiveness of the Portfolio's hedging and trading strategies and potentially
result in a loss. As of June 30, 2004, Fund Portfolio had no open contracts.
C. Foreign Currency Translation
The books and records of the Portfolio 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 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.
-38-
D. Forward Foreign Currency Contracts
The Portfolio enters 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 Portfolio records 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.
E. Taxes
Each Fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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 shareowners. Therefore, no
federal income tax provision is required.
The combined capital loss carryforward of $91,595,745 includes a net capital
loss carryforward of $57,651,000 from the merger with Safeco RST Core Equity
Portfolio, the full use of which may be limited.
F. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of trade
date. Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD),
the principal underwriter for the Trust and a wholly owned indirect subsidiary
of UniCredito Italiano S.p.A. (UniCredito Italiano), $828,816 in commissions on
the sale of trust shares for the year ended June 30, 2004. Dividends and
distributions to shareowners are recorded on the ex-dividend date.
G. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers or
other institutional investors, with the Portfolios' custodian acting as the
lending agent. When entering into a loan, the Portfolio receives collateral
which is maintained by the custodian and earns income in the form of negotiated
lenders' fees. The Portfolio also continues to receive interest or dividends on
the securities loaned, and gain or loss in the fair value of the securities
loaned that may occur during the term of the loan, will be for account of the
Trust. The loans are secured by collateral of at least 102%, at all times, of
the fair value of the securities loaned. The fair value of the collateral will
be adjusted daily to reflect any price fluctuation in the value of the loaned
securities. The Trust has the right under the lending agreement to recover the
securities on loan from the borrower on demand. The Trust invests cash
collateral in temporary cash investments.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, 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 Portfolio's custodian, or subcustodian. The Trust's investment adviser,
Pioneer Investment Management, Inc. (PIM), is responsible for determining that
the value of the collateral remains at least equal to the repurchase price.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
Pioneer Fund VCT Portfolio that would have been issued at June 30, 2004, in
connection with the proposed acquisition. The number of the shares assumed to be
issued is equal to the net asset value of Safeco RST Core Equity Portfolio, as
of June 30, 2004, divided by the net asset value per share of the Class I shares
of Pioneer Fund VCT Portfolio as of June 30, 2004. The pro forma number of
shares outstanding (in thousands), by class, for the combined fund consist of
the following at June 30, 2004:
-39-
Shares of Pioneer Additional Shares Total Outstanding
Fund VCT Portfolio Assumed Issued Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
--------------- ------------------ ----------------- ----------------
Class I 7,880 16,170 24,050
Class II 5,850 5,850
4. Management Agreement
PIM manages the Portfolio, and is a wholly owned indirect subsidiary of
UniCredito Italiano. Management fees are calculated daily at the annual rate of
0.65% of the Portfolios' average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At June 30, 2004, $345,258 was payable to
PIM related to management fees, administrative fees and certain other services.
5. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredito Italiano, provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in due
to affiliates is $257 in transfer agent fees payable to PIMSS at June 30, 2004.
6. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$25,055 payable to PFD at June 30, 2004.
-40-
PIONEER MONEY MARKET VCT PORTFOLIO
PRO FORMA
Schedule of Investments (a)
December 31, 2003
(Unaudited) (Amounts in Thousands)
Pioneer Safeco RST
Pioneer Safeco RST Money Money
Money Money Market VCT Market Pro Forma
Market VCT Market Pro Forma Portfolio Portfolio Combined
Portfolio Portfolio Combined % of Net Market Market Market
Shares Shares Shares Assets Value Value Value
---------- ---------- --------- -------- ---------- ---------- ---------
CORPORATE BONDS 51.7%
Capital Goods 2.4%
Industrial Conglomerates 2.4%
450 450 General Electric Capital Corp., 5.75%, 4/6/04 $ 455 $ $ 455
General Electric Capital Corp., Floating Rate,
500 500 9/16/04 500 500
400 400 Tennessee Valley Authority, 4.75%, 7/15/04 408 408
-------------------------------------
Total Capital Goods $ 1,363 $ $ 1,363
-------------------------------------
Commercial Services & Supplies 0.3%
Office Services & Supplies 0.3%
170 170 Pitney Bowes Inc., 5.5%, 4/15/04 $ 172 $ $ 172
-------------------------------------
Total Commercial Services & Supplies $ 172 $ $ 172
-------------------------------------
Food & Drug Retailing 3.1%
Hypermarkets & Supercenters 3.1%
1,725 1,725 Wal-Mart Stores Inc., 7.5%, 5/15/04 $ 1,766 $ $ 1,766
-------------------------------------
Total Food & Drug Retailing $ 1,766 $ $ 1,766
-------------------------------------
Food, Beverage & Tobacco 2.4%
Brewers 1.3%
New Belgium Brewery Co., 1.40%, 7/01/15 Put Date
775 775 1/02/04 $ $ 775 $ 775
-------------------------------------
Soft Drinks 1.1%
620 620 Pepsico Inc., 4.5%, 9/15/04 $ 633 $ $ 633
-------------------------------------
Total Food, Beverage & Tobacco $ 633 $ 775 $ 1,408
-------------------------------------
-41-
Pharmaceuticals & Biotechnology 0.9%
Pharmaceuticals 0.9%
500 500 Abbott Laboratories, 5.125%, 7/1/04 $ 510 $ $ 510
-------------------------------------
Total Pharmaceuticals & Biotechnology $ 510 $ $ 510
-------------------------------------
Banks 9.6%
Diversified Banks 8.3%
1,137 1,137 Abbey National Treasury, 5.5%, 2/2/04 $ 1,141 $ $ 1,141
400 400 Abbey National Treasury, Floating Rate, 4/2/04 400 400
675 675 Banc One Corp., 7.25%, 8/15/04 700 700
202 202 Bank of America, 5.75%, 3/1/04 203 203
300 300 First USA Bank, Floating Rate, 7/21/04 300 300
500 500 Nationsbank Corp., 6.125%, 7/15/04 513 513
1,000 1,000 Wells Fargo Co., 7.2%, 4/1/04 1,015 1,105
500 500 Wells Fargo Financial, 6.0%, 2/1/04 502 502
-------------------------------------
$ 3,562 $ 1,213 $ 4,775
-------------------------------------
Thrifts & Mortgage Finance 1.3%
700 700 Abbey National, plc, 8.20%, 10/15/04 $ $ 737 $ 737
-------------------------------------
Total Banks $ 3,562 $ 1,950 $ 5,512
-------------------------------------
Diversified Financials 26.9%
Consumer Finance 2.9%
1,635 1,635 National Rural Utilities, 5.25%, 7/15/04 $ 1,670 $ $ 1,670
-------------------------------------
Diversified Capital Markets 2.2%
1,250 1,250 Chase Manhattan JP Morgan, 5.69%, 2/10/04 $ 1,256 $ $ 1,256
-------------------------------------
Investment Banking & Brokerage 8.2%
Goldman Sachs Group, LP, 1.40%, 1/11/05 Put Date
1,000 1,000 1/15/04 (144A) $ $ 1,000 $ 1,000
1,300 1,300 Lehman Brothers Holdings, Inc., 6.625%, 4/01/04 1,317 1,317
500 500 Merrill Lynch & Co., Inc., 5.55%, 5/21/04 508 508
500 500 Merrill Lynch, Floating Rate, 11/11/04 500 500
1,400 1,400 Morgan Stanley Dean Witter Co., 5.625%, 1/20/04 1,403 1,403
-------------------------------------
$ 500 $ 4,228 $ 4,728
-------------------------------------
-42-
Diversified Financial Services 11.5%
950 950 JP Morgan & Co., Inc., 5.75%, 2/25/04 $ 956 $ $ 956
400 400 American General Finance, 1.77%, 3/8/04 400 400
1,000 1,000 Associates Corp., Floating Rate, 6/25/04 1,000 1,000
1,000 1,000 Bank One Corp., Floating Rate, 5/7/04 1,001 1,001
500 500 Bank One Corp., Floating Rate, 5/2/04 500 500
500 500 G.E. Capital Corp., Floating Rate, 5/7/04 500 500
800 800 Merrill Lynch, Floating Rate, 5/21/04 801 801
1,500 1,500 PACCAR Financial Corp., 1.38%, 2/17/04 1,500 1,500
-------------------------------------
$ 6,659 $ $ 6,659
-------------------------------------
Specialized Finance 2.1%
1,200 1,200 International Lease Finance Corp., 5.25%, 5/03/04 $ $ 1,214 $ 1,214
-------------------------------------
Total Diversified Financials $ 10,085 $ 5,442 $ 15,527
-------------------------------------
Insurance 1.8%
Multi-Line Insurance 1.8%
1,000 1,000 American General Finance, 5.82%, 4/16/04 $ 1,012 $ $ 1,012
-------------------------------------
Total Insurance $ 1,102 $ $ 1,012
-------------------------------------
Technology Hardware & Equipment 1.9%
Computer Hardware 1.9%
465 465 IBM Corp., 5.625%, 4/12/04 $ 471 $ $ 471
650 650 IBM Corp., Floating Rate, 9/10/04 651 651
-------------------------------------
Total Technology Hardware & Equipment $ 1,121 $ $ 1,121
-------------------------------------
Real Estate 1.0%
Real Estate Management & Development 1.0%
600 600 SF Tarns, LLC, 1.24%, 1/01/28 Put date 1/02/04 $ $ 600 $ 600
-------------------------------------
Total Real Estate $ $ 600 $ 600
-------------------------------------
Health Care Equipment & Services 0.9%
Health Care Facilities 0.9%
500 500 ACTS Retirement-Life Communities, Inc., 1.17%,
11/15/29 Put Date 1/02/04 $ $ 500 $ 500
-------------------------------------
Total Health Care Equipment & Services $ $ 500 $ 500
-------------------------------------
-43-
Retailing 0.5%
General Merchandise Stores 0.5%
Racetrac Capital, LLC, 1.12%, 4/01/18 Put Date
300 300 1/07/04 $ $ 300 $ 300
-------------------------------------
Total Retailing $ $ 300 $ 300
-------------------------------------
TOTAL CORPORATE BONDS $ 20,226 $ 9,567 $ 29,793
-------------------------------------
Corporate Bonds (At Cost) $ 20,226 $ 9,567 $ 29,793
-------------------------------------
MUNICIPAL BONDS 9.7%
Maryland Health and Higher Education Facilities
Authority Revenue (University of Maryland
1,255 1,255 Medical System), 1.20%, 7/01/29 Put Date 1/07/04 $ $ 1,255 $ 1,255
Maryland Health and Higher Education Facilities
Authority Revenue, 1.20%, 1/01/28, Put Date
1,240 1,240 1/07/04 1,240 1,240
New Jersey Turnpike Authority Revenue, 1.15%,
1,400 1,400 1/01/04 1,400 1,400
New York Dormitory Authority Revenue (City
700 700 University Systems), 1.59%, 1/01/04 700 700
Tenderfoot Seasonal Housing Facilities Revenue,
1,000 1,000 1.19%, 7/01/35, Put Date 1/02/04 1,000 1,000
-------------------------------------
TOTAL MUNICIPAL BONDS $ $ 5,595 $ 5,595
-------------------------------------
Municipal Bonds (At Cost) $ $ 5,595 $ 5,595
-------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 13.9%
Banks 1.7%
Thrifts & Mortgage Finance 1.7%
1,000 1,000 Federal Home Loan Mortgage Corp, 5.25%, 2/15/04 $ 1,005 $ $ 1,005
-------------------------------------
Total Banks $ 1,005 $ $ 1,005
-------------------------------------
-44-
Government 12.1%
1,500 1,500 Federal Home Loan Bank, 1.02%, 7/16/04 $ 1,500 $ $ 1,500
2,800 2,800 Federal Home Loan Bank, Floating Rate, 1/2/04 2,800 2,800
Federal National Mortgage Association, 1.50%,
500 500 12/21/04 500 500
Federal National Mortgage Association, 5.125%,
686 686 2/13/04 689 689
1,500 1,500 Freddie Mac, 5.00%, 1/15/04 1,502 1,502
-------------------------------------
Total Government $ 6,991 $ $ 6,991
-------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 7,996 $ $ 7,996
-------------------------------------
U.S. Government Agency Obligations (At Cost) $ 7,996 $ $ 7,996
-------------------------------------
TEMPORARY CASH INVESTMENTS 22.0%
Commercial Paper 15.2%
1,500 1,500 EI Dupont, 1.05%, 1/9/04 $ 1,500 $ $ 1,500
1,000 1,000 Countrywide Home Loans, Inc., 1.12%, 1/20/04 999 999
1,000 1,000 Dexia Delaware LLC, 1.06%, 1/27/04 999 999
1,100 1,100 General Electric Capital Corp., 1.09%, 1/06/04 1,100 1,100
600 600 Merrill Lynch & Co., Inc., 1.04%, 1/30/04 600 600
National Rural Utilities Cooperative Finance
1,000 1,000 Corp., 1.08%, 1/20/04 999 999
1,500 1,500 State Street, 1.05%, 1/7/04 1,500 1,500
1,100 1,100 Toronto Dominion Holdings, Inc., 1.08%, 1/27/04 1,099 1,099
-------------------------------------
Total Commercial Paper $ 2,999 $ 5,796 $ 8,795
-------------------------------------
Repurchase Agreement 3.6%
UBS Warburg, Inc., 0.73%, Dated 12/31/03,
repurchase price of $2,100,000 plus accrued
interest on 1/2/04 collateralized by $2,131,000
2,100 2,100 U.S. Treasury Bill, 1.75%, 12/31/04. $ 2,100 $ $ 2,100
-------------------------------------
Total Repurchase Agreement $ 2,100 $ 2,100
-------------------------------------
-45-
Investment Companies 3.1%
AIM Short-Term Investments Co., Liquid Assets
1,137 1,137 Money Market Portfolio (Institutional Shares) $ $ 1,137 $ 1,137
668 668 American Advantage Money Market Select Fund 668 668
-------------------------------------
Total Investment Companies $ $ 1,805 $ 1,805
-------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS $ 5,099 $ 7,601 $ 12,700
-------------------------------------
Temporary Cash Investments (At Cost) $ 5,099 $ 7,601 $ 12,700
-------------------------------------
TOTAL INVESTMENTS IN SECURITIES 97.2% $ 33,321 $ 22,763 $ 56,084
-------------------------------------
OTHER ASSETS AND LIABILITIES 2.8% $ 1,415 $ 177 $ 1,592
-------------------------------------
TOTAL NET ASSETS 100.0% $ 34,736 $ 22,940 $ 57,676
=====================================
Total Investments at Cost $ 33,321 $ 22,763 $ 56,084
=====================================
(a) No adjustments are shown to the unaudited pro forma combined schedule
of investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer VCT Money Market
Portfolio to comply with its prospectus restrictions. The foregoing
sentence shall not restrict in any way the ability of the investment
adviser of either of the funds from buying or selling securities in the
normal course of such fund's business and operations.
(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
December 31, 2003, the value of these securities amounted to
$1,000,000, or 1.7% of total net assets.
If a Put date is indicated, the Fund has a right to sell a specified
underlying security at an exercise price equal to the amortized cost of
the underlying security plus interest, if any, as of that date.
Securities with a maturity of more than thirteen months have variable
rates and/or demand features which qualify them as short-term
securities. Rates shown are those in effect on 12/31/03. These rates
change periodically based on specified market rates or indices.
The accompanying notes are an integral part of these financial statements.
-46-
Pioneer Money Market VCT Portfolio
Pro Forma Statement of Assets and Liabilities
December 31, 2003
(unaudited) (Amounts in Thousands, except for per share data)
Pioneer Money Safeco RST
Market VCT Money Market Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
------------- ------------ ----------- ---------
ASSETS:
Investment in securities, at value (Cost $33,321 and
$22,763, respectively) $ 33,321 $ 22,763 $ 56,084
Cash 34 - 34
Receivables -
Investment securities sold 1,101 - 1,101
Fund shares sold - 280 280
Dividends, interest and foreign taxes withheld 358 140 498
Other 4 4
------------- ------------ ----------
Total assets $ 34,818 $ 23,183 $ 58,001
------------- ------------ ----------
LIABILITIES:
Payables -
Fund shares repurchased $ 24 $ 207 $ 231
Dividend - 2 2
Due to affiliates 21 12 33
Accrued expenses 37 22 59
------------- ------------ ----------- ----------
Total liabilities $ 82 $ 243 - $ 325
------------- ------------ ----------- ----------
NET ASSETS:
Paid-in capital $ 34,739 $ 22,940 $ 57,679
Accumulated undistributed net investment loss (3) - (3)
Total net assets $ 34,736 $ 22,940 - $ 57,676
============= ============ =========== ==========
OUTSTANDING SHARES:
No par value, (Unlimited number of shares authorized)
Class I 34,743 - 22,940 (a) 57,683
============= ============ ==========
Trust Shares - 22,940 (22,940) (a) -
============= ============ ==========
NET ASSET VALUE PER SHARE:
Class I $ 1.00 $ - $ 1.00
============= ============ ==========
Trust Shares - 1.00
============= ============ ==========
(a) Trust Shares of Safeco RST Money Market Portfolio is exchanged for Class I
shares of Pioneer Money Market VCT Portfolio.
The accompanying notes are an integral part of these financial statements.
-47-
Pioneer Money Market VCT Portfolio
Pro Forma Statement of Operations
For the Year Ended December 31, 2003
(unaudited)
Pioneer
Money Market Safeco RST
VCT Money Market Pro Forma Pro Forma
Portfolio (000's) Fund (000's) Adjustments (000's) Combined (000's)
----------------- ------------ ------------------- ----------------
INVESTMENT INCOME:
Interest $ 619 $ 380 $ 999
----------------- ------------ ------------------- ----------------
EXPENSES:
Management fees $ 239 $ 182 $ (41)(b) $ 380
Transfer agent fees 1 - 1
Administrative fees 38 - 8 (c) 46
Custodian fees 25 11 36
Professional fees 23 24 (24)(a) 23
Printing 7 6 13
Fees and expenses of nonaffiliated trustees - 8 (8)(a) -
Miscellaneous 8 5 13
----------------- ------------ ------------------- ----------------
Total expenses $ 341 $ 236 $ (65) $ 512
----------------- ------------ ------------------- ----------------
Net investment income $ 278 $ 144 $ 487
----------------- ------------ ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments $ 2 $ - $ 2
----------------- ------------ ----------------
Net increase (decrease) in net assets resulting
from operations $ 280 $ 144 $ 489
================= ============ ================
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Money Market VCT Portfolio's
management contract.
(c) Reflects increase due to a change in fee rates.
See accompanying notes to pro forma financial statements.
-48-
Pioneer Money Market VCT Portfolio
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
12/31/03
(Unaudited)
1. General
The accompanying pro forma combining financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco RST Money
Market Portfolio by Pioneer Money Market VCT Portfolio.
Under the terms of an Agreement and Plan of Reorganization between Pioneer Money
Market VCT Portfolio and Safeco RST Money Market Portfolio, the combination will
be treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies. The
acquisition will be accomplished by an acquisition of the net assets of Safeco
RST Money Market Portfolio in exchange for a "Class I" shares of Pioneer Money
Market VCT Portfolio at net asset value. The accompanying schedules of
investments, statements of assets and liabilities and the related statements of
operations of Pioneer Money Market VCT Portfolio and Safeco RST Money Market
Portfolio have been combined as of and for their most recent fiscal year ended
December 31, 2003. Adjustments have been made to expenses for duplicate services
that would not have been incurred if the merger took place on January 1, 2003.
Following the acquisition, the Pioneer Money Market VCT Portfolio will be the
accounting survivor. All related acquisition costs will be borne by Pioneer
Investment management, Inc. and Symetra.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer Money Market VCT Portfolio
and Safeco RST Money Market Portfolio included in their respective annual
reports to shareowners dated December 31, 2003.
2. 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 an open-end management
investment company. The Trust consists of sixteen separate Portfolios
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio)
Pioneer Value VCT Portfolio (Value Portfolio)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
-49-
The investment objective of Pioneer Money Market VCT Portfolio is to seek
current income consistent with preserving capital and providing liquidity.
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 as of trade date. Securities are valued at
amortized cost, which approximates fair market value. Investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
Interest income, including interest on income bearing cash accounts, is recorded
on the accrual basis.
B. Federal Income Taxes
Each fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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 shareowners. Therefore, no
federal income tax provision is required.
The combined capital loss carryforward of $3,000 does not include any net
capital loss carryforward from the merger with Safeco RST Money Market
Portfolio.
C. Portfolio Shares
The Portfolio records sales and repurchases of its shares as of trade date. The
Portfolio declares as daily dividends substantially all of its 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.
D. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, 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 Portfolio's custodian, or sub-custodians. The Portfolio's investment
adviser, Pioneer Investment Management, Inc. (PIM), is responsible for
determining that the value of the collateral remains at least equal to the
repurchase price.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of the
Pioneer Money Market VCT Portfolio that would have been issued at December 31,
2003, in connection with the proposed acquisition. The number of shares assumed
to be issued is equal to the net assets of Safeco RST Money Market Portfolio, as
of December 31, 2003, divided by the net asset value per share of Class I shares
of the Pioneer Money Market VCT Portfolio as of December 31, 2003. The pro forma
number of shares outstanding (in thousands), by class, for the combined fund
consist of the following at December 31, 2003:
Shares of Money Market Additional Shares Assumed Total
Portfolio Issued Outstanding Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
--------------- ----------------------- ------------------------- ------------------
Class I 34,743 22,940 57,683
-50-
4. Management Agreement
PIM manages the Pioneer Money Market VCT Portfolio and is a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano).
Management fees are calculated daily at the annual rate of 0.50% of the
Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2003, $32,622 would have
been payable by PIM related to management fees, administrative fees and certain
other services and is included in due to affiliates.
5. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredito Italiano, provides substantially all transfer
agent and shareowner services to the Portfolio at negotiated rates. Included in
due to affiliates is $125 in transfer agent fees that would have been payable to
PIMSS at December 31, 2003.
-51-
PIONEER MONEY MARKET VCT PORTFOLIO
PRO FORMA
Schedule of Investments (a)
June 30, 2004
(Unaudited) (Amounts in Thousands)
Pioneer Safeco RST
Pioneer Safeco RST Money Money
Money Money Market VCT Market Pro Forma
Market VCT Market Pro Forma Portfolio Portfolio Combined
Portfolio Portfolio Combined % of Net Market Market Market
Shares Shares Shares Assets Value Value Value
---------- ---------- --------- -------- ---------- ---------- ---------
CORPORATE BONDS 47.6%
Energy 2.8%
Integrated Oil & Gas 2.8%
1,500 1,500 Exxon Capital Corp., 0.00%, 11/15/04 $ 1,491 $ $ 1,491
-------------------------------------
Total Energy $ 1,491 $ $ 1,491
-------------------------------------
Capital Goods 1.7%
Industrial Conglomerates 1.7%
400 400 Tennessee Valley Authority, 4.75%, 7/15/04 $ 401 $ $ 401
500 500 GE Capital Corp., Floating Rate, 2/16/05 500 500
-------------------------------------
Total Capital Goods $ 901 $ $ 901
-------------------------------------
Food, Beverage & Tobacco 3.6%
Brewers 1.3%
New Belgium Brewery Co. 1.30%, 7/01/15 Put
725 725 Date 7/01/04 $ $ 725 $ 725
-------------------------------------
Soft Drinks 2.3%
1,220 1,220 Pepsico, Inc., 4.5%, 9/15/04 $ 1,228 $ $ 1,228
-------------------------------------
Total Food, Beverage & Tobacco $ 1,228 $ 725 $ 1,953
-------------------------------------
Household & Personal Products 0.9%
Household Products 0.9%
Procter & Gamble Co., 6.6%, 12/15/04 $ 512 $ $ 512
-------------------------------------
500 Total Household & Personal Products $ 512 $ $ 512
-------------------------------------
Pharmaceuticals & Biotechnology 2.3%
Pharmaceuticals 2.3%
1,250 1,250 Abbott Laboratories, 5.125%, 7/1/04 $ 1,250 $ $ 1,250
-------------------------------------
Total Pharmaceuticals & Biotechnology $ 1,250 $ $ 1,250
-------------------------------------
-52-
Banks 15.2%
Diversified Banks 12.0%
750 750 Bank of America Corp., Floating Rate, 1/31/05 $ 752 $ $ 752
750 750 Bank of America Corp., Floating Rate, 4/28/05 751 751
675 675 Banc One Corp. 7.25%, 8/15/04 680 680
500 500 Boatmen's Bancshares 7.625%, 10/01/04 508 508
500 500 Nationsbank Corp. 6.125%, 7/15/04 501 501
1,000 1,000 Wells Fargo Co., 6.625%, 7/15/04 1,002 1,002
1,000 1,000 First Union Corp., Floating Rate, 3/31/05 1,003 1,003
300 300 First USA Bank, Floating Rate, 7/21/04 300 300
1,000 1,000 Associates Corp., Floating Rate, 6/27/05 1,000 1,000
-------------------------------------
$ 4,808 $ 1,689 $ 6,497
-------------------------------------
Thrifts & Mortgage Finance 3.2%
700 700 Abbey National, plc 8.20%, 10/15/04 $ $ 714 $ 714
1,000 1,000 Countrywide Home Loans, Inc. 6.84%, 10/22/04 1,017 1,017
-------------------------------------
$ $ 1,731 $ 1,731
-------------------------------------
Total Banks $ 4,808 $ 3,419 $ 8,227
-------------------------------------
Diversified Financials 16.4%
Asset Management & Custody Banks 1.8%
910 910 Mellon Funding Corp. 7.50%, 6/15/05 $ $ 954 $ 954
-------------------------------------
Consumer Finance 3.0%
1,635 1,635 National Rural Utilities, 5.25%, 7/15/04 $ 1,638 $ $ 1,638
-------------------------------------
Diversified Financial Services 4.0%
Associates Corporation of North America 6.10%,
125 125 1/15/05 $ $ 128 $ 128
CC USA, Inc., (144A), 1.335%, 8/13/04, (acquired
1,000 1,000 1/02/04) 1,000 1,000
1,000 1,000 Security Capital Group, 7.80%, 1/19/05 1,034 1,034
-------------------------------------
$ $ 2,161 $ 2,161
-------------------------------------
-53-
Investment Banking & Brokerage 7.6%
1,000 1,000 J.P. Morgan & Co., Inc. 7.625%, 9/15/04 $ $ 1,013 $ 1,013
200 200 Lehman Brothers Holdings, Inc., 8.75%, 3/15/05 209 209
500 500 Merrill Lynch, Floating Rate, 4/11/05 500 500
500 500 Merrill Lynch, Floating Rate, 10/29/04 501 501
Salomon Smith Barney Holdings, Inc.,
175 175 6.25%, 6/15/04 181 181
1,200 1,200 American Express, Floating Rate, 4/18/05 1,201 1,201
500 500 American Express, Floating Rate, 12/16/04 500 500
-------------------------------------
$ 2,703 $ 1,404 $ 4,106
-------------------------------------
Total Diversified Financials $ 4,340 $ 4,519 $ 8,859
-------------------------------------
Technology Hardware & Equipment 2.1%
Computer Hardware 2.1%
500 500 IBM Corp., 6.0%, 11/30/04 $ 509 $ $ 509
650 650 IBM Corp., Floating Rate, 9/10/04 650 650
-------------------------------------
Total Technology Hardware & Equipment $ 1,159 $ $ 1,159
-------------------------------------
Real Estate 1.1%
Real Estate Management & Development 1.1%
600 600 SF Tarns, LLC 1.39%, 1/01/28 Put date 7/01/04 $ $ 600 $ 600
-------------------------------------
Total Real Estate $ $ 600 $ 600
-------------------------------------
Health Care Equipment & Services 0.9%
Health Care Facilities 0.9%
ACTS Retirement-Life Communities, Inc. 1.13%,
500 500 11/15/29 Put Date 7/01/04 $ $ 500 $ 500
-------------------------------------
Total Health Care Equipment & Services $ $ 500 $ 500
-------------------------------------
-------------------------------------
Retailing 0.6%
General Merchandise Stores 0.6%
Racetrac Capital, LLC 1.36%, 4/01/18 Put Date
300 300 7/07/04 $ $ 300 $ 300
-------------------------------------
Total Retailing $ $ 300 $ 300
-------------------------------------
TOTAL CORPORATE BONDS $ 15,690 $ 10,064 $ 25,753
-------------------------------------
Corporate Bonds (At Cost) $ 15,690 $ 10,064 $ 25,754
-------------------------------------
-54-
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 24.1%
Banks 17.6%
Thrifts & Mortgage Finance 17.6%
2,500 2,500 Federal Home Loan Mortgage Corp., 4.5%, 8/15/04 $ 2,510 $ $ 2,510
Federal Home Loan Mortgage Corp., 1.32%, 1/15/42
999 999 (CMO) 999 999
Federal National Mortgage Association, 6.5%,
2,500 2,500 8/15/04 2,516 2,516
Federal National Mortgage Association, 3.5%,
500 500 9/15/04 502 502
Federal National Mortgage Association, 1.56%,
1,000 1,000 5/16/05 1,000 1,000
2,000 2,000 Freddie Mac, Floating Rate, 2/4/05 2,000 2,000
-------------------------------------
Total Banks $ 8,528 $ 999 $ 9,527
-------------------------------------
Government 6.5%
Government 6.5%
Federal Home Loan Bank (Unsecured Bond) 1.70%,
1,000 1,000 5/24/05 $ $ 1,000 $ 1,000
500 500 Federal Home Loan Bank, 1.47%, 3/01/05 500 500
1,000 1,000 Federal Home Loan Bank, 1.38%, 3/28/05 1,000 1,000
1,000 1,000 Federal Home Loan Bank, 1.28%, 4/22/05 1,000 1,000
-------------------------------------
Total Government $ 2,500 $ 1,000 $ 3,500
-------------------------------------
Total U.S. Government And Agency Obligations $ 11,028 $ 1,999 $ 13,027
-------------------------------------
U.S. Government And Agency Obligations (At Cost) $ 11,029 $ 1,999 $ 13,028
-------------------------------------
-55-
MUNICIPAL BONDS 6.3%
Tenderfoot Seasonal Housing Facilities Revenue,
1,000 1,000 1.35%, 7/01/35 Put Date 7/01/04 $ $ 1,000 $ 1,000
Maryland Health and Higher Education Facilities
Authority Revenue, (University of Maryland
1,255 1,255 Medical System) 1.25%, 7/01/29 Put Date 7/01/04 1,255 1,255
Maryland Health and Higher Education Facilities
Authority Revenue, 1.25%, 1/01/28 Put Date
1,160 1,160 7/01/04 1,160 1,160
-------------------------------------
TOTAL MUNICIPAL BONDS $ $ 3,415 $ 3,415
-------------------------------------
Municipal Bonds (At Cost) $ $ 3,415 $ 3,415
-------------------------------------
TEMPORARY CASH INVESTMENTS 30.2%
Commercial Paper 28.0%
1,500 1,500 American General Finance Corp., 1.17%, 7/19/04 $ 1,499 $ $ 1,499
1,000 1,000 Apreco, Inc. 1.16%, 7/19/04 999 999
1,400 1,400 Coca-Cola Co., 1.08%, 7/12/04 1,400 1,400
1,000 1,000 Cooperative Association of Tractor Dealers,
Inc. 1.30%, 7/26/04 999 999
1,000 1,000 Dexia Delaware, LLC 1.06%, 7/07/04 1,000 1,000
1,500 1,500 EI Dupont, 1.16%, 7/22/04 1,499 1,499
1,100 1,100 Household Finance Corp. 1.09%, 7/08/04 1,100 1,100
1,000 1,000 K2 (USA) LLC 1.22%, 8/25/04 998 998
1,000 1,000 Moat Fundings, LLC 1.06%, 7/01/04 1,000 1,000
National Rural Utilities Cooperative Finance
1,000 1,000 Corp. 1.24%, 7/15/04 999 999
1,300 1,300 Paccar Financial, 1.10%, 8/04/04 1,299 1,299
1,000 1,000 Receivables Capital Corp. 1.08%, 7/09/04 1,000 1,000
1,350 1,350 Toyota Motor Credit Corp., 1.18%, 7/23/04 1,349 1,349
-------------------------------------
Total Commercial Paper $ 7,045 $ 8,095 $ 15,140
-------------------------------------
-56-
Investment Companies 2.2%
AIM Short-Term Investments Co., Liquid Assets
1,216 1,216 Money Market Portfolio (Institutional Shares) $ $ 1,216 $ 1,216
-------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS 30.2% $ 7,045 $ 9,311 $ 16,356
-------------------------------------
Temporary Cash Investments (At Cost) $ 7,045 $ 9,311 $ 16,356
-------------------------------------
TOTAL INVESTMENT IN SECURITIES 108.3% $ 33,763 $ 24,789 $ 58,552
-------------------------------------
OTHER ASSETS AND LIABILITIES -8.3% $ -4,584 $ 109 $ -4,475
-------------------------------------
TOTAL NET ASSETS 100.0% $ 29,179 $ 24,898 $ 54,077
=====================================
Investments at Cost $ 33,763 $ 24,789 $ 58,552
=====================================
(a) No adjustments are shown to the unaudited pro forma combined schedule
of investments due to the fact that upon consummation of the merger, no
securities would need to be sold in order for Pioneer VCT Money Market
Portfolio to comply with its prospectus restrictions. The foregoing
sentence shall not restrict in any way the ability of the investment
adviser of either of the funds from buying or selling securities in the
normal course of such fund's business and operations.
(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, 2004, the value of these securities amounted to $1,000,071 or 1.8%
of total net assets.
If a Put date is indicated, the Fund has a right to sell a specified
underlying security at an exercise price equal to the amortized cost of
the underlying security plus interest, if any, as of that date.
Securities with a maturity of more than thirteen months have variable
rates and/or demand features which qualify them as short-term
securities. Rates shown are those in effect on 6/30/04. These rates
change periodically based on specified market rates or indices.
The accompanying notes are an integral part of these financial statements.
-57-
Pioneer Money Market VCT Portfolio
Pro Forma Statement of Assets and Liabilities
June 30, 2004
(unaudited) (Amounts in Thousands, except per share data)
Pioneer Money Safeco RST
Market VCT Money Market Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
------------- ------------ ----------- ---------
ASSETS:
Investment in securities, at value (Cost $33,763
and $24,789, respectively) $ 33,763 $ 24,789 $ 58,552
Fund shares sold 22 -- 22
Dividends, interest and foreign taxes withheld 270 150 420
Other 1 -- 1
------------- ------------ ----------- ---------
Total assets $ 34,056 $ 24,939 $ 58,995
------------- ------------ ----------- ---------
LIABILITIES:
Payables -
Investment securities purchased $ 1,503 $ -- $ 1,503
Fund shares repurchased 22 -- 22
Dividends -- 10 10
Due to bank 3,320 -- 3,320
Due to affiliates 17 13 30
Accrued expenses 15 18 33
------------- ------------ ----------- ---------
Total liabilities $ 4,877 $ 41 -- $ 4,918
------------- ------------ ----------- ---------
NET ASSETS:
Paid-in capital $ 29,186 $ 24,898 $ 54,084
Accumulated undistributed net investment loss (4) (4)
Accumulated net realized loss (3) (3)
------------- ------------ ----------- ---------
Total net assets $ 29,179 $ 24,898 -- $ 54,077
============= ============ =========== =========
OUTSTANDING SHARES:
(Unlimited number of shares authorized)
Trust Shares -- 24,898 (24,898)(a) --
============= ============ =========== =========
Class I 29,190 24,898 (a) 54,088
============= ============ =========== =========
NET ASSET VALUE PER SHARE:
Trust Shares $ -- $ 1.00 $
============= ============ =========== =========
Class I $ 1.00 $ -- $ 1.00
============= ============ =========== =========
(a) Trust Shares of Safeco RST Money Market Portfolio is exchanged for Class I
shares of Pioneer Money Market VCT Portfolio.
The accompanying notes are an integral part of these financial statements.
-58-
Pioneer Money Market VCT Portfolio
Pro Forma Statement of Operations
For the Year Ended June 30, 2004
(unaudited) (Amounts in Thousands)
Pioneer Safeco
Money Market RST Money Pro Forma Pro Forma
VCT Portfolio Market Portfolio Adjustments Combined
------------- ---------------- ----------- ---------
INVESTMENT INCOME:
Dividends $ - $ - $ -
Interest 423 298 721
Income from securities loaned, net - - -
------------- ---------------- ----------- ---------
Total investment income $ 423 $ 298 $ 721
EXPENSES:
Management fees $ 184 $ 160 $ (45)(b) $ 299
Transfer agent fees 1 - 1
Administrative fees 28 - 6 (c) 34
Custodian fees 23 11 34
Registration fees - - -
Professional fees 24 25 (25)(a) 24
Printing (6) 10 4
Fees and expenses of nonaffiliated trustees - 9 (9)(a) -
Miscellaneous 5 5 10
------------- ---------------- ----------- ---------
Total expenses $ 259 $ 220 $ (73) $ 406
Less management fees waived by Pioneer
Investment Management, Inc. - - -
Less fees paid indirectly - - -
------------- ---------------- ----------- ---------
Net expenses $ 259 $ 220 $ (73) $ 406
------------- ---------------- ----------- ---------
Net investment income $ 164 $ 78 $ 73 $ 315
------------- ---------------- ----------- ---------
Net increase in net assets resulting from operations $ 164 $ 78 $ 73 $ 315
============= ================ =========== =========
(a) Reflects reduction in expenses due to elimination of duplicate services.
(b) Management fees conformed to Pioneer Money Market VCT Portfolio's
management contract.
(c) Reflects decrease due to a change in fee rates.
The accompanying notes are an integral part of these financial statements.
-59-
Pioneer Money Market VCT Portfolio
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
6/30/04
(Unaudited)
1. General
The accompanying pro forma combining financial statements are presented to show
the effect of the proposed acquisition (the "acquisition") of Safeco RST Money
Market Portfolio by Pioneer Money Market VCT Portfolio.
Under the terms of an Agreement and Plan of Reorganization between Pioneer Money
Market VCT Portfolio and Safeco RST Money Market Portfolio, the combination will
be treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies. The
acquisition will be accomplished by an acquisition of the net assets of Safeco
RST Money Market Portfolio in exchange for "Class I" shares of Pioneer Money
Market VCT Portfolio at net asset value. The accompanying statements of assets
and liabilities and the related statements of operations of Pioneer Money Market
VCT Portfolio and Safeco RST Money Market Portfolio have been combined as of and
for their most recent semiannual date, June 30, 2004. Adjustments have been made
to expenses for duplicate services that would not have been incurred if the
merger took place on July 1, 2003. Following the acquisition, the Pioneer Money
Market VCT Portfolio will be the accounting survivor. All related acquisition
costs will be borne by Pioneer Investment Management, Inc. and Symetra.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of Pioneer Money Market VCT Portfolio
and Safeco RST Money Market Portfolio included in their respective semiannual
reports to shareowners dated June 30, 2004.
2. 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 an open-end management
investment company. The Trust consists of nineteen separate Portfolios
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio)
Pioneer Value VCT Portfolio (Value Portfolio)
Pioneer Papp America Pacific Rim VCT Portfolio (Papp America Pacific Rim
Portfolio)(Class II shares only)
Pioneer Papp Small & Mid Cap Growth VCT Portfolio (Papp Small & Mid Cap Growth
Portfolio)(Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap Growth
VCT Portfolio)(Class II shares only)
-60-
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Pioneer Money Market VCT Portfolio is to seek
current income consistent with preserving capital and providing liquidity.
The Trust's financial statements have been prepared in conformity with generally
accepted accounting principles in the United States 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 as of trade date. Securities are valued at
amortized cost, which approximates fair market value. Investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
Interest income, including interest on income bearing cash accounts, is recorded
on the accrual basis.
B. Federal Income Taxes
Each Fund has previously elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, it will be 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 shareowners. Therefore, no
federal income tax provision is required.
The combined capital loss carryforward of $3,000 does not include any net
capital loss carryforward from the merger with Safeco RST Money Market
Portfolio.
C. Portfolio Shares
The Portfolio records sales and repurchases of its shares as of trade date. The
Portfolio declares as daily dividends substantially all of its 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.
D. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, 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 Portfolio's custodian, or sub-custodians. The Portfolio's investment
adviser, Pioneer Investment Management, Inc. (PIM), is responsible for
determining that the value of the collateral remains at least equal to the
repurchase price.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
Pioneer Money Market VCT Portfolio that would have been issued at June 30, 2004,
in connection with the proposed acquisition. The number of shares assumed to be
issued is equal to the net assets Safeco RST Money Market Portfolio, as of June
30, 2004, divided by the net asset value per share of the Class I shares of
Pioneer Money Market VCT Portfolio as of June 30, 2004. The pro forma number of
shares outstanding (in thousands), by class, for the combined fund consist of
the following at June 30, 2004:
Shares of Money Market Additional Shares Assumed Total
Portfolio Issued Outstanding Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
--------------- ---------------------- ------------------------- ------------------
Class I 29,190 24,898 54,088
-61-
4. Management Agreement
Pioneer Investment Management, Inc. manages the Pioneer Money Market VCT
Portfolio and is a wholly owned indirect subsidiary of UniCredito Italiano
S.p.A. (UniCredito Italiano). Management fees are calculated daily at the annual
rate of 0.50% of the Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At June 30, 2004, $29,894 would have been
payable by Pioneer Investment Management, Inc. related to management fees,
administrative fees and certain other services and is included in due to
affiliates.
5. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredito Italiano, provides substantially all transfer
agent and shareowner services to the Portfolio at negotiated rates. Included in
due to affiliates is $129 in transfer agent fees that would have been payable to
PIMSS at June 30, 2004.
-62-
PART C
OTHER INFORMATION
PIONEER VARIABLE CONTRACTS TRUST
(on behalf of its series,
Pioneer Bond VCT Portfolio
Pioneer Fund VCT Portfolio
Pioneer Growth Opportunities VCT Portfolio
Pioneer Mid Cap Value VCT Portfolio
Pioneer Money Market VCT Portfolio
Pioneer Small Cap Value II VCT Portfolio)
ITEM 15. INDEMNIFICATION
No change from the information set forth in Item 25 of the most recently filed
Registration Statement of Pioneer Variable Contracts Trust (the "Registrant") on
Form N-1A under the Securities Act of 1933 and the Investment Company Act of
1940 (File Nos. 33-84546 and 811-08786) as filed with the Securities and
Exchange Commission on June 6, 2004 (Accession No. 0001016964-04-000195), which
information is incorporated herein by reference.
(1)(a) Agreement and Declaration of Trust (1)
(1)(b) Amendments to Agreement and Declaration of Trust (2)(3)(4)(5)(6)(7)(9)
(10)(11)
(12)(13)
(1)(c) Amendment to Agreement and Declaration of Trust to establish additional (15)
series
(2) Amended and Restated By-Laws (8)
(3) Not applicable
(4) Form of Agreement and Plan of Reorganization (14)
(5) Reference is made to Exhibits (1) and (2) hereof
(6)(a) Form of Management Contract for Pioneer Bond VCT Portfolio (15)
(6)(b) Management Contract for Pioneer Fund VCT Portfolio (8)
(6)(c) Form of Management Contract for Pioneer Growth Opportunities VCT Portfolio (15)
(6)(d) Management Contract for Pioneer Mid Cap Value VCT Portfolio (8)
(6)(e) Management Contract for Pioneer Money Market VCT Portfolio (8)
(6)(f) Form of Management Contract for Pioneer Small Cap Value II VCT Portfolio (15)
(6)(g) Expense Limitation Agreement (*)
(7) Underwriting Agreement with Pioneer Funds Distributor, Inc. (8)
(8) Not applicable
(9) Custodian Agreement with Brown Brothers Harriman & Co. (15)
(10)(a) Form of Distribution Plan relating to Class II Shares (15)
(10)(b) Form of Multiple Class Plan Pursuant to Rule 18f-3 (15)
(11) Opinion of Counsel (legality of securities being offered) (15)
(12) Form of opinion as to tax matters and consent (15)
(13)(a) Investment Company Service Agreement with Pioneering Services Corporation (15)
(13)(b) Administration Agreement with Pioneer Investment Management, Inc. (15)
(14) Consents of Independent Registered Public Accounting Firm (*)
(15) Not applicable
(16) Powers of Attorney (15)
(17)(a) Code of Ethics (12)
(17)(b) Form of Proxy Cards (*)
(1) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on August 8, 1995 (Accession no. 0000930709-95-000005).
(2) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 6 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on August 18, 1997 (Accession no. 0000930709-97-000011).
(3) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 8 to the Registrant's Registration Statement
on Form N-1A
(File Nos. 33-84546; 811-08786), as filed with the Securities and Exchange
Commission on July 16, 1998 (Accession no. 0000930709-98-000013).
(4) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 11 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on June 4, 1999 (Accession no. 0000930709-99-000016).
(5) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 12 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on January 12, 2000 (Accession no. 0000930709-00-000002).
(6) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 15 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on July 6, 2000 (Accession no. 0000930709-00-000018).
(7) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 18 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on January 18, 2001 (Accession no. 0001016964-01-000006).
(8) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 20 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on April 26, 2001 (Accession no. 0001016964-01-500006).
(9) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 22 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on October 22, 2001 (Accession no. 0000930709-01-500036).
(10) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 24 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on May 1, 2002 (Accession no. 0001016964-02-000111).
(11) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 26 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on February 18, 2003 (Accession no. 0001016964-03-000044).
(12) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 28 to the Registrant's Registration Statement
on Form N-1A
(File Nos. 33-84546; 811-08786), as filed with the Securities and Exchange
Commission on November 18, 2003 (Accession no. 0001016964-03-000241).
(13) Previously filed. Incorporated herein by reference from the exhibits filed
with Post-Effective Amendment No. 30 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-84546; 811-08786), as filed with the Securities and
Exchange Commission on April 29, 2004 (Accession no. 0001016964-04-000122).
(14) Filed herewith as Exhibit A to the Proxy Statement and Prospectus included
as Part A of this Registration Statement.
(15) Previously filed. Incorporated herein by reference from the exhibits filed
with Registrant's Initial Registration Statement on Form N-14 (File No.
333-118431), as filed with the Securities and Exchange Commission on August 20,
2004 (Accession no. 0001145443-04-001270).
(*) Filed herewith.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is part of this
Registration Statement by any person or party which is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information called for by the applicable
registration form for the reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-14 has been signed on behalf of the
Registrant, in the City of Boston and the Commonwealth of Massachusetts, on the
19th day of October, 2004.
Pioneer Variable Contracts Trust,
on behalf of its series,
Pioneer Bond VCT Portfolio Pioneer
Fund VCT Portfolio Pioneer Growth
Opportunities VCT Portfolio Pioneer
Mid Cap Value VCT Portfolio Pioneer
Money Market VCT Portfolio Pioneer
Small Cap Value II VCT Portfolio
By: /s/ Osbert M. Hood
------------------------------------
Osbert M. Hood
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board, October 19, 2004
- --------------------------- Trustee, and President
John F. Cogan, Jr.
* Chief Financial Officer and October 19, 2004
- --------------------------- Treasurer
Vincent Nave
*
- ---------------------------
Mary K. Bush Trustee
*
- ---------------------------
Richard H. Egdahl Trustee
*
- ---------------------------
Margaret B.W. Graham Trustee
/s/ Osbert M. Hood
- ---------------------------
Osbert M. Hood Trustee
*
- ---------------------------
Marguerite A. Piret Trustee
*
- ---------------------------
Steven K. West Trustee
*
- ---------------------------
John Winthrop Trustee
* By: /s/ Osbert M. Hood October 19, 2004
--------------------------------------
Osbert M. Hood, Attorney-in-Fact
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
(6)(g) Expense Limitation Agreement
(14) Consents of Independent Registered Public Accounting Firm
(17)(b) Form of Proxy Cards
Expense Limit and Reimbursement Agreement
Expense Limit and Reimbursement Agreement made as of August 3, 2004,
between Pioneer Investment Management, Inc. (PIM) and the investment companies
and series thereof listed on Annex A (each a "Fund").
Whereas PIM wishes to reduce the expenses of the Investor Class shares
or Class I shares of each Fund until the end of the month of the second
anniversary of the reorganization relating to the initial issuance of Investor
Class shares or Class I shares of such Fund; and
Whereas each Fund wishes to have PIM enter into such an agreement;
Now therefore the parties agree as follows:
Section 1. PIM agrees, until the end of the month of the second
anniversary of the reorganization relating to the initial issuance of Investor
Class shares or Class I shares of a Fund, to limit such Fund's ordinary
operating expenses (other than extraordinary expenses, such as litigation,
taxes, brokerage commissions, etc.) attributable to the Investor Class shares or
Class I shares (the "Expense Limitation") to the percentage listed for such Fund
on Annex A. Such limitation shall be made by waiving transfer agency fees and/or
reimbursing expenses attributable to Investor Class shares or Class I shares. In
the event that the waiver of transfer agency fees and expenses is not
sufficient, PIM shall waive other fees and/or reimburse the Fund for the Fund's
other ordinary operating expenses (other than extraordinary expenses, such as
litigation, taxes, brokerage commissions, etc) so that the Expense Limitation is
satisfied with respect to Investor Class shares or Class I shares, as the case
may be.
Section 2. PIM may not terminate or modify the duration or amount of
this Expense Limitation Agreement. PIM may otherwise modify this Agreement with
the approval of the Board of Trustees of each Fund.
Section 3. PIM shall keep a record of the amount of expenses that it
waived or reimbursed pursuant to Section 1 hereof ("Prior Expenses"). If at any
future date the total expenses of a Fund attributable to Investor Class shares
or Class I shares, as the case may be, are less than the Expense Limitation, PIM
shall be entitled to be reimbursed for such Prior Expenses attributable to
Investor Class shares or Class I shares, provided that such reimbursement does
not cause the Fund's Investor Class or Class I share expenses to exceed the
Expense Limitation. PIM shall also be entitled to reimbursement of the
corresponding Prior Expenses attributable to any other authorized class of
shares. If the Fund's Investor Class or Class I expenses subsequently exceed the
Expense Limitation, the reimbursement of Prior Expenses shall be suspended and,
if subsequent reimbursement of Prior Expenses shall be resumed to the extent
that Investor Class or Class I expenses do not exceed the Expense Limitation,
the Expense Limitation shall be applied. Notwithstanding anything in this
Section 3 to the contrary, the Fund shall not reimburse PIM for any Prior
Expense pursuant to this Section 3 more than three (3) years after the expense
was incurred.
Section 4. It is not intended by PIM or the Fund that the reimbursement
agreement in Section 3 shall be an obligation of a Fund unless and until the
total expenses of such Fund
-1-
attributable to the Investor Class shares or Class I shares, as the case may be,
are less than the Expense Limitation. PIM understands that such total expenses
may never be reduced to such level and there is no assurance that the Prior
Expenses shall be reimbursed. In addition, each Fund shall have the right to
terminate this Agreement, including its obligation to reimburse Prior Expenses,
at any time upon notice to PIM. This Agreement automatically terminates without
obligation by the Fund upon termination of the Management Contract between PIM
and the Fund.
Section 5. This Agreement shall be governed by the laws of the State of
Delaware.
In witness whereof, the parties hereto have caused this Agreement to be
signed as of the 3rd day of August, 2004.
Each Fund listed on Annex A PIONEER INVESTMENT MANAGEMENT, INC.
By: /s/ Osbert M. Hood By: /s/ Dorothy E. Bourassa
------------------------------- --------------------------------
Osbert M. Hood Dorothy E. Bourassa
Executive Vice President Secretary
-2-
Annex A
- --------------------------------------------------------------------------------
Acquiring Fund Class of Shares Expense Limitation
(Investor class) for
initial two years
- --------------------------------------------------------------------------------
Pioneer International Investor Class 1.40%
Equity Fund
- --------------------------------------------------------------------------------
Pioneer Balanced Fund Investor Class 1.10%
- --------------------------------------------------------------------------------
Pioneer Fund Investor Class 1.02%
- --------------------------------------------------------------------------------
Pioneer Growth Shares Investor Class 1.15%
- --------------------------------------------------------------------------------
Pioneer Value Fund Investor Class 1.10%
- --------------------------------------------------------------------------------
Pioneer Small Cap Value Investor Class 1.15%
Fund
- --------------------------------------------------------------------------------
Pioneer Bond Fund Investor Class 0.74%
- --------------------------------------------------------------------------------
Pioneer Tax Free Income Investor Class 0.70%
Fund
- --------------------------------------------------------------------------------
Pioneer America Income Investor Class 0.74%
Trust
- --------------------------------------------------------------------------------
Pioneer High Yield Fund Investor Class 0.90%
- --------------------------------------------------------------------------------
Pioneer Cash Reserves Investor Class 0.71%
Fund
- --------------------------------------------------------------------------------
Pioneer Tax Free Money Investor Class 0.65%
Market Fund
- --------------------------------------------------------------------------------
Pioneer Growth Investor Class 1.05%
Opportunities Fund
- --------------------------------------------------------------------------------
Pioneer Mid Cap Value Investor Class 1.10%
Fund
- --------------------------------------------------------------------------------
Pioneer California Tax Investor Class 0.63%
Free Income Fund
- --------------------------------------------------------------------------------
Pioneer Municipal Bond Investor Class 0.62%
Fund
- --------------------------------------------------------------------------------
-3-
- --------------------------------------------------------------------------------
Acquiring Fund Class of Expense limitation for
Shares initial two years
- --------------------------------------------------------------------------------
Pioneer Fund VCT Class I 0.80%
Portfolio
- --------------------------------------------------------------------------------
Pioneer Small Cap Value Class I 1.01%
II VCT Portfolio
- --------------------------------------------------------------------------------
Pioneer Bond VCT Class I 0.62%
Portfolio
- --------------------------------------------------------------------------------
Pioneer Money Market Class I 0.90%
VCT Portfolio
- --------------------------------------------------------------------------------
Pioneer Mid Cap VCT Class I 0.88%
Portfolio
- --------------------------------------------------------------------------------
Pioneer Growth Class I 0.79%
Opportunities VCT
Portfolio
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption "Experts - Safeco
Portfolios," in the Combined Proxy Statement of Safeco Resource Series Trust and
Prospectus for Class I Shares of Pioneer Bond VCT Portfolio, Pioneer Fund VCT
Portfolio, Pioneer Growth Opportunities VCT Portfolio, Pioneer Money Market VCT
Portfolio, Pioneer Mid Cap Value VCT Portfolio and Pioneer Small Cap Value II
VCT Portfolio, each a series of Pioneer Variable Contracts Trust, (the "Combined
Proxy Statement and Prospectus"), and to the incorporation by reference of our
report dated January 30, 2004, with respect to the financial statements and
financial highlights of Safeco Multi-Cap Core Portfolio, Safeco Small-Cap Value
Portfolio, Safeco Bond Portfolio, Safeco Growth Opportunities Portfolio, Safeco
Core Equity Portfolio, and Safeco Money Market Portfolio included in the Safeco
Resource Series Trust Annual Report for the year ended December 31, 2003, in the
Combined Proxy Statement and Prospectus included in this Registration Statement
on Form N-14 of the Pioneer Variable Contracts Trust. We further consent to the
reference to us under the heading "Representations and Warranties" (paragraph
4.1(f)) in the Agreement and Plan of Reorganization included as Exhibits A-1 and
A-2 to the Combined Proxy Statement and Prospectus.
We also consent to the references to our firm under the captions "Independent
Auditors" and "Financial Statements" in the Safeco Resource Series Trust
Statement of Additional Information, and to the incorporation by reference of
our report, dated January 30, 2004, on the financial statements and financial
highlights of the Safeco Multi-Cap Core Portfolio, Safeco Small-Cap Value
Portfolio, Safeco Bond Portfolio, Safeco Growth Opportunities Portfolio, Safeco
Core Equity Portfolio, and Safeco Money Market Portfolio included in the Safeco
Resource Series Trust Annual Report for the year ended December 31, 2003, in
Post-Effective Amendment No. 28 to the Registration Statement (Form N-1A, File
Nos. 33-06547/811-4717), as filed with the Securities and Exchange Commission on
April 29, 2004 (Accession No. 0001047469-04-014236), which is incorporated by
reference into the Combined Proxy Statement and Prospectus included in this
Registration Statement on Form N-14 of the Pioneer Variable Contracts Trust.
/s/ ERNST & YOUNG LLP
Seattle, Washington
October 18, 2004
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the references to our firm under the captions "Financial
Highlights" and "Experts - Pioneer Portfolios", in the Combined Proxy Statement
of Safeco Resource Series Trust and Prospectus for Class I Shares of Pioneer
Bond VCT Portfolio, Pioneer Fund VCT Portfolio, Pioneer Growth Opportunities VCT
Portfolio, Pioneer Money Market VCT Portfolio, Pioneer Mid Cap Value VCT
Portfolio and Pioneer Small Cap Value II VCT Portfolio ("Combined Proxy
Statement and Prospectus"), and to the incorporation by reference of our reports
dated February 6, 2004, with respect to the financial statements and financial
highlights of Pioneer Fund VCT Portfolio, Pioneer Money Market VCT Portfolio and
Pioneer Mid Cap Value VCT Portfolio, (each a Portfolio of Pioneer Variable
Contracts Trust), included in the Annual Reports to the Shareowners for the year
ended December 31, 2003, in the Combined Proxy Statement and Prospectus included
in this Registration Statement on Form N-14 of the Pioneer Variable Contracts
Trust. We further consent to the reference to us under the heading
"Representations and Warranties" (paragraph 4.2(g)) in the Agreement and Plan of
Reorganization included as Exhibit A-1 to the Combined Proxy Statement and
Prospectus.
We also consent to the references to our firm under the captions "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information
of Pioneer Variable Contracts Trust, and to the incorporation by reference of
our report, dated February 6, 2004, on the financial statements and financial
highlights of Pioneer Fund VCT Portfolio, Pioneer Money Market VCT Portfolio,
Pioneer Mid Cap Value VCT Portfolio (each a portfolio of Pioneer Variable
Contracts Trust) included in the Annual Report to the Shareowners for the year
ended December 31, 2003, in Post-Effective Amendments Nos. 30 and 31 to the
Registration Statement (Form N-1A, File Nos. 33-84546; 811-08786), as filed with
the Securities and Exchange Commission on May 28, 2004 (Accession No.
0001016964-04-000122) and June 1, 2004 (Accession No. 0001016964-04-000195),
respectively, which are incorporated by reference into the Combined Proxy
Statement and Prospectus included in this Registration Statement on Form N-14 of
the Pioneer Variable Contracts Trust.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 15, 2004
SAFECO RESOURCE SERIES TRUST
SAFECO SMALL-CAP VALUE PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Small-Cap Value Portfolio
(the "Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ], each of
them (with full powers of substitution) to vote for the undersigned all shares
of beneficial interest of the undersigned in the above-referenced Safeco
Portfolio at the Special Meeting of Shareholders to be held at 2:00 p.m.,
Pacific time, on December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854
154th Place, N.E., Redmond, Washington 98052, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
---------------------------------------------------
---------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Small Cap Value II VCT Portfolio
("Pioneer Portfolio"), a series of Pioneer Variable Contracts Trust managed
by Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.
SAFECO RESOURCE SERIES TRUST
SAFECO BOND PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Bond Portfolio (the
"Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ], each of them
(with full powers of substitution) to vote for the undersigned all shares of
beneficial interest of the undersigned in the above-referenced Safeco Portfolio
at the Special Meeting of Shareholders to be held at 2:00 p.m., Pacific time, on
December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854 154th Place,
N.E., Redmond, Washington 98052, and any adjournment thereof ("Meeting"), with
all the power the undersigned would have if personally present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
----------------------------------------------------
----------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX
BELOW. THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO
SPECIFICATION IS MADE BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Bond VCT Portfolio ("Pioneer
Portfolio"), a series of Pioneer Variable Contracts Trust managed by
Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.
SAFECO RESOURCE SERIES TRUST
SAFECO MONEY MARKET PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Money Market Portfolio
(the "Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ], each of
them (with full powers of substitution) to vote for the undersigned all shares
of beneficial interest of the undersigned in the above-referenced Safeco
Portfolio at the Special Meeting of Shareholders to be held at 2:00 p.m.,
Pacific time, on December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854
154th Place, N.E., Redmond, Washington 98052, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
----------------------------------------------------
----------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Money Market VCT Portfolio ("Pioneer
Portfolio"), a series of Pioneer Variable Contracts Trust managed by
Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.
SAFECO RESOURCE SERIES TRUST
SAFECO CORE EQUITY PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Core Equity Portfolio
(the "Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ], each of
them (with full powers of substitution) to vote for the undersigned all shares
of beneficial interest of the undersigned in the above-referenced Safeco
Portfolio at the Special Meeting of Shareholders to be held at 2:00 p.m.,
Pacific time, on December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854
154th Place, N.E., Redmond, Washington 98052, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
----------------------------------------------------
----------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Fund VCT Portfolio ("Pioneer
Portfolio"), a series of Pioneer Variable Contracts Trust managed by
Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.
SAFECO RESOURCE SERIES TRUST
SAFECO MULTI-CAP CORE PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Multi-Cap Core Portfolio
(the "Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ], each of
them (with full powers of substitution) to vote for the undersigned all shares
of beneficial interest of the undersigned in the above-referenced Safeco
Portfolio at the Special Meeting of Shareholders to be held at 2:00 p.m.,
Pacific time, on December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854
154th Place, N.E., Redmond, Washington 98052, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
----------------------------------------------------
----------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Mid Cap Value VCT Portfolio ("Pioneer
Portfolio"), a series of Pioneer Variable Contracts Trust managed by
Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.
SAFECO RESOURCE SERIES TRUST
SAFECO GROWTH OPPORTUNITIES PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 8, 2004
This proxy is solicited on behalf of the board of trustees of Safeco
Resource Series Trust, on behalf of its series, Safeco Growth Opportunities
Portfolio (the "Safeco Portfolio"). The undersigned hereby appoints [ ] and [ ],
each of them (with full powers of substitution) to vote for the undersigned all
shares of beneficial interest of the undersigned in the above-referenced Safeco
Portfolio at the Special Meeting of Shareholders to be held at 2:00 p.m.,
Pacific time, on December 8, 2004, at Safeco Mutual Funds, King Auditorium, 4854
154th Place, N.E., Redmond, Washington 98052, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Special Meeting and
combined Proxy Statement and Prospectus.
Date , 2004
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD
PROMPTLY.
----------------------------------------------------
----------------------------------------------------
Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your board of trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization.
Under the Agreement and Plan of Reorganization, your Safeco Portfolio will
transfer all of its assets to Pioneer Growth Opportunities VCT Portfolio
("Pioneer Portfolio"), a series of Pioneer Variable Contracts Trust managed
by Pioneer Investment Management, Inc. ("Pioneer"), in exchange for Class I
shares of the Pioneer Portfolio.
Refer to pages __ in the combined Proxy Statement and Prospectus to review
relevant information regarding the Pioneer Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
Your board of trustees recommends that you vote "FOR" Proposal 2.
(2) To approve an interim investment advisory agreement between your Safeco
Portfolio and Pioneer.
FOR |_| AGAINST |_| ABSTAIN |_|
(3) To transact such other business as may properly come before the meeting.
We need your vote before __________, 2004.
PLEASE SIGN AND DATE THE REVERSE SIDE.