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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08786
Pioneer Variable Contracts Trust
(Exact name of registrant as specified in charter)
60 State Street, Boston, MA 02109
(Address of principal executive offices) (ZIP code)
Dorothy E. Bourassa, Pioneer Investment Management, Inc.,
60 State Street, Boston, MA 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 742-7825
Date of fiscal year end: December 31
Date of reporting period: January 1, 2008 through December 31, 2008
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREOWNERS.
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Bond VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Note: On November 9, 2007, Pioneer America Income VCT Portfolio
was reorganized into Pioneer Bond VCT Portfolio.
Please refer to your contract prospectus to determine the applicable share class
offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
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T a b l e o f C o n t e n t s
Pioneer Bond VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 21
Notes to Financial Statements 26
Report of Independent Registered Public
Accounting Firm 30
Trustees, Officers and Service Providers 32
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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PORTFOLIO UPDATE 12/31/08
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Portfolio Diversification
(As a percentage of total investment in securities)
[THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Government Securities 48.0%
U.S. Corporate Bonds 30.7%
Collateralized Mortgage Obligations 10.6%
Senior Floating Rate Loans 3.8%
Asset Backed Securities 3.0%
Municipal Bonds 1.1%
Temporary Cash Investments 0.9%
Convertible Corporate Bonds 0.7%
Convertible Preferred Stocks 0.6%
Foreign Government Bonds 0.6%
Quality Distribution
(As a percentage of total investment in securities)
[THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
AAA 1.8%
AA 3.7%
A 9.7%
BBB 12.9%
BB 7.9%
B & Lower 3.4%
Commercial Paper 0.4%
Treasury/Agency 60.2%
Five Largest Holdings
(As a percentage of total long-term holdings)*
1. Fannie Mae- Aces, 6.3%,
4/25/19 2.21%
2. U.S. Treasury Bonds, 6.25%,
8/15/23 1.86
3. Federal National Mortgage
Association, 4.79%, 12/1/12 1.77
4. Federal National Mortgage
Association, 5.0%, 3/1/33 1.66
5. Federal National Mortgage
Association, 5.0%, 12/1/17 1.35
* The Portfolio is actively managed, and current holdings may be different.
The holdings listed should not be considered recommendations to buy or sell
any security listed.
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PERFORMANCE UPDATE 12/31/08
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Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 10.24 $ 10.87
Class II $ 10.24 $ 10.87
Net
Distributions per Share Investment Short-Term Long-Term
1/1/08 - 12/31/08 Income Capital Gains Capital Gains
Class I $ 0.5672 $ - $ -
Class II $ 0.5410 $ - $ -
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Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Bond VCT Portfolio at net asset value, compared to that of the Barclays Capital
Aggregate Bond Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA IS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Pioneer Bond VCT Pioneer Bond VCT Barclays Capital
Portfolio, Class I Portfolio, Class II Aggregate Bond Index
12-98 $10,000 $10,000 $10,000
9,601 9,577 9,918
12-00 10,733 10,680 11,071
11,514 11,429 12,006
12-02 12,411 12,288 13,237
12,818 12,660 13,780
12-04 13,269 13,072 14,378
13,618 13,382 14,727
12-06 14,256 13,974 15,365
15,189 14,852 16,436
12-08 15,093 14,722 17,297
The Barclays Capital Aggregate Bond Index is a market value-weighted measure of
Treasury and agency issues, corporate bond issues and mortgage-backed
securities. Index returns assume reinvestment of dividends and, unlike Portfolio
returns, do not reflect any fees, expenses or sales charges. You cannot invest
directly in an Index.
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Average Annual Total Returns
(as of December 31, 2008)
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Class I Class II*
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10 Years 4.20% 3.94%
5 Years 3.32% 3.06%
1 Year -0.64% -0.88%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
* Performance for periods prior to the inception of Class II shares on
November 9, 2007, is based on the performance of Class I shares reduced to
reflect the higher expenses of Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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COMPARING ONGOING PORTFOLIO EXPENSES
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As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Bond VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008
Share Class I II
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Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 977.95 $ 976.84
Expenses Paid During Period* $ 3.08 $ 4.32
* Expenses are equal to the Portfolio's annualized expense ratio of 0.62% and
0.87% for Class I and Class II shares respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect
the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Bond VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008
Share Class I II
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Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000,00
Ending Account Value on 12/31/08 $ 1,022.02 $ 1,020.76
Expenses Paid During Period* $ 3.15 $ 4.42
* Expenses are equal to the Portfolio's annualized expense ratio of 0.62% and
0.87% for Class I and Class II shares respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect
the one-half year period).
3
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
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A Word About Risk:
When interest rates rise, the prices of fixed- income securities in the
Portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Portfolio will generally rise. Investments in
the Portfolio are subject to possible loss due to the financial failure of
underlying securities and their inability to meet their debt obligations.
Prepayment risk is the chance that mortgage-backed bonds will be paid off early
if falling interest rates prompt homeowners to refinance their mortgages. Forced
to reinvest the unanticipated proceeds at lower interest rates, the Portfolio
would experience a decline in income and lose the opportunity for additional
price appreciation associated with falling interest rates. Investments in high
yield or lower-rated securities are subject to greater-than-average risk. The
securities issued by U.S. Government sponsored entities (i.e., FNMA, Freddie
Mac) are neither guaranteed nor issued by the U.S. Government. The Portfolio may
invest in mortgage-backed securities, which during times of fluctuating interest
rates may increase or decrease more than other fixed-income securities.
Mortgage-backed securities are also subject to pre-payments. At times, the
Portfolio's investments may represent industries or industry sectors that are
interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries
and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The year 2008 was a very difficult period for investing in corporate bonds or
other fixed-income securities with credit risk, as worried investors sought out
the highest-quality securities when economic growth slowed and a credit crisis
widened. In the following interview, Kenneth J. Taubes discusses the factors
that influenced the performance of Pioneer Bond VCT Portfolio during the 12
months ended December 31, 2008. Mr. Taubes, Head of U.S. Portfolio Management at
Pioneer Investments, is responsible for the daily management of the Portfolio.
Q. How did the Portfolio perform over the 12 months ended December 31, 2008?
A: Pioneer Bond VCT Portfolio's Class I shares returned -0.64% at net asset
value, during the 12 months ending December 31, 2008, and Class II shares
returned -0.88%. Over the same period, the Barclays Capital (formerly
Lehman Brothers) Aggregate Bond Index returned 5.24%, while the Barclays
Capital Government/Credit Bond Index returned 5.70%. Over the same 12
months, the average return of the 39 variable portfolios in Lipper's
Corporate Debt, A-Rated category was -5.23%. On December 31, 2008, the
30-day SEC yield of the Portfolio's Class I shares was 6.59%.
Q. What were the principal factors affecting the Portfolio's performance
during the 12 months ended December 31, 2008?
A: The year presented very difficult challenges for any portfolio investing in
corporate debt. Investors fled to the highest-quality securities amid fears
that the economy would continue to deteriorate. Such fears were exacerbated
as a worsening crisis in credit markets sharply restricted lending
activity, choking corporate investments and consumer spending. The
problems, which first appeared in 2007, worsened considerably during 2008
as unemployment rose, manufacturing activity weakened, housing values
declined and consumer spending fell. Many observers had hoped that the
economic slowdown would not lead to recession, but those hopes were crushed
in September 2008 when investment bank Lehman Brothers was forced into
bankruptcy and several other major financial institutions required
emergency government rescues because of their exposures to deteriorating
credit. Stocks and corporate bond prices fell precipitously in the final
months of the year, particularly in October and November, as major
commercial and investment banks teetered on the edge of collapse, economic
production contracted and consumer spending plummeted. In response to all
these developments, the U.S. government acted aggressively. The Federal
Reserve Board (the Fed) lowered short-term interest rates nearly to zero
while making other policy changes to inject liquidity into the financial
system. Congress and the Bush administration agreed upon a $700 billion
financial rescue plan and the incoming Obama administration began preparing
an additional economic stimulus plan for consideration in 2009. As the
economic outlook continued to deteriorate, the yield spreads between
corporate bonds and U.S. Treasury obligations widened, particularly in the
final six months of the year ended December 31, 2008, as investors bid up
Treasury prices while trying to avoid investments with credit risk.
Government agency mortgages trailed Treasuries, but outperformed
investment-grade corporates, which in turn fared better than high-yield
bonds.
In this environment, the Portfolio underperformed the more passive Barclays
indices, primarily because of its investments in high-yield bonds and bank
loans, as the Barclays indices had little or no exposure to high-yield
debt. However, the Portfolio substantially outperformed its Lipper peer
group average.
Q. How did you position the Portfolio during the year ended December 31, 2008?
A: Throughout most of the year, we focused on government-agency
mortgage-backed securities, principally investing in Ginnie Mae, Fannie Mae
and Freddie Mac mortgages. We emphasized agency mortgage-backed securities
because of their high quality and superior yields to Treasuries. They also
carried significantly less credit risk than corporate debt. The Portfolio
had a relatively small position in Treasuries because we thought they were
overpriced. As the year progressed and corporate bonds underperformed, we
began building the Portfolio's positions in corporate securities, primarily
investment-grade debt, where we saw appealing values, especially in light
of our assessment of the relative risks. We also established a Portfolio
position in non-government agency residential mortgages, where we saw
market values falling to extraordinarily low levels that were inconsistent
with the default records of those mortgages.
4
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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At the end of the year, slightly more than half of the Portfolio's assets
remained invested in government-agency mortgages, while about 11% of assets
were invested in high-yield corporate debt instruments, including bank
loans. At December 31, 2008, the average credit quality of Portfolio
holdings was AA-. We kept the average effective duration of the Portfolio -
which is a measure of price risk from changes in interest rates -
relatively low, at 3.81 years, as we saw little value in investing in
longer-maturity bonds when Treasury yields had fallen to extremely low
absolute levels.
Q: What types of investments had the greatest influence on the Portfolio's
performance during the fiscal year ended December 31, 2008?
A: The Portfolio's exposure to high-yield debt was the principal factor
resulting in its underperformance relative to the Barclays bond indices.
Investments in both high-yield and investment-grade corporate bonds held
back the Portfolio's relative results, especially in the final quarter of
2008 when corporate bond values plummeted. Security selection also hurt the
Portfolio's performance, as several of our holdings underperformed despite
continuing to meet all their debt obligations. In addition, the Portfolio's
underweighted position in Treasuries, combined with our short duration
positioning for the Portfolio, held back relative performance as Treasuries
continued to rally at the end of the year during the flight toward
higher-quality investments.
Among the investments that detracted from the Portfolio's results during
the 12-month period included: the securities of American General Finance, a
subsidiary of American International Group (AIG); Forest City Enterprises,
a real estate developer; and Sallie Mae, a student loan provider.
Asset-backed securities of Domino's, the pizza chain, also underperformed.
All of the securities continued to meet their debt obligations during the
period, however. We also had a very small position in Washington Mutual,
which defaulted when the banking company failed, but that investment had a
negligible impact on overall Portfolio performance.
We did, however, see good performance from several selections in the
Portfolio. The stronger performers included: bonds of Constellation Brands,
a leading producer and marketer of wines, beer and spirits; and the bank
loans to Talecris, a health care services company specializing in
processing blood supplies.
Q: What is your investment outlook?
A: As we look ahead at the start of 2009, the market prices of high-yield and
investment-grade corporate debt are approaching Depression-like lows.
However, we think the actions of the U.S. government show that officials
are determined not to repeat the mistakes that preceded the Depression of
the 1930s. The Fed has eased the flow of money into the credit markets, and
the incoming administration has made it clear that stimulating the economy
is more important than balancing the budget during a time of economic
contraction.
We think that one day we may look back and recognize that this was a period
when there were extraordinary opportunities to invest in corporate debt and
other securities whose prices reflected an extremely pessimistic view of
the economy. We think many of the worst possible scenarios already are
factored into the prices of investments such as corporate bonds, bank
loans, non-agency mortgages and asset-backed debt. Given the extremely low
valuations, we have been increasing the Portfolio's investments in
investment-grade corporates, non-agency mortgages and some selective
high-yield bonds, which we think have excellent potential once the economy
starts to reverse its downslide and begins to recover.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08
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Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
CONVERTIBLE CORPORATE BONDS - 0.7%
Consumer Services - 0.3%
Casinos & Gaming - 0.3%
181,000 BB-/NR Scientific Games Corp., 0.75%, 12/1/24 $ 156,791
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Total Consumer Services $ 156,791
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Banks - 0.1%
Regional Banks - 0.1%
95,000 A-/A1 National City Corp., 4.0%, 2/1/11 $ 84,669
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Total Banks $ 84,669
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Telecommunication Services - 0.3%
Integrated Telecommunication Services - 0.3%
230,000 B+/B1 Qwest Communications International, 3.5%, 11/15/25 $ 193,488
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Total Telecommunication Services $ 193,488
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TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $395,188) $ 434,948
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CONVERTIBLE PREFERRED STOCKS - 0.6%
Diversified Financials - 0.5%
Diversified Financial Services - 0.5%
475 Bank of America Corp., 7.25%, 12/31/49 $ 308,750
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Total Diversified Financials $ 308,750
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Insurance - 0.1%
Life & Health Insurance - 0.1%
4,800 Delphi Financial Group, 7.376% 5/15/37 $ 57,840
-----------
Total Insurance $ 57,840
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TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $455,877) $ 366,590
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ASSET BACKED SECURITIES - 2.9%
Materials - 0.0%
Steel - 0.0%
23,410 0.57 AAA/Aaa CXHE 2006-A AV2, Floating Rate Note, 6/25/36 $ 22,419
-----------
Total Materials $ 22,419
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Consumer Services - 0.2%
Restaurants - 0.2%
200,000 BB/Ba3 Dunkin Brands Master Finance LLC, 8.28%, 6/20/31 (144A) $ 128,944
-----------
Total Consumer Services $ 128,944
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Food & Drug Retailing - 0.1%
Food Retail - 0.1%
155,000 BB/Aaa Dominos Pizza Master Issuer LLC, 7.629%, 4/25/37 $ 62,000
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Total Food & Drug Retailing $ 62,000
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6 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Banks - 1.8%
Thrifts & Mortgage Finance - 1.8%
100,000 0.57 AAA/Aaa Carrington Mortgage, Floating Rate Note, 10/25/36 $ 84,851
109,896 0.62 AAA/Aaa CMLTI 2006-WFH2 A2A, Floating Rate Note, 8/25/36 81,794
48,336 AAA/Aaa Countrywide Asset Backed Certificates, 5.069%, 2/25/36 44,498
120,000 0.98 AA+/Aa1 Countrywide Asset Backed Certificates, Floating Rate Note, 11/25/35 103,506
223,000 0.89 AA+/Aa1 Countrywide Asset Backed Certificates, Floating Rate Note, 8/25/35 203,687
75,000 0.93 AA+/Aa1 Countrywide Asset Backed Certificates, Floating Rate Note, 10/25/35 61,637
183,591 0.76 AAA/Aaa FBR Securitization Trust, Floating Rate Note, 9/25/35 156,096
50,054 0.58 AAA/Aaa Fremont Home Loan Trust, Floating Rate Note, 2/25/36 45,427
46,899 AAA/Aaa Lehman XS Trust, 3.34875%, 5/25/46 46,212
136,665 A/Baa1 Local Insight Media Finance Ll, 5.88%, 10/23/37 102,349
110,468 0.52 AAA/Aaa Morgan Stanley Ixis Real Estate, Floating Rate Note, 11/25/36 104,721
117,788 0.00 AAA/Aaa SASC 2007-BC4 A3, Floating Rate Note, 11/25/37 105,196
-----------
$ 1,139,974
-----------
Total Banks $ 1,139,974
-----------
Diversified Financials - 0.8%
Consumer Finance - 0.3%
89,092 0.00 AAA/Aaa Nomura Home Equity Trust, Floating Rate Note, 3/25/36 $ 84,626
100,000 0.91 AA+/Aa1 RASC 2005-KS7 M1, Floating Rate Note, 8/25/35 77,431
-----------
$ 162,057
-----------
Diversified Financial Services - 0.1%
27,000 0.91 AA/Aa2 Asset Backed Securities Corp., Floating Rate Note, 4/25/35 $ 22,383
46,597 0.66 AAA/Aaa FFML 2006-FF4 A2, Floating Rate Note, 3/25/36 35,283
14,151 1.01 AAA/Aaa First Franklin Mortgage Loan Asset Backed Certificate, Floating Rate
Note, 9/24/34 11,633
-----------
$ 69,299
-----------
Investment Banking & Brokerage - 0.3%
65,805 2.73 AAA/Aaa GSAMP Trust, Floating Rate Note, 11/25/35 $ 60,566
77,786 2.91 A/Aa2 GSAMP Trust, Floating Rate Note, 3/25/35 71,547
110,000 2.64 AAA/B2 MLMI 2006-AR1 A2C, Floating Rate Note, 3/25/37 74,516
-----------
$ 206,629
-----------
Specialized Finance - 0.1%
70,000 0.00 AAA/Aaa SLMA 2004-10 A6B, Floating Rate Note, 4/27/26 $ 54,600
-----------
Total Diversified Financials $ 492,585
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $2,108,948) $ 1,845,922
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.5%
Materials - 0.1%
Steel - 0.1%
9,242,642 AAA/Aaa MSDWC 2000-1345 X, 0.7259%, 9/3/15 $ 90,987
-----------
Total Materials $ 90,987
-----------
Banks - 5.0%
Diversified Banks - 0.1%
55,904 AAA/Aa2 RALI 2005-QA10 A41, 5.7412%, 9/25/35 $ 30,901
-----------
The accompanying notes are an integral part of these financial statements. 7
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
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Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Thrifts & Mortgage Finance - 4.9%
160,000 AAA/Aaa Banc of America Commercial Mortgage, Inc., 4.877%, 7/10/42 $ 133,861
306,669 AAA/Ba1 Chase Mortgage Finance Corp., 5.5%, 5/25/37 247,026
264,011 AAA/Aaa Countrywide Alternative Loan Trust, 6.0%, 6/25/35 166,162
350,000 AAA/Aaa GMAC Commercial Mortgage Securities, Inc., 4.864%, 12/10/41 289,219
175,000 AAA/Aaa GS Mortgage Securities Corp. II, 7.12%, 11/18/29 167,445
74,489 2.87 NR/Aaa IMPAC CMB Trust, Floating Rate Note, 11/25/35 36,902
200,000 AAA/Aaa JP Morgan Mortgage Trust, 4.5%, 8/25/19 163,755
264,183 AAA/Aaa JP Morgan Mortgage Trust, 6.0%, 8/25/34 232,318
100,000 AAA/Aaa JPMCC 2002-C3 B, 5.146%, 7/12/35 89,726
100,000 AAA/Aaa JPMCC 2004-PNC1 A3, 5.299%, 6/12/41 90,379
94,961 AAA/Aaa Master Asset Securitization Trust, 5.5%, 11/25/33 83,267
250,000 5.70 AAA/Aaa SASC 2007 BHC1 A1, Floating Rate Note, 12/18/49 (e) 83,143
60,000 NR/Ba1 SBA CMBS Trust, 6.709%, 11/15/36 40,800
40,000 AA/Aa2 TSTAR 2006-1 B, 5.7467%, 10/15/36 24,394
315,000 AAA/Aaa TSTAR 2006-1A A, 5.668%, 10/15/36 252,947
400,000 AAA/Aaa Wachovia Bank Commercial Mortgage Trust, 4.803%, 10/15/41 321,086
134,983 AAA/Aaa WAMU Mortgage Pass-Through Certificate, 4.5%, 8/25/18 106,450
190,017 2.70 AAA/Aaa WAMU Mortgage Pass-Through Certificate, Floating Rate Note,
4/25/45 89,704
100,000 AAA/Aaa WBCMT 2003-C9 B, 5.109%, 12/15/35 87,091
226,081 AAA/NR Wells Fargo Mortgage Backed Securities, 5.0%, 11/25/20 213,929
199,588 NR/Aaa Wells Fargo Mortgage Backed Securities, 5.0%, 3/25/21 144,951
17,950 AAA/Aaa Wells Fargo Mortgage Backed Securities, 5.25, 12/25/33 18,574
-----------
$ 3,083,129
-----------
Total Banks $ 3,114,030
-----------
Diversified Financials - 1.9%
Diversified Financial Services - 1.9%
143,215 NR/Aaa CMSI 2006-1 3A1, 5.0%, 2/25/36 $ 108,503
18,023 AAA/Aaa First Horizon Mortgage Pass-Through Trust, 5.0%, 3/25/18 17,595
10,138 2.88 AAA/Aaa Impac Securities Assets Corp., Floating Rate Note, 11/25/34 5,031
124,214 2.82 AAA/Aaa Impac Securities Assets Corp., Floating Rate Note, 5/25/36 88,177
179,255 AAA/NR J.P. Morgan Alternative Loan Trust, 6.0%, 3/25/36 131,431
308,935 AAA/AAA Master Alternative Loans Trust, 6.0%, 7/25/34 240,776
40,997 AAA/Aaa Morgan Stanley Capital I, 5.25%, 12/25/17 40,153
14,968 AAA/Aaa Morgan Stanley Capital I, 7.0%, 7/25/33 14,140
62,213 0.00 AAA/Aa3 Residential Accredit Loans, Inc., Floating Rate Note, 9/25/46 49,111
159,725 AAA/Aaa Residential Funding Mortgage Securities I, 5.5%, 11/25/35 134,769
5,650 AAA/Aaa Salomon Brothers Mortgage Securities, 8.0%, 9/25/30 4,257
450,000 NR/Ba2 Tower 2004-2A F, 6.376%, 12/15/14 340,200
-----------
$ 1,174,143
-----------
Total Diversified Financials $ 1,174,143
-----------
Real Estate - 0.4%
Mortgage Real Estate Investment Trusts - 0.4%
298,989 AAA/Aaa CS First Boston Mortgage Security, 3.5%, 7/25/18 $ 262,473
32,860 AA/Aa2 CS First Boston Mortgage Security, 7.0%, 5/25/32 18,633
-----------
$ 281,106
-----------
Total Real Estate $ 281,106
-----------
8 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Government - 3.1%
Government - 3.1%
1,281,596 AAA/Aaa Fannie Mae-Aces, 6.3%, 4/25/19 $ 1,368,446
50,567 NR/NR Federal Home Loan Bank, 5.0%, 1/15/16 51,352
150,000 AAA/Aaa Freddie Mac, 3.8%, 1/15/18 148,477
350,000 AAA/Aaa Freddie Mac, 5.5%, 7/15/28 357,691
41,718 AAA/Aaa Freddie Mac, 6.1%, 9/15/18 41,707
-----------
$ 1,967,673
-----------
Total Government $ 1,967,673
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $7,674,560) $ 6,627,939
-----------
CORPORATE BONDS - 30.6%
Energy - 3.3%
Integrated Oil & Gas - 0.4%
60,000 BBB+/Baa1 Marathon Oil Corp., 5.9%, 3/15/18 $ 50,110
215,000 BBB/Baa2 Petro-Canada, 4.0%, 7/15/13 184,364
-----------
$ 234,474
-----------
Oil & Gas Drilling - 0.3%
125,000 BBB+/Baa2 Transocean Sedco, 1.5%, 12/15/37 $ 101,250
100,000 BBB+/Baa2 Transocean Sedco, 1.625%, 12/15/37 87,125
-----------
$ 188,375
-----------
Oil & Gas Equipment & Services - 0.1%
100,000 5.53 NR/NR Sevan Marine ASA, Floating Rate Note, 5/14/13 (144A) $ 50,090
-----------
Oil & Gas Exploration & Production - 0.4%
135,000 BBB/Baa2 Canadian National Resource, 5.9%, 2/1/18 $ 116,637
148,927 BBB+/NR Gazprom International SA, 7.201%, 2/1/20 108,716
-----------
$ 225,353
-----------
Oil & Gas Refining & Marketing - 0.3%
200,000 BBB/Baa1 Spectra Energy Capital, 6.2%, 4/15/18 $ 173,550
-----------
Oil & Gas Storage & Transportation - 1.8%
50,000 BBB-/Baa2 Boardwalk Pipelines LLC, 5.5%, 2/1/17 $ 40,430
90,000 BBB/Baa2 Buckeye Partners LP, 6.05%, 1/15/18 75,443
125,000 B+/B1 Holly Energy Partners LP, 6.25%, 3/1/15 83,750
250,000 BBB/Baa2 Kinder Morgan Energy, 5.95%, 2/15/18 (b) 213,366
250,000 BBB-/Baa3 NGPL Pipeco LLC, 6.514%, 12/15/12 (144A) 237,255
200,000 BBB-/Baa3 Plains All America Pipeline, 6.125%, 1/15/17 159,038
265,000 A-/A3 Questar Pipeline Co., 5.83%, 2/1/18 244,965
185,000 BB/Ba1 Southern Union Co., 7.2%, 11/1/66 63,825
-----------
$ 1,118,072
-----------
Total Energy $ 1,989,914
-----------
Materials - 1.7%
Aluminum - 0.3%
285,000 B/B3 Novelis, Inc., 7.25%, 2/15/15 $ 165,300
-----------
Commodity Chemicals - 0.1%
135,000 B+/Ba3 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 56,025
-----------
The accompanying notes are an integral part of these financial statements. 9
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Fertilizers & Agricultural Chemicals - 0.9%
350,000 BBB/Baa2 Agrium, Inc., 6.75%, 1/15/19 $ 335,037
220,000 A-/Baa1 Potash Corp. Saskatchewan, 4.875%, 3/1/13 208,321
-----------
$ 543,358
-----------
Steel - 0.4%
260,000 BBB+/Baa2 ArcelorMittal, 6.125%, 6/1/18 $ 178,037
80,000 BBB/Baa2 Commercial Metals Co., 7.35%, 8/15/18 64,056
-----------
$ 242,093
-----------
Total Materials $ 1,006,776
-----------
Capital Goods - 1.7%
Aerospace & Defense - 0.3%
190,000 A+/A2 Boeing Co., 5.125%, 2/15/13 $ 189,816
-----------
Building Products - 0.2%
220,000 BB+/BBB- C10 Capital SPV, Ltd., Floating Rate Note, 12/31/49 $ 104,683
-----------
Electrical Component & Equipment - 0.7%
205,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 164,000
395,000 BB-/Ba1 Belden CDT, Inc., 7.0%, 3/15/17 296,250
-----------
$ 460,250
-----------
Trading Companies & Distributors - 0.5%
340,000 BBB+/Baa1 GATX Financial Corp., 6.0%, 2/15/18 $ 302,264
100,000 BBB-/Baa2 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 40,480
-----------
$ 342,744
-----------
Total Capital Goods $ 1,097,493
-----------
Commercial Services & Supplies - 0.6%
Office Services & Supplies - 0.6%
365,000 A/A1 Pitney Bowes, Inc., 5.6%, 3/15/18 $ 361,868
-----------
Total Commercial Services & Supplies $ 361,868
-----------
Transportation - 1.1%
Railroads - 1.1%
135,000 BBB/Baa1 Burlington Northern Santa Fe Corp., 5.75%, 3/15/08 $ 130,137
75,000 BBB/Baa1 Burlington Northern Santa Fe Corp., 7.0%, 2/1/14 78,268
235,000 BB-/B1 Kansas City Southern Mex, 7.625%, 12/1/13 192,700
305,000 BBB/Baa2 Union Pacific Corp., 5.7%, 8/15/18 293,634
-----------
$ 694,739
-----------
Total Transportation $ 694,739
-----------
Automobiles & Components - 0.2%
Auto Parts & Equipment - 0.2%
490,000 B-/B3 Lear Corp., 8.75%, 12/1/16 $ 142,100
-----------
Total Automobiles & Components $ 142,100
-----------
Consumer Durables & Apparel - 0.3%
Household Appliances - 0.3%
255,000 BBB/Baa2 Whirlpool Corp., 5.5%, 3/1/13 $ 201,751
-----------
Total Consumer Durables & Apparel $ 201,751
-----------
10 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Consumer Services - 0.4%
Education Services - 0.4%
150,000 AAA/Aaa President & Fellows of Harvard, 3.7%, 4/1/13 $ 147,968
105,000 AAA/Aaa President & Fellows of Harvard, 6.3%, 10/1/37 113,374
-----------
$ 261,342
-----------
Total Consumer Services $ 261,342
-----------
Media - 0.6%
Broadcasting - 0.2%
165,000 BBB+/Baa1 Grupo Televisa S.A., 6.0%, 5/15/18 (144A) $ 138,749
-----------
Cable & Satellite - 0.4%
100,000 BBB/Baa2 British Sky Broadcasting, 6.1%, 2/15/18 (144A) $ 82,110
135,000 BBB+/Baa2 Comcast Corp., 5.3%, 1/15/14 126,243
35,000 BBB+/Baa2 Time Warner Cable, Inc., 8.75, 2/14/19 38,057
-----------
$ 246,410
-----------
Total Media $ 385,159
-----------
Retailing - 0.3%
Specialty Stores - 0.3%
215,000 B/B3 Sally Holdings, 9.25%, 11/15/14 (144A) (b) $ 184,900
-----------
Total Retailing $ 184,900
-----------
Food, Beverage & Tobacco - 1.7%
Agricultural Products - 0.4%
250,000 A/A2 Cargill, Inc., 5.2%, 1/22/13 (144A) $ 229,024
-----------
Brewers - 0.4%
280,000 BBB+/Baa1 Miller Brewing Co., 5.5%, 8/15/13 (144A) $ 261,068
-----------
Distillers & Vintners - 0.4%
265,000 BB-/Ba3 Constellation Brands, Inc., 8.375%, 12/15/14 $ 251,750
-----------
Soft Drinks - 0.4%
280,000 A/A2 Bottling Group LLC, 5.0%, 11/15/13 $ 273,501
-----------
Tobacco - 0.1%
100,000 A/A3 UST, Inc., 5.75%, 3/1/18 $ 82,071
-----------
Total Food, Beverage & Tobacco $ 1,097,414
-----------
Health Care Equipment & Services - 0.6%
Health Care Facilities - 0.3%
235,000 BB-/B2 HCA, Inc., 9.625%, 11/15/16 $ 183,300
-----------
Managed Health Care - 0.3%
195,000 A-/Baa1 United Health Group, 4.875%, 2/15/13 $ 182,057
-----------
Total Health Care Equipment & Services $ 365,357
-----------
Pharmaceuticals & Biotechnology - 0.5%
Biotechnology - 0.5%
335,000 BBB+/Baa3 Biogen Idec, Inc., 6.0%, 3/1/13 $ 331,344
-----------
Total Pharmaceuticals & Biotechnology $ 331,344
-----------
Banks - 3.1%
Diversified Banks - 1.0%
220,000 A+/Aa2 Barclays Plc, 6.05%, 12/4/17 $ 194,083
210,000 A+/A1 Wachovia Corp., 5.75%, 6/15/17 209,022
200,000 AA/Aa1 Wells Fargo Co., 4.375%, 1/31/13 195,843
-----------
$ 598,948
-----------
The accompanying notes are an integral part of these financial statements. 11
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Regional Banks - 2.1%
250,000 A/A1 American Express Bank FSB, 5.5%, 4/16/13 $ 236,810
55,000 A-/A2 Keycorp, 6.5%, 5/14/13 50,704
145,000 A+/Aa3 Mellon Funding Corp., 5.5%, 11/15/18 124,997
250,000 A+/A1 PNC Bank N.A., 6.0%, 12/7/17 248,454
100,000 8.25 A-/A3 PNC Funding Corp., Floating Rate Note, 5/29/49 80,579
250,000 BBB/Baa2 Sovereign Bancorp, 8.75%, 5/30/18 246,984
210,000 A+/Aa3 Wachovia Bank N.A., 6.0%, 11/15/17 202,718
100,000 A+/Aa2 Wells Fargo Capital, 9.75%, 12/29/49 101,000
45,000 BBB/NR Zions Bancorporation, 5.5%, 11/16/15 31,824
-----------
$ 1,324,070
-----------
Total Banks $ 1,923,018
-----------
Diversified Financials - 5.6%
Asset Management & Custody Banks - 0.3%
205,000 A-/A3 Eaton Vance Corp., 6.5%, 10/2/17 $ 181,649
-----------
Consumer Finance - 1.4%
335,000 BBB/Baa1 American General Finance, 6.9%, 12/15/17 $ 144,979
305,000 A+/Aa3 American Honda Finance, 6.7%, 10/1/13 (144A) 307,443
200,000 A/A2 Caterpillar Financial, 7.05%, 10/1/18 210,506
415,000 4.00 BBB-/Baa2 SLM Corp., Floating Rate Note, 7/25/14 209,255
-----------
$ 872,183
-----------
Diversified Financial Services - 1.1%
125,000 8.40 BBB/Baa2 Citigroup, Inc., Floating Rate Note, 4/29/49 $ 82,536
150,000 A+/Aa2 JP Morgan Chase & Co., 6.0%, 1/15/18 (b) 158,329
400,000 A-/A1 JP Morgan Chase & Co., 7.9%, 4/29/49 332,732
49,359 BBB/Baa2 Power Receivables Finance LLC, 6.29%, 1/1/12 (144A) 48,351
100,000 BB/Baa2 TNK-BP Finance SA, 6.625%, 3/20/17 (144A) 48,000
65,000 BB/Baa2 TNK-BP Finance SA, 7.5%, 7/18/16 (144A) 33,800
-----------
$ 703,748
-----------
Investment Banking & Brokerage - 1.3%
790,000 5.79 BBB/A3 Goldman Sachs Capital, Floating Rate Note, 12/29/49 $ 303,694
200,000 A/A2 Merrill Lynch & Co., 5.45%, 2/5/13 192,249
380,000 A/A2 Morgan Stanley Dean Witter, 6.625%, 4/1/18 333,370
-----------
$ 829,313
-----------
Specialized Finance - 1.5%
320,000 BBB+/Baa1 CIT Group, Inc., 7.625%, 11/30/12 $ 270,134
371,849 NR/Baa3 Coso Geothermal Power, 7.0%, 7/15/26 (144A) 310,494
155,000 A-/Baa1 International Lease Finance Corp., 6.375%, 3/25/13 105,291
180,000 A+/A1 National Rural Utilities Corp., 5.45%, 2/1/18 159,824
75,000 A+/A1 National Rural Utilities Corp., 10.375%, 11/1/18 87,781
-----------
$ 933,524
-----------
Total Diversified Financials $ 3,520,417
-----------
Insurance - 2.2%
Life & Health Insurance - 0.7%
295,000 B+/B1 Presidential Life Corp., 7.875%, 2/15/09 $ 277,669
180,000 A+/A3 Prudential Financial, 5.15%, 1/15/13 146,205
-----------
$ 423,874
-----------
12 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Multi-Line Insurance - 0.4%
275,000 BB/Baa3 Liberty Mutual Group, 7.0%, 3/15/37 (144A) $ 131,143
100,000 BBB-/Baa2 Liberty Mutual Group, 7.3%, 6/15/14 (144A) 93,637
65,000 10.75 BB/Baa3 Liberty Mutual Group, Floating Rate Note, 6/15/58 (144A) 35,750
-----------
$ 260,530
-----------
Property & Casualty Insurance - 0.7%
3,000 6.15 BB+/Ba2 Ambac Financial Group, Inc., Floating Rate Note, 2/15/37 $ 300
265,000 BBB-/Baa3 Hanover Insurance Group, 7.625%, 10/15/25 159,000
255,000 BB/NR Kingsway America, Inc., 7.5%, 2/1/14 212,453
140,000 14.00 A/Baa3 MBIA, Inc., Floating Rate Note, 1/15/33 (144A) 71,400
-----------
$ 443,153
-----------
Reinsurance - 0.4%
145,000 AAA/Aaa Berkshire Hathway, Inc., 5.0%, 8/15/13 $ 147,500
210,000 BBB+/NR Platinum Underwriters HD, 7.5%, 6/1/17 136,319
-----------
$ 283,819
-----------
Total Insurance $ 1,411,376
-----------
Real Estate - 1.2%
Diversified Real Estate Activities - 0.3%
270,000 A-/A2 WEA Finance LLC, 7.125%, 4/15/18 $ 191,536
-----------
Real Estate Operating Companies - 0.2%
250,000 B+/B1 Forest City Enterprises, 6.5%, 2/1/17 $ 87,500
150,000 B+/B1 Forest City Enterprises, 7.625%, 6/1/15 52,500
-----------
$ 140,000
-----------
Retail Real Estate Investment Trusts - 0.3%
185,000 AAA/Aaa Trustreet Properties, Inc., 7.5%, 4/1/15 $ 200,735
-----------
Specialized Real Estate Investment Trusts - 0.4%
260,000 BBB-/Baa2 Health Care, Inc., 6.0%, 11/15/13 $ 175,054
55,000 BBB-/Ba1 Ventas Realty Capital Corp., 7.125%, 6/1/15 43,038
-----------
$ 218,092
-----------
Total Real Estate $ 750,363
-----------
Software & Services - 0.4%
Data Processing & Outsourced Services - 0.4%
370,000 B/B3 First Data Corp., 9.875%, 9/24/15 (144A) $ 223,850
-----------
Total Software & Services $ 223,850
-----------
Technology Hardware & Equipment - 0.1%
Electronic Equipment & Instruments - 0.1%
135,000 BBB-/Ba1 Agilent Technologies, Inc., 6.5%, 11/1/17 $ 92,799
-----------
Total Technology Hardware & Equipment $ 92,799
-----------
Semiconductors - 0.2%
Semiconductor Equipment - 0.2%
200,000 BBB/Baa1 KLA Instruments Corp., 6.9%, 5/1/18 $ 151,266
-----------
Total Semiconductors $ 151,266
-----------
The accompanying notes are an integral part of these financial statements. 13
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Telecommunication Services - 0.9%
Integrated Telecommunication Services - 0.9%
155,000 BBB-/Baa3 Embarq Corp., 7.082%, 6/1/16 $ 119,350
10,000 BBB/Baa2 Telecom Italia Capital, 4.875%, 10/1/10 9,050
175,000 A/A3 Verizon Communications, Inc., 8.75%, 11/1/18 205,314
250,000 BB/Ba3 Windstream Corp., 8.125%, 8/1/13 230,000
-----------
$ 563,714
-----------
Total Telecommunication Services $ 563,714
-----------
Utilities - 3.9%
Electric Utilities - 2.5%
30,000 BBB+/Baa2 Commonwealth Edison, 6.15%, 9/15/17 $ 27,895
96,283 BBB-/Baa3 Crocket Cogeneration, 5.869%, 3/30/25 (144A) 76,652
90,000 BBB+/Baa3 Entergy Gulf States, 5.7%, 6/1/15 81,253
102,028 BB-/Ba2 FPL Energy National Wind, 6.125%, 3/25/19 (144A) 88,633
148,056 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 138,988
200,000 BBB+/Baa2 Israel Electric Corp., 7.25%, 1/15/19 (144A) 186,530
60,000 BBB/Baa3 Nevada Power Co., 6.5%, 8/1/18 57,727
315,000 BBB+/Baa1 NY State Gas and Electric, 6.15%, 12/15/17 (144A) 286,680
46,019 NR/NR Orcal Geothermal, 6.21%, 12/30/20 (144A) 51,696
185,000 BB+/Baa3 Public Service of New Mexico, 7.95%, 5/15/18 150,545
40,000 A/A2 Southern California Edison Co., 5.75%, 3/15/14 41,918
235,000 CCC/B3 TXU Energy Co., 10.25%, 11/1/15 166,850
225,000 BBB+/Baa2 West Penn Power Co., 5.95%, 12/15/17 189,552
-----------
$ 1,544,919
-----------
Gas Utilities - 0.3%
255,000 A/Aa3 Nakilat, Inc., 6.267%, 12/31/33 (144A) $ 170,873
-----------
Independent Power Producer & Energy Traders - 0.8%
235,000 BB-/Ba3 Intergen NV, 9.0%, 6/30/17 $ 192,700
140,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 107,150
160,000 BBB-/Baa3 Panoche Energy Center, 6.885%, 7/31/29 (144A) 135,462
142,087 BB/Ba2 Tenaska Alabama, 7.0%, 6/30/21 (144A) 111,444
-----------
$ 546,756
-----------
Multi-Utilities - 0.3%
65,000 A-/Baa2 Dominion Resources, Inc., 6.4%, 6/15/18 $ 63,648
160,000 BB/Ba2 NSG Holdings LLC, 7.75%, 12/15/25 (144A) 124,800
-----------
$ 188,448
-----------
Total Utilities $ 2,450,996
-----------
TOTAL CORPORATE BONDS
(Cost $22,942,067) $19,207,956
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 47.8%
730,000 AAA/Aaa Fannie Mae, 5.24%, 8/7/18 769,797
500,000 AAA/Aaa Farmer Mac GTD, 5.125%, 4/19/17 (144A) 571,700
250,000 AAA/Aaa Federal Home Loan Bank, 4.0%, 2/12/10 258,924
21,887 AAA/Aaa Federal Home Loan Corp., 6.5%, 2/1/32 22,865
13,581 AAA/Aaa Federal Home Loan Corp., 7.0%, 3/1/32 14,286
18,357 AAA/Aaa Federal Home Loan Corp., 7.0%, 4/1/32 19,292
1,366,797 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 12/1/21 - 12/1/35 1,402,509
250,000 AAA/Aaa Federal Home Loan Mortgage Corp., 5.25%, 4/3/12 252,343
413,121 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/33 - 3/1/37 423,698
14 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS - (continued)
1,160,354 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 10/1/32 - 1/1/34 $ 1,199,421
292,813 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 - 7/1/32 305,612
146,415 AAA/Aaa Federal Home Loan Mortgage Corp., 7.0%, 8/1/22 - 10/1/46 150,732
17,434 AAA/Aaa Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 18,482
702,504 AAA/Aaa Federal National Mortgage Association, 4.0%, 7/1/18 - 3/1/36 699,321
644,843 AAA/Aaa Federal National Mortgage Association, 4.5%, 4/1/19 - 3/1/37 663,860
1,077,718 AAA/Aaa Federal National Mortgage Association, 4.79%, 12/1/12 1,096,654
2,155,352 AAA/Aaa Federal National Mortgage Association, 5.0%, 3/1/09 - 12/1/35 2,216,721
2,646,423 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/17 - 12/1/34 2,732,242
132,841 AAA/Aaa Federal National Mortgage Association, 5.9% 7/1/28 138,320
812,992 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/11 - 9/1/34 840,392
719,155 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/21 - 7/1/34 750,822
130,933 AAA/Aaa Federal National Mortgage Association, 7.0%, 3/1/12 - 1/1/32 137,841
7,940 AAA/Aaa Federal National Mortgage Association, 7.5%, 2/1/31 8,407
177,901 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/29 - 5/1/31 188,478
13,475 AAA/Aaa Federal National Mortgage Association, 9.5%, 2/1/21 14,725
240,000 NR/Aaa Financing Corp., 10.35%, 8/3/18 383,174
303,000 A/Aa2 Freddie Mac, 5.0%, 12/14/18 314,064
1,255,546 AAA/Aaa Government National Mortgage Association, 4.5%,
12/15/18 - 12/15/34 1,294,241
1,708,853 AAA/Aaa Government National Mortgage Association, 5.0%,
7/15/17 - 7/15/37 1,775,922
1,983,599 AAA/Aaa Government National Mortgage Association, 5.5%,
6/15/17 - 6/20/38 2,052,091
150,805 AAA/Aaa Government National Mortgage Association, 5.72%,
1/15/29 - 10/15/29 156,395
2,440,911 AAA/Aaa Government National Mortgage Association, 6.0%,
8/15/13 - 9/15/34 2,534,561
873,375 AAA/Aaa Government National Mortgage Association, 6.5%,
4/15/17 - 1/15/34 918,672
299,775 AAA/Aaa Government National Mortgage Association, 7.0%,
1/15/26 - 5/15/32 316,900
42,731 AAA/Aaa Government National Mortgage Association, 7.5%,
6/15/23 - 1/15/32 45,284
6,998 AAA/Aaa Government National Mortgage Association, 7.75%, 11/15/29 7,417
1,280 AAA/Aaa Government National Mortgage Association, 8.0%, 8/20/25 1,356
66,345 AAA/Aaa Government National Mortgage Association I, 6.0%, 2/15/29 68,822
177,344 AAA/Aaa Government National Mortgage Association II, 5.0%, 12/20/18 185,537
745,869 AAA/Aaa Government National Mortgage Association II, 5.5%,
7/20/19 - 11/20/34 771,295
153,882 AAA/Aaa Government National Mortgage Association II, 5.9%, 2/20/28 159,001
614,002 AAA/Aaa Government National Mortgage Association II, 6.0%,
12/20/18 - 10/20/34 635,305
15,588 AAA/Aaa Government National Mortgage Association II, 6.5%, 8/20/28 16,407
63,826 AAA/Aaa Government National Mortgage Association II, 7.0%,
5/20/26 - 1/20/31 67,242
198,058 AAA/Aaa New Valley Generation I, 7.299%, 3/15/19 248,424
250,000 AA+/Aaa Private Export Funding 3.375%, 2/15/09 250,926
250,000 AAA/Aaa Tennessee Valley Authority, 4.75%, 8/1/13 270,579
95,000 AAA/Aaa U.S. Treasury Bonds, 3.875%, 5/15/18 108,330
The accompanying notes are an integral part of these financial statements. 15
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS - (continued)
847,000 AAA/Aaa U.S. Treasury Bonds, 6.25%, 8/15/23 $ 1,155,228
135,000 AAA/Aaa U.S. Treasury Bonds, 7.25%, 5/15/16 180,763
500,000 AAA/Aaa U.S. Treasury Notes, 6.375%, 8/15/27 731,719
600,000 AAA/Aaa U.S. Treasury Strip, 0.0%, 5/15/17 479,807
-----------
$30,026,906
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $28,689,865) $30,026,906
-----------
FOREIGN GOVERNMENT BONDS - 0.6%
250,000 AAA/Aaa Aid-Egypt, 4.45%, 9/15/15 $ 270,088
90,000 A/Aa3 Korea Development Bank, 5.3%, 1/17/13 81,936
-----------
$ 352,024
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $331,714) $ 352,024
-----------
MUNICIPAL BONDS - 1.1%
Municipal Higher Education - 1.1%
275,000 AAA/Aa3 California State University Revenue, 5.0%, 11/1/39 $ 253,259
275,000 AAA/Aaa Connecticut State Health & Education, 5.0%, 7/1/42 271,476
175,000 AAA/Aaa New York State Dormitory Authority, 5.0%, 7/1/38 173,401
-----------
$ 698,136
-----------
TOTAL MUNICIPAL BONDS
(Cost $700,345) $ 698,136
-----------
SENIOR FLOATING RATE LOAN INTERESTS - 3.8%**
Energy - 0.1%
Oil & Gas Exploration & Production - 0.1%
88,653 4.34 B+/B2 Calpine Corp., 1st Priority Term Loan, 3/31/14 $ 65,762
-----------
Total Energy $ 65,762
-----------
Materials - 0.5%
Paper Packaging - 0.5%
197,985 5.50 B+/B2 Graham Packaging Co., New Term Loan, 10/7/11 $ 144,199
197,045 6.72 BB/Ba2 Graphic Packaging International, Inc., Incremental Term Loan,
5/16/14 147,291
-----------
$ 291,490
-----------
Total Materials $ 291,490
-----------
Capital Goods - 0.3%
Aerospace & Defense - 0.2%
222,410 5.44 B+/Ba3 Aeroflex, Inc., Tranche B-1 Term Loan, 8/15/14 $ 140,118
-----------
Construction & Farm Machinery & Heavy Trucks - 0.1%
57,314 5.56 BB-/Ba3 Accuride Corp., Term Advance Loan, 1/31/12 $ 39,654
-----------
Total Capital Goods $ 179,772
-----------
Commercial Services & Supplies - 0.2%
Environmental & Facilities Services - 0.2%
197,990 4.24 BB-/B2 Synagro Technologies, Inc., 1st Lien Term Loan, 4/2/14 $ 133,643
-----------
Total Commercial Services & Supplies $ 133,643
-----------
16 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Transportation - 0.1%
Air Freight & Couriers - 0.1%
14,961 3.10 B/Ba2 Ceva Group Plc, Additional Pre-Funded Term Loan, 11/4/13 $ 9,276
45,548 5.05 NR/Ba2 Ceva Group Plc, U.S. Term Loan, 11/4/13 28,240
-----------
$ 37,516
-----------
Total Transportation $ 37,516
-----------
Automobiles & Components - 0.2%
Tires & Rubber - 0.2%
205,000 2.22 BB/Ba1 Goodyear Tire & Rubber Co., 2nd Lien Term Loan, 4/30/14 $ 131,713
-----------
Total Automobiles & Components $ 131,713
-----------
Consumer Durables & Apparel - 0.1%
Housewares & Specialties - 0.1%
59,100 3.96 BB-/Ba3 Jarden Corp., Term B3 Loan, 1/24/12 $ 46,157
-----------
Total Consumer Durables & Apparel $ 46,157
-----------
Consumer Services - 0.2%
Casinos & Gaming - 0.2%
100,000 5.44 NR/NR Fontainebleau Las Vegas, Initial Term Loan, 6/6/14 $ 28,750
31,673 6.55 BB-/Ba3 Gateway Casinos & Entertainment, Delayed Draw Term Loan,
9/30/14 14,094
156,781 6.55 BB-/Ba3 Gateway Casinos & Entertainment, Term Advance Loan, 9/30/14 69,768
-----------
$ 112,612
-----------
Total Consumer Services $ 112,612
-----------
Media - 0.2%
Broadcasting - 0.1%
200,000 2.71 B-/B2 Univision Communications, Inc., Initial Term Loan, 9/29/14 $ 82,222
-----------
Cable & Satellite - 0.1%
63,558 6.40 B/B3 Knology, Inc., Term Loan, 6/30/12 $ 36,546
-----------
Total Media $ 118,768
-----------
Retailing - 0.1%
Internet Retail - 0.1%
90,000 6.64 BBB-/Ba1 Ticketmaster Corp., Term B Loan, 7/25/14 $ 62,100
-----------
Total Retailing $ 62,100
-----------
Health Care Equipment & Services - 0.9%
Health Care Equipment - 0.2%
163,074 5.64 B+/B2 Talecris Biotherapeutics, Inc., 1st Lien Term Loan, 12/6/13 $ 143,097
-----------
Health Care Facilities - 0.4%
106,551 4.45 BB/Ba3 CHS/Community Health Systems, Inc., Funded Term Loan, 7/25/14 $ 83,482
1,816 1.80 BB/Ba3 CHS/Community Health Sys, Inc., Delayed Draw Term Loan, 7/25/14 1,423
98,000 3.71 BB+/Ba2 HCA, Inc., Tranche B Term Loan, 11/18/13 77,481
74,509 3.07 B+/Ba3 Psychiatric Solutions, Inc., Term Loan, 7/2/12 58,986
-----------
$ 221,372
-----------
Health Care Services - 0.2%
195,134 3.71 BB-/Ba3 Catalent Pharma Solutions, Inc., Dollar Term Loan, 4/10/14 $ 118,544
-----------
The accompanying notes are an integral part of these financial statements. 17
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Health Care Supplies - 0.1%
95,040 4.71 BB-/B1 Bausch & Lomb, Inc., Parent Term Loan, 4/24/15 $ 65,170
14,400 3.43 BB-/B1 Bausch & Lomb, Inc., Delayed Draw Term Loan, 4/24/15 9,874
-----------
$ 75,044
-----------
Total Health Care Equipment & Services $ 558,057
-----------
Pharmaceuticals & Biotechnology - 0.1%
Life Sciences Tools & Services - 0.1%
79,800 5.25 BBB-/Baa3 Life Technologies Corp., Term B Facility Loan, 6/11/16 $ 75,012
-----------
Total Pharmaceuticals & Biotechnology $ 75,012
-----------
Diversified Financials - 0.1%
Diversified Financial Services - 0.1%
148,875 4.94 BB/Ba2 Metavante Corp., Term Loan, 11/1/14 $ 111,656
-----------
Total Diversified Financials $ 111,656
-----------
Software & Services - 0.2%
IT Consulting & Other Services - 0.2%
148,485 4.02 BB/Ba3 Sungard Data Systems, Inc., New U.S. Term Loan, 2/28/14 $ 102,603
-----------
Total Software & Services $ 102,603
-----------
Semiconductors - 0.2%
Semiconductor Equipment - 0.2%
55,106 7.07 BB-/Ba1 Flextronics Semiconductors, A1A Delayed Draw Term Loan, 10/1/14 $ 35,452
191,769 6.16 BB-/Ba1 Flextronics Semiconductors, Closing Date Term Loan, 10/1/14 123,372
-----------
$ 158,824
-----------
Total Semiconductors $ 158,824
-----------
Telecommunication Services - 0.1%
Integrated Telecommunication Services - 0.1%
119,478 6.10 B+/B2 Telesat Canada, Inc., U.S. Term I Loan, 10/31/14 $ 82,568
10,262 4.46 B+/B2 Telesat Canada, Inc., U.S. Term II Loan, 10/31/14 7,092
-----------
$ 89,660
-----------
Total Telecommunication Services $ 89,660
-----------
Utilities - 0.2%
Electric Utilities - 0.2%
148,125 5.60 BBB-/Ba1 Texas Competitive Electric Holdings, Initial Tranche B2 Loan,
10/10/13 $ 103,379
-----------
Total Utilities $ 103,379
-----------
TOTAL SENIOR FLOATING RATE LOAN INTERESTS
(Cost $3,329,901) $ 2,378,724
-----------
TEMPORARY CASH INVESTMENTS - 0.9%
Securities Lending Collateral - 0.9%
(d) Certificates of Deposit:
13,218 Abbey National Plc, 3.15%, 8/13/09 $ 13,218
13,216 Bank of Nova Scotia, 3.21%, 5/5/09 13,216
21,123 Bank of Scotland NY, 2.92%, 6/5/09 21,123
23,791 Barclays Bank, 1.5%, 5/27/09 23,791
4,202 Calyon NY, 4.62%, 1/16/09 4,202
26,435 CBA, 4.87%, 7/16/09 26,435
23,791 DNB NOR Bank ASA NY, 3.04%, 6/5/09 23,791
24,214 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 24,214
1,531 NORDEA NY, 4.13%, 4/9/09 1,531
18 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Securities Lending Collateral - (continued)
19,826 Royal Bank of Canada NY, 2.7%, 8/7/09 $ 19,826
13,218 Royal Bank of Scotland, 3.06%, 3/5/09 13,218
2,642 Skandinavian Enskilda Bank NY, 3.06%, 2/13/09 2,642
26,435 Societe Generale, 3.29%, 9/4/09 26,435
23,791 Svenska Bank NY, 4.61%, 7/8/09 23,791
26,435 U.S. Bank NA, 2.25%, 8/24/09 26,435
-----------
$ 263,868
-----------
Commercial Paper:
2,519 BBVA U.S., 2.83%, 3/12/09 $ 2,519
26,435 Monumental Global Funding, Ltd., 2.5%, 8/17/09 26,435
13,218 CME Group, Inc., 2.9%, 8/6/09 13,218
13,216 General Electric Capital Corp., 2.86%, 3/16/09 13,216
25,959 American Honda Finance Corp., 4.95%, 7/14/09 25,959
26,435 HSBC Bank, Inc., 2.5%, 8/14/09 26,435
13,218 IBM, 2.39%, 9/25/09 13,218
23,792 Met Life Global Funding, 3.19%, 6/12/09 23,792
23,792 New York Life Global, 2.13%, 9/4/09 23,792
22,470 Westpac Banking Corp., 2.34%, 6/1/09 22,470
-----------
$ 191,054
-----------
Tri-party Repurchase Agreements:
58,157 Deutsche Bank, 0.25%, 1/2/09 $ 58,157
4,491 Barclays Capital Markets, 0.5%, 1/2/09 4,491
-----------
$ 62,648
-----------
Time Deposit:
26,435 BNP Paribas, 0.01%, 1/2/09 $ 26,435
-----------
Money Market Mutual Funds:
6,609 Columbia Government Reserves Fund $ 6,609
19,826 JP Morgan, U.S. Government Money Market Fund 19,826
-----------
$ 26,435
-----------
Total Securities Lending Collateral $ 570,440
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $570,440) $ 570,440
-----------
TOTAL INVESTMENT IN SECURITIES - 99.5%
(Cost $67,198,905)(a) $62,509,585
-----------
OTHER ASSETS AND LIABILITIES - 0.5% $ 353,716
-----------
TOTAL NET ASSETS - 100.0% $62,863,301
===========
NR Not rated by either S&P or Moody's.
(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, 2008, the value of these securities amounted to $4,707,096
or 7.5% of total net assets.
** Senior floating rate loan interests in which the Portfolio invests
generally pay interest at rates that are periodically redetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate
offered by one or more major United States banks, (iii) the certificate
of deposit or (iv) other base lending rates used by commercial lenders.
The rate shown is the coupon rate at period end.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $67,431,772 was as follows:
Aggregate gross unrealized gain for all investments in which there is an
excess of value over tax cost $ 1,628,561
Aggregate gross unrealized loss for all investments in which there is an
excess of tax cost over value (6,550,748)
------------
Net unrealized loss $ (4,922,187)
============
The accompanying notes are an integral part of these financial statements. 19
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
(b) At December 31, 2008, the following securities were out on loan:
Principal
Amount ($) Description Value
148,000 JP Morgan Chase & Co., 6.0%, 1/15/18 $ 156,214
240,000 Kinder Morgan Energy, 5.95%, 2/15/18 204,840
212,000 Sally Holdings, 9.25%, 11/15/14 (144A) 182,320
---------
Total $ 543,374
=========
(c) Debt obligation with a variable interest rate. Rate shown is rate at period
end.
(d) Security lending collateral is managed by Credit Suisse, New York Branch.
(e) Security is fair valued (see Note A).
Purchases and sales of securities (excluding temporary cash investments)
for the year ended December 31, 2008 aggregated $36,213,091 and
$36,403,700, respectively.
Various inputs are used in determining the value of the Portfolio's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- --------------------------------------------------------------
Level 1 - Quoted Prices $ 308,750
Level 2 - Other Significant Observable Inputs 62,117,692
Level 3 - Significant Unobservable Inputs 83,143
-----------
Total $62,509,585
===========
Following is a reconciliation of assets valued using significant unobservable
inputs (Level 3):
Investments
in Securities
- ------------------------------------------------------------------
Balance as of 12/31/07 $ --
Realized gain (loss) --
Change in unrealized appreciation (depreciation)(1) (90,385)
Net purchases (sales) --
Transfers in and out of Level 3 173,528
- ------------------------------------------------------------------
Balance as of 12/31/08 $ 83,143
==================================================================
(1) Unrealized appreciation/(depreciation) on these securities is included in
the change in unrealized gain (loss) on investments in the Statement of
Operations.
20 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
CLASS I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 (a)
Net asset value, beginning of period $ 10.87 $ 10.72 $ 10.79 $ 11.61 $ 11.24
------- ------- ------- ------- -------
Net increase (decrease) from investment operations:
Net investment income $ 0.56 $ 0.54 $ 0.50 $ 0.59 $ 0.44
Net realized and unrealized gain (loss) on investments (0.62) 0.14 (0.01) (0.29) (0.04)
------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ (0.06) $ 0.68 $ 0.49 $ 0.30 $ 0.40
Distributions to shareowners:
Net investment income (0.57) (0.53) (0.56) (1.12) (0.03)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (0.63) $ 0.15 $ (0.07) $ (0.82) $ 0.37
------- ------- -------- -------- -------
Net asset value, end of period $ 10.24 $ 10.87 $ 10.72 $ 10.79 $ 11.61
======= ======= ======== ======== =======
Total return* (0.64)% 6.55% 4.68% 2.62% 3.56%
Ratio of net expenses to average net assets 0.62% 0.62% 0.62% 0.62% 0.89%
Ratio of net investment income to average net assets 5.24% 4.82% 4.71% 4.48% 3.61%
Portfolio turnover rate 54% 53% 18% 31% 57%
Net assets, end of period (in thousands) $38,770 $45,563 $ 30,569 $33,332 $45,793
Ratios with no waiver of management fees by PIM:
Net expenses 0.76% 0.78% 0.80% 0.83% 0.89%
Net investment income 5.09% 4.66% 4.52% 4.27% 3.61%
(a) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
* 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.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 21
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
11/9/07 (a)
Year Ended to
CLASS II 12/31/08 12/31/07
Net asset value, beginning of period $ 10.87 $ 10.79
------- -------
Net increase (decrease) from investment operations:
Net investment income $ 0.54 $ 0.06
Net realized and unrealized gain (loss) on investments (0.63) 0.09
------- -------
Net increase (decrease) from investment operations $ (0.09) $ 0.15
Distributions to shareowners:
Net investment income (0.54) (0.07)
------- --------
Net increase (decrease) in net asset value $ (0.63) $ 0.08
------- --------
Net asset value, end of period $ 10.24 $ 10.87
======= ========
Total return* (0.88)% 1.39%(b)
Ratio of net expenses to average net assets 0.87% 0.86%**
Ratio of net investment income to average net assets 5.00% 4.07%**
Portfolio turnover rate 54% 53%(b)
Net assets, end of period (in thousands) $24,093 $21,412
Ratios with no waiver of management fees by PIM:
Net expenses 1.02% 0.98%**
Net investment income 4.85% 3.95%**
(a) Class II commenced operations on November 9, 2007.
(b) Not annualized.
* 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.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
22 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $543,374)
(cost $67,198,905) $ 62,509,585
Cash 326,711
Receivables --
Investment securities sold 589
Portfolio shares sold 67,149
Dividends and interest 653,006
Due from Pioneer Investment Management, Inc. 23,022
------------
Total assets $ 63,580,062
------------
LIABILITIES:
Payables --
Investment securities purchased $ 9,250
Portfolio shares repurchased 53,932
Upon return of securities loaned 570,440
Due to affiliates 1,303
Unrealized depreciation on unfunded corporate loans 20,929
Accrued expenses 60,907
------------
Total liabilities $ 716,761
------------
NET ASSETS:
Paid-in capital $ 69,200,728
Distributions in excess of net investment income (113,875)
Accumulated net realized loss on investments (1,513,303)
Net unrealized loss on investments (4,710,249)
------------
Total net assets $ 62,863,301
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $38,770,298/3,786,393 shares) $ 10.24
============
Class II (based on $24,093,003/2,353,167 shares) $ 10.24
============
The accompanying notes are an integral part of these financial statements. 23
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $ 17,461
Interest 4,013,013
Income from securities loaned, net 10,202
------------
Total investment income $ 4,040,676
------------
EXPENSES:
Management fees $ 344,721
Transfer agent fees
Class I 1,373
Class II 1,250
Distribution fees
Class II 63,938
Administrative fees 20,681
Custodian fees 47,059
Professional fees 54,683
Printing expense 21,378
Fees and expenses of nonaffiliated trustees 5,533
Miscellaneous 30,584
------------
Total expenses $ 591,200
Less management fees waived and expenses reimbursed by Pioneer Investment Management, Inc. (99,757)
------------
Net expenses $ 491,443
------------
Net investment income $ 3,549,233
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments $ 1,071,196
------------
Change in net unrealized loss on:
Investments $ (5,313,995)
Unfunded corporate loans (21,138) $ (5,335,133)
------------ ------------
Net loss on investments $ (4,263,937)
------------
Net decrease in net assets resulting from operations $ (714,704)
============
24 The accompanying notes are an integral part of these financial statements.
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 3,549,233 $ 1,665,971
Net realized gain on investments 1,071,196 11,423
Change in net unrealized gain (loss) on investments (5,335,133) 711,215
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (714,704) $ 2,388,609
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.57 and $0.53 per share, respectively) $ (2,301,825) $ (1,583,348)
Class II ($0.54 and $0.07 per share, respectively) (1,299,639) (143,206)
------------- -------------
Total distributions to shareowners $ (3,601,464) $ (1,726,554)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 20,373,599 $ 4,739,833
Shares issued in reorganization -- 40,039,382
Reinvestment of distributions 3,601,430 1,726,551
Cost of shares repurchased (23,770,764) (10,762,038)
------------- -------------
Net increase in net assets resulting from Portfolio share transactions $ 204,265 $ 35,743,728
------------- -------------
Net increase (decrease) in net assets $ (4,111,903) $ 36,405,783
NET ASSETS:
Beginning of year $ 66,975,204 $ 30,569,421
------------- -------------
End of year $ 62,863,301 $ 66,975,204
============= =============
Distributions in excess of net investment income, end of year $ (113,875) $ (230,808)
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 570,240 $ 6,104,758 359,678 $ 3,852,801
Shares issued in reorganization -- -- 1,672,169 18,042,707
Reinvestment of distributions 216,793 2,301,791 147,372 1,583,348
Less shares repurchased (1,192,424) (12,631,635) (839,049) (8,985,887)
---------- ------------- --------- ------------
Net increase (decrease) (405,391) $ (4,225,086) 1,340,170 $ 14,492,969
========== ============= ========= ============
CLASS II (a)
Shares sold 1,323,616 $ 14,268,841 81,734 $ 887,032
Shares issued in reorganization -- -- 2,038,617 21,996,675
Reinvestment of distributions 122,683 1,299,639 12,842 143,203
Less shares repurchased (1,062,637) (11,139,129) (163,688) (1,776,151)
---------- ------------- --------- ------------
Net increase 383,662 $ 4,429,351 1,969,505 $ 21,250,759
========== ============= ========= ============
(a) Class II shares commenced operations on November 9, 2007.
The accompanying notes are an integral part of these financial statements. 25
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Bond VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is to provide current income from an investment grade portfolio with
due regard to preservation of capital and prudent investment risk. The Portfolio
also seeks a relatively stable level of dividends; however, the level of
dividends will be maintained only if consistent with preserving the investment
grade quality of the Portfolio.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Class II shares commenced operations on November 9, 2007. Each class of
shares represents an interest in the same schedule of investments of the
Portfolio and has identical rights (based on relative net asset values) to
assets and liquidation proceeds. Share classes can bear different class-specific
fees and expenses such as transfer agent and distribution fees. Differences in
class-specific fees and expenses will result in differences in net investment
income and, therefore, the payment of different dividends by each class. The
Amended and Restated Declaration of Trust of the Portfolio gives the Board the
flexibility to specify either per share voting or dollar-weighted voting when
submitting matters for shareholder approval. Under per share voting, each share
of a class of the Portfolio is entitled to one vote. Under dollar-weighted
voting, a shareholder's voting power is determined not by the number of shares
owned, but by the dollar value of the shares on the record date. Share classes
have exclusive voting rights with respect to matters affecting only that class,
including with respect to the distribution plan for that class. There is no
distribution plan for Class I shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting year. Actual
results could differ from those estimates.
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors. The Portfolio's prospectuses contain unaudited
information regarding the Portfolio's principal risks. Please refer to those
documents when considering the Portfolio's risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements which
are consistent 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 (NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset values, securities are valued at the last sale
price on the principal exchange where they are traded. Fixed income
securities are valued at prices supplied by independent pricing services,
which consider such factors as Treasury spreads, yields, maturities and
ratings. Valuations may be supplemented by dealers and other sources, as
required. Securities for which market prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, one security has been fair valued,
which represents 0.1% of net assets. Temporary cash investments are valued
at cost which approximates market value.
Interest income, including interest on income bearing cash accounts, is
recorded on the accrual basis, net of unrecoverable foreign taxes withheld
at the applicable country rates. All discounts/premiums are accreted/
amortized for financial reporting purposes.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three
26
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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fiscal years remain subject to examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$1,513,303, of which the following amounts will expire between 2010 and
2015, if not utilized: $250,361 in 2010, $171,643 in 2011, $241,325 in
2012, $472,395 in 2013, $280,250 in 2014 and $97,329 in 2015.
At December 31, 2008, the Portfolio has reclassified $169,164 to decrease
distributions in excess of net investment income and $169,164 to increase
accumulated net realized loss on investments to reflect permanent book/tax
differences. The reclassification has no impact on the net asset value of
the Portfolio and is designed to present the Portfolio's capital accounts
on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, was as
follows:
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,601,464 $1,726,554
----------- ----------
Total distributions $ 3,601,464 $1,726,554
=========== ==========
Distributable Earnings:
Undistributed ordinary income $ 118,992
Capital loss carryforward (1,513,303)
Unrealized depreciation (4,943,116)
-----------
Total $(6,337,427)
===========
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
primarily attributable to the tax treatment of premium and amortization.
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in commissions on the sale of
Trust shares for the year ended December 31, 2008. Dividends and
distributions to shareowners are recorded on the ex-dividend date.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. The Portfolio declares as daily dividends
substantially all of its respective net investment income. All dividends
are paid on a monthly basis. Short-term capital gain distributions, if any,
may be declared with the daily dividends. Distributions paid by the
Portfolio with respect to each class of shares are calculated in the same
manner, at the same time, and in the same amount, except that Class I and
Class II shares can bear different transfer agent and distribution fees.
Dividends and distributions to shareowners are recorded on the ex-dividend
date.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower
27
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Bond VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
and the lending agent in payment of any rebate due to the borrower with
respect to the securities loan, and in compensation for the lending agent's
services to the Portfolio. The Portfolio also continues to receive payments
in lieu of dividends and interest on the securities loaned. Gain or loss on
the value of the loaned securities that may occur during the term of the loan
will be for the account of the Portfolio. The amount of the collateral is
required to be adjusted daily to reflect any price fluctuation in the value
of the loaned securities. The Portfolio has the right, under the lending
agreement, to terminate the loan and recover the securities from the borrower
with prior notice. The Portfolio will be required to return the cash
collateral to the borrower and could suffer a loss if the value of the
collateral, as invested, has declined.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest,
is required to be at least equal to or in excess of the value of the
repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit manages the Portfolio.
Management fees are calculated at the annual rate of 0.50% of the Portfolio's
average daily net assets.
Through May 1, 2010, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Portfolio to the
extent necessary to limit Portfolio expenses to 0.62% and 0.87% of the average
daily net assets attributable to Class I and Class II shares, respectively.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $891 in management fees,
administrative costs and certain other fees payable to PIM at December 31, 2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredit provides substantially all transfer agent and
shareowner services to the Trust at negotiated rates. Included in "Due to
affiliates" reflected on the Statement of Assets and Liabilities is $251 in
transfer agent fees payable to PIMSS at December 31, 2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $161 in distribution fees payable to PFD at December 31,
2008.
5. Unfunded Loan Commitments
As of December 31, 2008, the Portfolio had unfunded loan commitments of
approximately $44,733 (excluding unrealized depreciation on those commitments of
$20,929 as of December 31, 2008) which could be extended at the option of the
borrower, pursuant to the following loan agreements:
- --------------------------------------------------------------------------------
Unfunded
Borrower Commitment
- --------------------------------------------------------------------------------
Bausch & Lomb, Inc., Delayed Draw Term Loan, 4/24/15 $ 9,600
CHS/Community Health Sys, Inc., Delayed Draw Term Loan, 7/25/14 3,633
Fontainebleau Las Vegas, Delayed Draw Term Loan, 5/17/14 31,500
- --------------------------------------------------------------------------------
28
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Bond VCT Portfolio
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6. Merger Information
On October 30, 2007, beneficial owners of Pioneer America Income VCT Portfolio
approved a proposed Agreement and Plan of Reorganization that provided for the
merger listed below. This tax-free reorganization was accomplished on November
9, 2007, by exchanging all of Pioneer America Income VCT Portfolio's Class I
and Class II net assets for Pioneer Bond VCT Portfolio's shares, based on
Pioneer Bond VCT Portfolio's Class II shares' ending net asset value. The
following charts show the details of the reorganization as of that closing date
("Closing Date"):
- -------------------------------------------------------------------------------------------------------------
Pioneer Bond Pioneer America Pioneer Bond
VCT Portfolio Income VCT Portfolio VCT Portfolio
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- -------------------------------------------------------------------------------------------------------------
Net Assets
Class I $28,422,481 $18,042,707 $46,465,188
Class II - 21,996,675 21,996,675
----------- ----------- -----------
Total Net Assets $28,422,481 $40,039,382 $68,461,863
=========== =========== ===========
Shares Outstanding
Class I 2,634,581 1,837,959 4,306,750
Class II - 2,237,327 2,038,617
=========== =========== ===========
Shares Issued in Reorganization
Class I 1,672,169
-----------
Class II 2,038,617
===========
- -------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Unrealized Appreciation Realized Loss on
on Closing Date Closing Date
- -----------------------------------------------------------------------------------
Pioneer America Income VCT Portfolio $337,939 $(87,076)
- -----------------------------------------------------------------------------------
7. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
29
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Bond VCT Portfolio
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the Shareowners
of Pioneer Bond VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Bond VCT Portfolio, one of the portfolios constituting Pioneer Variable
Contracts Trust (the "Trust"), including the schedule of investments, as of
December 31, 2008, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Bond VCT Portfolio at December 31, 2008, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young
Boston, Massachusetts
February 6, 2009
30
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Bond VCT Portfolio
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ADDITIONAL INFORMATION (unaudited)
The percentage of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified interest
income was 91.53%.
31
Pioneer Bond VCT Portfolio
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Board of Trustees provides broad supervision over the Portfolio's affairs.
The officers of the Trust are responsible for the Trust's operations. The
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Trust within the meaning of the 1940 Act are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are referred to
as Independent Trustees. Each of the Trustees serves as a trustee of each of the
76 U.S. registered investment portfolios for which Pioneer serves as investment
adviser (the Pioneer Funds). The address for all Trustees and all officers of
the Trust is 60 State Street, Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves Deputy Chairman and a Director None
Board, Trustee until a successor trustee is of Pioneer Global Asset
and President elected or earlier Management S.p.A. ("PGAM");
retirement or removal. Non-Executive Chairman and a
Director of Pioneer Investment
Management USA Inc. ("PIM-USA");
Chairman and a Director of
Pioneer; Chairman and Director
of Pioneer Institutional Asset
Management, Inc. (since 2006);
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
Director of PIOGLOBAL Real
Estate Investment Fund (Russia)
(until June 2006); Director of
Nano-C, Inc. (since 2003);
Director of Cole Management Inc.
(since 2004); Director of
Fiduciary Counseling, Inc.;
President and Director of
Pioneer Funds Distributor, Inc.
("PFD") (until May 2006);
President of all of the Pioneer
Funds; and Of Counsel, Wilmer
Cutler Pickering Hale and Dorr
LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves Director, CEO and President of None
(50)* Executive Vice until a successor trustee is Pioneer Investment Management
President elected or earlier USA Inc. (since February 2007);
retirement or removal. Director and President of
Pioneer Investment Management,
Inc. and Pioneer Institutional
Asset Management, Inc. (since
February 2007); Executive Vice
President of all of the Pioneer
Funds (since March 2007);
Director of Pioneer Global Asset
Management S.p.A. (since April
2007); Head of New Markets
Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment adviser
and certain of its affiliates.
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32
Pioneer Bond VCT Portfolio
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
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INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock (65) Trustee Trustee since 2005. Serves Executive Vice President and Director of
until a successor trustee is Chief Financial Officer, I-trax, Enterprise Community
elected or earlier Inc. (publicly traded health Investment, Inc.
retirement or removal. care services company) (2004 - (privately-held
2007); Partner, Federal City affordable housing
Capital Advisors (boutique finance company);
merchant bank) (1997 to 2004 and and Director of New
2008 - present); and Executive York Mortgage Trust
Vice President and Chief (publicly traded
Financial Officer, Pedestal Inc. mortgage REIT)
(internet-based mortgage trading
company) (2000 - 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves President, Bush International, Director of Marriott
until a successor trustee is LLC (international financial International, Inc.,
elected or earlier advisory firm) Director of Discover
retirement or removal. Financial Services
(credit card issuer
and electronic
payment services);
Director of Briggs &
Stratton Co. (engine
manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation
(national security,
defense, and
intelligence
technology firm);
and Member, Board of
Governors,
Investment Company
Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves Professor, Harvard University Trustee, Mellon
(64) until a successor trustee is Institutional Funds
elected or earlier Investment Trust and
retirement or removal Mellon Institutional
Funds Master
Portfolio (oversees
17 portfolios in
fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves Founding Director, Vice None
(61) until a successor trustee is President and Corporate
elected or earlier retirement Secretary, The Winthrop Group,
or removal. Inc. (consulting firm); and
Desautels Faculty of Management,
McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves Chief Executive Officer, None
until a successor trustee is Quadriserv, Inc. (technology
elected or earlier products for securities lending
retirement or removal. industry) (2008 - present);
Private investor (2004 - 2008);
and Senior Executive Vice
President, The Bank of New York
(financial and securities
services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves President and Chief Executive Director of New
until a successor trustee is Officer, Newbury, Piret & America High Income
elected or earlier Company, Inc. (investment Fund, Inc.
retirement or removal. banking firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves Senior Counsel, Sullivan & Director, The Swiss
until a successor trustee is Cromwell LLP (law firm) Helvetia Fund, Inc.
elected or earlier (closed-end
retirement or removal. investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
33
Pioneer Bond VCT Portfolio
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the Secretary of PIM-USA; Senior None
discretion of the Board Vice President - Legal of
Pioneer; Secretary/ Clerk of
most of PIM-USA's subsidiaries;
and Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the Associate General Counsel of None
Secretary discretion of the Board Pioneer since January 2008 and
Assistant Secretary of all of
the Pioneer Funds since
September 2003; Vice President
and Senior Counsel of Pioneer
from July 2002 to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the Vice President - Fund None
discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Treasurer of all of
the Pioneer Funds since March
2008; Deputy Treasurer of
Pioneer from March 2004 to
February 2008; Assistant
Treasurer of all of the Pioneer
Funds from March 2004 to
February 2008; and Treasurer and
Senior Vice President, CDC IXIS
Asset Management Services from
2002 to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the Fund Administration Manager - None
(35) Treasurer discretion of the Board Fund Accounting, Administration
and Controllership Services
since June 2003 and Assistant
Treasurer of all of the Pioneer
Funds since September 2003;
Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the Chief Compliance Officer of None
Compliance discretion of the Board Pioneer since December 2006 and
Officer of all the Pioneer Funds since
January 2007; Vice President and
Compliance Officer, MFS
Investment Management (August
2005 to December 2006);
Consultant, Fidelity Investments
(February 2005 to July 2005);
Independent Consultant (July
1997 to February 2005)
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35
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37
[LOGO]PIONEER
Investments(R)
Pioneer Variable Contracts Trust
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is also
available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18656-03-0209
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2008
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Cullen Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 7
Financial Statements 10
Notes to Financial Statements 14
Report of Independent Registered Public
Accounting Firm 17
Approval of Investment Sub-Advisory Agreement 18
Trustees, Officers and Service Providers 20
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 81.8%
Depositary Receipts for International Stocks 15.6%
Temporary Cash Investments 2.6%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Consumer Staples 22.4%
Industrials 19.0%
Health Care 17.2%
Financials 9.6%
Information Technology 8.9%
Telecommunication Services 7.4%
Energy 6.3%
Consumer Discretionary 6.1%
Materials 3.1%
Five Largest Holdings
(As a percentage of equity holdings)*
1. ITT Corp. 4.12%
2. Johnson & Johnson 4.11
3. Chubb Corp. 3.99
4. Bristol-Myers Squibb Co. 3.90
5. Raytheon Co. 3.87
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/08 12/31/07
Net Asset Value per Share $ 9.03 $ 13.56
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
$ 0.1606 $ - $ 0.0004
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Cullen Value VCT Portfolio at net asset value, compared to that of the Standard
& Poor's (S&P) 500 Index and the Russell 1000 Value Index. Portfolio returns
are based on net asset value and do not reflect any applicable insurance fees
or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Cullen Russell 1000 S&P
VCT Portfolio, Class II Value Index 500 Index
3/05 10000 10000 10000
12/05 11056 10696 10721
12/06 12951 13075 12413
12/07 13780 13053 13094
12/08 9296 8243 8251
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure
of the broad U.S. stock market. The Russell 1000 Value Index measures the
performance of large-cap U.S. value stocks. Index returns assume reinvestment
of dividends and, unlike Portfolio returns, do not reflect any fees, expenses
or sales charges. You cannot invest directly in an Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Life-of-Class
(3/18/05) -2.06%
1 Year -32.54%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Cullen Value VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class II
-------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $1,000.00
Ending Account Value On 12/31/08 $ 749.97
Expenses Paid During Period* $ 4.40
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Cullen Value VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class II
-------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $1,000.00
Ending Account Value On 12/31/08 $1,020.11
Expenses Paid During Period* $ 5.08
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
Equity prices dropped precipitously during 2008 as weakness that started in the
financials sector spread through economies both in the United States and
abroad. In the following interview, James P. Cullen discusses the factors that
influenced the performance of Pioneer Cullen Value VCT Portfolio during the 12
months ended December 31, 2008. Mr. Cullen, President of Schafer Cullen Capital
Management, the Portfolio's sub-adviser, oversees the team responsible for the
daily management of the Portfolio.
Q: How did the Portfolio perform during the 12-month period ended December 31,
2008?
A: Pioneer Cullen Value VCT Portfolio's Class II shares returned -32.54% at net
asset value for the 12 months ended December 31, 2008. During the same
12-month period, the Standard & Poor's 500 Index, a broad measure of the
overall U.S. stock market, returned -36.99%, and the Russell 1000 Value
Index, which measures large-cap U.S. value stocks, returned -36.85%. Over
the 12 months ended December 31, 2008, the average return of the 119
variable annuity portfolios in Lipper's Large Cap Value category was
-37.09%.
Q: What were the principal factors affecting the Portfolio's performance during
the 12 months ended December 31, 2008?
A: Almost all stocks produced dismal returns in 2008. Credit problems, which
first surfaced in mid-2007 among subprime mortgages and then spread
throughout the financials sector, undercut the economic expansion that had
produced positive results in the market for more than five years. While
official U.S. gross domestic product (GDP) figures indicated that domestic
economic growth turned negative in the third quarter of 2008, most
economists believed the economic recession actually began in late 2007. As
economic worries escalated, investors grew increasingly apprehensive,
fleeing equities as well as corporate bonds. In a general flight to quality,
investors at times were willing to accept virtually no yield for investments
in short-term Treasury bills because they carried no credit risk.
We maintained our discipline during this challenging period, focusing the
Portfolio's investments on companies with strong balance sheets and
relatively low stock valuations. We also emphasized corporations with a
global presence, as we believed companies competing internationally would
have more opportunities to succeed. Our stock selections led to relatively
heavy exposures for the Portfolio in the consumer staples and industrials
sectors. At the same time, we lightened the Portfolio's weighting in the
financials sector, the area that was hurt most directly as credit markets
deteriorated.
While we maintained a relatively concentrated portfolio of stocks in about
35 different corporations, we kept the Portfolio well diversified by
industry. At the end of the fiscal year, on December 31, 2008, for example,
the Portfolio had investments in 29 different industries. The largest
weightings were in two traditionally defensive industries, the
pharmaceuticals and packaged foods groups, which comprised roughly 11% and
10% of Portfolio assets, respectively. Household products and defense
contractors had the next-largest weightings, each with about 6% of Portfolio
assets. The Portfolio was significantly underweighted in the financials
sector.
Q: What changes did you make in the Portfolio during the period, and how did
they affect performance?
A: We reduced exposure to the financials sector in both the first and second
halves of the year, because we believed financials companies would continue
A Word About Risk:
Investments in mid-sized companies may offer the potential for higher returns,
but are also subject to greater short-term price fluctuations than larger, more
established companies. The Portfolio invests in a limited number of securities
and, as a result, the Portfolio's performance may be more volatile than the
performance of other portfolios holding more securities. Investing in foreign
and/or emerging markets securities involves risks relating to interest rates,
currency exchange rates, economic, and political conditions. At times, the
Portfolio's investments may represent industries or industry sectors that are
interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries
and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to be pressured by the effects of the credit crisis. We added
pharmaceuticals stocks to the Portfolio, as well as shares of some very
attractively priced, large-cap growth companies with global reaches. During
the first six months, we added positions in Johnson & Johnson, a diversified
health care products corporation, and Eli Lilly, a pharmaceuticals
corporation with a full pipeline of potential new products. During the
second six months of 2008, we invested in another pharmaceutical company,
Bristol-Myers Squibb, as well as in entertainment conglomerate Disney, and
software corporation Oracle. All of the companies mentioned here have had a
global presence. In the first half of 2008, we began reducing the
Portfolio's exposure to the financials sector by selling Wachovia, Wells
Fargo and Regions Financial. During the second half of 2008, we continued to
lower the Portfolio's investments in financials stocks, selling shares of
investment bank Morgan Stanley and insurer Met Life. We also sold positions
in General Electric (GE) and Brazilian oil company Petrobras. We sold GE in
large part because of the difficulties that management had in explaining the
problems in its financials divisions. As for Petrobras, we took profits
after its share price had appreciated sharply in reaction to the discovery
of new oil fields.
Our investment decisions were made on a stock-by-stock basis, but the
effective move away from financials stocks and toward defensive areas, such
as consumer staples and pharmaceuticals, helped the Portfolio withstand the
most severe effects of volatility in the market. In addition, we believe the
Portfolio's investments in several large-cap growth companies with global
franchises and low stock prices also have positioned it for the future.
Several energy-related investments helped support the Portfolio's results
early in the period, including Petrobras. During the second half of 2008,
positions in Bristol-Myers Squibb, insurance company Chubb and
telecommunications services corporation Verizon were among the Portfolio's
better performing stocks. During 2008's second half, some of the poorer
performing holdings were companies whose profits were hurt when the prices
for oil and other commodities prices fell sharply. They included Enso Energy
and Devon Energy, as well as Anglo-American, a mining company.
Q: What is your investment outlook?
A: We maintain a five-year horizon in our strategy for the Portfolio, as we
believe history has shown that high-quality, lower-priced corporations have
performed well over the longer term, despite any shorter-term market
disruptions. We also have several reasons to think the market may start
recovering in the next year.
First, historical trends indicate that the equity markets typically start
rising three to six months before a recession ends. The current recession
likely started more than a year ago. Normally, recessions don't last for
more than 18 months, and so we think there is potential for stock prices to
begin recovering by mid-year.
Second, the market as of December 31, 2008, remained inexpensive. Even
assuming a 20% drop in earnings, the stock market currently is cheap by
historical standards after stock indices declined by almost 40% in the past
year. One would have to go back to the 1980s to find a time when stocks have
been so inexpensive.
Third, a new administration is taking office. The first year in the term of
a new president usually is a very good period for the stock market, and
Barack Obama has made it clear he intends to hit the ground running, pushing
an
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08 (continued)
- --------------------------------------------------------------------------------
aggressive package to re-stimulate the economy. In addition, governments all
over the world also are launching stimulus programs, which we believe could
give added impetus for a global economic recovery.
Fourth, cash is available for equity investments. Corporations have plenty
of cash on their balance sheets and investors also have huge sums parked in
short-term Treasuries and other low-yielding investments. There is money
available to fuel a market recovery.
Individually, these factors may not be sufficient to stimulate a market
recovery. But when added together they suggest to us that it is reasonable
to expect some improvement in the equity market in the months to come,
especially for those investors who take a longer-term view. The long-term
historical record indicates that lower-priced stocks generally perform very
well during the five years following a low in the market. We believe this is
a reasonable time for long-term investors to be exposed to equities,
particularly those equities that are priced attractively.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
6
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 95.9%
Energy - 6.1%
Integrated Oil & Gas - 0.9%
9,800 Gazprom OAO (A.D.R.) $ 139,372
-----------
Oil & Gas Drilling - 2.0%
10,150 ENSCO International, Inc. $ 288,159
-----------
Oil & Gas Exploration & Production - 3.2%
7,100 Devon Energy Corp. $ 466,541
-----------
Total Energy $ 894,072
-----------
Materials - 3.0%
Construction Materials - 0.8%
12,125 Cemex SA (A.D.R.)*(b) $ 110,823
-----------
Diversified Metals & Mining - 1.6%
20,310 Anglo American Plc (A.D.R.) $ 236,002
-----------
Forest Products - 0.6%
2,850 Weyerhaeuser Co. $ 87,239
-----------
Total Materials $ 434,064
-----------
Capital Goods - 14.1%
Aerospace & Defense - 7.0%
10,700 Raytheon Co. $ 546,126
9,100 United Technologies Corp. 487,760
-----------
$ 1,033,886
-----------
Industrial Conglomerates - 3.1%
8,000 3M Co. $ 460,320
-----------
Industrial Machinery - 4.0%
12,650 ITT Corp. $ 581,774
-----------
Total Capital Goods $ 2,075,980
-----------
Transportation - 4.1%
Air Freight & Couriers - 2.1%
4,750 FedEx Corp. $ 304,713
-----------
Railroads - 2.0%
5,350 Canadian National Railway Co. $ 196,666
3,050 Canadian Pacific Railway, Ltd. 102,541
-----------
$ 299,207
-----------
Total Transportation $ 603,920
-----------
Automobiles & Components - 1.5%
Auto Parts & Equipment - 1.5%
9,950 BorgWarner, Inc. $ 216,612
-----------
Total Automobiles & Components $ 216,612
-----------
Media - 3.0%
Movies & Entertainment - 3.0%
19,800 The Walt Disney Co. $ 449,262
-----------
Total Media $ 449,262
-----------
Retailing - 1.3%
Home Improvement Retail - 1.3%
8,600 Home Depot, Inc. $ 197,972
-----------
Total Retailing $ 197,972
-----------
Shares Value
Food, Beverage & Tobacco - 18.3%
Agricultural Products - 3.0%
4,500 Archer Daniels Midland Co. $ 129,735
6,100 Bunge, Ltd. (b) 315,797
-----------
$ 445,532
-----------
Distillers & Vintners - 2.3%
5,900 Diageo Plc (A.D.R.) $ 334,766
-----------
Packaged Foods & Meats - 13.0%
8,150 General Mills, Inc. $ 495,113
18,350 Kraft Foods, Inc. 492,698
11,085 Nestle SA (A.D.R.) 432,016
19,900 Unilever N.V. 488,544
-----------
$ 1,908,371
-----------
Total Food, Beverage & Tobacco $ 2,688,669
-----------
Household & Personal Products - 3.2%
Household Products - 3.2%
8,800 Kimberly-Clark Corp. $ 464,112
-----------
Total Household &
Personal Products $ 464,112
-----------
Health Care Equipment & Services - 1.5%
Health Care Equipment - 1.5%
6,250 Covidien, Ltd. $ 226,500
-----------
Total Health Care Equipment &
Services $ 226,500
-----------
Pharmaceuticals & Biotechnology - 14.9%
Pharmaceuticals - 14.9%
5,350 AstraZeneca Plc (A.D.R.)* $ 219,511
23,650 Bristol-Myers Squibb Co. 549,861
11,950 Eli Lilly & Co. 481,227
9,850 GlaxoSmithKline Plc (A.D.R.) 367,110
9,700 Johnson & Johnson 580,351
-----------
$ 2,198,060
-----------
Total Pharmaceuticals &
Biotechnology $ 2,198,060
-----------
Diversified Financials - 5.4%
Investment Banking & Brokerage - 0.9%
11,100 Merrill Lynch & Co., Inc. $ 129,204
-----------
Diversified Financial Services - 4.5%
13,300 Bank of America Corp. $ 187,264
10,850 Citigroup, Inc. 72,804
12,850 JPMorgan Chase & Co. 405,161
-----------
$ 665,229
-----------
Total Diversified Financials $ 794,433
-----------
Insurance - 3.8%
Property & Casualty Insurance - 3.8%
11,050 Chubb Corp. $ 563,547
-----------
Total Insurance $ 563,547
-----------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Software & Services - 3.3%
Systems Software - 3.3%
27,050 Oracle Corp.* $ 479,597
-----------
Total Software & Services $ 479,597
-----------
Technology Hardware & Equipment - 5.3%
Communications Equipment - 1.7%
15,850 Nokia Corp. (A.D.R.) $ 247,260
-----------
Computer Hardware - 2.9%
11,950 Hewlett-Packard Co. $ 433,666
-----------
Technology Distributors - 0.7%
5,100 Arrow Electronics, Inc.* $ 96,084
-----------
Total Technology Hardware &
Equipment $ 777,010
-----------
Telecommunication Services - 7.1%
Integrated Telecommunication
Services - 5.9%
15,750 AT&T Corp. $ 448,875
12,500 Verizon Communications, Inc. 423,750
-----------
$ 872,625
-----------
Wireless Telecommunication
Services - 1.2%
8,600 Vodafone Group Plc (A.D.R.) $ 175,784
-----------
Total Telecommunication Services $ 1,048,409
-----------
TOTAL COMMON STOCKS
(Cost $18,199,743) $14,112,219
-----------
Principal
Amount ($) Value
TEMPORARY CASH INVESTMENTS - 2.6%
Security Lending Collateral - 2.6% (c)
Certificates of Deposit:
8,770 Abbey National Plc, 3.15%, 8/13/09 $ 8,770
8,769 Bank of Nova Scotia, 3.21%, 5/5/09 8,769
14,015 Bank of Scotland NY, 2.92%, 6/5/09 14,015
15,787 Barclays Bank, 1.5%, 5/27/09 15,787
2,788 Calyon NY, 4.62%, 1/16/09 2,788
17,540 CBA, 4.87%, 7/16/09 17,540
15,787 DNB NOR Bank ASA NY,
3.04%, 6/5/09 15,787
16,068 Intesa SanPaolo S.p.A.,
1.44%, 5/22/09 16,068
1,016 NORDEA NY, 4.13%, 4/9/09 1,016
13,155 Royal Bank of Canada NY,
2.7%, 8/7/09 13,155
8,770 Royal Bank of Scotland,
3.06%, 3/5/09 8,770
1,753 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 1,753
17,540 Societe Generale, 3.29%, 9/4/09 17,540
15,787 Svenska Bank NY, 4.61%, 7/8/09 15,787
17,540 U.S. Bank NA, 2.25%, 8/24/09 17,540
--------
$175,085
--------
Commercial Paper:
1,671 BBVA U.S., 2.83%, 3/12/09 $ 1,671
17,540 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 17,540
8,770 CME Group, Inc., 2.9%, 8/6/09 8,770
8,769 General Electric Capital Corp.,
2.86%, 3/16/09 8,769
17,225 American Honda Finance Corp.,
4.95%, 7/14/09 17,225
17,540 HSBC Bank, Inc., 2.5%, 8/14/09 17,540
8,770 IBM, 2.39%, 9/25/09 8,770
15,786 MetLife Global Funding,
3.19%, 6/12/09 15,786
15,786 New York Life Global, 2.13%, 9/4/09 15,786
14,909 Westpac Banking Corp., 2.34%, 6/1/09 14,909
--------
$126,766
--------
Tri-party Repurchase Agreements:
38,589 Deutsche Bank, 0.25%, 1/2/09 $ 38,589
2,980 Barclays Capital Markets, 0.5%, 1/2/09 2,980
--------
$ 41,569
--------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Amount ($) Value
Time Deposit:
17,540 BNP Paribas, 0.01%, 1/2/09 $ 17,540
-----------
Money Market Mutual Funds:
4,385 Columbia Government Reserves Fund $ 4,385
13,155 JPMorgan, U.S. Government Money
Market Fund 13,155
-----------
$ 17,540
-----------
$ 378,500
-----------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $378,500) $ 378,500
-----------
TOTAL INVESTMENT IN
SECURITIES - 98.5%
(Cost $18,578,243)(a) $14,490,719
-----------
OTHER ASSETS AND
LIABILITIES - 1.5% $ 217,144
-----------
TOTAL NET ASSETS - 100.0% $14,707,863
===========
* Non-income producing security.
(A.D.R.) American Depositary Receipt.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $18,639,954 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 365,932
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (4,515,167)
-----------
Net unrealized loss $(4,149,235)
===========
(b) At December 31, 2008, the following securities were out on loan:
Shares Security Value
6,000 Bunge, Ltd. $ 310,620
7,000 Cemex SA (A.D.R.) * 63,980
---------
Total $ 374,600
=========
(c) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $7,328,301 and $5,368,766,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds,
credit risk, etc.)
Level 3 -- significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- --------------------------------------------------------------------------------
Level 1 -- Quoted Prices $14,112,219
Level 2 -- Other Significant
Observable Inputs 378,500
Level 3 -- Significant Unobservable Inputs --
-----------
Total $14,490,719
===========
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year 3/18/05 (a)
Ended Ended Ended to
Class II 12/31/08 12/31/07 12/31/06 12/31/05
Net asset value, beginning of period $ 13.56 $ 12.85 $ 10.99 $10.00
------- ------- ------- ------
Increase (decrease) from investment operations:
Net investment income $ 0.17 $ 0.14 $ 0.12 $ 0.04
Net realized and unrealized gain (loss) on investments ( 4.54) 0.68 1.76 0.95
------- ------- ------- ------
Net increase (decrease) from investment operations $ (4.37) $ 0.82 $ 1.88 $ 0.99
Distributions to shareowners:
Net income ( 0.16) ( 0.11) ( 0.02) --
Net realized gain 0.00(c) -- -- --
------- ------- ------- -------
Net investment increase (decrease) in net asset value $ (4.53) $ 0.71 $ 1.86 $ 0.99
------- ------- ------- -------
Net asset value, end of period $ 9.03 $ 13.56 $ 12.85 $10.99
======= ======= ======= ======
Total return* (32.54)% 6.40% 17.14% 9.90%(b)
Ratio of net expenses to average net assets+ 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment income to average net assets+ 1.52% 1.43% 1.70% 1.13%**
Portfolio turnover rate 31% 17% 19% 34%(b)
Net assets, end of period (in thousands) $14,708 $20,560 $14,290 $ 4,523
Ratios assuming no waiver of fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses 1.55% 1.32% 1.68% 5.71%**
Net investment income (loss) 0.97% 1.11% 1.02% ( 3.58)%**
(a) Class II shares were first publicly offered on March 18, 2005.
* Assumes initial investment at net asset value at the beginning of the
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of the period.
** Annualized.
(b) Not annualized.
(c) Amount rounds to less than one cent per share.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges and sales charges.
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $374,600) (cost $18,578,243) $ 14,490,719
Cash 604,159
Receivables --
Investment securities sold 268,273
Dividends 39,278
Due from Pioneer Investment Management, Inc. 2,977
------------
Total assets $ 15,405,406
------------
LIABILITIES:
Payables --
Investment securities purchased $ 266,536
Portfolio shares repurchased 904
Upon return of securities loaned 378,500
Due to affiliates 232
Accrued expenses 51,371
------------
Total liabilities $ 697,543
------------
NET ASSETS:
Paid-in capital $ 19,572,701
Undistributed net investment income 279,665
Accumulated net realized loss on investments (1,056,979)
Net unrealized loss on investments (4,087,524)
------------
Total net assets $ 14,707,863
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class II ($14,707,863/1,629,373) $ 9.03
------------
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $10,497) $432,374
Interest 23,738
Income from securities loaned, net 7,671
--------
Total investment income $ 463,783
------------
EXPENSES:
Management fees $128,807
Transfer agent fees 1,354
Distribution fees 46,003
Administrative fees 5,519
Custodian fees 42,346
Professional fees 43,512
Printing expense 9,215
Fees and expenses of nonaffiliated trustees 6,212
Miscellaneous 1,950
--------
Total expenses $ 284,918
Less fees waived and expenses reimbursed by Pioneer Investment Management, Inc. (100,961)
------------
Net expenses $ 183,957
------------
Net investment income $ 279,826
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (1,037,996)
------------
Change in net unrealized loss on investments $ (6,495,353)
------------
Net loss on investments $ (7,533,349)
------------
Net decrease in net assets resulting from operations $ (7,253,523)
============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 279,826 $ 252,572
Net realized gain (loss) on investments (1,037,996) 50,779
Change in net unrealized gain (loss) on investments (6,495,353) 748,091
------------ ------------
Net increase (decrease) in net assets resulting from operations $ (7,253,523) $ 1,051,442
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class II ($0.16 and $0.11 per share, respectively) $ (252,588) $ (154,057)
Net realized gain:
Class II ($0.00 and $0.00 per share, respectively) (629) --
------------ ------------
Total distributions to shareowners $ (253,217) $ (154,057)
------------ ------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 9,048,263 $ 11,715,336
Reinvestment of distributions 253,216 154,057
Cost of shares repurchased (7,647,140) (6,496,977)
------------ ------------
Net increase in net assets resulting from Portfolio share transactions $ 1,654,339 $ 5,372,416
------------ ------------
Net increase (decrease) in net assets $ (5,852,401) $ 6,269,801
NET ASSETS:
Beginning of year 20,560,264 14,290,463
------------ ------------
End of year $ 14,707,863 $ 20,560,264
============ ============
Undistributed net investment income $ 279,665 $ 252,507
============ ============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS II
Shares sold 759,584 $ 9,048,263 874,662 $ 11,715,336
Reinvestment of distributions 20,503 253,216 11,270 154,057
Less shares repurchased (666,877) (7,647,140) (481,554) (6,496,977)
-------- ------------ -------- ------------
Net increase 113,210 $ 1,654,339 404,378 $ 5,372,416
======== ============ ======== ============
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Cullen Value VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is capital appreciation. Current income is a secondary objective.
The Portfolio offers one class of shares designated as Class II shares. The
Portfolio commenced operations on March 18, 2005.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio's prospectuses contain unaudited information regarding the
Portfolio's principal risks. Please refer to those documents when considering
the Portfolio's principal risks. Investments in mid-sized companies may offer
the potential for higher returns, but are also subject to greater short-term
price fluctuations than larger, more established companies.
The following is a summary of significant accounting policies consistently
followed by the Trust, in the preparation of its financial statements which are
consistent with those policies 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. Trading in foreign equity
securities is substantially completed each day at various times prior to
the close of the NYSE. The value of such securities used in computing the
net asset value of the Portfolio's shares is based on the last sale price
on the principal exchange where they traded. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with income tax
rules. Therefore, the source of the Portfolio's distributions may be shown
in the accompanying financial statements as either from, or in excess of,
net investment income or net realized gain on investment transactions, or
from paid-in capital, depending on the type of book/tax differences that
may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$995,268, which will expire in 2016 if not utilized.
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At December 31, 2008, the Portfolio has reclassified $80 to decrease
undistributed net investment income and $80 to decrease accumulated net
realized loss on investments to reflect permanent book/tax differences. The
reclassification has no impact on the net asset value of the Portfolio and
presents the Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the years ended December 31,
2008 and December 31, 2007 and the components of distributable earnings
(accumulated losses) on a federal income tax basis at December 31, 2008,
was as follows:
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 252,668 $154,057
Long-term capital gain 549 --
----------- --------
Total distributions $ 253,217 $154,057
=========== ========
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 279,665
Capital loss carryforward (995,268)
Unrealized depreciation (4,149,235)
-----------
Total $(4,864,838)
===========
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales.
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees are calculated based on the average daily net asset value attributable
to Class II shares of the Portfolio. Dividends and distributions to
shareowners are recorded on the ex-dividend date.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the portfolio.
Management fees are calculated daily at the annual rate of 0.70% of the
Portfolio's average daily net assets.
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
PIM, and not the Portfolio, pays a portion of the fee it receives from the
Portfolio to Cullen LLC as compensation for Cullen's subadvisory services to
the Portfolio.
Through May 1, 2010, PIM has agreed not to impose all or a portion of its
management fee and, if necessary, to limit other ordinary operating expenses to
the extent required to reduce Class II expenses to 1.00% of the average daily
net assets attributable to Class II shares.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $4 in management fees,
administrative fees and certain other fees payable to PIM at December 31, 2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly
owned indirect subsidiary of UniCredit, provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in
"Due to affiliates" reflected on the Statement of Assets and Liabilities is
$129 in transfer agent fees payable to PIMSS at December 31, 2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $99 in distribution fees payable to PFD at December 31,
2008.
5. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the Shareowners
of Pioneer Cullen Value VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Cullen Value VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, and the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2008, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Cullen Value VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, and the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the periods indicated therein, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 6, 2009
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED)
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained Cullen Capital Management, LLC to serve as the sub-
adviser to the Portfolio pursuant to a sub-advisory agreement between PIM and
the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the first
quintile of its Morningstar category for the one and three year periods ended
June 30, 2008. (In all quintile rankings referred to throughout this
disclosure, first quintile is most favorable to the Portfolio's shareowners.
Thus, highest relative performance would be first quintile and lowest relative
expenses would also be first quintile.) The Trustees concluded that the
investment performance of the Portfolio was satisfactory.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the third quintile relative to the management
fees paid by other funds in its peer group Morningstar category for the
comparable period. The Trustees also considered that the Portfolio's expense
ratio for the twelve months ended June 30, 2008 was in the second quintile
relative to its Strategic Insight peer group. The Trustees noted that PIM
agreed that the contractual expense limitation agreement would be in effect
until at least December 31, 2009.
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
other clients with similar investment strategies as the Portfolio. The Trustees
noted that the fee rates for those clients generally were higher than the
sub-advisory fees paid to the sub-adviser with respect to the Portfolio.
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into account the
investment performance of the Portfolio and the contractual expense limitation
agreed to by PIM with respect to the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees concluded that, because of the
breakpoints in the management and sub-advisory fee schedules and the reduced
fee rates above certain asset levels, any perceived or potential economies of
scale would be shared with the Portfolio.
Other Benefits
The Trustees considered the other benefits to the sub-adviser from its
relationship with the Portfolio, including the benefits to the sub-adviser and
its affiliates from the use of "soft" commission dollars generated by the
Portfolio to pay for research and brokerage services. The Trustees further
noted that the sub-adviser reported that it did not know of any intangible
benefits received by it by virtue of its relationship with the Portfolio. The
Trustees concluded that the benefits received by the sub-adviser from its
relationship with the Portfolio were reasonable in the context of the overall
relationship between the sub-adviser and the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
19
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Board of Trustees provides broad supervision over the Portfolio's affairs.
The officers of the Trust are responsible for the Trust's operations. The
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Trust within the meaning of the 1940 Act are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are referred to
as Independent Trustees. Each of the Trustees serves as a trustee of each of the
76 U.S. registered investment portfolios for which Pioneer serves as investment
adviser (the "Pioneer Funds"). The address for all Trustees and all officers of
the Trust is 60 State Street, Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves Deputy Chairman and a Director None
Board, Trustee until a successor trustee of Pioneer Global Asset
and President is elected or earlier Management S.p.A. ("PGAM");
retirement or removal. Non-Executive Chairman and a
Director of Pioneer Investment
Management USA Inc. ("PIM-USA");
Chairman and a Director of
Pioneer; Chairman and Director
of Pioneer Institutional Asset
Management, Inc. (since 2006);
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
Director of PIOGLOBAL Real
Estate Investment Fund (Russia)
(until June 2006); Director of
Nano-C, Inc. (since 2003);
Director of Cole Management Inc.
(since 2004); Director of
Fiduciary Counseling, Inc.;
President and Director of
Pioneer Funds Distributor, Inc.
("PFD") (until May 2006);
President of all of the Pioneer
Funds; and Of Counsel, Wilmer
Cutler Pickering Hale and Dorr
LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves Director, CEO and President of None
(50)* Executive Vice until a successor trustee Pioneer Investment Management
President is elected or earlier USA Inc. (since February 2007);
retirement or removal. Director and President of
Pioneer Investment Management,
Inc. and Pioneer Institutional
Asset Management, Inc. (since
February 2007); Executive Vice
President of all of the Pioneer
Funds (since March 2007);
Director of Pioneer Global Asset
Management S.p.A. (since April
2007); Head of New Markets
Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the Portfolio's investment adviser and certain of
its affiliates.
20
- --------------------------------------------------------------------------------
Pioneer Cullen Value VCT Portfolio
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock (65) Trustee Trustee since 2005. Serves Executive Vice President and Director of
until a successor trustee Chief Financial Officer, I-trax, Enterprise Community
is elected or earlier Inc. (publicly traded health Investment, Inc.
retirement or removal. care services company) (2004 - (privately-held
2007); Partner, Federal City affordable housing
Capital Advisors (boutique finance company);
merchant bank) (1997 to 2004 and and Director of New
2008 - present); and Executive York Mortgage Trust
Vice President and Chief (publicly traded
Financial Officer, Pedestal Inc. mortgage REIT)
(internet-based mortgage trading
company) (2000 - 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves President, Bush International, Director of Marriott
until a successor trustee LLC (international financial International, Inc.,
is elected or earlier advisory firm) Director of Discover
retirement or removal. Financial Services
(credit card issuer
and electronic
payment services);
Director of Briggs &
Stratton Co. (engine
manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation
(national security,
defense, and
intelligence
technology firm);
and Member, Board of
Governors,
Investment Company
Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves Professor, Harvard University Trustee, Mellon
(64) until a successor trustee Institutional Funds
is elected or earlier Investment Trust and
retirement or removal. Mellon Institutional
Funds Master
Portfolio (oversees
17 portfolios in
fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves Founding Director, Vice None
(61) until a successor trustee President and Corporate
is elected or earlier Secretary, The Winthrop Group,
retirement or removal. Inc. (consulting firm); and
Desautels Faculty of Management,
McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves Chief Executive Officer, None
until a successor trustee Quadriserv, Inc. (technology
is elected or earlier products for securities lending
retirement or removal. industry) (2008 - present);
Private investor (2004 - 2008);
and Senior Executive Vice
President, The Bank of New York
(financial and securities
services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves President and Chief Executive Director of New
until a successor trustee Officer, Newbury, Piret & America High Income
is elected or earlier Company, Inc. (investment Fund, Inc.
retirement or removal. banking firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves Senior Counsel, Sullivan & Director, The Swiss
until a successor trustee Cromwell LLP (law firm) Helvetia Fund, Inc.
is elected or earlier (closed-end
retirement or removal. investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
21
Pioneer Cullen Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the Secretary of PIM-USA; Senior None
discretion of the Board Vice President - Legal of
Pioneer; Secretary/ Clerk of
most of PIM-USA's subsidiaries;
and Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the Associate General Counsel of None
Secretary discretion of the Board Pioneer since January 2008 and
Assistant Secretary of all of
the Pioneer Funds since
September 2003; Vice President
and Senior Counsel of Pioneer
from July 2002 to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the Vice President - Fund None
discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Treasurer of all of
the Pioneer Funds since March
2008; Deputy Treasurer of
Pioneer from March 2004 to
February 2008; Assistant
Treasurer of all of the Pioneer
Funds from March 2004 to
February 2008; and Treasurer and
Senior Vice President, CDC IXIS
Asset Management Services from
2002 to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the Fund Administration Manager - None
(35) Treasurer discretion of the Board Fund Accounting, Administration
and Controllership Services
since June 2003 and Assistant
Treasurer of all of the Pioneer
Funds since September 2003;
Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the Chief Compliance Officer of None
Compliance discretion of the Board Pioneer since December 2006 and
Officer of all the Pioneer Funds since
January 2007; Vice President and
Compliance Officer, MFS
Investment Management (August
2005 to December 2006);
Consultant, Fidelity Investments
(February 2005 to July 2005);
Independent Consultant (July
1997 to February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
22
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23
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24
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This page for your notes.
25
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This page for your notes.
26
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27
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This page for your notes.
28
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This page for your notes.
29
[LOGO] PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18678-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share class
offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Emerging Markets VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 10
Notes to Financial Statements 15
Report of Independent Registered Public
Accounting Firm 19
Trustees, Officers and Service Providers 21
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Pioneer Emerging Markets VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
International Common Stocks 43.2%
Depositary Receipts for International Stocks 32.2%
Temporary Cash Investments 18.8%
U.S. Common Stocks 4.2%
International Preferred Stocks 1.6%
Geographical Distribution
(As a percentage of equity holdings)
China 18.6%
Brazil 15.6%
South Africa 11.8%
Russia 8.8%
Taiwan 7.2%
South Korea 6.3%
India 5.7%
Israel 4.1%
Hong Kong 3.5%
Indonesia 2.8%
Mexico 2.7%
Peru 2.4%
Canada 2.3%
United States 1.7%
Egypt 1.6%
Philippines 1.5%
Malaysia 1.2%
Other (Individually less than 1%) 2.2%
Five Largest Holdings
(As a percentage of equity holdings)
1. China Mobile (Hong Kong),
Ltd. (A.D.R.) 4.34%
2. Petrobras Brasileiro
(A.D.R.) 3.88
3. America Movil SA (A.D.R.)
(Series L) 2.72
4. Gazprom (A.D.R.) 2.69
5. Companhia Vale do Rio
Doce (A.D.R.) 2.55
* The Portfolio is actively managed, and current holdings may be different.
The holdings listed should not be considered recommendations to buy or sell
any security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 15.84 $ 43.86
Class II $ 15.62 $ 43.32
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.1255 $ 0.2168 $ 4.9629
Class II $ 0.0292 $ 0.2168 $ 4.9629
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Emerging Markets VCT Portfolio at net asset value, compared to that of the
Morgan Stanley Capital International (MSCI) Emerging Markets Index. Portfolio
returns are based on net asset value and do not reflect any applicable
insurance fees or surrender charges.
Pioneer Pioneer
Emerging Markets Emerging Markets
VCT Pioneer, VCT Pioneer, MSCI Emerging
Class I Class II Markets Index
12/98 $10,000 $10,000 $10,000
12/99 $17,830 $17,874 $16,641
12/00 $11,703 $11,761 $11,547
12/01 $10,841 $10,915 $11,273
12/02 $10,686 $10,784 $10,597
12/03 $16,860 $17,057 $16,560
12/04 $20,019 $20,298 $20,858
12/05 $27,547 $28,002 $28,063
12/06 $37,328 $38,016 $37,208
12/07 $53,174 $54,309 $52,008
12/08 $22,172 $22,698 $24,350
The Morgan Stanley Capital International (MSCI) Emerging Markets Index measures
the performance of emerging market stocks. Index returns are calculated
monthly, assume reinvestment of dividends and, unlike Portfolio returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in the
Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
Class I Class II
10 Years 8.54% 8.29%
5 Years 5.88% 5.63%
1 Year -58.20% -58.30%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Emerging Markets VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 475.16 $ 474.67
Expenses Paid During Period* $ 5.64 $ 6.52
* Expenses are equal to the Portfolio's annualized expense ratio of 1.52% and
1.76% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Emerging Markets VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,017.50 $ 1,016.29
Expenses Paid During Period* $ 7.71 $ 8.92
* Expenses are equal to the Portfolio's annualized expense ratio of 1.52% and
1.76% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
In the following interview, Christopher Smart, manager of Pioneer Emerging
Market VCT Portfolio, discusses the factors that influenced the Portfolio's
performance during the 12 months ended December 31, 2008.
Q: Please discuss the performance of emerging markets stocks during the past
12 months.
A: In a stark reversal of a trend that has been in place for most of this
decade, emerging markets stocks generated a negative return and
underperformed the developed markets during the past year. The cause of the
downturn was the worldwide credit freeze, the subsequent drop-off in global
economic growth, and the plunge in commodity prices. For the emerging
markets, which are very sensitive to both commodity prices and global
economic trends, the chain of events proved particularly destructive. The
impact of the issues was heightened in the latter half of the period, when
hedge funds and other leveraged investors were forced to liquidate
positions without regard for fundamentals or valuations. In this
environment, the Class I shares of the Portfolio produced a total return of
-58.20% at net asset value over the 12-month period ended December 31,
2008, and Class II shares returned -58.30% at net asset value. The returns
lagged the-53.18% return over the same period of the benchmark MSCI
Emerging Markets Index. Over the same 12-month period, the 44 Emerging
Markets variable portfolios tracked by Lipper, Inc. posted an average
return of -54.07%.
Q: What were the key factors affecting the Portfolio's performance over the
12-month period ended December 31, 2008?
A: Looking first at absolute performance, the massive decline in emerging
markets stocks in 2008 meant that virtually every holding in the Portfolio
produced a negative return. At a time when performance in the broader asset
class was so poor, there were very few places for investors to hide.
In terms of performance relative to the benchmark, the largest negative was
our position in Russia. The combination of falling oil prices, a troubled
banking sector and a weak currency caused a large decline in Russian
equities and a sharp loss in value for all of the Portfolio's holdings in
the country. Indonesia also was a source of weakness for the Portfolio. The
leading causes of underperformance for the Portfolio's Indonesian holdings
were positions in the coal stocks Bumi Resources and Indo Tambangraya
Megah, both of which declined sharply when China's demand for coal
slackened in the latter half of the period. The underperformance of those
two Indonesian coal stocks is indicative of the exceptionally poor returns
for the materials section in general. While our concerns about global
growth prompted us to reduce the Portfolio's weighting in materials stocks
earlier in the year, the sharp declines for so many stocks in the group
meant that even the Portfolio's reduced position was a negative for
performance.
China, where we elected to emphasize stocks related to the strong consumer
sector over those more sensitive to global economic trends, was an area of
positive relative performance. We also added value through investments in
gold stocks and our decision to underweight the Portfolio in South Korean
investments.
Q: What is your broad view regarding the emerging markets?
A: In the short term, we anticipate slowing global growth, continued
difficulties in the banking sector, and further stock market volatility.
However, we believe the ongoing weakness in the near-term outlook is
obscuring the important long-term story that continues to unfold in the
emerging markets. A look past
A Word About Risk:
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may
not be in effect for all portfolios. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
the headlines will show that demographic trends remain favorable, consumer
spending is rising, and emerging nations continue to benefit from their
increasing integration with the world economy. We believe that the massive
debt problems of the past no longer exist, reflecting the more sensible
fiscal policies of emerging nations. Additionally, most emerging market
banking systems appear to be sound -- a distinct contrast to the developed
world. Taken together, we believe that these factors are helping emerging
markets to generate positive economic growth even as the economies of the
developed world are contracting.
Despite the favorable long-term backdrop, valuations have declined to
remarkably low levels. As of the close of the period, the price-to-earnings
(P/E) ratio of the MSCI Emerging Markets Index stood at 8.4 times trailing
earnings, compared with the 10-year average of 16 times. Similarly, the
price-to-book ratio of the index was 1.4 times trailing earnings, which was
well below the 10-year average of 1.9 times. While valuations alone do not
form the basis for an investment case, we believe this helps illustrate the
potential opportunities that have been created by this bear market.
Q: How is the Portfolio positioned at December 31, 2008?
A: In an environment of elevated risk, we are focusing our investments on
companies with sound balance sheets, strong franchises, and predictable
earnings. We believe our approach will stand the Portfolio in good stead
while economic growth remains under pressure. Once we begin to see signs of
a recovery in the global economy, we will look for opportunities to add more
risk to the Portfolio.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCKS - 1.8%
Media - 0.9%
Cable & Satellite - 0.9%
102,880 Net Servicos de Comunicacao SA* $ 590,743
-----------
Total Media $ 590,743
-----------
Banks - 0.9%
Diversified Banks - 0.9%
49,975 Banco Itau Holding Financeira SA $ 563,555
-----------
Total Banks $ 563,555
-----------
TOTAL PREFERRED STOCKS
(Cost $1,713,352) $ 1,154,298
-----------
COMMON STOCKS - 92.0%
Energy - 14.3%
Coal & Consumable Fuels - 1.4%
554,000 Indo Tambangraya Megah Pt $ 544,314
445,000 Yanzhou Coal Mining Co., Ltd.*(b) 331,124
-----------
$ 875,438
-----------
Integrated Oil & Gas - 9.4%
836,400 China Petroleum & Chemical Corp. $ 515,274
110,500 Gazprom (A.D.R.) 1,580,641
18,300 Lukoil Holding (A.D.R.)* 605,730
111,600 Petrobras Brasileiro SA (A.D.R.) (b) 2,277,756
30,400 Sasol, Ltd. (A.D.R.) 922,032
-----------
$ 5,901,433
-----------
Oil & Gas Equipment & Services - 1.1%
25,700 Tenaris SA (A.D.R.) $ 539,186
38,900 Torchmark Corp. (G.D.R.) 151,659
-----------
$ 690,845
-----------
Oil & Gas Exploration & Production - 1.1%
681,600 CNOOC, Ltd. $ 647,726
-----------
Oil & Gas Refining & Marketing - 1.3%
16,100 Reliance Industries, Ltd. (G.D.R.) (144A) $ 826,143
-----------
Total Energy $ 8,941,585
-----------
Materials - 17.2%
Construction Materials - 2.1%
204,312 Pretoria Portland Cement Co. $ 695,884
1,466,600 PT Indocement Tunggal Prakarsa Tbk 632,803
-----------
$ 1,328,687
-----------
Diversified Metals & Mining - 3.6%
140,880 Companhia Vale do Rio Doce (A.D.R.) (b) $ 1,500,372
20,700 Freeport-McMoRan Copper & Gold, Inc.
(Class B) (b) 505,908
65,200 New World Resources BV 256,991
-----------
$ 2,263,271
-----------
Fertilizers & Agricultural Chemicals - 1.6%
91,700 Israel Chemicals, Ltd. $ 640,439
181,600 Uralkali* 335,960
-----------
$ 976,399
-----------
Shares Value
Gold - 5.6%
28,600 Anglogold Ashanti, Ltd. (A.D.R.)* $ 792,506
66,700 Harmony Gold Mining Co., Ltd.* 699,212
216,800 IAMGOLD Corp. 1,324,648
1,140,875 Zijin Mining Group Co., Ltd. 699,539
-----------
$ 3,515,905
-----------
Precious Metals & Minerals - 3.3%
70,600 Compania de Minas Buenaventura
SAA (b) $ 1,406,352
46,000 Impala Platinum Holdings, Ltd. 658,044
-----------
$ 2,064,396
-----------
Steel - 1.0%
36,100 Kumba Iron Ore, Ltd. $ 623,947
-----------
Total Materials $10,772,605
-----------
Capital Goods - 10.5%
Aerospace & Defense - 0.9%
12,100 Elbit Systems, Ltd. $ 554,288
-----------
Construction & Engineering - 6.9%
188,082 Aveng, Ltd. $ 615,836
475,300 China Communications Construction Co.,
Ltd. (b) 594,061
883,500 China Railway Group, Ltd.*(b) 620,056
410,900 China Railways Construction Corp.* 616,660
16,400 Hyundai Engineering & Construction
Co., Ltd.* 762,256
38,600 Larsen & Toubro, Ltd. 619,087
20,400 Orascom Construction Industries Co. 517,966
-----------
$ 4,345,922
-----------
Heavy Electrical Equipment - 1.2%
26,000 Bharat Heavy Electricals, Ltd. $ 738,000
-----------
Industrial Conglomerates - 1.5%
166,100 Keppel Corp. $ 505,092
81,500 Murray & Roberts Holdings, Ltd. 417,439
-----------
$ 922,531
-----------
Total Capital Goods $ 6,560,741
-----------
Transportation - 0.8%
Marine - 0.8%
512,600 China Shipping Development Co., Ltd.*(b) $ 515,943
-----------
Total Transportation $ 515,943
-----------
Automobiles & Components - 0.8%
Automobile Manufacturers - 0.8%
485,300 PT Astra International Tbk $ 489,576
-----------
Total Automobiles & Components $ 489,576
-----------
Consumer Durables & Apparel - 3.3%
Apparel, Accessories & Luxury Goods - 1.0%
1,335,400 Anta Sports Products, Ltd.* $ 612,165
-----------
Homebuilding - 1.1%
174,140 Cyrela Brazil Realty SA* $ 692,196
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Housewares & Specialties - 1.2%
35,490 Woongjin Coway Co., Ltd.* $ 760,413
-----------
Total Consumer Durables & Apparel $ 2,064,774
-----------
Media - 1.7%
Advertising - 1.0%
67,500 Focus Media Holding, Ltd.*(b) $ 613,575
-----------
Movies & Entertainment - 0.7%
99,900 CTC Media, Inc.* $ 479,520
-----------
Total Media $ 1,093,095
-----------
Retailing - 3.4%
Department Stores - 3.4%
92,400 Lojas Renner SA* $ 625,581
1,371,600 New World Department Store China, Ltd.* 754,903
632,900 Parkson Retail Group, Ltd. (b) 723,790
-----------
$ 2,104,274
-----------
Total Retailing $ 2,104,274
-----------
Food & Drug Retailing - 1.9%
Food Retail - 0.9%
69,900 X-5 Retail Group NV (G.D.R.)*(b) $ 603,506
-----------
Hypermarkets & Supercenters - 1.0%
22,200 Brasil Distr Pao Acu (A.D.R.)* $ 611,832
-----------
Total Food & Drug Retailing $ 1,215,338
-----------
Food, Beverage & Tobacco - 0.8%
Packaged Foods & Meats - 0.8%
18,800 Wimm-Bill-Dann*(b) $ 494,628
-----------
Total Food, Beverage & Tobacco $ 494,628
-----------
Household & Personal Products - 3.3%
Household Products - 1.2%
4,800 LG Household & Health Care, Ltd.* $ 727,236
-----------
Personal Products - 2.1%
1,398 Amorepacific Corp.* $ 728,885
71,700 Natura Cosmeticos SA* 588,284
-----------
$ 1,317,169
-----------
Total Household &
Personal Products $ 2,044,405
-----------
Pharmaceuticals & Biotechnology - 2.0%
Pharmaceuticals - 2.0%
29,000 Teva Pharmaceutical Industries, Ltd. (b) $ 1,234,530
-----------
Total Pharmaceuticals &
Biotechnology $ 1,234,530
-----------
Shares Value
Banks - 9.1%
Diversified Banks - 8.2%
56,596 Banco Bradesco SA (b) $ 558,603
96,400 Banco do Brasil SA 611,429
408,300 Bumiputra-Commerce Holdings Berhad 696,860
1,487,800 China Construction Bank Corp. (b) 823,341
1,450,945 Chinatrust Financial Holding Co., Ltd. 626,416
1,592,500 Industrial & Commerical Bank of
China Ltd. (b) 846,374
554,000 Sberbank RF* 417,080
8,762 Uniao de Bancos Brasileiros SA
(Unibanco) (G.D.R.) 566,200
-----------
$ 5,146,303
-----------
Thrifts & Mortgage Finance - 0.9%
18,000 Housing Development Finance Corp. Ltd.* $ 562,881
-----------
Total Banks $ 5,709,184
-----------
Diversified Financials - 1.6%
Diversified Financial Services - 1.0%
226,000 African Bank Investments, Ltd. $ 621,107
-----------
Investment Banking & Brokerage - 0.6%
124,400 EFG-Hermes Holding SAE* $ 392,942
-----------
Total Diversified Financials $ 1,014,049
-----------
Insurance - 3.6%
Life & Health Insurance - 2.5%
54,725 Cathay Financial Holding Co., Ltd. (144A)
( G.D.R.) (b) $ 609,472
20,100 China Life Insurance Co. (A.D.R.)*(b) 932,640
-----------
$ 1,542,112
-----------
Property & Casualty Insurance - 1.1%
4,700 Samsung Fire & Marine Insurance Co., Ltd.* $ 713,299
-----------
Total Insurance $ 2,255,411
-----------
Technology Hardware & Equipment - 2.7%
Communications Equipment - 1.0%
225,500 ZTE Corp.* $ 595,400
-----------
Computer Hardware - 0.8%
929,000 Compal Electronics, Inc.* $ 494,703
-----------
Electronic Manufacturing Services - 0.9%
298,519 Hon Hai Precision Industry Co., Ltd. $ 589,290
-----------
Total Technology Hardware &
Equipment $ 1,679,393
-----------
Semiconductors - 2.1%
Semiconductors - 2.1%
163,241 Taiwan Semiconductor Manufacturing Co.
(A.D.R.) (b) $ 1,289,604
-----------
Total Semiconductors $ 1,289,604
-----------
Telecommunication Services - 12.9%
Integrated Telecommunication Services - 0.7%
65,600 Vimpel-Communications (A.D.R.) $ 469,696
-----------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Wireless Telecommunication Services - 12.2%
51,600 America Movil SA (A.D.R.) (Series L) $ 1,599,084
38,500 Bharti Televentures, Ltd.* 569,591
50,100 China Mobile (Hong Kong), Ltd.
(A.D.R.) (b) 2,547,585
20,200 Mobile Telesystems, Inc. (A.D.R.)(b) 538,936
78,900 MTN Group, Ltd. 913,282
18,800 Philippine Long Distance Telephone
Co. 865,096
404,000 Taiwan Mobile Co. Ltd* 601,246
-----------
$ 7,634,820
-----------
Total Telecommunication
Services $ 8,104,516
-----------
TOTAL COMMON STOCKS
(Cost $85,115,296) $57,583,651
-----------
Principal
Amount ($)
TEMPORARY CASH INVESTMENTS - 21.8%
Securities Lending Collateral - 21.8% (d)
Certificates of Deposit:
315,510 Abbey National Plc, 3.15%, 8/13/09 $ 315,510
315,467 Bank of Nova Scotia, 3.21%, 5/5/09 315,467
504,209 Bank of Scotland NY, 2.92%, 6/5/09 504,209
567,918 Barclays Bank, 1.5%, 5/27/09 567,918
100,312 Calyon NY, 4.62%, 1/16/09 100,312
631,020 CBA, 4.87%, 7/16/09 631,020
567,918 DNB NOR Bank ASA NY, 3.04%,
6/5/09 567,918
578,014 Intesa SanPaolo S.p.A., 1.44%,
5/22/09 578,014
36,549 NORDEA NY, 4.13%, 4/9/09 36,549
473,265 Royal Bank of Canada NY, 2.7%,
8/7/09 473,265
315,510 Royal Bank of Scotland, 3.06%,
3/5/09 315,510
63,073 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 63,073
631,020 Societe Generale, 3.29%, 9/4/09 631,020
567,918 Svenska Bank NY, 4.61%, 7/8/09 567,918
631,020 U.S. Bank NA, 2.25%, 8/24/09 631,020
-----------
$ 6,298,724
-----------
Commercial Paper:
60,129 BBVA U.S., 2.83%, 3/12/09 $ 60,129
631,020 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 631,020
315,510 CME Group, Inc., 2.9%, 8/6/09 315,510
315,477 General Electric Capital Corp., 2.86%,
3/16/09 315,477
619,662 American Honda Finance Corp.,
4.95%, 7/14/09 619,662
Principal
Amount ($) Value
Commercial Paper (continued):
631,020 HSBC Bank, Inc., 2.5%, 8/14/09 $ 631,020
315,510 IBM, 2.39%, 9/25/09 315,510
567,918 Met Life Global Funding, 3.19%,
6/12/09 567,918
567,918 New York Life Global, 2.13%, 9/4/09 567,918
536,367 Westpac Banking Corp., 2.34%,
6/1/09 536,367
-----------
$ 4,560,531
-----------
Tri-party Repurchase
Agreements:
1,388,244 Deutsche Bank, 0.25%, 1/2/09 $ 1,388,244
107,198 Barclays Capital Markets, 0.5%,
1/2/09 107,198
-----------
$ 1,495,442
-----------
Time Deposit:
631,020 BNP Paribas, 0.01%, 1/2/09 $ 631,020
-----------
Money Market Mutual Funds:
157,755 Columbia Government Reserves Fund $ 157,755
473,265 JP Morgan, U.S. Government Money
Market Fund 473,265
-----------
$ 631,020
-----------
Total Securities Lending
Collateral $13,616,737
-----------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $13,616,737) $13,616,737
-----------
TOTAL INVESTMENT IN SECURITIES - 115.6%
(Cost $100,445,385)(a)(c) $72,354,686
-----------
OTHER ASSETS AND
LIABILITIES - (15.6)% $(9,787,829)
-----------
TOTAL NET ASSETS - 100.0% $62,566,857
===========
* Non-income producing security.
(A.D.R.) American Depositary Receipt.
(G.D.R.) Global Depositary Receipt.
(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, 2008, the value of these securities amounted to $1,435,615
or 2.3% of total net assets.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $105,474,571 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 1,657,194
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (31,462,691)
------------
Net unrealized loss $(33,119,885)
============
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
50,850 Banco Bradesco SA $ 501,890
2,101 Cathay Financial Holding Co., Ltd.
(144A) (G.D.R.) 23,399
160,000 China Communications Construction
Co., Ltd. 199,984
666,000 China Construction Bank Corp. 368,564
11,100 China Life Insurance Co. (A.D.R.)* 515,040
41,200 China Mobile (Hong Kong), Ltd.
( A.D.R.) 2,095,020
392,400 China Railway Group, Ltd. * 275,386
200,000 China Shipping Development Co.,
Ltd. * 201,300
126,500 Companhia Vale do Rio Doce (A.D.R.) 1,347,225
43,000 Compania de Minas Buenaventura
SAA 856,560
66,300 Focus Media Holding, Ltd. * 602,667
15,000 Freeport-McMoRan Copper & Gold,
Inc. (Class B) 366,600
918,000 Industrial & Commerical Bank of
China, Ltd. 487,917
15,000 Mobile Telesystems (A.D.R.)* 400,200
300,000 Parkson Retail Group, Ltd. 343,080
100,000 Petrobras Brasileiro SA (A.D.R.) 2,041,000
100,000 Taiwan Semiconductor Manufacturing
Co. (A.D.R.) 790,000
26,100 Teva Pharmaceutical Industries, Ltd. 1,111,077
11,500 Wimm-Bill-Dann * 302,565
35,000 X-5 Retail Group NV (G.D.R.)* 302,187
185,000 Yanzhou Coal Mining Co., Ltd. * 137,659
-----------
Total $13,269,320
===========
(c) Distributions of investment by country of issue, as a percentage of
total investment in securities (excluding temporary cash investments),
is as follows:
China 18.6%
Brazil 15.6
South Africa 11.8
Russia 8.8
Taiwan 7.2
South Korea 6.3
India 5.7
Israel 4.1
Hong Kong 3.5
Indonesia 2.8
Mexico 2.7
Peru 2.4
Canada 2.3
United States 1.7
Egypt 1.6
Philippines 1.5
Malaysia 1.2
Other (Individually less than 1%) 2.2
-----
100.0%
=====
(d) Security lending collateral is managed by Credit Suisse, New York
Branch.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $75,776,395 and $65,449,493,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments Other Financial
Valuation Inputs in Securities Instruments
- ----------------------------------------------- --------------- ----------------
Level 1 - Quoted Prices $25,482,691 -
Level 2 - Other Significant Observable Inputs 46,871,995 (9,132)
Level 3 - Significant Unobservable Inputs - -
----------- ------
Total $72,354,686 (9,132)
=========== ======
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 43.86 $ 34.26 $ 28.09 $ 20.48 $ 17.37
-------- ------- -------- ------- -------
Increase from investment operations:
Net investment income $ 0.39 $ 0.11 $ 0.27 $ 0.22 $ 0.22
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (23.10) 13.83 8.83 7.51 3.04
-------- ------- -------- ------- -------
Net increase (decrease) from investment
operations $ (22.71) $ 13.94 $ 9.10 $ 7.73 $ 3.26
Distributions to shareowners:
Net investment income ( 0.13) ( 0.20) ( 0.16) ( 0.12) ( 0.15)
Net realized gain ( 5.18) ( 4.14) ( 2.77) -- --
-------- ------- -------- ------- -------
Total Distributions $ (5.31) $ (4.34) $ (2.93) $ (0.12) $ (0.15)
-------- -------- -------- -------- --------
Redemption Fee $ -- $ -- $ 0.00(a) $ -- $ --
-------- -------- --------- -------- --------
Net increase (decrease) in net asset value $ (28.02) $ 9.60 $ 6.17 $ 7.61 $ 3.11
-------- -------- --------- -------- --------
Net asset value, end of period $ 15.84 $ 43.86 $ 34.26 $ 28.09 $ 20.48
======== ======== ========= ======== ========
Total return* (58.20)% 42.86% 35.77% 37.95% 18.93%
Ratio of net expenses to average net assets+ 1.52% 1.40% 1.51% 1.75% 1.75%
Ratio of net investment income to average net assets+ 1.44% 0.41% 0.84% 0.94% 1.12%
Portfolio turnover rate 65% 54% 49% 74% 66%
Net assets, end of period (in thousands) $ 24,424 $ 47,612 $ 12,919 $ 11,205 $ 8,633
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction for
fees paid indirectly:
Net expenses 1.52% 1.40% 1.51% 1.77% 1.87%
Net investment income 1.44% 0.41% 0.84% 0.92% 1.00%
(a) Amount rounds to less than one cent per share.
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 43.32 $ 33.92 $ 27.84 $ 20.33 $ 17.26
-------- ------- -------- ------- -------
Increase from investment operations:
Net investment income $ 0.31 $ 0.10 $ 0.17 $ 0.15 $ 0.16
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (22.80) 13.58 8.79 7.46 3.04
-------- ------- -------- ------- -------
Net increase (decrease) from investment
operations $ (22.49) $ 13.68 $ 8.96 $ 7.61 $ 3.20
Distributions to shareowners:
Net investment income ( 0.03) ( 0.14) ( 0.11) ( 0.10) ( 0.13)
Net realized gain ( 5.18) ( 4.14) ( 2.77) -- --
-------- ------- -------- ------- -------
Total Distributions $ (5.21) $ (4.28) $ (2.88) $ (0.10) $ (0.13)
-------- -------- -------- -------- --------
Redemption Fee $ -- $ -- $ 0.00(a) $ -- $ --
-------- -------- --------- -------- --------
Net increase (decrease) in net asset value $ (27.70) $ 9.40 $ 6.08 $ 7.51 $ 3.07
-------- -------- --------- -------- --------
Net asset value, end of period $ 15.62 $ 43.32 $ 33.92 $ 27.84 $ 20.33
======== ======== ========= ======== ========
Total return* (58.30)% 42.45% 35.51% 37.60% 18.73%
Ratio of net expenses to average net assets+ 1.76% 1.64% 1.75% 1.97% 1.99%
Ratio of net investment income to average net assets+ 1.24% 0.31% 0.57% 0.70% 0.88%
Portfolio turnover rate 65% 54% 49% 74% 66%
Net assets, end of period (in thousands) $ 38,143 $ 85,981 $ 58,130 $ 44,026 $ 30,347
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction for
fees paid indirectly:
Net expenses 1.76% 1.64% 1.75% 1.99% 2.11%
Net investment income 1.24% 0.31% 0.57% 0.68% 0.76%
(a) Amount rounds to less than one cent per share.
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $13,269,320) (cost $ 72,354,686
$100,445,385)
Cash 3,748,723
Foreign currencies, at value (cost $477,079) 484,550
Receivables --
Portfolio shares sold 91,444
Dividends 130,028
Other 2,283
-------------
Total assets $ 76,811,714
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 263,227
Portfolio shares repurchased 254,824
Forward foreign currency settlement contracts, net 9,132
Upon return of securities loaned 13,616,737
Due to affiliates 2,574
Accrued expenses 98,363
-------------
Total liabilities $ 14,244,857
-------------
NET ASSETS:
Paid-in capital $ 99,663,042
Undistributed net investment income 935,640
Accumulated net realized loss on investments and foreign currency transactions (9,940,111)
Net unrealized loss on investments (28,090,699)
Net unrealized loss on forward foreign currency contracts and other assets and
liabilities denominated
in foreign currencies (1,015)
-------------
Total net assets $ 62,566,857
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $24,423,800/1,541,920 shares) $ 15.84
=============
Class II (based on $38,143,057/2,442,162 shares) $ 15.62
=============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $217,042) $ 2,905,863
Interest (net of foreign taxes withheld of $2,209) 65,610
Income from securities loaned, net 48,711
-------------
Total investment income $ 3,020,184
-------------
EXPENSES:
Management fees $ 1,163,041
Transfer agent fees
Class I 1,508
Class II 1,508
Distribution fees
Class II 153,222
Administrative fees 30,329
Custodian fees 208,252
Professional fees 74,608
Printing expense 24,066
Fees and expenses of nonaffiliated trustees 6,432
Miscellaneous 22,908
-------------
Total expenses $ 1,685,874
-------------
Net investment income $ 1,334,310
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on:
Investments $ (9,796,393)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (397,879) $ (10,194,272)
------------- -------------
Change in net unrealized gain (loss) on:
Investments $ (71,646,352)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies 5 $ (71,646,347)
------------- -------------
Net loss on investments and foreign currency transactions $ (81,840,619)
-------------
Net decrease in net assets resulting from operations $ (80,506,309)
=============
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 1,334,310 $ 320,814
Net realized gain (loss) on investments and foreign currency transactions (10,194,272) 15,270,762
Change in net unrealized gain (loss) on investments and foreign currency transactions (71,646,347) 16,782,791
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (80,506,309) $ 32,374,367
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.13 and $0.20 per share, respectively) $ (139,087) $ (81,603)
Class II ($0.03 and $0.14 per share, respectively) (54,930) (248,195)
Net realized gain:
Class I ($5.18 and $4.14 per share, respectively) (5,740,455) (1,655,519)
Class II ($5.18 and $4.14 per share, respectively) (9,743,938) (7,391,771)
------------- -------------
Total distributions to shareowners $ (15,678,410) $ (9,377,088)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 51,837,446 $ 77,968,177
Reinvestment of distributions 15,678,409 9,377,088
Cost of shares repurchased (42,356,875) (47,798,762)
------------- -------------
Net increase in net assets resulting from
Portfolio share transactions $ 25,158,980 $ 39,546,503
------------- -------------
Net increase (decrease) in net assets $ (71,025,739) $ 62,543,782
NET ASSETS:
Beginning of year 133,592,596 71,048,814
------------- -------------
End of year $ 62,566,857 $ 133,592,596
============= =============
Undistributed net investment income $ 935,640 $ 193,887
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 863,350 $ 27,901,545 891,064 $ 36,440,509
Reinvestment of distributions 174,312 5,879,542 46,311 1,737,122
Less shares repurchased (581,174) (17,239,682) (228,974) (8,753,056)
-------- ------------- -------- -------------
Net increase 456,488 $ 16,541,405 708,401 $ 29,424,575
======== ============= ======== =============
CLASS II
Shares sold 1,001,423 $ 23,935,901 1,071,155 $ 41,527,668
Reinvestment of distributions 294,261 9,798,867 205,929 7,639,966
Less shares repurchased (838,081) (25,117,193) (1,006,262) (39,045,706)
========= ============= ========== =============
Net increase 457,603 $ 8,617,575 270,822 $ 10,121,928
========= ============= ========== =============
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Emerging Markets Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is to seek long-term capital growth.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distribution fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio's investments in emerging markets or countries with limited or
developing markets may subject the Portfolio to a greater degree of risk than
in a developed market. Risks associated with these developing markets include
political, social or economic factors and may affect the price of the
Portfolio's investments and income generated by these investments, as well as
the Portfolio's ability to repatriate such amounts. The Portfolio's
prospectuses contain unaudited information regarding the Portfolio's principal
risks. Please refer to those documents when considering the Portfolio's
principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements which
are consistent with those generally accepted in the investment company
industry:
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Portfolio is computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, securities are valued using 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 using the mean between the last bid
and asked prices. Securities for which market prices and/or quotations are
not readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees (management appraised). At
December 31, 2008, there were no securities that were management appraised.
The Portfolio invests primarily in securities of non-U.S. issuers. The
principal exchanges and markets for such securities have closing times
prior to the close of the NYSE. However, the value of these securities may
be influenced by changes in global markets occurring after the closing
times of the local exchanges and markets up to the time the Portfolio
determines its net asset value. Consequently, the Board of Trustees of the
Portfolio has determined that the use of daily fair valuations as provided
by a pricing service is appropriate for the Portfolio. The Portfolio may
also take into consideration other significant events in determining the
fair value of these securities. Thus, the Portfolio's securities valuations
may differ from prices reported by the various local exchanges and markets.
Temporary cash investments are valued at cost which approximates market
value.
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 becomes aware of the
ex-dividend data in the exercise of reasonable diligence. Interest income
is recorded on the accrual basis. Dividend and interest income are reported
net of unrecoverable foreign taxes withheld at the applicable country
rates.
Gains and losses from sales on investments are calculated on the identified
cost method for both
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
financial reporting and federal income tax purposes, and, if applicable,
are reported net of foreign taxes on capital gains at the applicable
country rates.
B. 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, if any,
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. dollars actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the Statement of Operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
C. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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.
(See Note 5)
D. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
In addition to the requirements of the Internal Revenue Code, the Portfolio
may also be required to pay local taxes on the recognition of capital gains
and/or the repatriation of foreign currencies in certain countries. During
the year ended December 31, 2008, the Portfolio paid no such taxes.
In determining the daily net asset value, the Portfolio estimates the
reserve for such taxes, if any, associated with investments in certain
countries. The estimated reserve for taxes on capital gains is based on the
net unrealized appreciation on certain portfolio securities, the holding
year of such securities and the related tax rates, tax loss carryforward
(if applicable) and other such factors. As of December 31, 2008, the
Portfolio had no reserves related to taxes on the repatriation of foreign
capital gains.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$696,838, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $4,214,087 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $398,540 to decrease
undistributed net investment income and $398,540 to decrease accumulated
net realized loss on investments to reflect permanent book/tax differences.
The reclassification has no impact on the net asset value of the Portfolio
and is designed to present the Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, were as
follows:
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 842,418 $ 761,994
Long-term capital gain 14,835,992 8,615,094
------------ ----------
Total distributions $ 15,678,410 $9,377,088
============ ==========
Distributable Earnings:
Undistributed ordinary income $ 926,508
Capital loss carryforward (696,838)
Post-October loss deferred (4,214,087)
Unrealized depreciation (33,111,768)
------------
Total $(37,096,185)
============
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales and the mark to
market on forward currency contracts.
E. Portfolio Shares
The Portfolio records sales and repurchases of its shares as of trade date.
Certain insurance companies paid Pioneer Portfolios Distributor, Inc.
(PFD), the principal underwriter for the Trust and a wholly owned indirect
subsidiary of UniCredit S.p.A. (UniCredit), $633,101 in commissions on the
sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II shares are calculated based on the average daily net
asset values attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of the
shares based on the respective percentage of adjusted net assets at the
beginning of the day. Dividends and distributions to shareowners are
recorded on the ex-dividend date. Distributions paid by the Portfolio with
respect to each class of shares are calculated in the same manner and at
the same time, except that Class I and Class II shares can bear different
transfer agent and distribution fees.
F. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 1.15% of the
Portfolio's average daily net assets.
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
In addition, under the management and administration agreement, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $2,055 in management fees,
administrative costs and certain others fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $257 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $262 in distribution fees payable to PFD at December 31,
2008.
5. Forward Foreign Currency Contracts
During the year ended December 31, 2008, the Portfolio had entered into various
contracts that obligate the Portfolio to deliver currencies at specified future
dates. At the maturity of a contract, the Portfolio must make delivery of the
foreign currency. Alternatively, prior to the settlement date of a portfolio
hedge, the Portfolio may close out such contracts by entering into an
offsetting hedge contract. At December 31, 2008 the Portfolio had no
outstanding portfolio hedges. The Portfolio's gross forward currency settlement
contracts receivable and payable were $166,904 and $176,036, respectively,
resulting in a net payable of $9,132.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of
Pioneer Emerging Markets VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Emerging Markets VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from the brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Emerging Markets VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 6, 2009
19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (unaudited)
- --------------------------------------------------------------------------------
For the fiscal year ending December 31, 2008, the Fund has elected to pass
through foreign tax credits of $209,178.
20
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are
Custodian responsible for the Trust's operations. The Trustees and
Brown Brothers Harriman & Co. officers are listed below, together with their principal
occupations during the past five years. Trustees who are
Independent Registered Public Accounting Firm interested persons of the Trust within the meaning of the
Ernst & Young LLP 1940 Act are referred to as Interested Trustees. Trustees
who are not interested persons of the Trust are referred to
Principal Underwriter as Independent Trustees. Each of the Trustees serves as a
Pioneer Funds Distributor, Inc. trustee of each of the 76 U.S. registered investment
portfolios for which Pioneer serves as investment adviser
Legal Counsel (the "Pioneer Funds"). The address for all Trustees and all
Bingham McCutchen LLP officers of the Trust is 60 State Street, Boston,
Massachusetts 02109.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
Pioneer Investment Management Shareholder Services, Inc.
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1998. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000-2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment
adviser and certain of its affiliates.
21
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- -------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
Benjamin M. Friedman Professor, Harvard University
(64)
- -------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- -------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- -------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- -------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- -------------------------------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment
Company Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- --------------------------------------------------------------------------------
22
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- -------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- -------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- -------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- -------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- -------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- -------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- -------------------------------------------------------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
29
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18658-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Equity Income VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 10
Notes to Financial Statements 15
Report of Independent Registered Public
Accounting Firm 18
Trustees, Officers and Service Providers 19
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 91.6%
Temporary Cash Investments 8.4%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Consumer Staples 17.0%
Utilities 16.4%
Industrials 13.5%
Financials 13.3%
Materials 10.9%
Energy 8.4%
Consumer Discretionary 7.1%
Health Care 6.5%
Telecommunication Services 5.2%
Information Technology 1.7%
Five Largest Holdings
(As a percentage of equity holdings)
1. Questar Corp. 2.72%
2. Emerson Electric Co. 2.69
3. Colgate-Palmolive Co. 2.51
4. Chubb Corp. 2.50
5. PG&E Corp. 2.45
The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 15.18 $ 23.76
Class II $ 15.26 $ 23.89
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.5689 $ 0.0347 $ 1.2330
Class II $ 0.5294 $ 0.0347 $ 1.2330
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Equity Income VCT Portfolio at net asset value, compared to that of the Russell
1000 Value Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Equity Income Pioneer Equity Income
VCT Portfolio, VCT Portfolio, Russell 1000
Class I Class II Value Index
12/98 10,000 10,000 10,000
10,121 10,096 10,735
12/00 11,624 11,559 11,488
10,814 10,733 10,846
12/02 9,103 9,010 9,162
11,162 11,017 11,913
12/04 12,990 12,784 13,878
13,733 13,489 14,857
12/06 16,815 16,473 18,163
16,951 16,563 18,131
12/08 11,816 11,515 11,450
The Russell 1000 Value Index measures the performance of large-cap U.S. value
stocks. 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 an index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class I Class II
10 Years 1.68% 1.42%
5 Years 1.15% 0.89%
1 Year -30.29% -30.48%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may
not be in effect for all portfolios. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
2
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value - $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Equity Income VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/08 $ 752.73 $ 751.73
Expenses Paid During Period* $ 3.30 $ 4.40
* Expenses are equal to the Portfolio's annualized expense ratio of 0.75% and
1.00% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Equity Income VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/08 $ 1,021.37 $ 1,020.11
Expenses Paid During Period* $ 3.81 $ 5.08
* Expenses are equal to the Portfolio's annualized expense ratio of 0.75% and
1.00% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
Over the past year, and particularly the last few months, the global economy
has seen upheaval, especially in the financial sector. Credit markets have all
but frozen, with negative consequences for an already shaky U. S. economy.
Governments and central banks all over the world have taken aggressive action
to shore up financial institutions and enable them to lend again. In the
following interview, John Carey, who manages Pioneer Equity Income VCT
Portfolio, discusses the environment over the past year ended December 31,
2008, and how it affected the Portfolio's performance.
Q: How did Pioneer Equity Income VCT Portfolio fare through the difficult
12-month period ended December 31, 2008?
A: While we had been cautious on the economy for some time, the downturn of
the past year startled us by its intensity and duration. Certainly the year
2008 was one of the worst years for investors in recent memory as the
American banking system all but collapsed and industrial activity slowed
markedly. Companies both large and small ran into trouble, and some ceased
to exist or were absorbed by other companies, occasionally with government
prodding. Consumer confidence plunged, and the fall Presidential election
turned largely into a debate over what to do next as both major candidates
seemed unable to offer any reassurance that everything could be set right
quickly.
Pioneer Equity Income VCT Portfolio's performance results suffered during
the downturn, though the results were somewhat better than those of the
overall market and competing funds. For the 12 months ended December 31,
2008, Class I shares of the Portfolio returned -30.29% at net asset value,
and Class II shares returned -30.48%. By comparison, the Portfolio's
benchmark, the Russell 1000 Value Index (the Russell Index) returned
-36.85% over the same 12-month period, and the average return of the 69
variable portfolios in Lipper Analytical Services' equity income category
was -35.83%.
During the year, our stock selection proved to be the decisive factor in
the Portfolio's performance advantage over its competitors and the
benchmark. Of course we realize that relatively strong performance compared
with the benchmark is small consolation to our shareholders when the
absolute performance numbers are so weak, but we take some satisfaction in
having preserved just a bit more value than we might have.
Q: Please discuss the Portfolio's performance during the fiscal year ended
December 31, 2008. Specifically, which holdings or sector allocations had
the greatest positive and negative effects on performance relative to the
benchmark Russell 1000 Value Index?
A: Stock selection was a positive contributor for the Portfolio in the vast
majority of sectors during the year ended December 31, 2008. Our choices in
the financials and industrials sectors proved to be the best. In
financials, we not only avoided many of the worst stocks in the Portfolio's
benchmark - most notably, AIG and Citigroup - but we also had important
positions in two of the few financial stocks that performed relatively well
during the period. SAFECO stock rose after the company received a premium
takeover bid from another insurance company, and Chubb stock ended the year
down only modestly. In industrials, our main success lay in having only a
very small Portfolio position in laggard General Electric. We also note the
relatively good performance of our food companies General Mills, Campbell
Soup, and Hershey within the consumer-staples sector.
The most significant detractors from the Portfolio's performance were our
overweight in the underperforming materials sector, where stocks were hit
hard by concerns over a slowing economy and, in particular, falling metals
prices; and our underweight in energy, which did well early in the year
before flagging in the second half as oil and gas prices came tumbling
down.
Q: Oftentimes a weak stock market presents investment opportunities. Did you
find some over the second half of the reporting period, and, overall, can
you discuss changes you made to the Portfolio?
A: As we look at the stock market, we see many stocks selling at lower prices
than we have seen in a long time. The sell-off has been, we think, quite
undiscriminating,
A Word About Risk:
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
as investors have seemed just to want to "get out of the market," no matter
what the price. So, yes, we have seen what we regarded as bargains. At the
same time, we have also sold from the Portfolio stocks of companies we did
not think were as well positioned for the difficult times in which we find
ourselves. Overall, we added ten names to the Portfolio during the last six
months of the annual reporting period, and we eliminated eleven.
The new entries were all in the category of economically sensitive stocks
with, in our minds, good longer-term prospects in a recovering economy -
which we do think we shall eventually see! Marathon Oil is a worldwide
energy company that should see benefits in its refining operations from
lower oil prices, but that also has attractive exploration-and-production
activities. Carpenter Technology is a leader in stainless steel.
Caterpillar and Deere are machinery makers: Caterpillar is one of the
premier producers of construction equipment, and Deere makes both
agricultural and construction equipment. Illinois Tool Works makes a whole
host of components for machinery builders and other industrial users;
Parker-Hannifin specializes in fluid-power systems; and General Electric,
which did attract us after it had fallen sharply in price, is a well-known
provider of everything from aircraft engines to medical-imaging equipment.
Cedar Shopping Centers is a real estate investment trust with supermarket
and drugstore-anchored properties; and FirstEnergy and PPL are public
utilities.
With respect to sales from the Portfolio during the 12-month period, we
realized good gains on two stocks that were acquired at premium prices by
other companies: SAFECO, which we mentioned above; and Wm. Wrigley Jr.,
which was purchased by the private confectionary giant Mars. Our other
sales - Regal Entertainment Group, Regions Financial, Developers
Diversified Realty, Liberty Property Trust, CBS, Teck Cominco, New York
Times, Lincoln National, and Equity Residential - fell into the category of
companies about which we had fundamental concerns.
Q: With world financial markets still in turmoil and with a new U. S.
President set to take office by the time this report is published, what is
your outlook for the coming months?
A: Investors today are uncertain of the potential length of the ongoing
economic recession. The recession has also spread overseas, and that is
affecting the ability of American companies to expand the exports on which
so many of them have come to depend for growth. With respect to the public
policy responses in the form of massive bail-outs and other "rescue
packages," the jury is really still out on whether they are likely to help
much. We do know the programs are expensive, and there is concern among
investors over the longer-range budgetary implications of what the outgoing
administration has already done and the incoming administration is
promising.
Despite everything, however, we are of the opinion that this is a business
cycle and not the spiral to oblivion, and that in due course, no matter
whether the government responses are effective or not, the economy will
improve. We continue to have great faith in the underlying resilience of
our country and its people. We have also observed that investments made
during past periods of economic distress, at the bargain-basement prices
often prevailing, have often worked out well when held for the long term by
patient shareholders. Certainly we are excited by the low prices of many
stocks today. Will this time be different, and will investors instead be
disappointed? We are proceeding under the assumption that will not be the
case, but we must emphasize the risks and unknown time horizon.
Thank you for your support.
Past performance is no guarantee of future results, and there is no
guarantee that the market forecast discussed will be realized.
Any information in this shareholder 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 opinions should not be relied upon for any other
purposes.
5
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 100.6%
Energy - 8.4%
Integrated Oil & Gas - 7.4%
59,067 Chevron Corp. $ 4,369,186
67,916 ConocoPhillips 3,518,049
119,269 Marathon Oil Corp. 3,263,200
47,039 Royal Dutch Shell Plc (A.D.R.) 2,490,245
------------
$ 13,640,680
------------
Oil & Gas Storage & Transportation - 1.0%
114,723 Spectra Energy Corp. $ 1,805,740
------------
Total Energy $ 15,446,420
------------
Materials - 11.0%
Aluminum - 1.4%
221,095 Alcoa, Inc. (b) $ 2,489,530
------------
Diversified Chemical - 2.8%
175,003 Dow Chemical Co. $ 2,640,795
100,326 E.I. du Pont de Nemours and Co. 2,538,248
------------
$ 5,179,043
------------
Diversified Metals & Mining - 1.6%
48,609 Compass Minerals International, Inc. $ 2,851,404
------------
Forest Products - 0.7%
40,598 Weyerhaeuser Co. $ 1,242,705
------------
Industrial Gases - 0.9%
33,160 Air Products & Chemicals, Inc. $ 1,666,953
------------
Specialty Chemicals - 1.9%
197,688 Valspar Corp. $ 3,576,176
------------
Steel - 1.7%
6,540 Carpenter Technology Corp. $ 134,332
65,359 Nucor Corp. 3,019,586
------------
$ 3,153,918
------------
Total Materials $ 20,159,729
------------
Capital Goods - 12.7%
Aerospace & Defense - 2.3%
79,261 United Technologies Corp. $ 4,248,390
------------
Construction & Farm Machinery &
Heavy Trucks - 4.4%
50,700 Caterpillar, Inc. (b) $ 2,264,769
44,700 Deere & Co. 1,712,904
141,933 PACCAR, Inc. 4,059,284
------------
$ 8,036,957
------------
Electrical Component & Equipment - 2.7%
135,407 Emerson Electric Co. $ 4,957,250
------------
Industrial Conglomerates - 0.1%
10,724 General Electric Co. $ 173,729
------------
Industrial Machinery - 3.2%
29,594 Gorman-Rupp Co. (b) $ 920,965
67,800 Illinois Tool Works, Inc. 2,376,390
22,600 Parker Hannifin Corp. 961,404
79,236 The Timken Co. 1,555,403
------------
$ 5,814,162
------------
Total Capital Goods $ 23,230,488
------------
Commercial Services & Supplies - 0.9%
Office Services & Supplies - 0.9%
70,676 Mine Safety Appliances Co. $ 1,689,863
------------
Total Commercial Services &
Supplies $ 1,689,863
------------
Automobiles & Components - 1.7%
Auto Parts & Equipment - 1.7%
168,831 Johnson Controls, Inc. $ 3,065,971
------------
Total Automobiles & Components $ 3,065,971
------------
Consumer Durables & Apparel - 1.8%
Apparel, Accessories & Luxury Goods - 1.3%
44,218 VF Corp. $ 2,421,820
------------
Household Appliances - 0.5%
22,153 Snap-On, Inc. $ 872,385
------------
Total Consumer Durables & Apparel $ 3,294,205
------------
Consumer Services - 1.9%
Leisure Facilities - 1.2%
172,547 Cedar Fair, L.P. $ 2,162,014
------------
Restaurants - 0.7%
22,334 McDonald's Corp. (b) $ 1,388,951
------------
Total Consumer Services $ 3,550,965
------------
Media - 0.4%
Publishing - 0.4%
33,710 McGraw-Hill Co., Inc. $ 781,735
------------
Total Media $ 781,735
------------
Retailing - 1.3%
Distributors - 1.3%
61,855 Genuine Parts Co. $ 2,341,830
------------
Total Retailing $ 2,341,830
------------
Food, Beverage & Tobacco - 13.3%
Packaged Foods & Meats - 11.7%
114,679 Campbell Soup Co. (b) $ 3,441,517
58,168 General Mills, Inc. 3,533,706
114,027 H.J. Heinz Co., Inc. 4,287,415
73,691 Hershey Foods Corp. 2,560,025
61,389 Kellogg Co. 2,691,908
146,840 Kraft Foods, Inc. 3,942,654
22,040 The J.M. Smucker Co. 955,654
------------
$ 21,412,879
------------
6 The accompanying notes are an integral part of these financial statements.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Soft Drinks - 1.6%
22,497 Coca-Cola Co. $ 1,018,439
36,396 PepsiCo, Inc. 1,993,409
------------
$ 3,011,848
------------
Total Food, Beverage & Tobacco $ 24,424,727
------------
Household & Personal Products - 3.8%
Household Products - 3.8%
41,765 Clorox Co. $ 2,320,463
67,591 Colgate-Palmolive Co. 4,632,687
------------
$ 6,953,150
------------
Total Household & Personal Products $ 6,953,150
------------
Pharmaceuticals & Biotechnology - 6.5%
Pharmaceuticals - 6.5%
67,685 Abbott Laboratories $ 3,612,348
39,911 Eli Lilly & Co. 1,607,216
92,366 Merck & Co., Inc. 2,807,926
221,294 Pfizer, Inc. 3,919,117
------------
$ 11,946,607
------------
Total Pharmaceuticals &
Biotechnology $ 11,946,607
------------
Banks - 5.2%
Diversified Banks - 3.6%
158,530 U.S. Bancorp $ 3,964,835
91,125 Wells Fargo & Co. 2,686,365
------------
$ 6,651,200
------------
Regional Banks - 1.6%
12,155 SunTrust Banks, Inc. (b) $ 359,059
156,834 Whitney Holding Corp. (b) 2,507,776
------------
$ 2,866,835
------------
Total Banks $ 9,518,035
------------
Diversified Financials - 2.8%
Asset Management & Custody Banks - 1.7%
22,730 Northern Trust Corp. $ 1,185,142
55,805 T. Rowe Price Associates, Inc. (b) 1,977,729
------------
$ 3,162,871
------------
Diversified Finance Services - 1.1%
144,678 Bank of America Corp. $ 2,037,066
------------
Total Diversified Financials $ 5,199,937
------------
Insurance - 3.1%
Property & Casualty Insurance - 3.1%
90,521 Chubb Corp. $ 4,616,571
22,579 The Travelers Companies, Inc. 1,020,571
------------
$ 5,637,142
------------
Total Insurance $ 5,637,142
------------
Real Estate - 2.3%
Retail Real Estate Investment Trusts - 0.8%
46,300 Cedar Shopping Centers, Inc. $ 327,804
66,579 Kimco Realty Corp. 1,217,064
------------
$ 1,544,868
------------
Specialized Real Estate Investment Trusts - 1.5%
78,181 Plum Creek Timber Co., Inc. $ 2,716,008
------------
Total Real Estate $ 4,260,876
------------
Semiconductors - 1.8%
Semiconductor Equipment - 0.6%
104,743 Applied Materials, Inc. $ 1,061,047
------------
Semiconductors - 1.2%
110,251 Microchip Technology, Inc. (b) $ 2,153,202
------------
Total Semiconductors $ 3,214,249
------------
Telecommunication Services - 5.2%
Integrated Telecommunication Services - 5.2%
87,260 AT&T Corp. $ 2,486,910
22,630 Embarq Corp. 813,775
221,426 Frontier Communications Corp. (b) 1,935,263
74,943 Verizon Communications, Inc. 2,540,568
197,127 Windstream Corp. 1,813,568
------------
$ 9,590,084
------------
Total Telecommunication Services $ 9,590,084
------------
Utilities - 16.5%
Electric Utilities - 4.5%
165,750 Duke Energy Corp. $ 2,487,908
43,611 Edison International LLC 1,400,785
14,700 FirstEnergy Corp. 714,126
26,800 PPL Corp. 822,492
75,261 Southern Co. 2,784,657
------------
$ 8,209,968
------------
Gas Utilities - 6.1%
87,521 AGL Resources, Inc. $ 2,743,783
101,970 Equitable Resources, Inc. 3,421,094
153,804 Questar Corp. 5,027,853
------------
$ 11,192,730
------------
Multi-Utilities - 5.9%
117,176 NSTAR $ 4,275,752
116,958 PG&E Corp. 4,527,444
69,494 Public Service Enterprise Group, Inc. 2,027,140
------------
$ 10,830,336
------------
Total Utilities $ 30,233,034
------------
TOTAL COMMON STOCKS
(Cost $200,789,336) $184,539,047
------------
The accompanying notes are an integral part of these financial statements. 7
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal
Amount ($) Value
TEMPORARY CASH INVESTMENTS - 9.2%
Securities Lending Collateral - 9.2% (c)
Certificates of Deposit:
390,677 Abbey National Plc, 3.15%, 8/13/09 $ 390,677
390,624 Bank of Nova Scotia, 3.21%, 5/5/09 390,624
624,331 Bank of Scotland NY, 2.92%, 6/5/09 624,331
703,218 Barclays Bank, 1.5%, 5/27/09 703,218
124,211 Calyon NY, 4.62%, 1/16/09 124,211
781,354 CBA, 4.87%, 7/16/09 781,354
703,218 DNB NOR Bank ASA NY, 3.04%,
6/5/09 703,218
715,720 Intesa SanPaolo S.p.A., 1.44%,
5/22/09 715,720
45,256 NORDEA NY, 4.13%, 4/9/09 45,256
586,015 Royal Bank of Canada NY, 2.7%,
8/7/09 586,015
390,677 Royal Bank of Scotland, 3.06%,
3/5/09 390,677
78,099 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 78,099
781,354 Societe Generale, 3.29%, 9/4/09 781,354
703,218 Svenska Bank NY, 4.61%, 7/8/09 703,218
781,354 U.S. Bank NA, 2.25%, 8/24/09 781,354
------------
$ 7,799,326
------------
Commercial Paper:
767,289 American Honda Finance Corp.,
4.95%, 7/14/09 $ 767,289
74,454 BBVA U.S., 2.83%, 3/12/09 74,454
390,677 CME Group, Inc., 2.9%, 8/6/09 390,677
390,635 General Electric Capital Corp., 2.86%,
3/16/09 390,635
781,354 HSBC Bank, Inc., 2.5%, 8/14/09 781,354
390,677 IBM, 2.39%, 9/25/09 390,677
703,218 MetLife Global Funding, 3.19%,
6/12/09 703,218
781,354 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 781,354
703,218 New York Life Global, 2.13%, 9/4/09 703,218
664,151 Westpac Banking Corp., 2.34%,
6/1/09 664,151
------------
$ 5,647,027
------------
Tri-party Repurchase Agreements:
132,736 Barclays Capital Markets, 0.5%,
1/2/09 $ 132,736
1,718,978 Deutsche Bank, 0.25%, 1/2/09 1,718,978
------------
$ 1,851,714
------------
Time Deposit:
781,354 BNP Paribas, 0.01%, 1/2/09 $ 781,354
------------
Money Market Mutual Fund:
195,338 Columbia Government Reserves Fund,
0.82%, 1/2/09 $ 195,338
586,015 JPMorgan, U.S. Government Money
Market Fund, 0.98%, 1/2/09 586,015
------------
$ 781,354
------------
Total Securities Lending
Collateral $ 16,860,775
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $16,860,775) $ 16,860,775
------------
TOTAL INVESTMENT IN
SECURITIES - 109.8%
(Cost $217,650,111) (a) $201,399,822
------------
OTHER ASSETS AND
LIABILITIES - (9.8)% $(17,918,062)
------------
TOTAL NET ASSETS - 100.0% $183,481,760
============
(A.D.R.) American Depositary Receipt
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $216,195,128 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 24,577,338
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (39,372,644)
------------
Net unrealized loss $(14,795,306)
============
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
217,000 Alcoa, Inc. $ 2,443,420
81,300 Campbell Soup Co. 2,439,813
30,000 Caterpillar, Inc. 1,340,100
20,000 Coca-Cola, Inc. 905,400
200,000 Frontier Communications Corp. 1,748,000
19,400 Gorman-Rupp Co. 603,728
10,000 McDonald's Corp. 621,900
109,000 Microchip Technology, Inc. 2,128,770
54,300 T. Rowe Price Associates, Inc. 1,924,392
10,000 SunTrust Banks, Inc. 295,400
153,550 Whitney Holding Corp. 2,455,265
-----------
Total $16,906,188
===========
(c) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments)
for the year ended December 31, 2008 aggregated $42,093,238 and
$82,004,371, respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
8 The accompanying notes are an integral part of these financial statements.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------
Level 1 - Quoted Prices $184,539,047
Level 2 - Other Significant Observable Inputs 16,860,775
Level 3 - Significant Unobservable Inputs --
------------
Total $201,399,822
============
The accompanying notes are an integral part of these financial statements. 9
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 23.76 $ 24.93 $ 21.25 $ 20.58 $ 18.09
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.68 $ 0.82 $ 0.60 $ 0.51 $ 0.44
Net realized and unrealized gain (loss) on investments (7.42) (0.53) 4.05 0.66 2.49
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ (6.74) $ 0.29 $ 4.65 $ 1.17 $ 2.93
Distributions to shareholders:
Net investment income (0.57) (0.65) (0.60) (0.50) (0.44)
Net realized gain (1.27) (0.81) (0.37) -- --
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (8.58) $ (1.17) $ 3.68 $ 0.67 $ 2.49
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.18 $ 23.76 $ 24.93 $ 21.25 $ 20.58
======== ======== ======== ======== ========
Total return* (30.29)% 0.81% 22.45% 5.72% 16.39%
Ratio of net expenses to average net assets+ 0.75% 0.70% 0.69% 0.71% 0.72%
Ratio of net investment income to average net assets+ 3.17% 2.59% 2.70% 2.56% 2.40%
Portfolio turnover rate 17% 31% 23% 22% 19%
Net assets, end of period (in thousands) $ 93,110 $166,323 $310,682 $232,249 $188,234
* 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.
+ Ratios assuming no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 23.89 $ 25.07 $ 21.37 $ 20.68 $ 18.19
-------- -------- -------- -------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.62 $ 0.62 $ 0.56 $ 0.45 $ 0.36
Net realized and unrealized gain (loss) on investments (7.45) (0.40) 4.06 0.68 2.53
-------- -------- -------- -------- -------
Net increase (decrease) from investment operations $ (6.83) $ 0.22 $ 4.62 $ 1.13 $ 2.89
Distributions to shareholders:
Net investment income (0.53) (0.59) (0.55) (0.44) (0.40)
Net realized gain (1.27) (0.81) (0.37) -- --
-------- -------- -------- -------- -------
Net increase (decrease) in net asset value $ (8.63) $ (1.18) $ 3.70 $ 0.69 $ 2.49
-------- -------- -------- -------- -------
Net asset value, end of period $ 15.26 $ 23.89 $ 25.07 $ 21.37 $ 20.68
======== ======== ======== ======== =======
Total return* (30.48)% 0.54% 22.12% 5.52% 16.04%
Ratio of net expenses to average net assets+ 1.00% 0.95% 0.94% 0.96% 0.98%
Ratio of net investment income to average net assets+ 2.92% 2.41% 2.45% 2.32% 2.16%
Portfolio turnover rate 17% 31% 23% 22% 19%
Net assets, end of period (in thousands) $ 90,372 $153,810 $156,004 $127,459 $93,691
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 11
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $16,906,188) (cost $217,650,111) $ 201,399,822
Cash 1,917,750
Receivables --
Investment securities sold 736,336
Portfolio shares sold 161,843
Dividends and interest 707,876
-------------
Total assets $ 204,923,627
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 2,611,078
Portfolio shares repurchased 1,890,963
Upon return of securities loaned 16,860,775
Due to affiliates 4,479
Accrued expenses 74,572
-------------
Total liabilities $ 21,441,867
-------------
NET ASSETS:
Paid-in capital $ 218,803,783
Undistributed net investment income 2,842,567
Accumulated net realized loss on investments (21,914,301)
Net unrealized loss on investments (16,250,289)
-------------
Total net assets $ 183,481,760
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $93,110,207/6,134,040 shares) $ 15.18
=============
Class II (based on $90,371,553/5,923,490 shares) $ 15.26
=============
12 The accompanying notes are an integral part of these financial statements.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $20,865) $9,612,230
Interest 41,058
Income from securities loaned, net 322,630
----------
Total investment income $ 9,975,918
-------------
EXPENSES:
Management fees $1,653,400
Transfer agent fees
Class I 1,620
Class II 1,620
Distribution fees (Class II) 309,315
Administrative fees 76,288
Custodian fees 46,393
Professional fees 57,123
Printing expense 29,176
Fees and expenses of non-affiliated trustees 7,851
Miscellaneous 42,533
----------
Total expenses $ 2,225,319
-------------
Net investment income $ 7,750,599
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments: $ (19,555,380)
-------------
Change in net unrealized loss on investments: $ (73,415,423)
-------------
Net loss on investments $ (92,970,803)
-------------
Net decrease in net assets resulting from operations $ (85,220,204)
=============
The accompanying notes are an integral part of these financial statements. 13
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Year
Ended Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 7,750,599 $ 11,250,678
Net realized gain (loss) on investments (19,555,380) 47,294,180
Change in net unrealized loss on investments (73,415,423) (53,148,826)
-------------- --------------
Net increase (decrease) in net assets resulting from operations $ (85,220,204) $ 5,396,032
-------------- --------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.57 and $0.65 per share, respectively) $ (3,592,434) $ (6,562,706)
Class II ($0.53 and $0.59 per share, respectively) (3,175,293) (3,871,319)
Net realized gain:
Class I ($1.27 and $0.81 per share, respectively) $ (7,935,658) $ (11,380,164)
Class II ($1.27 and $0.81 per share, respectively) (7,517,576) (5,413,454)
-------------- --------------
Total distributions to shareowners $ (22,220,961) $ (27,227,643)
-------------- --------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 31,151,708 $ 94,057,890
Shares issued in reorganization 27,227,643
Reinvestment of distributions 22,220,961 (77,763,146)
Cost of shares repurchased (82,582,149) (168,244,364)
-------------- --------------
Net decrease in net assets resulting from Portfolio share transactions $ (29,209,480) $ (124,721,977)
-------------- --------------
Net decrease in net assets $ (136,650,645) $ (146,553,588)
NET ASSETS:
Beginning of year $ 320,132,405 $ 466,685,993
-------------- --------------
End of year $ 183,481,760 $ 320,132,405
============== ==============
Undistributed net investment income $ 2,842,567 $ 2,282,290
============== ==============
'08 Shares '08 Amount '07 Shares '07 Amount
Class I
Shares sold 549,977 $ 10,006,293 2,353,879 $ 61,197,208
Reinvestment of distributions 560,838 11,528,092 695,309 17,942,870
Less shares repurchased (1,976,386) (39,969,650) (1,664,530) (42,104,347)
Redemptions in kind -- -- (6,844,767) (168,244,364)
---------- ------------- ---------- --------------
Net decrease (865,571) $ (18,435,265) (5,460,109) $ (131,208,633)
========== ============= ========== ==============
Class II
Shares sold 1,075,936 $ 21,145,415 1,269,739 $ 32,860,682
Reinvestment of distributions 516,946 10,692,869 359,589 9,284,773
Less shares repurchased (2,107,691) (42,612,499) (1,412,811) (35,658,799)
---------- ------------- ---------- --------------
Net increase (decrease) (514,809) $ (10,774,215) 216,517 $ 6,486,656
========== ============= ========== ==============
14 The accompanying notes are an integral part of these financial statements.
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Equity Income VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified
open-end management investment company. The investment objective of the
Portfolio is current income and long-term growth of capital from a portfolio
consisting primarily of income producing equity securities of U.S.
corporations.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distributions fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by insurance companies for the purpose
of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
period. Actual results could differ from those estimates.
The Portfolio's prospectuses contain unaudited information regarding the
Portfolio's principal risks. Please refer to those documents when considering
the Portfolio's principal risks. At times, the Portfolio's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent with those policies generally accepted in the investment
company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Net asset values for
the portfolios are computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. Trading in foreign equity
securities is substantially completed each day at various times prior to
the close of the NYSE. The value of such securities used in computing the
net asset value of the Portfolio's shares is based on the last sale price
on the principal exchange where they traded. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware of the
ex-dividend data in the exercise of reasonable diligence. Interest income
is recorded on the accrual basis. Dividend and interest income are reported
net of unrecoverable foreign taxes withheld at the applicable country
rates. All discounts/premiums are accreted/amortized for financial
reporting purposes.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
15
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of each Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$9,742,803, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $11,553,772 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $13,027 to increase
paid in capital, $422,595 to decrease undistributed net investment income
and $409,568 to decrease accumulated net realized loss on investments to
reflect permanent book/tax differences. The reclassification has no impact
on the net asset value of the Portfolio and presents the Portfolio's
capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, were as
follows:
- --------------------------------------------------------------------------------
2008 2007
------------ -----------
Distributions paid from:
Ordinary income $ 7,190,725 $11,160,682
------------
Long-term capital gain 15,030,236 16,066,961
------------ -----------
Total distributions $ 22,220,961 $27,227,643
============ ===========
Distributable Earnings (Accumulated Losses):
Undistributed ordinary income $ 769,858
Capital loss carryforward (9,742,803)
Post-October loss deferred (11,553,772)
Unrealized depreciation (14,795,306)
------------
Total $(35,322,023)
============
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales, the tax basis
adjustments on partnerships and Real Estate Investment Trust (REIT)
holdings.
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II shares are calculated based on the average daily net
asset value attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted-net assets at the
beginning of the day. Dividends and distributions to shareowners are
recorded on the ex-dividend date.
16
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributions paid by the Portfolio with respect to each class of shares
are calculated in the same manner and at the same time, except that Class I
and Class II shares can bear different transfer agent and distribution
expense rates.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average daily net assets.
In addition, under the management and administration agreement, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $3,385 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $477 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $617 payable to PFD at December 31, 2008.
5. Expense Offset Arrangements
The Portfolio has entered into an expense offset arrangement with PIMSS
resulting in a reduction in the Portfolio's total expenses due to interest
earned on cash held by PIMSS. For the year ended December 31, 2008, the
Portfolio's expenses were not reduced under this arrangement.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
17
Pioneer Equity Income VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Equity Income VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Equity Income VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Equity Income VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
18
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are responsible
Custodian for the Trust's operations. The Trustees and officers are listed
Brown Brothers Harriman & Co. below, together with their principal occupations during the past
five years. Trustees who are interested persons of the Trust
Independent Registered Public Accounting Firm within the meaning of the 1940 Act are referred to as Interested
Ernst & Young LLP Trustees. Trustees who are not interested persons of the Trust
are referred to as Independent Trustees. Each of the Trustees
Principal Underwriter serves as a trustee of each of the 76 U.S. registered investment
Pioneer Funds Distributor, Inc. portfolios for which Pioneer serves as investment adviser (the
"Pioneer Funds"). The address for all Trustees and all officers
of the Trust is 60 State Street, Boston, Massachusetts 02109.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the Portfolio's investment adviser and certain of
its affiliates.
19
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal
- --------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- -------------------------- -------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment
Company Institute
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) None
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- ----------------------------------------------------------------------------------------------------------
20
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- -------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- -------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- -------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (35) Fund Administration Manager - Fund Accounting, Administration and None
Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- --------------------------------------------------------------------------------------------------------------------------------
21
[LOGO]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18648-03-0209
[Logo]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio -- Class I and Class II Shares
ANNUAL REPORT
December 31, 2008
NOTE: Effective November 9, 2007, Pioneer Value VCT Portfolio
was re-organized into Pioneer Fund VCT Portfolio.
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Fund VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 10
Notes to Financial Statements 15
Report of Independent Registered Public
Accounting Firm 19
Trustees, Officers and Service Providers 20
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 85.1%
Temporary Cash Investments 7.2%
Depositary Receipts for International Stocks 5.5%
International Common Stocks 2.2%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Industrials 16.7%
Consumer Staples 16.5%
Health Care 14.8%
Information Technology 11.4%
Consumer Discretionary 11.0%
Financials 9.8%
Energy 9.8%
Materials 5.4%
Telecommunication Services 2.6%
Utilities 2.0%
Five Largest Holdings
(As a percentage of equity holdings)*
1. Chevron Corp. 4.04%
2. Norfolk Southern Corp. 3.09
3. Chubb Corp. 2.59
4. Becton, Dickinson & Co. 2.33
5. Hewlett-Packard Co. 2.16
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 15.94 $ 25.72
Class II $ 15.93 $ 25.68
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.4028 $ - $ 0.9045
Class II $ 0.3326 $ - $ 0.9045
- --------------------------------------------------------------------------------
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 Standard &
Poor's (S&P) 500 Index. Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Fund Pioneer Fund
VCT Portfolio, VCT Portfolio,
Class I Class II S&P 500
12/98 10,000 10,000 10,000
11,591 11,562 12,103
12/00 11,733 11,677 11,002
10,460 10,382 9,695
12/02 8,469 8,383 7,553
10,481 10,348 9,719
12/04 11,661 11,479 10,775
12,381 12,160 11,304
12/06 14,440 14,148 13,088
15,160 14,837 13,807
12/08 9,965 9,731 8,699
The Standard & Poor's 500 Stock Index (the S&P 500) is a commonly used measure
of the broad U.S. stock 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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class I Class II
- --------------------------------------------------------------------------------
10 Years -0.03% -0.27%
5 Years -1.00% -1.22%
1 Year -34.27% -34.41%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
The performance of Class II shares for the period prior to the commencement of
operations of Class II on May 1, 2000, is based on the performance of the
Portfolio's Class I shares, reduced to reflect the higher distribution fee of
Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Fund VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- -----------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 729.20 $ 728.29
Expenses Paid During Period* $ 3.26 $ 4.34
* Expenses are equal to the Portfolio's annualized expense ratio of 0.75% and
1.00% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Fund VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,021.37 $ 1,020.11
Expenses Paid During Period* $ 3.81 $ 5.08
* Expenses are equal to the Portfolio's annualized expense ratio of 0.75% and
1.00% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
A Word About Risk:
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
The year 2008 was one of the worst on record for investors. The American
banking system all but collapsed, industrial activity slowed markedly, and
unemployment rose significantly. Business and consumer confidence dropped.
Companies both large and small ran into trouble, and some ceased to exist or
were absorbed into other companies, occasionally with U.S. government prodding.
The fall Presidential election turned largely into a debate over what to do
next as both major candidates seemed unable to offer any reassurance that
everything could be put right quickly. As the United States settled into
recession, many other countries around the world also saw their economies
weaken. When the year ended, the world seemed to be confronting the first truly
global slowdown in quite some time. In the following interview, John Carey,
portfolio manager of the Pioneer Fund VCT Portfolio, discusses the market
environment during the 12 months ended December 31, 2008, and how it affected
the Portfolio's performance.
Q: How did the Portfolio fare through the end of 2008, one of the most
tumultuous years in the history of equity markets?
A: The performance of Pioneer Fund VCT Portfolio suffered during the downturn,
though the results were somewhat better than those of the overall market and
competing portfolios. For the 12 months ended December 31, 2008, Class I
shares of the Portfolio returned -34.27% at net asset value, and Class II
shares returned -34.41%, versus the -36.99% return for the benchmark Standard
& Poor's 500 Index (the S&P 500), and the -38.76% average return for the 229
variable portfolios in Lipper Analytical Services' large-cap core category.
Most of the losses came in the second half of the year: for the six months
ended December 31, 2008, Class I shares of the Portfolio returned -27.08%,
and Class II shares returned -27.17%, versus returns of -28.48% for the S & P
500 and -30.20% for the average variable portfolio in the Lipper category.
During the year as a whole and also during the second half of 2008, both our
stock selection and our sector allocations provided the performance advantage
over the Portfolio's competitors and the benchmark. Of course we realize that
relative performance is small consolation to our shareholders when the
absolute performance numbers are so weak, but we take some satisfaction from
having preserved just a bit more value than the majority of portfolios in our
Lipper category.
Q: Please discuss the Portfolio's performance during the last six months of
2008. Specifically, which holdings and sector allocations had the greatest
positive and negative effects on performance relative to the benchmark S & P
500 Index?
A: The most important contributors to the Portfolio's relative performance were
underweights and stock selections in the underperforming financials and
energy sectors. While managing to avoid some of the worst stocks among the
financials, including American International Group and Citigroup, the
Portfolio also had two of the few stocks in that sector that performed
comparatively well, Chubb and SAFECO. In energy, our light investment in the
swooning oil-services industry was the key factor.
Negative factors in performance for the Portfolio included overweights and
stock selections in the underperforming materials sector and our stock
selections in the consumer discretionary and staples sectors. After doing
well earlier in the year, the metals and mining stocks within materials
plummeted in the second half as commodities prices fell sharply. In consumer,
the Portfolio was hurt by not owning some of the stocks that held up
particularly well in the economic downturn, including Procter & Gamble and
Wal-Mart Stores.
Q: Energy prices soared to historic highs during the year, then plunged later in
the year as global economic growth slowed and consumers cut back on energy
usage. How is the Portfolio positioned in energy and other commodities, and
what is your view of the commodities over the next year?
A: At December 31, 2008, the Portfolio was still underweight the energy sector,
but remained overweight the materials sector. If one takes the two
natural-resources sectors together, however, the Portfolio was only slightly
underweight the S & P 500 allocation to the sectors. The Portfolio was
underweight the energy sector from the beginning of the year because of
concern over the rising costs for the companies and skepticism of the high
oil prices. Sure enough, oil prices came down, and profits for the companies
were squeezed. We did make new investments in energy in the second half,
believing that the sharply lower share prices for many of the companies no
longer reflected the positive longer-term prospects. Marathon Oil is a
leading refiner of petroleum products and also has international
exploration-and-production operations. Schlumberger is perhaps the leading
international oil-services company. But overall we are still cautious on
energy.
With respect to materials, we were, in retrospect, much too sanguine about
the potential for metals. In the event, the economic slowdown hit the miners
very hard, and the performance of the stocks later in the year was even more
dismal than that of the energy names. The longer-term picture appears bright,
with growing demand for metals from industrializing parts of the world. In
the near term, though, it will all be about survival,
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
particularly in view of the leveraged balance sheets of some of the miners
that made acquisitions near peak prices.
Q: Oftentimes a weak stock market presents investment opportunities. Did you
find some over the second half of the reporting period, and, overall, can
you discuss changes you made to the Portfolio?
A: As we look at the stock market, we see many stocks selling at lower prices
than we have seen in a long time. The sell-off has been, we think, quite
undiscriminating, as investors have seemed just to want to "get out of the
market," no matter what the price. So, yes, we have seen what we regarded
as bargains. At the same time, we have also sold stocks of companies we did
not think were as well positioned for the difficult times in which we find
ourselves. Overall, we added eight names to the Portfolio during the six
months ended December 31, 2008, and eliminated thirteen.
With respect to initiated positions, we have already mentioned Marathon Oil
and Schlumberger. Monsanto is a leading producer of seeds, pesticides, and
herbicides, with a premier reputation in the agricultural market. Stryker
makes surgical and medical devices and equipment and is most noted for its
orthopedic implants, including artificial hips, knees, and shoulders. Aflac
is a supplemental insurance provider with a particularly strong market
presence in Japan. International Business Machines is the most diversified
technology company, with leading businesses in computer software, hardware,
and services. First Energy and PPL are public utilities. What all the stocks
had in common was a lower share price at the time of purchase than our
appraisal of underlying, long-term value.
With respect to sales from the Portfolio, we realized good gains on the
stocks of two companies that were acquired at premium prices by other
companies: SAFECO, which was bought by fellow insurance company Liberty
Mutual; and Barr Pharmaceuticals, which was taken over by Teva
Pharmaceuticals, also a Portfolio holding. The acquisition of Barr was in
exchange for a combination of cash and Teva shares. Our other sales were made
for a variety of reasons, including disappointment with growth prospects,
concern for financial condition, and less attractive prospects than we had
originally envisioned. That liquidation list comprised Ford Motor, Gannett,
Zimmer, Banco Bilbao Vizcaya Argentaria (BBVA), Hartford Financial, MetLife,
Microsoft, Corning, Motorola, Dell, and Sun Microsystems.
Q: A year like 2008 can cause even the most confident of investors to lose
heart, and even some of the bluest of the blue-chip stocks took a beating
over the last year. That said, what is your outlook for the coming year?
A: The biggest issue for investors currently is uncertainty over the length of
the ongoing economic recession in the U.S. The spread of the recession
overseas has also affected the ability of American companies to expand the
exports on which so many of them have come to depend for growth. With
respect to the public-policy responses to date, in the form of massive
bail-outs and other "rescue packages," the jury is still out on whether
they are likely to help much. We do know that the programs are expensive,
and there is concern among investors over the longer-range budgetary
implications of what the outgoing administration has already done and the
incoming administration is promising. For now, the Federal Reserve is much
more focused on the economic contraction than on the more distant risk of
inflation and so has pushed short-term interest rates down to very low,
almost negligible levels. But that emphasis could change quickly if the
economy does appear over the next few quarters to have regained its
footing.
Despite everything, however, we are of the opinion that this is a business
cycle and not the spiral to oblivion, and that in due course, no matter
whether the government responses are effective or not, the economy will
improve. We continue to have great faith in the resilience of our country and
its people. We have also observed that investments made during past periods
of economic distress and extreme uncertainty, at the bargain-basement prices
often prevailing, have often worked out well when held for the long term by
patient shareholders. Certainly we are excited by the low prices of many
stocks today. Will this time be different, and will investors instead be
disappointed? We are proceeding under the assumption that will not be the
case, but we must emphasize the risks and the unknown time horizon.
Thank you for your support.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.3%
Energy - 9.7%
Integrated Oil & Gas - 7.4%
157,201 Chevron Corp. $ 11,628,158
63,838 Exxon Mobil Corp. 5,096,188
90,856 Marathon Oil Corp. 2,485,820
40,553 Royal Dutch Shell Plc (A.D.R.) 2,146,876
------------
$ 21,357,042
------------
Oil & Gas Equipment & Services - 0.5%
35,400 Schlumberger, Ltd. $ 1,498,482
------------
Oil & Gas Exploration & Production - 1.8%
72,014 Apache Corp. $ 5,367,203
------------
Total Energy $ 28,222,727
------------
Materials - 5.4%
Aluminum - 0.8%
198,303 Alcoa, Inc. (b) $ 2,232,892
------------
Diversified Chemical - 1.0%
79,835 Dow Chemical Co. $ 1,204,710
68,167 E.I. du Pont de Nemours and Co. 1,724,625
------------
$ 2,929,335
------------
Diversified Metals & Mining - 1.3%
46,397 Freeport-McMoRan Copper & Gold, Inc.
(Class B)(b) $ 1,133,943
100,299 Rio Tinto Plc 2,174,107
61,983 Teck Cominco, Ltd. (Class B)* 304,956
29,625 Xstrata Plc 276,475
------------
$ 3,889,481
------------
Fertilizers & Agricultural Chemicals - 0.8%
31,500 Monsanto Co. $ 2,216,025
------------
Industrial Gases - 0.9%
31,026 Air Products & Chemicals, Inc. $ 1,559,677
18,970 Praxair, Inc. 1,126,059
------------
$ 2,685,736
------------
Specialty Chemicals - 0.6%
47,973 Ecolab, Inc. $ 1,686,251
------------
Total Materials $ 15,639,720
------------
Capital Goods - 11.2%
Aerospace & Defense - 3.7%
80,562 General Dynamics Corp. $ 4,639,566
19,242 Honeywell International, Inc. 631,715
104,596 United Technologies Corp. 5,606,346
------------
$ 10,877,627
------------
Construction & Farm Machinery &
Heavy Trucks - 4.2%
67,124 Caterpillar, Inc. (b) $ 2,998,429
100,839 Deere & Co. 3,864,150
187,938 PACCAR, Inc. 5,375,027
------------
$ 12,237,606
------------
Shares Value
Electrical Component & Equipment - 1.3%
70,606 Emerson Electric Co. $ 2,584,886
41,628 Rockwell International Corp. 1,342,087
------------
$ 3,926,973
------------
Industrial Conglomerates - 1.4%
41,753 3M Co. $ 2,402,468
99,397 General Electric Co. 1,610,231
------------
$ 4,012,699
------------
Industrial Machinery - 0.6%
21,233 Illinois Tool Works, Inc. $ 744,217
22,995 Parker Hannifin Corp. 978,207
------------
$ 1,722,424
------------
Total Capital Goods $ 32,777,329
------------
Transportation - 5.3%
Railroads - 5.3%
46,267 Burlington Northern, Inc. $ 3,502,875
78,676 Canadian National Railway Co. 2,892,130
189,070 Norfolk Southern Corp. 8,895,744
------------
$ 15,290,749
------------
Total Transportation $ 15,290,749
------------
Automobiles & Components - 1.8%
Auto Parts & Equipment - 1.8%
42,527 BorgWarner, Inc. $ 925,813
242,325 Johnson Controls, Inc. 4,400,622
------------
$ 5,326,435
------------
Total Automobiles & Components $ 5,326,435
------------
Consumer Durables & Apparel - 0.6%
Apparel, Accessories & Luxury
Goods - 0.6%
79,297 Coach, Inc.* $ 1,646,999
------------
Total Consumer Durables & Apparel $ 1,646,999
------------
Media - 4.6%
Movies & Entertainment - 0.5%
65,857 The Walt Disney Co. $ 1,494,295
------------
Publishing - 4.1%
250,005 Elsevier NV $ 2,937,586
122,298 John Wiley & Sons, Inc. 4,351,363
198,724 McGraw-Hill Co., Inc. 4,608,410
------------
$ 11,897,359
------------
Total Media $ 13,391,654
------------
Retailing - 3.9%
Department Stores - 0.7%
23,440 J.C. Penney Co., Inc. $ 461,768
118,058 Nordstrom, Inc. (b) 1,571,352
------------
$ 2,033,120
------------
General Merchandise Stores - 1.7%
141,148 Target Corp. (b) $ 4,873,840
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Home Improvement Retail - 1.1%
144,497 Lowe's Co., Inc. $ 3,109,575
------------
Specialty Stores - 0.4%
64,687 Staples, Inc. $ 1,159,191
------------
Total Retailing $ 11,175,726
------------
Food & Drug Retailing - 3.1%
Drug Retail - 2.2%
71,121 CVS/Caremark Corp. $ 2,044,018
178,860 Walgreen Co. 4,412,476
------------
$ 6,456,494
------------
Food Distributors - 0.9%
108,947 Sysco Corp. (b) $ 2,499,244
------------
Total Food & Drug Retailing $ 8,955,738
------------
Food, Beverage & Tobacco - 10.5%
Packaged Foods & Meats - 7.6%
111,393 Campbell Soup Co. $ 3,342,904
57,288 General Mills, Inc. 3,480,246
95,955 H.J. Heinz Co., Inc. 3,607,908
118,348 Hershey Foods Corp. (b) 4,111,410
40,912 Kellogg Co. 1,793,991
158,741 Kraft Foods, Inc. 4,262,196
37,491 Nestle SA 1,454,468
------------
$ 22,053,123
------------
Soft Drinks - 2.9%
59,283 Coca-Cola Co. (b) $ 2,683,741
103,243 PepsiCo, Inc. 5,654,619
------------
$ 8,338,360
------------
Total Food, Beverage & Tobacco $ 30,391,483
------------
Household & Personal Products - 2.8%
Household Products - 2.4%
13,958 Clorox Co. $ 775,506
90,829 Colgate-Palmolive Co. 6,225,420
------------
$ 7,000,926
------------
Personal Products - 0.4%
36,547 Estee Lauder Co. $ 1,131,495
------------
Total Household &
Personal Products $ 8,132,421
------------
Health Care Equipment & Services - 6.6%
Health Care Equipment - 6.6%
98,142 Becton, Dickinson & Co. $ 6,711,931
59,752 C. R. Bard, Inc. 5,034,704
70,276 Medtronic, Inc. 2,208,072
97,400 St. Jude Medical, Inc.* 3,210,304
47,300 Stryker Corp. 1,889,635
------------
$ 19,054,646
------------
Total Health Care
Equipment & Services $ 19,054,646
------------
Shares Value
Pharmaceuticals & Biotechnology - 8.1%
Pharmaceuticals - 8.1%
96,793 Abbott Laboratories $ 5,165,842
52,665 Eli Lilly & Co. 2,120,820
63,468 Merck & Co., Inc. 1,929,427
177,499 Pfizer, Inc. 3,143,507
47,926 Roche Holdings AG (A.D.R.) 3,648,127
222,271 Schering-Plough Corp. 3,785,275
86,058 Teva Pharmaceutical Industries, Ltd.
(A.D.R.) (b) 3,663,489
------------
$ 23,456,487
------------
Total Pharmaceuticals &
Biotechnology $ 23,456,487
------------
Banks - 3.6%
Diversified Banks - 2.9%
155,075 U.S. Bancorp $ 3,878,426
155,834 Wells Fargo & Co. 4,593,986
------------
$ 8,472,412
------------
Regional Banks - 0.7%
22,321 SunTrust Banks, Inc. (b) $ 659,362
59,660 Zions Bancorporation 1,462,267
------------
$ 2,121,629
------------
Total Banks $ 10,594,041
------------
Diversified Financials - 3.3%
Asset Management & Custody Banks - 2.3%
33,181 Franklin Resources, Inc. $ 2,116,284
94,883 T. Rowe Price Associates, Inc. (b) 3,362,654
42,786 The Bank of New York Mellon Corp. 1,212,127
------------
$ 6,691,065
------------
Consumer Finance - 0.3%
39,487 American Express Co. $ 732,484
------------
Diversified Finance Services - 0.7%
76,251 Bank of America Corp. $ 1,073,614
30,079 J.P. Morgan Chase & Co. 948,391
------------
$ 2,022,005
------------
Total Diversified Financials $ 9,445,554
------------
Insurance - 2.8%
Life & Health Insurance - 0.2%
14,356 Aflac, Inc. $ 658,079
------------
Property & Casualty Insurance - 2.6%
146,070 Chubb Corp. $ 7,449,570
------------
Total Insurance $ 8,107,649
------------
Software & Services - 2.5%
Application Software - 0.6%
80,717 Adobe Systems, Inc.* $ 1,718,465
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Data Processing & Outsourced Services - 1.9%
72,607 Automatic Data Processing, Inc. $ 2,856,359
34,666 DST Systems, Inc.*(b) 1,316,615
34,542 Fiserv, Inc.* 1,256,293
------------
$ 5,429,267
------------
Total Software & Services $ 7,147,732
------------
Technology Hardware & Equipment - 6.3%
Communications Equipment - 2.0%
115,561 Cisco Systems, Inc.* $ 1,883,644
250,439 Nokia Corp. (A.D.R.) 3,906,848
------------
$ 5,790,492
------------
Computer Hardware - 2.7%
171,586 Hewlett-Packard Co. $ 6,226,856
19,200 IBM Corp.* 1,615,872
------------
$ 7,842,728
------------
Computer Storage & Peripherals - 0.3%
81,630 EMC Corp.* $ 854,666
------------
Office Electronics - 1.3%
117,879 Canon, Inc. (A.D.R.)(b) $ 3,701,401
------------
Total Technology Hardware &
Equipment $ 18,189,287
------------
Semiconductors - 2.6%
Semiconductor Equipment - 0.5%
155,199 Applied Materials, Inc. $ 1,572,166
------------
Semiconductors - 2.1%
221,799 Intel Corp. $ 3,251,573
173,102 Texas Instruments, Inc. 2,686,543
------------
$ 5,938,116
------------
Total Semiconductors $ 7,510,282
------------
Telecommunication Services - 2.6%
Integrated Telecommunication Services - 2.6%
167,566 AT&T Corp. $ 4,775,631
67,338 Verizon Communications, Inc. 2,282,758
55,820 Windstream Corp. 513,544
------------
$ 7,571,933
------------
Total Telecommunication Services $ 7,571,933
------------
Utilities - 2.0%
Electric Utilities - 1.5%
17,537 FirstEnergy Corp. $ 851,947
34,877 PPL Corp. 1,070,375
69,476 Southern Co. 2,570,612
------------
$ 4,492,934
------------
Multi-Utilities - 0.5%
46,997 Public Service Enterprise Group, Inc. $ 1,370,902
------------
Total Utilities $ 5,863,836
------------
TOTAL COMMON STOCKS
(Cost $309,028,282) $287,892,428
------------
Principal
Amount ($) Value
TEMPORARY CASH INVESTMENTS - 7.7%
Securities Lending Collateral - 7.7% (c)
Certificates of Deposit:
519,013 Abbey National Plc, 3.15%, 8/13/09 $ 519,013
518,942 Bank of Nova Scotia, 3.21%, 5/5/09 518,942
829,421 Bank of Scotland NY, 2.92%, 6/5/09 829,421
934,223 Barclays Bank, 1.5%, 5/27/09 934,223
165,013 Calyon NY, 4.62%, 1/16/09 165,013
1,038,025 CBA, 4.87%, 7/16/09 1,038,025
934,223 DNB NOR Bank ASA NY,
3.04%, 6/5/09 934,223
950,831 Intesa SanPaolo S.p.A.,
1.44%, 5/22/09 950,831
60,124 NORDEA NY, 4.13%, 4/9/09 60,124
77,851 Royal Bank of Canada NY,
2.7%, 8/7/09 778,519
519,013 Royal Bank of Scotland,
3.06%, 3/5/09 519,013
103,754 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 103,754
1,038,025 Societe Generale, 3.29%, 9/4/09 1,038,025
934,223 Svenska Bank NY, 4.61%, 7/8/09 934,223
1,038,025 U.S. Bank NA, 2.25%, 8/24/09 1,038,025
------------
$ 10,361,374
------------
Commercial Paper:
98,912 BBVA U.S., 2.83%, 3/12/09 $ 98,912
1,038,025 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 1,038,025
519,013 CME Group, Inc., 2.9%, 8/6/09 519,013
518,958 General Electric Capital Corp.,
2.86%, 3/16/09 518,958
1,019,341 American Honda Finance Corp.,
4.95%, 7/14/09 1,019,341
1,038,025 HSBC Bank, Inc., 2.5%, 8/14/09 1,038,025
519,013 IBM, 2.39%, 9/25/09 519,013
934,223 MetLife Global Funding,
3.19%, 6/12/09 934,223
934,223 New York Life Global, 2.13%, 9/4/09 934,223
882,322 Westpac Banking Corp.,
2.34%, 6/1/09 882,322
------------
$ 7,502,055
------------
Tri-party Repurchase Agreements:
2,283,656 Deutsche Bank, 0.25%, 1/2/09 $ 2,283,656
176,340 Barclays Capital Markets,
0.5%, 1/2/09 176,340
------------
$ 2,459,996
------------
Time Deposit:
1,038,025 BNP Paribas, 0.01%, 1/2/09 $ 1,038,025
------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Amount ($) Value
Money Market Mutual Funds:
259,506 Columbia Government Reserves Fund $ 259,506
778,519 JPMorgan, U.S. Government Money
Market Fund 778,519
------------
$ 1,038,025
------------
Total Securities Lending
Collateral $ 22,399,475
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $22,399,475) $ 22,399,475
------------
TOTAL INVESTMENT IN
SECURITIES - 107.0%
(Cost $331,427,757)(a) $310,291,903
------------
OTHER ASSETS AND
LIABILITIES - (7.0)% $(20,394,497)
------------
TOTAL NET ASSETS - 100.0% $289,897,406
============
(A.D.R.) American Depositary Receipt.
* Non-income producing security.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $332,412,972 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 38,852,474
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (60,973,543)
------------
Net unrealized loss $(22,121,069)
============
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
55,400 Alcoa, Inc. $ 623,804
10,000 Canon, Inc. (A.D.R.) 314,000
60,000 Caterpillar, Inc. 2,680,200
53,000 Coca-Cola Co. 2,399,310
25,100 DST Systems, Inc. * 953,298
Freeport-McMoRan Copper & Gold, Inc.
45,000 (Class B) 1,099,800
14,700 Hershey Foods Corp. 510,678
116,800 Nordstrom, Inc. 1,554,608
20,000 SunTrust Banks, Inc. 590,800
70,000 Sysco Corp. 1,605,800
90,500 T. Rowe Price Associates, Inc. 3,207,320
139,000 Target Corp. 4,799,670
45,900 Teva Pharmaceutical Industries, Ltd. 1,953,963
-----------
Total $22,293,251
===========
(c) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $51,569,438 and $114,584,932,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- -----------------------------------------------------------------
Level 1 - Quoted Prices $287,892,428
Level 2 - Other Significant Observable Inputs 22,399,475
Level 3 - Significant Unobservable Inputs -
------------
Total $310,291,903
============
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 25.72 $ 24.80 $ 21.55 $ 20.57 $ 18.70
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.39 $ 0.33 $ 0.32 $ 0.27 $ 0.24
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (8.87) 0.91 3.24 0.99 1.85
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ (8.48) $ 1.24 $ 3.56 $ 1.26 $ 2.09
Distributions to shareowners:
Net investment income (0.40) (0.32) (0.31) (0.28) (0.22)
Net realized gain (0.90) -- -- -- --
-------- ------- -------- -------- --------
Net increase in net asset value $ (9.78) $ 0.92 $ 3.25 $ 0.98 $ 1.87
-------- ------- -------- -------- --------
Net asset value, end of period $ 15.94 $ 25.72 $ 24.80 $ 21.55 $ 20.57
======== ======== ======== ======== ========
Total return* (34.27)% 4.99% 16.63% 6.17% 11.26%
Ratio of net expenses to average net assets+ 0.74% 0.70% 0.70% 0.70% 0.71%
Ratio of net investment income to average net assets+ 1.78% 1.22% 1.35% 1.26% 1.26%
Portfolio turnover rate 12% 24% 9% 23% 17%
Net assets, end of period (in thousands) $218,622 $374,349 $386,917 $382,973 $454,136
Ratios no waiver of fees and assumption of expenses by PIM
and no reduction for fees paid indirectly:
Net expenses 0.74% 0.70% 0.70% 0.70% 0.71%
Net investment income 1.78% 1.22% 1.35% 1.26% 1.26%
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 25.68 $ 24.73 $ 21.49 $ 20.51 $ 18.66
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.35 $ 0.24 $ 0.25 $ 0.20 $ 0.18
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (8.87) 0.97 3.25 1.01 1.85
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ (8.52) $ 1.21 $ 3.50 $ 1.21 $ 2.03
Distributions to shareowners:
Net investment income (0.33) (0.26) (0.26) (0.23) (0.18)
Net realized gain (0.90) -- -- -- --
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (9.75) $ 0.95 $ 3.24 $ 0.98 $ 1.85
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.93 $ 25.68 $ 24.73 $ 21.49 $ 20.51
======== ======== ======== ======== ========
Total return* (34.41)% 4.87% 16.35% 5.94% 10.93%
Ratio of net expenses to average net assets+ 0.99% 0.95% 0.95% 0.95% 0.96%
Ratio of net investment income to average net assets+ 1.53% 0.98% 1.10% 1.01% 1.00%
Portfolio turnover rate 12% 24% 9% 23% 17%
Net assets, end of period (in thousands) $ 71,276 $147,940 $155,710 $116,656 $133,627
Ratios with no waiver of fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 0.99% 0.95% 0.95% 0.95% 0.96%
Net investment income 1.53% 0.98% 1.10% 1.01% 1.00%
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $22,293,251) (cost $331,427,757) $ 310,291,903
Cash 2,559,353
Receivables --
Portfolio shares sold 390,391
Dividends and foreign taxes withheld 692,428
Other 247
-------------
Total assets $ 313,934,322
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 1,429,807
Portfolio shares repurchased 109,655
Upon return of securities loaned 22,399,475
Due to affiliates 7,860
Accrued expenses 90,119
-------------
Total liabilities $ 24,069,416
-------------
NET ASSETS:
Paid-in capital $ 319,707,923
Accumulated net realized loss on investments (8,674,259)
Net unrealized loss on:
Investments (21,135,854)
Forward currency contracts and other assets and liabilities denominated in foreign currencies (404)
-------------
Total net assets $ 289,897,406
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $218,621,679/13,717,159 shares) $ 15.94
=============
Class II (based on $71,275,727/4,474,052 shares) $ 15.93
=============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $261,751) $ 10,025,699
Interest 19,544
Other income 266,357
Income from securities loaned, net 136,691
--------------
Total investment income $ 10,448,291
--------------
EXPENSES:
Management fees $ 2,692,766
Transfer agent fees
Class I 1,404
Class II 1,404
Distribution fees
Class II 272,870
Administrative fees 124,255
Custodian fees 50,286
Professional fees 71,857
Printing expense 57,213
Fees and expenses of nonaffiliated trustees 13,173
Miscellaneous 48,822
--------------
Total expenses $ 3,334,050
--------------
Net investment income $ 7,114,241
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on:
Investments $ (5,168,146)
Other assets and liabilities denominated in foreign currencies (31,995) $ (5,200,141)
-------------- --------------
Change in net unrealized loss on:
Investments $ (163,401,136)
Other assets and liabilities denominated in foreign currencies (663) $ (163,401,799)
-------------- --------------
Net loss on investments and foreign currency transactions $ (168,601,940)
--------------
Net decrease in net assets resulting from operations $ (161,487,699)
==============
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 7,114,241 $ 6,245,852
Net realized gain (loss) on investments and foreign currency transactions (5,200,141) 40,458,365
Change in net unrealized loss on investments and foreign currency transactions (163,401,799) (20,275,382)
-------------- --------------
Net increase (decrease) in net assets resulting from operations $ (161,487,699) $ 26,428,835
-------------- --------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.40 and $0.32 per share, respectively) $ (5,576,145) $ (4,719,451)
Class II ($0.33 and $0.26 per share, respectively) (1,596,546) (1,540,471)
Net realized gain:
Class I ($0.90 and $0.00 per share, respectively) (12,363,681) --
Class II ($0.90 and $0.00 per share, respectively) (4,446,023) --
-------------- --------------
Total distributions to shareowners $ (23,982,395) $ (6,259,922)
-------------- --------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 40,672,011 $ 105,555,383
Shares issued in reorganization -- 55,441,058
Redemptions in kind -- (12,457,608)
Reinvestment of distributions 23,982,395 6,259,948
Cost of shares repurchased (111,576,481) (195,305,515)
-------------- --------------
Net decrease in net assets resulting from
Portfolio share transactions $ (46,922,075) $ (40,506,734)
-------------- --------------
Net decrease in net assets $ (232,392,169) $ (20,337,821)
NET ASSETS:
Beginning of year $ 522,289,575 $ 542,627,396
-------------- --------------
End of year $ 289,897,406 $ 522,289,575
============== ==============
Undistributed net investment income $ -- $ 4,122
============== ==============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 1,348,736 $ 29,151,711 3,143,089 $ 83,007,023
Redemptions in kind -- -- (485,677) (12,457,608)
Reinvestment of distributions 820,959 17,939,826 180,581 4,719,477
Less shares repurchased (3,010,167) (65,289,291) (3,884,694) (101,180,009)
---------- ------------- ---------- --------------
Net decrease (840,472) $ (18,197,754) (1,046,701) $ (25,911,117)
---------- ------------- ---------- --------------
CLASS II
Shares sold 570,655 $ 11,520,300 873,097 $ 22,548,360
Shares issued in reorganization -- -- 2,163,131 55,441,058
Reinvestment of distributions 275,502 6,042,569 59,350 1,540,471
Less shares repurchased (2,131,983) (46,287,190) (3,631,748) (94,125,506)
---------- ------------- ---------- --------------
Net decrease (1,285,826) $ (28,724,321) (536,170) $ (14,595,617)
========== ============= ========== ==============
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Fund VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified
open-end management investment company. The investment objective of the
Portfolio is reasonable income and capital growth.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distributions fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by insurance companies for the purpose
of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors. The Portfolio's prospectuses contain unaudited
information regarding the Portfolio's principal risks. Please refer to those
documents when considering the Portfolio's principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent with those policies 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
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) are
paid or received by the Portfolio,
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
depending on the daily fluctuation in the value of the contracts, and are
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, 2008, the Portfolio had no open futures 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, if any,
represent, among other things, the net realized gains and losses on foreign
currency contracts, disposition of foreign currencies, and the difference
between the amount of income accrued and the U.S. dollars 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 may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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.
At December 31, 2008, the Portfolio had no open forward contracts.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$5,159,070 of which $2,666,505 will expire in 2009 and $2,492,565 will
expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $2,529,974 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $704,223 to decrease
paid in capital, $54,328 to decrease distributions in excess of net
investment income and $649,895 to decrease accumulated net realized loss on
investments to reflect permanent book/tax differences. The reclassification
has no impact on the net asset value of the Portfolio and presents the
Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, were as follows:
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 7,172,774 $6,259,922
Long-term capital gain 16,809,621 --
------------ ----------
Total distributions $ 23,982,395 $6,259,922
============ ==========
Distributable Earnings:
Capital loss carryforward $ (5,159,070)
Post-October loss deferred (2,529,974)
Unrealized depreciation (22,121,473)
------------
Total $(29,810,517)
============
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales.
F. Portfolio Shares
The Portfolio records sales and repurchases of its shares as of trade date.
Certain insurance companies paid Pioneer Funds Distributor, Inc. (PFD), the
principal underwriter for the Portfolio and a wholly owned indirect
subsidiary of UniCredit S.p.A. (UniCredit), $633,101 in underwriting
commissions on the sale of Portfolio shares for the year ended December 31,
2008. Distribution fees for Class II shares are calculated based on the
average daily net asset value attributable to Class II shares of the
Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. Distributions paid by a Portfolio with respect to
each class of shares are calculated in the same manner and at the same
time, except that Class I and Class II shares can bear different transfer
agent and distribution fees. 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. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
accounting, regulatory reporting and insurance premiums, are paid by the
Portfolio. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $5,286 in management fees, administrative costs and certain
other fees payable to PIM at December 31, 2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $2,091 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to its Class II shares. Pursuant to
the Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average
daily net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $483 in distribution fees payable to PFD at December 31,
2008.
5. Expense Offsets Arrangements
The Portfolio has entered into an expense offset arrangement with PIMSS
resulting in a reduction in the Portfolio's total expenses due to interest
earned on cash held by PIMSS. For the year ended December 31, 2008, the
Portfolio's expenses were not reduced under this arrangement.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Fund VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Fund VCT Portfolio, one of the portfolios constituting the Pioneer Variable
Contracts Trust (the "Trust"), including the schedule of investments, as of
December 31, 2008, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Fund VCT Portfolio at December 31, 2008, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
19
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's
affairs. The officers of the Trust are responsible for the Trust's
Custodian operations. The Trustees and officers are listed below, together with
Brown Brothers Harriman & Co. their principal occupations during the past five years. Trustees who
are interested persons of the Trust within the meaning of the 1940 Act
Independent Registered Public Accounting Firm are referred to as Interested Trustees. Trustees who are not
Ernst & Young LLP interested persons of the Trust are referred to as Independent
Trustees. Each of the Trustees serves as a trustee of each of the 76
Principal Underwriter U.S. registered investment portfolios for which Pioneer serves as
Pioneer Funds Distributor, Inc. investment adviser (the "Pioneer Funds"). The address for all Trustees
and all officers of the Trust is 60 State Street, Boston,
Legal Counsel Massachusetts 02109.
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment
adviser and certain of its affiliates.
20
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- -----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- -----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- -----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- -----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- -----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- -----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- -----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- --------------------------------------------------------------------------------
21
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
- --------------------------------------------------------------------------------
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board.
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board.
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
- --------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- --------------------------------------------------------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
29
[Logo]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18649-03-0209
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2008
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Global High Yield VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 19
Notes to Financial Statements 23
Report of Independent Registered Public Accounting Firm 27
Trustees, Officers and Service Providers 29
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
Portfolio Diversification
(As a percentage of total investment in securities)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S. Corporate Bonds 81.2%
Senior Floating Rate Loans 4.0%
Asset Backed Securities 4.0%
Convertible Corporate Bonds 3.8%
Temporary Cash Investments 2.2%
Foreign Government Bonds 1.8%
Collateralized Mortgage Obligations 1.8%
U.S. Preferred Stocks 1.0%
Rights/Warrants 0.2%
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Maturity Distribution
(As a percentage of total investment in securities)
<1 year 19.0%
1-3 years 24.9%
3-4 years 27.4%
4-6 years 23.7%
6-8 years 4.4%
8+ years 0.6%
Five Largest Holdings
(As a percentage of long-term holdings)
1. Taganka Car Loan Finance Plc,
Floating Rate Note,
11/14/13 (144A) 1.63%
2. Alfa Div Payment Rights Fin,
Floating Rate Note, 3/15/12
(144A) 1.48
3. GC Impsat Hldgs I Plc, 9.875%,
2/15/17 (144A) 1.45
4. First Data Corp., 9.875%,
9/24/15 (144A) 1.44
5. Altra Industrial Motion, 9.0%,
12/1/11 1.42
The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class II $ 5.59 $ 9.66
Net Long-Term
Distributions per Share Investment Short-Term Capital
(1/1/08 - 12/31/08) Income Capital Gains Gains
Class II $ 0.9377 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Global High Yield VCT Portfolio at net asset value, compared to that of Merrill
Lynch (ML) Global High Yield and Emerging Markets Plus Index. Portfolio returns
are based on net asset value and do not reflect any applicable insurance fees
or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Pioneer Global High Yield ML Global High Yield and
VCT Portfolio Emerging Markets Plus Index
3/31/2005 $10,000 $10,000
12/31/2005 $10,586 $10,542
12/31/2006 $11,856 $11,909
12/31/2007 $12,134 $12,396
12/31/2008 $7,956 $9,499
The ML Global High Yield and Emerging Markets Plus Index tracks the performance
of the below- and border-line investment-grade global debt markets denominated
in the major developed market currencies. Index returns assume reinvestment of
dividends and, unlike Portfolio returns, do not reflect any fees, expenses or
sales charges. You cannot invest directly in any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class II
- --------------------------------------------------------------------------------
Life-of-Class
(3/18/05) -5.99%
1 Year -34.43%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Global High Yield VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class II
--------------------------------------------------
Beginning Account Value on 7/1/08 $1,000.00
Ending Account Value on 12/31/08 $ 664.13
Expenses Paid During Period* $ 4.16
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Global High Yield VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class II
--------------------------------------------------
Beginning Account Value on 7/1/08 $1,000.00
Ending Account Value on 12/31/08 $1,020.11
Expenses Paid During Period* $ 5.05
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
A Word About Risk:
Investments in high yield or lower-rated securities are subject to
greater-than-average risk. When interest rates rise, the prices of fixed income
securities in the Portfolio will generally fall. Conversely, when interest
rates fall, the prices of fixed income securities in the Portfolio will
generally rise. Investing in foreign and/or emerging markets securities
involves risks relating to interest rates, currency exchange rates, economic,
and political conditions. Investments in the Portfolio are subject to possible
loss due to the financial failure of underlying securities and their inability
to meet their debt obligations. Prepayment risk is the chance that
mortgage-backed bonds will be paid off early if falling interest rates prompt
homeowners to refinance their mortgages. Forced to reinvest the unanticipated
proceeds at lower interest rates, the Portfolio would experience a decline in
income and lose the opportunity for additional price appreciation associated
with falling interest rates. At times, the Portfolio's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
As a credit crisis spread from the United States to markets throughout the
world and undercut the ability of major financial institutions to lend or
borrow, investors grew increasingly apprehensive about credit risk during 2008.
As worried investors fled to the safest and highest-quality securities they
could find, the prices of high-yield corporate bonds and emerging market debt
declined sharply. The following is an interview with Andrew Feltus, CFA, who
discusses the performance of Pioneer Global High Yield VCT Portfolio during the
12 months ended December 31, 2008. Mr. Feltus, a member of Pioneer's Fixed
Income Department, is responsible for the daily management of the Portfolio.
Q: How did the Portfolio perform during 2008?
A: Pioneer Global High Yield VCT Portfolio's Class II shares returned -34.54%
at net asset value during the 12 months ended December 31, 2008. Over the
same period, the Portfolio's benchmark, the Merrill Lynch High Yield and
Emerging Markets Plus Index returned -23.38%, while the average return of
the 103 variable portfolios in Lipper's High Current Yield category was
-26.93% for the same 12 months. On December 31, 2008, the 30-day SEC yield
of the Portfolio's Class II shares was 23.78%.
Q: What was the environment like for high-yield investing in 2008?
A: The market for high-yield bonds deteriorated for most of the year amid fears
that the global economy was entering a recession and that lending activity
would freeze up entirely. While high-yield bonds struggled in the early
months of 2008, market conditions hit their nadir following the September
bankruptcy filing of prominent investment bank Lehman Brothers, when
virtually all institutions became hesitant to lend money. In fact,
September, October and November were the worst three months on record for
high-yield bond performance. The U.S. government, after declining the same
support it provided to Bear Stearns for Lehman Brothers, intervened
aggressively to rescue other financial institutions. The Federal Reserve
Board (the Fed) slashed interest rates, bringing the target Federal funds
rate effectively to zero by the end of the year, and the Treasury
Department took other steps to shore up staggering financial corporations.
Congress then passed a giant $700 billion rescue package that was labeled
the Troubled Asset Relief Program (TARP). While TARP was originally
designed to buy distressed debt securities, the Treasury Department
eventually also used it to directly inject capital into financial
institutions by acquiring equity-like securities. Late in the year, the
TARP money also started being used to prop up the troubled automotive
industry. While the U.S. economy reeled from the impacts of the credit
crisis, foreign economies also felt the effects as fears spread that the
economic downturn could turn into a global recession.
Amid a cascading series of events that included the collapse or
near-collapse of major financial institutions at home and abroad,
fixed-income investors attempted to avoid credit risk whenever possible.
U.S. Treasury yields fell and their prices rose as investors at times
appeared willing to accept no return if they could gain the safety of the
government guarantee. As high-yield corporate bonds fell in value, the
yield spreads between high-yield securities and Treasuries widened
substantially. Default rates on high-yield bonds rose to about 4.4% on an
issuer basis and 6.2% on a value basis at the end of the year, but
high-yield bond prices fell to reflect a potential default rate of 20%.
Investment-grade corporate bonds also fell in value. Mortgages backed by
U.S. federal agencies did not perform as well as Treasuries, but they
outperformed corporate bonds, both investment-grade and high-yield. While
emerging market debt also struggled, emerging market corporates performed
even worse than domestic high-yield corporates.
Q: What were your principal strategies in this difficult market and how did
they affect the Portfolio's results?
A: We emphasized domestic high-yield corporate bonds, whose prices we believed
were falling to unrealistically low levels as the credit crisis
intensified. At the end of the year, nearly 66% of Portfolio assets were
invested in bonds of U.S.-domiciled companies. Among the Portfolio's
domestic holdings, it had a very light position in automotive industry
bonds. While the strategy supported the Portfolio's results for most of the
year, it detracted from results in the final month when auto bonds
outperformed as federal aid started moving toward the industry. We
underweighted emerging market high-yield debt, but the Portfolio had a
relatively large position in emerging market corporates when compared with
emerging market sovereigns. The emphasis on emerging market corporates was
the single largest
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
factor contributing to the Portfolio's underperformance relative to the
benchmark Merrill Lynch Index. The Portfolio also had a large position in
the euro early in the year, which helped support results as the European
currency continued to appreciate. We later reduced that position, but the
presence of any euro position was a detriment to performance during the
final quarter of the year when the U.S. dollar strengthened.
Over the course of the year, we responded opportunistically to extremely
low prices and added positions to the Portfolio in some convertible
securities and in non-agency mortgage-backed securities, where we thought
there was good opportunity for price appreciation once the credit markets
started to stabilize and recover.
By investment rating in the high-yield universe, BB-rated securities
outperformed B-rated debt, which in turn outperformed CCC-rated bonds. The
Portfolio was overweight in B-rated debt and underweight in BB-rated bonds.
The Portfolio was slightly underweight in CCC-rated securities. The average
credit rating of Portfolio holdings was B at the end of the year.
Q: What were some of the investments that most influenced the Portfolio's
performance during the 12 months ended December 31, 2008?
A: During a year in which virtually all high-yield investments lost value and
produced negative results, some bonds held up better than the overall
market. They included two Latin American corporate bonds: Corporacion
Interamericana de Entretenimiento (CIE) of Mexico, which produces live
entertainment shows throughout Latin America, tendered its bonds, helping
support performance; and Sul America of Brazil, an insurance company, saw
its bonds outperform when the company was purchased by Dutch insurer ING.
Several holdings produced particularly disappointing results, including
debt of two U.S. companies and one European company that entered into
default. The U.S. securities were of VeraSun, a producer of ethanol for
fuels, and of Land Source, a land development company based in California.
The Portfolio's investment in VeraSun was secured, and so it continued to
receive income after the bankruptcy filing. Land Source, which is a
land-development joint venture between homebuilder Lennar and the
California Public Employees' Retirement System (CALPERS), was hurt by the
real estate slump in California. The European default was in the bonds of
Belvedere, a liquor company that to the surprise of bondholders filed for
bankruptcy protection for narrow, technical reasons. Other poor-performing
securities were of two related European chemical companies, Basell and
Nell. While neither filed for bankruptcy during the year, it was
anticipated that a third, related company, Lyondell, a U.S.-based chemical
corporation, would file for bankruptcy early in 2009.
Q: What is your investment outlook?
A: As we enter 2009, high-yield bonds are selling at extremely low prices,
reflecting an expectation of default rates that we believe are overly
pessimistic. We anticipate some increase in default rates as the economy
remains soft in the first half of the year, before, we believe, stabilizing
in the second half of 2009. However, we believe at current prices and
yields, bond investors should be well paid as they wait for the high-yield
market to recover. The major question is how long we will need to wait
before the economic stimulus efforts of the federal government begin to take
effect. As we wait, we will continue to be very selective while also
remaining alert for potential opportunities to purchase securities selling
at prices we believe have fallen to unrealistically low levels.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
CONVERTIBLE CORPORATE BONDS - 3.7%
Materials - 0.3%
Forest Products - 0.3%
40,000 Sino Forest Corp., 5.0%, 8/1/13 (144A) $ 27,200
-----------
Total Materials $ 27,200
-----------
Capital Goods - 0.8%
Trading Companies & Distributors - 0.8%
150,000 Wesco Distribution, Inc., 1.750%, 11/15/26 $ 82,688
-----------
Total Capital Goods $ 82,688
-----------
Transportation - 0.4%
Marine - 0.4%
80,000 Horizon Lines, 4.25%, 8/15/12 $ 41,000
-----------
Total Transportation $ 41,000
-----------
Health Care Equipment & Services - 1.2%
Health Care Facilities - 0.7%
85,000 LifePoint Hospitals, Inc., 3.25%, 8/15/25 $ 61,094
15,000 LifePoint Hospitals, Inc., 3.5%, 5/15/14 10,144
-----------
$ 71,238
-----------
Health Care Services - 0.5%
100,000 Omnicare, Inc., 3.25%, 12/15/35 $ 56,125
-----------
Total Health Care Equipment & Services $ 127,363
-----------
Real Estate - 0.1%
Retail Real Estate Investment Trust - 0.1%
75,000 General Growth Properties, 3.98%, 4/15/27 (144A) $ 5,719
-----------
Total Real Estate $ 5,719
-----------
Technology Hardware & Equipment - 0.1%
Communications Equipment - 0.1%
100,000 Nortel Networks, 2.125%, 4/15/14 $ 14,000
-----------
Total Technology Hardware & Equipment $ 14,000
-----------
Telecommunication Services - 0.8%
Wireless Telecommunication Services - 0.8%
130,000 NII Holdings, 3.125%, 6/15/12 $ 78,813
-----------
Total Telecommunication Services $ 78,813
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $601,361) $ 376,783
-----------
ASSET BACKED SECURITIES - 3.8%
Materials - 0.5%
Steel - 0.5%
20,683 3.36 Option One Mortgage Loan Trust, Floating Rate Note, 7/25/36 $ 18,205
35,853 0.56 Option One Mortgage Trust, Floating Rate Note, 5/25/37 32,093
-----------
$ 50,298
-----------
Total Materials $ 50,298
-----------
Consumer Services - 0.6%
Restaurants - 0.6%
100,000 Dunkin Brands Master Finance LLC, 8.28%, 6/20/31 (144A) $ 64,472
-----------
Total Consumer Services $ 64,472
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Banks - 2.1%
Thrifts & Mortgage Finance - 2.1%
23,725 3.08 ACE Securities Corp., 2004-HE4 M1, Floating Rate Note, 12/25/34 $ 15,023
30,000 Ace Securities Corp., 3.70875%, 4/25/35 25,307
15,799 0.93 Countrywide Asset-Backed, Floating Rate Note, 7/25/36 12,107
51,200 2.59 Lehman XS Trust., Floating Rate Note, 8/25/36 22,387
72,508 2.82 Lehman XS Trust., Floating Rate Note, 12/25/35 21,521
153,619 5.76 Taganka Car Loan Finance Plc, Floating Rate Note, 11/14/13 (144A) 118,287
-----------
$ 214,632
-----------
Total Banks $ 214,632
-----------
Diversified Financials - 0.2%
Diversified Finance Services - 0.2%
40,000 3.16 Bear Stearns Asset Backed Securities, Inc., Floating Rate Note, 3/25/35 $ 23,422
-----------
Total Diversified Financials $ 23,422
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $488,968) $ 391,692
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.7%
Banks - 0.6%
Thrifts & Mortgage Finance - 0.6%
24,471 2.83 Countrywide Home Loans ,Floating Rate Note, 3/25/35 $ 8,511
76,567 2.73 Luminent Mortgage Trust, Floating Rate Note, 7/25/36 11,958
65,000 T SRA R 2006-1 F, 7.5296%, 10/15/36 (144A) 19,500
47,504 2.70 WAMU Mortgage Pass-Through Certificate, Floating Rate Note, 4/25/45 22,426
-----------
$ 62,395
-----------
Total Banks $ 62,395
-----------
Diversified Financials - 0.3%
Diversified Financial Services - 0.3%
22,650 2.85 DSLA 2005-AR6 2A1C, Floating Rate Note, 10/19/45 $ 9,326
45,299 2.90 DSLA 2005-AR6 2A1C, Floating Rate Note, 10/19/45 18,652
-----------
$ 27,978
-----------
Total Diversified Financials $ 27,978
-----------
Telecommunication Services - 0.8%
Integrated Telecommunication Services - 0.8%
100,000 Global Tower Partners Acquisition, 7.87%, 5/15/37 $ 55,330
40,000 SBA CMBS Trust, 7.825%, 11/15/36 26,000
-----------
$ 81,330
-----------
Total Telecommunication Services $ 81,330
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $334,230) $ 171,703
-----------
CORPORATE BONDS - 78.1%
Energy - 9.8%
Coal & Consumable Fuels - 0.8%
110,000 Massey Energy Co., 6.875%, 12/15/13 $ 81,400
-----------
Oil & Gas Drilling - 1.1%
89,201 DDI Holding AS, 9.3%, 1/19/12 (144A) $ 44,601
500,000 Petromena AS, 9.75%, 5/24/12 (144A) 21,606
500,000 11.65 Sevan Drilling, Floating Rate Note, 12/7/12 43,212
-----------
$ 109,419
-----------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Oil & Gas Equipment & Services - 0.7%
50,000 Complete Production Service, 8.0%, 12/15/16 $ 31,500
500,000 11.99 Sevan Marine ASA, Floating Rate Note, 10/24/12 (144A) 43,212
-----------
$ 74,712
-----------
Oil & Gas Exploration & Production - 5.6%
35,000 Harvest Operations Corp., 7.875%, 10/15/11 $ 25,200
50,000 Hilcorp Energy, 7.75%, 11/1/15 (144A) 35,250
130,000 Mariner Energy, Inc., 7.5%, 4/15/13 (144A) 83,200
100,000 Norse Energy ASA, 6.5%, 7/14/11 (144A) 65,000
500,000 PA Resources AB, 8.75%, 3/10/10 57,616
100,000 Parallel Petroleum Corp., 10.25%, 8/1/14 63,500
35,000 Petrohawk Energy Corp., 7.875%, 6/1/15 (144A) 25,900
40,000 PetroHawk Energy Corp., 9.125%, 7/15/13 32,400
65,000 Plains E&P Co., 7.625%, 6/1/18 44,525
105,000 Quicksilver Resources, Inc., 7.125%, 4/1/16 56,175
50,000 Range Resources Corp., 7.5%, 5/15/16 43,375
80,000 Sandridge Energy, Inc., 8.0%, 6/1/18 44,400
-----------
$ 576,541
-----------
Oil & Gas Refining & Marketing - 0.3%
90,000 Aventine Renewable Energy, 10.0%, 4/1/17 (b) $ 14,850
90,000 Verasun Energy Corp., 9.375%, 6/1/17 (b) 10,800
-----------
$ 25,650
-----------
Oil & Gas Storage & Transportation - 1.3%
70,000 Copano Energy LLC, 8.125%, 3/1/16 $ 50,750
60,000 8.38 Enterprise Products, Floating Rate Note, 8/1/66 33,000
45,000 Southern Union Co., 7.2%, 11/1/66 15,525
60,000 7.00 Teppco Partners LP, Floating Rate Note, 6/1/67 32,141
-----------
$ 131,416
-----------
Total Energy $ 999,138
-----------
Materials - 8.1%
Aluminum - 1.0%
100,000 CII Carbon LLC, 11.125%, 11/15/15 $ 64,000
100,000 6.83 Noranda Aluminum Acquisition, Floating Rate Note, 5/15/15 34,000
50,000 8.58 Noranda Aluminum Holding, Floating Rate Note, 11/15/14 8,000
-----------
$ 106,000
-----------
Commodity Chemicals - 0.9%
100,000 Basell Finance Co., 8.1%, 3/15/27 (144A) $ 2,000
49,000 Georgia Gulf Corp., 10.75%, 10/15/16 11,760
100,000 Georgia Gulf Corp., 9.5%, 10/15/14 30,000
100,000 Hexion US Fin/Nova Scotia, 9.75%, 11/15/14 28,500
50,000 Nell AF Sarl, 8.375%, 8/15/15 (144A) 2,093
40,000 5.95 Nova Chemicals Corp., Floating Rate Note, 11/15/13 15,200
-----------
$ 89,553
-----------
Construction Materials - 0.5%
20,000 AGY Holding Corp., 11.0%, 11/15/14 $ 12,100
70,000 U.S. Concrete, Inc., 8.375%, 4/1/14 37,800
-----------
$ 49,900
-----------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Diversified Chemical - 0.2%
100,000 Ineos Group Holdings Plc, 7.875%, 2/15/16 (144A) $ 16,746
-----------
Diversified Metals & Mining - 0.6%
25,000 Freeport-McMoran Copper & Gold, 8.375%, 4/1/17 $ 20,500
65,000 New World Resources BV, 7.375%, 5/15/15 (144A) 40,818
-----------
$ 61,318
-----------
Forest Products - 0.2%
5,579 Ainsworth Lumber, 11.0%, 7/29/15 (144A) (b) $ 3,347
25,000 Sino Forest Corp., 9.125%, 8/17/11 (144A) 19,000
-----------
$ 22,347
-----------
Metal & Glass Containers - 1.2%
135,000 AEP Industries, Inc., 7.875%, 3/15/13 $ 76,275
50,000 Consol Glass, Ltd, 7.625%, 4/15/14 (144A) 41,865
-----------
$ 118,140
-----------
Paper Packaging - 1.8%
115,000 Graham Packaging Co., 9.875%, 10/15/14 $ 70,725
100,000 Graphic Packaging Co., 9.5%, 8/15/13 69,000
100,000 Pioneer Natural Resource, 10.0%, 6/1/13 48,000
-----------
$ 187,725
-----------
Paper Products - 0.9%
160,000 Exopack Holding Corp., 11.25%, 2/1/14 $ 93,600
-----------
Specialty Chemicals - 0.3%
50,000 Chemtura Corp., 6.875%, 6/1/16 $ 25,500
-----------
Steel - 0.5%
75,000 Algoma Acquisition Corp., 9.875%, 6/15/15 (144A) $ 28,500
100,000 Bulgaria Steel Finance, 12.0%, 5/4/13 10,466
25,000 Ryerson, Inc., 12.0%, 11/1/15 (144A) 15,438
-----------
$ 54,404
-----------
Total Materials $ 825,233
-----------
Capital Goods - 7.2%
Building Products - 0.7%
105,000 6.722 C10 Capital SPV Ltd., Floating Rate Note, 12/31/49 $ 49,962
75,000 Industrias Unidas, 11.5%, 11/15/16 (144A) 18,750
-----------
$ 68,712
-----------
Construction & Engineering - 1.0%
105,000 Desarrollos Metropolitan, 10.875%, 5/9/17 (144A) $ 8,400
45,000 Dycom Industries, 8.125%, 10/15/15 31,725
85,000 Mastec, Inc., 7.625%, 2/1/17 63,856
-----------
$ 103,981
-----------
Construction, Farm Machinery & Heavy Trucks - 1.3%
60,000 American Railcar, 7.5%, 3/1/14 $ 39,600
15,000 Greenbrier Co., Inc., 8.375%, 5/15/15 10,669
105,000 Titan Wheel International, Inc., 8.0%, 1/15/12 77,700
-----------
$ 127,969
-----------
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Electrical Component & Equipment - 1.0%
50,000 General Cable Corp., 1.0%, 10/15/12 $ 31,188
90,907 Ormat Funding Corp., 8.25%, 12/30/20 67,271
-----------
$ 98,459
-----------
Heavy Electrical Equipment - 1.3%
145,000 Altra Industrial Motion, 9.0%, 12/1/11 $ 137,025
-----------
Industrial Conglomerates - 0.4%
108,306 AAC Group Holding Corp., 14.75%, 10/1/12 $ 25,993
61,000 Indalex Holding, 11.5%, 2/1/14 6,863
24,000 Park-Ohio Industries, Inc., 8.375%, 11/15/14 9,840
-----------
$ 42,696
-----------
Industrial Machinery - 1.2%
120,000 Industrias Metalurgicas Pescar, 11.25%, 10/22/14 $ 54,000
100,000 Mueller Water Products, 7.375%, 6/1/17 68,000
-----------
$ 122,000
-----------
Trading Companies & Distributors - 0.3%
25,000 Glencore Funding LLC, 6.0%, 4/15/14 (144A) $ 10,120
60,000 Intcomex, Inc., 11.75%, 1/15/11 24,000
-----------
$ 34,120
-----------
Total Capital Goods $ 734,962
-----------
Commercial Services & Supplies - 0.5%
Diversified Commercial Services - 0.4%
120 Msx International, 12.5%, 4/1/12 (144A) $ 48,000
-----------
Environmental & Facilities Services - 0.1%
100,000 Aleris International, Inc., 9.0%, 12/15/14 $ 6,000
2,000 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) 2,005
-----------
$ 8,005
-----------
Total Commercial Services & Supplies $ 56,005
-----------
Transportation - 1.5%
Air Freight & Couriers - 0.8%
110,000 Ceva Group Plc, 10.0%, 9/1/14 (144A) $ 81,538
-----------
Airlines - 0.1%
9,263 Continental Airlines, Inc., 8.499%, 5/1/11 $ 8,613
-----------
Marine - 0.2%
100,000 Blt Finance Bv, 7.5%, 5/15/14 (144A) $ 27,000
-----------
Railroads - 0.4%
45,000 TFM SA De CV, 9.375%, 5/1/12 $ 41,175
-----------
Total Transportation $ 158,326
-----------
Automobiles & Components - 1.6%
Auto Parts & Equipment - 1.3%
35,000 Allison Transmission, 11.0%, 11/1/15 (144A) $ 17,150
25,000 Allison Transmission, 11.25%, 11/1/15 (144A) 9,875
175,000 Lear Corp., 8.75%, 12/1/16 50,750
70,000 Stanadyne Corp., 10.0%, 8/15/14 47,600
25,000 Tenneco Automotive, Inc., 8.625%, 11/15/14 (b) 9,500
-----------
$ 134,875
-----------
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
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Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Tires & Rubber - 0.3%
70,000 Cooper Standard Auto, 7.0%, 12/15/12 $ 21,000
70,000 Cooper Standard Auto, 8.375%, 12/15/14 12,250
-----------
$ 33,250
-----------
Total Automobiles & Components $ 168,125
-----------
Consumer Durables & Apparel - 0.7%
Homebuilding - 0.3%
60,000 Meritage Homes Corp., 6.25%, 3/15/15 $ 31,800
-----------
Housewares & Specialties - 0.4%
100,000 Yankee Acquisition Corp., 9.75%, 2/15/17 (b) $ 42,000
-----------
Total Consumer Durables & Apparel $ 73,800
-----------
Consumer Services - 2.5%
Casinos & Gaming - 2.3%
150,000 Codere Finance SA, 8.25%, 6/15/15 (144A) $ 101,523
100,000 Fontainebleau Las Vegas, 10.25%, 6/15/15 (144A) 9,750
65,000 Little Traverse Bay Odawa Inn, 10.25%, 2/15/14 (144A) 40,950
50,000 8.25 Lottomatica S.p.A., Floating Rate Note, 3/31/66 (144A) 41,864
120,000 Manshantucket Pequot Tribe, 8.5%, 11/15/15 (144A) 47,100
-----------
$ 241,187
-----------
Leisure Facilities - 0.2%
30,000 Firekeepers Development Authority, 13.875%, 5/1/15 (144A) $ 18,600
-----------
Total Consumer Services $ 259,787
-----------
Media - 1.6%
Broadcasting - 1.6%
50,000 CCH II LLC/CCH II Capital Corp., 10.25%, 9/15/10 $ 22,000
50,000 Intel, 11.5%, 6/16/15 (144A) 43,500
75,000 Kabel Deutschland GMBH, 10.625%, 7/1/14 66,750
20,000 Telesat Canada, 12.5%, 11/1/17 12,000
120,000 Univision Communications, 9.75%, 3/15/15 (144A) 15,000
-----------
$ 159,250
-----------
Total Media $ 159,250
-----------
Retailing - 2.4%
Apparel Retail - 0.1%
50,000 10.46 EDCON Holdings Property, Ltd., Floating Rate Note, 6/15/15 (144A) $ 15,351
-----------
Distributors - 0.7%
75,000 Marfrig Overseas, Ltd., 9.625%, 11/16/16 (144A) $ 44,250
50,000 Minerva Overseas, Ltd., 9.5%, 2/1/17 (144A) 27,500
-----------
$ 71,750
-----------
Home Improvement Retail - 0.1%
35,000 Kar Holdings, Inc., 10.0%, 5/1/15 (144A) $ 11,550
-----------
Internet Retail - 0.8%
50,000 Expedia, Inc., 8.5%, 7/1/16 (144A) $ 37,250
85,000 Ticketmaster, 10.75%, 8/1/16 45,900
-----------
$ 83,150
-----------
Specialty Stores - 0.7%
100,000 Sally Holdings LLC, 10.5%, 11/15/16 $ 68,000
-----------
Total Retailing $ 249,801
-----------
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Food & Drug Retailing - 0.6%
Food Distributors - 0.6%
100,000 Arantes International, 10.25%, 6/19/13 $ 30,000
55,000 Independencia International, 9.875%, 5/15/15 (144A) 30,250
-----------
$ 60,250
-----------
Total Food & Drug Retailing $ 60,250
-----------
Food, Beverage & Tobacco - 1.1%
Agricultural Products - 0.1%
10,000 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 9,050
-----------
Distillers & Vintners - 0.2%
7,108 Belvedere, 0.0%, 4/11/14 $ 2,820
46,200 Belvedere, 7.692%, 4/11/14 17,794
-----------
$ 20,614
-----------
Packaged Foods & Meats - 0.2%
30,000 Bertin Ltda, 10.25%, 10/5/16 (144A) $ 16,500
-----------
Tobacco - 0.6%
85,000 Alliance One International, Inc., 8.5%, 5/15/12 $ 62,475
-----------
Total Food, Beverage & Tobacco $ 108,639
-----------
Household & Personal Products - 0.4%
Household Products - 0.4%
75,000 Central Garden & Pet Co., 9.125%, 2/1/13 (b) $ 44,250
-----------
Total Household & Personal Products $ 44,250
-----------
Health Care Equipment & Services - 4.7%
Health Care Equipment - 0.9%
50,000 Accellent, Inc., 10.5%, 12/1/13 $ 34,250
50,000 Pts Acquisition, 9.75%, 4/15/17 18,142
50,000 Universal Hospital Services, 8.5%, 6/1/15 35,500
-----------
$ 87,892
-----------
Health Care Facilities - 0.4%
50,000 HCA, Inc., 9.625%, 11/15/16 $ 39,000
-----------
Health Care Services - 1.9%
100,000 Dasa Finance Corp., 8.75%, 5/29/18 (144A) $ 75,750
200,000 Surgical Care Affiliates, 8.875%, 7/15/15 (144A) 122,000
-----------
$ 197,750
-----------
Health Care Supplies - 0.8%
110,000 Biomet, Inc., 10.375%, 10/15/17 $ 86,900
-----------
Managed Health Care - 0.7%
90,000 Multiplan, Inc., 10.375% 4/15/16 (144A) $ 72,900
-----------
Total Health Care Equipment & Services $ 484,442
-----------
Pharmaceuticals & Biotechnology - 2.2%
Pharmaceuticals - 2.2%
100,000 AMR Holdco/Emcar Holdco, 10.0%, 2/15/15 $ 93,000
85,000 Angiotech Pharmaceutical, 7.75%, 4/1/14 (b) 18,275
75,000 Phibro Animal Health Corp., 10.0%, 8/1/13 (144A) 60,000
70,000 Phibro Animal Health Corp., 13.0%, 8/1/14 (144A) 54,600
-----------
$ 225,875
-----------
Total Pharmaceuticals & Biotechnology $ 225,875
-----------
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
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Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Banks - 4.6%
Diversified Banks - 4.0%
150,000 ALB Finance BV, 9.375%, 4/19/28 $ 30,000
203,125 4.78 Alfa Div Payment Rights Fin, Floating Rate Note, 3/15/12 (144A) 142,890
75,000 ATF Bank JSC, 9.25%, 4/12/12 (144A)+ 51,362
35,000 Banco Macro SA, 8.5%, 2/1/17 17,150
100,000 Centercredit International, 8.625%, 1/30/14 (144A) 35,000
50,000 Sibacademfinance, 7.0%, 5/21/10 45,681
50,000 Sibacademfinance Plc, 9.0%, 5/12/09 (144A) 50,287
80,000 Turanalem Finance BV, 8.5%, 2/10/15 (144A) 34,400
-----------
$ 406,770
-----------
Thrifts & Mortgage Finance - 0.6%
100,000 Hipotecaria Su Casita SA, 8.5%, 10/4/16 (144A) $ 63,000
-----------
Total Banks $ 469,770
-----------
Diversified Financials - 4.9%
Diversified Financial Services - 1.9%
50,000 8.40 Citi, Floating Rate Note, Perpetual $ 33,014
30,000 Mandra Forestry, 12.0%, 5/15/13 (144A) 15,000
60,000 Mirant JPSCO Finance, Ltd., 11.0%, 7/6/16 (144A) 45,000
100,000 TNK-BP Finance SA, 6.625%, 3/20/17 (144A) 48,000
100,000 TNK-BP Finance SA, 7.875%, 3/13/18 (144A) 50,000
-----------
$ 191,014
-----------
Investment Banking & Brokerage - 0.5%
50,000 Egidaco Investments, 18.0%, 6/24/11 $ 52,331
-----------
Multi-Sector Holding - 1.0%
125,000 Leucadia National, 8.125%, 9/15/15 $ 100,313
-----------
Specialized Finance - 1.5%
100,000 Ace Cash Express, Inc., 10.25%, 10/1/14 (144A) $ 20,000
200,000 NCO Group, Inc., 11.875%, 11/15/14 100,000
70,000 7.68 NCO Group, Inc., Floating Rate Note, 11/15/13 35,000
-----------
$ 155,000
-----------
Total Diversified Financials $ 498,658
-----------
Insurance - 3.2%
Insurance Brokers - 0.7%
150,000 Hub International Holdings, 10.25%, 6/15/15 (144A) $ 66,188
25,000 Usi Holdings Corp., 9.75%, 5/15/15 (144A) 9,969
-----------
$ 76,157
-----------
Life & Health Insurance - 1.2%
125,000 Presidential Life Corp., 7.875%, 2/15/09 $ 117,656
-----------
Multi-Line Insurance - 1.3%
100,000 Liberty Mutual Group, 7.0%, 3/15/37 (144A) $ 47,688
65,000 10.75 Liberty Mutual Group, Floating Rate Note, 6/15/58 (144A) 35,750
61,981 Sul America Partecipacoe, 8.625%, 2/15/12 (144A) 54,544
-----------
$ 137,982
-----------
Total Insurance $ 331,795
-----------
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Real Estate - 1.7%
Real Estate Development - 0.5%
100,000 Greentown China Holdings, 9.0%, 11/8/13 (144A) $ 35,000
100,000 Neo-China Group Holdings, 9.75%, 7/23/14 16,000
-----------
$ 51,000
-----------
Real Estate Operating Companies - 1.2%
70,000 Alto Palermo SA, 7.875%, 5/11/17 (144A) $ 27,300
135,000 9.76 Alto Palermo SA, Floating Rate Note, 6/11/12 (144A) 56,781
90,000 Inversiones Y Rep, 8.5%, 2/2/17 (144A) 34,650
-----------
$ 118,731
-----------
Total Real Estate $ 169,731
-----------
Software & Services - 2.2%
Application Software - 0.6%
50,000 Open Solutions, Inc., 9.75%, 2/15/15 (144A) $ 7,500
95,000 Vangent, Inc., 9.625%, 2/15/15 55,219
-----------
$ 62,719
-----------
Data Processing & Outsourced Services - 1.4%
230,000 First Data Corp., 9.875%, 9/24/15 (144A) $ 139,150
-----------
IT Consulting & Other Services - 0.2%
55,000 Activant Solutions, Inc., 9.5%, 5/1/16 $ 25,574
-----------
Total Software & Services $ 227,443
-----------
Technology Hardware & Equipment - 0.9%
Technology Distributors - 0.9%
100,000 Da-Lite Screen Co., Inc., 9.5%, 5/15/11 $ 88,000
-----------
Total Technology Hardware & Equipment $ 88,000
-----------
Semiconductors - 0.3%
Semiconductor Equipment - 0.3%
50,000 Freescale Semiconductor, 9.125%, 12/15/14 $ 11,500
55,000 6.65 Freescale Semiconductor, Floating Rate Note, 12/15/14 18,700
-----------
$ 30,200
-----------
Total Semiconductors $ 30,200
-----------
Telecommunication Services - 8.7%
Integrated Telecommunication Services - 4.6%
130,000 Broadview Networks Holdings, 11.375%, 9/1/12 $ 89,700
100,000 Digicel, Ltd., 9.25%, 9/1/12 (144A) 85,000
200,000 GC Impsat Holdings I Plc, 9.872%, 2/15/17 (144A) 140,000
100,000 10.46 Nordic Telephone Company Holdings, Floating Rate Note, 5/1/16 (144A) 94,196
110,000 Paetec Holdings, 9.5%, 7/15/15 (b) 65,450
-----------
$ 474,346
-----------
Wireless Telecommunication Services - 4.1%
100,000 Cell C Pty, Ltd., 11.0%, 7/1/15 (144A) $ 84,500
80,000 Cricket Communications I, 9.375%, 11/1/14 72,000
110,000 Hughes Network System, 9.5%, 4/15/14 89,375
50,000 Mobile Telesystems Finance, 8.0%, 1/28/12 40,000
220,000 True Move Co., Ltd., 10.75%, 12/16/13 (144A) 81,400
100,000 Vip Fin, 9.125%, 4/30/18 (144A) 54,000
-----------
$ 421,275
-----------
Total Telecommunication Services $ 895,621
-----------
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
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Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Utilities - 6.7%
Electric Utilities - 2.5%
175,000 Caiua Serv Electricidad, 11.125%, 4/2/49 (144A) $ 75,250
90,000 CIA Transporte Energia, 8.875%, 12/15/16 (144A) 29,700
125,000 1.33 Power Contract Financing LLC, Floating Rate Note, 2/5/10 (144A) 101,250
70,000 TXU Energy Co., 10.25%, 11/1/15 49,700
-----------
$ 255,900
-----------
Gas Utilities - 1.0%
200,000 Transport De Gas Del Sur, 7.875%, 5/14/17 (144A) $ 104,000
-----------
Independent Power Producer & Energy Traders - 2.8%
100,000 Biofuel Energy, 19.0%, 6/7/12 $ 80,000
100,000 Intergen NV, 9.0%, 6/30/17 82,000
100,000 NRG Energy, Inc., 7.375%, 1/15/17 92,000
39,962 Tenaska Alabama, 7.0%, 6/30/21 (144A) 31,343
-----------
$ 285,343
-----------
Multi-Utilities - 0.4%
50,000 NSG Holdings LLC, 7.75%, 12/15/25 (144A) $ 39,000
-----------
Total Utilities $ 684,243
-----------
TOTAL CORPORATE BONDS
(Cost $14,427,322) $ 8,003,344
-----------
FOREIGN GOVERNMENT BONDS - 1.8%
30,000 CIA Latino Americano 9.75%, 5/10/12 $ 12,000
ITL 35,000,000 Banco Nac De Desen Econo, 8.0%, 4/28/10 24,847
BRL 250,000 Republic of Brazil 12.5%, 1/5/22 111,795
COP 70,000,000 Republic of Columbia, 11.75%, 3/1/10 31,177
-----------
$ 179,819
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $250,810) $ 179,819
-----------
SENIOR FLOATING RATE LOAN INTERESTS - 3.9%**
Materials - 0.4%
Steel - 0.4%
98,500 5.4613 Niagara Corp., Term Loan, 6/29/14 $ 45,310
-----------
Total Materials $ 45,310
-----------
Capital Goods - 0.5%
Aerospace & Defense - 0.5%
74,219 5.4375 Aeroflex, Inc., Tranche B-1 Term Loan, 8/15/14 $ 46,758
-----------
Total Capital Goods $ 46,758
-----------
Consumer Durables & Apparel - 0.1%
Homebuilding - 0.1%
250,000 8.7500 Landsource Communities Development, Facility Loan, 2/27/14 $ 8,646
-----------
Total Consumer Durables & Apparel $ 8,646
-----------
Health Care Equipment & Services - 0.6%
Health Care Services - 0.6%
99,244 3.7088 Catalent Pharma Solutions, Inc., Dollar Term Loan, 4/10/14 $ 60,291
-----------
Total Health Care Equipment & Services $ 60,291
-----------
The accompanying notes are an integral part of these financial statements. 15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Technology Hardware & Equipment - 1.6%
Electronic Equipment & Instruments - 1.6%
151,250 6.7013 Huawei-3Com Co., Ltd., Tranche B Term Loan, 9/28/12 $ 124,781
47,579 4.7200 Scitor Corp., Term Loan, 9/26/14 42,107
-----------
$ 166,888
-----------
Total Technology Hardware & Equipment $ 166,888
-----------
Semiconductors - 0.0%
Semiconductor Equipment - 0.0%
83 7.0688 Flextronics Semiconductor, A-1-A Delayed Loan, 10/1/14 $ 53
289 6.1554 Flextronics Semiconductor, A Closing Date Loan, 10/1/14 186
-----------
$ 239
-----------
Total Semiconductors $ 239
-----------
Telecommunication Services - 0.7%
Integrated Telecommunication Services - 0.7%
7,833 4.4600 Telesat Canada, Inc., U.S. Term II Loan, 10/31/14 $ 5,413
91,205 6.1043 Telesat Canada, Inc., U.S. Term I Loan, 10/31/14 63,029
-----------
$ 68,442
-----------
Total Telecommunication Services $ 68,442
-----------
TOTAL SENIOR FLOATING RATE LOAN INTERESTS
(Cost $798,823) $ 396,574
-----------
PREFERRED STOCKS - 1.0%
Diversified Financials - 0.3%
Diversified Financial Services - 0.3%
45 Bank of America Corp., 7.25%, 12/31/49 $ 29,250
-----------
Total Diversified Financials $ 29,250
-----------
Insurance - 0.7%
Life & Health Insurance - 0.7%
6,000 Delphi Financial Group, 7.376% 5/15/37 $ 72,300
-----------
Total Insurance $ 72,300
-----------
TOTAL PREFERRED STOCKS
(Cost $186,415) $ 101,550
-----------
COMMON STOCK - 0.0%
Materials - 0.0%
Forest Products - 0.0%
1,675 Ainsworth Lumber Co., Ltd. (144A)* $ 1,366
-----------
Total Materials $ 1,366
-----------
TOTAL COMMON STOCK
(Cost $16,166) $ 1,366
-----------
RIGHTS/WARRANTS - 0.2%
Energy - 0.2%
Oil & Gas Exploration & Production - 0.2%
100,000 Norse Energy Corp ASA* $ 16,133
-----------
Total Energy $ 16,133
-----------
Diversified Financials - 0.0%
Diversified Financial Services - 0.0%
5 Mandra Forestry-CW13, Warrants Expire, 5/15/13* $ 300
-----------
Total Diversified Financials $ 300
-----------
16 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Real Estate - 0.0%
Real Estate Development - 0.0%
70,000 Neo-China Group Holdings, Ltd., Warrant -CW-12* $ 2,258
-----------
Total Real Estate $ 2,258
-----------
Utilities - 0.0%
Independent Power Producer & Energy Traders - 0.0%
4,706 Biofuel Energy ASA* $ --
-----------
Total Utilities $ --
-----------
TOTAL RIGHTS/WARRANTS
(Cost $12,064) $ 18,691
-----------
TEMPORARY CASH INVESTMENTS - 2.1%
Securities Lending Collateral - 2.1% (d)
Certificates of Deposit:
4,933 Abbey National Plc, 3.15%, 8/13/09 $ 4,933
4,933 Bank of Nova Scotia, 3.21%, 5/5/09 4,933
7,884 Bank of Scotland NY, 2.92%, 6/5/09 7,884
8,880 Barclays Bank, 1.5%, 5/27/09 8,880
1,568 Calyon NY, 4.62%, 1/16/09 1,568
9,867 CBA, 4.87%, 7/16/09 9,867
8,880 DNB NOR Bank ASA NY, 3.04%, 6/5/09 8,880
9,038 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 9,038
571 NORDEA NY, 4.13%, 4/9/09 571
7,400 Royal Bank of Canada NY, 2.7%, 8/7/09 7,400
4,933 Royal Bank of Scotland, 3.06%, 3/5/09 4,933
986 Skandinavian Enskilda Bank NY, 3.06%, 2/13/09 986
9,867 Societe Generale, 3.29%, 9/4/09 9,867
8,880 Svenska Bank NY, 4.61%, 7/8/09 8,880
9,867 U.S. Bank NA, 2.25%, 8/24/09 9,867
-----------
$ 98,486
-----------
Commercial Paper:
940 BBVA U.S., 2.83%, 3/12/09 $ 940
9,867 Monumental Global Funding, Ltd., 2.5%, 8/17/09 9,867
4,933 CME Group, Inc., 2.9%, 8/6/09 4,933
4,933 General Electric Capital Corp., 2.86%, 3/16/09 4,933
9,689 American Honda Finance Corp., 4.95%, 7/14/09 9,689
9,867 HSBC Bank, Inc., 2.5%, 8/14/09 9,867
4,933 IBM, 2.39%, 9/25/09 4,933
8,880 Met Life Global Funding, 3.19%, 6/12/09 8,880
8,880 New York Life Global, 2.13%, 9/4/09 8,880
8,387 Westpac Banking Corp., 2.34%, 6/1/09 8,387
-----------
$ 71,308
-----------
Tri-party Repurchase Agreements:
21,706 Deutsche Bank, 0.25%, 1/2/09 $ 21,706
1,676 Barclays Capital Markets, 0.5%, 1/2/09 1,676
-----------
$ 23,383
-----------
Time Deposit:
9,867 BNP Paribas, 0.01%, 1/2/09 $ 9,867
-----------
The accompanying notes are an integral part of these financial statements. 17
PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
Floating
Principal Rate (c)
Amount ($) (unaudited) Value
Money Market Mutual Funds:
2,467 Columbia Government Reserves Fund $ 2,467
7,400 JP Morgan, U.S. Government Money Market Fund 7,400
-----------
$ 9,867
-----------
Total Securities Lending Collateral $ 212,910
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $212,910) $ 212,910
-----------
TOTAL INVESTMENT IN SECURITIES - 96.0%
(Cost $17,329,069)(a) $ 9,815,564
-----------
OTHER ASSETS AND LIABILITIES - 4.0% $ 404,184
-----------
TOTAL NET ASSETS - 100.0% $10,219,748
===========
* Non-income producing security.
+ Investment deemed to be an affiliate of the Fund.
(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, 2008, the value of these securities amounted to $3,862,112
or 37.7% of total net assets.
** Senior floating rate loan interests in which the Portfolio invests
generally pay interest at rates that are periodically redetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate
offered by one or more major United States banks, (iii) the certificate
of deposit or (iv) other base lending rates used by commercial lenders.
The rate shown is the coupon rate at period end.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $17,379,576 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ 46,247
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (7,610,259)
------------
Net unrealized loss $ (7,564,012)
============
(b) At December 31, 2008, the following securities were out on loan:
Principal Description Value
2,000 Ainsworth Lumber, 11.0%, 7/29/15 (144A) $ 1,200
82,000 Angiotech Pharmaceutical, 7.75%, 4/1/14 17,630
89,000 Aventine Renewable Energy, 10.0%, 4/1/17 14,685
74,000 Central Garden & Pet Co., 9.125%, 2/1/13 43,660
100,000 Paetec Holdings, 9.5%, 7/15/15 59,500
24,000 Tenneco Automotive, Inc., 8.625%, 11/15/14 9,120
85,000 Verasun Energy Corp., 9.375%, 6/1/17 10,200
90,000 Yankee Acquisition Corp., 9.75%, 2/15/17 37,800
--------
Total $193,795
========
(c) Debt obligation with a variable interest rate. Rate shown is rate at
period end.
(d) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $4,928,248 and $4,476,895,
respectively.
NOTE: Principal amounts are denominated in U.S. Dollars unless otherwise
denoted.
BRL Brazilian Real
COP Columbian Peso
ITL Italian Lira
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Other
Investments Financial
Valuation Inputs in Securities Instruments
- --------------------------------------------------------------------------------
Level 1 - Quoted Prices $ 46,749 $ -
Level 2 - Other Significant Observable Inputs 9,768,815 4,909
Level 3 - Significant Unobservable Inputs - -
---------- ------
Total $9,815,564 $4,909
========== ======
18 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
3/18/05 (a)
Year Ended Year Ended Year Ended to
Class II 12/31/08 12/31/07 12/31/06 12/31/05
Net asset value, beginning of period $ 9.66 $ 10.38 $ 10.02 $10.00
------- ------- ------- ------
Increase from investment operations:
Net investment income $ 0.83 $ 0.79 $ 0.77 $ 0.51
Net realized and unrealized gain (loss) on investments,
credit default swaps and foreign currency transactions (3.96) (0.54) 0.39 0.01
------- ------- ------- ------
Net increase (decrease) from investment operations $ (3.13) $ 0.25 $ 1.16 $ 0.52
Distributions to shareowners:
Net investment income (0.94) (0.83) (0.75) (0.50)
Net realized gain -- (0.14) (0.05) --
------- ------- ------- ------
Net increase (decrease) in net asset value $ (4.07) $ (0.72) $ 0.36 $ 0.02
------- ------- ------- ------
Net asset value, end of period $ 5.59 $ 9.66 $ 10.38 $10.02
======= ======= ======= ======
Total return* (34.54)% 2.34% 12.00% 5.34%(b)
Ratio of net expenses to average net assets 1.00% 1.00% 1.00% 0.99%**
Ratio of net investment income to average net assets 9.82% 7.65% 7.56% 6.72%**
Portfolio turnover rate 32% 77% 32% 26%(b)
Net assets, end of period (in thousands) $10,220 $16,069 $11,646 $3,632
Ratios with no waiver of management fees and assumption
of expenses by PIM:
Net expenses 1.73% 1.38% 2.22% 5.65%**
Net investment income 9.09% 7.27% 6.34% 2.06%**
(a) The Portfolio commenced operations on March 18, 2005.
(b) Not annualized.
* Assumes initial investment at net asset value at the beginning of the
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
** Annualized.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities of unaffiliated issuers, at value (including securities
loaned of $193,795) (cost $17,253,548) $ 9,764,202
Investment in securities of affiliated issuers, at value
(cost $75,521) 51,362
Total Investments in securities, at value
(cost $17,329,069) 9,815,564
Cash 313,670
Foreign currencies, at value (cost $25,667) 17,372
Receivables -
Dividends and interest 351,479
Forward foreign currency portfolio hedge contracts 4,909
Due from Pioneer Investment Management, Inc. 2,292
Other 280
------------
Total assets $ 10,505,566
------------
LIABILITIES:
Payables -
Investment securities purchased $ 115
Portfolio shares repurchased 454
Dividends 16,291
Upon return of securities loaned 212,910
Due to affiliates 198
Accrued expenses 55,850
------------
Total liabilities $ 285,818
------------
NET ASSETS:
Paid-in capital $ 18,172,077
Distributions in excess of net investment income (70,586)
Accumulated net realized loss on investments, credit default swaps and foreign currency (360,687)
transactions
Net unrealized loss on investments (7,513,505)
Net unrealized loss on forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (7,551)
------------
Total net assets $ 10,219,748
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class II (based on $10,219,748 / 1,828,849 shares) $ 5.59
============
20 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $ 12,695
Interest (net of foreign taxes withheld of $1,863) (including income from affiliates
of $6,398) (including income from affiliates of $6,398) 1,543,647
Income from securities loaned, net 12,136
------------
Total investment income $ 1,568,478
------------
EXPENSES:
Management fees $ 94,211
Transfer agent fees 1,504
Distribution fees 36,235
Administrative fees 4,347
Custodian fees 29,400
Professional fees 50,128
Printing expense 13,255
Fees and expenses of nonaffiliated trustees 5,692
Miscellaneous 15,652
------------
Total expenses $ 250,424
Less management fees waived and expenses reimbursed by Pioneer Investment Management, Inc. (105,498)
------------
Net expenses $ 144,926
------------
Net investment income $ 1,423,552
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
CREDIT DEFAULT SWAPS, AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Investments $ (234,308)
Credit default swaps 763
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies 105,072 $ (128,473)
------------ ------------
Change in net unrealized (loss) on:
Investments $ (6,724,707)
Credit default swaps (299)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (15,612) $ (6,740,618)
------------ ------------
Net loss on investments, credit default swaps and foreign currency transactions $ (6,869,091)
------------
Net decrease in net assets resulting from operations $ (5,445,539)
============
The accompanying notes are an integral part of these financial statements. 21
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 1,423,552 $ 1,282,665
Net realized gain (loss) on investments, credit default swaps and foreign currency
transactions (128,473) 177,175
Change in net unrealized (loss) on investments, credit default swaps and foreign currency
transactions (6,740,618) (1,069,555)
------------ -------------
Net increase (decrease) in net assets resulting from operations $ (5,445,539) $ 390,285
------------ -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class II ($0.94 and $0.83 per share, respectively) $ (1,625,944) $ (1,347,133)
Net realized gain:
Class II ($0.00 and $0.14 per share, respectively) -- $ (229,168)
------------ -------------
Total distributions to shareowners $ (1,625,944) $ (1,576,301)
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 7,041,266 $ 23,319,679
Reinvestment of distributions 1,560,308 1,508,386
Cost of shares repurchased (7,379,679) (19,218,725)
------------ -------------
Net increase in net assets resulting from Portfolio share transactions $ 1,221,895 $ 5,609,340
------------ -------------
Net increase (decrease) in net assets $ (5,849,588) $ 4,423,324
NET ASSETS:
Beginning of year 16,069,336 11,646,012
------------ -------------
End of year $ 10,219,748 $ 16,069,336
============ ============
Undistributed (distributions in excess of) net investment income $ (70,586) $ 11,964
============ ============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS II
Shares sold 796,878 $ 7,041,266 2,264,353 $ 23,319,679
Reinvestment of distributions 207,476 1,560,308 148,663 1,508,386
Less shares repurchased (838,827) (7,379,679) (1,871,173) (19,218,725)
-------- ------------ ---------- -------------
Net increase 165,527 $ 1,221,895 541,843 $ 5,609,340
======== ============ ========== =============
22 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Global High Yield VCT Portfolio (the Portfolio) is one of 19
portfolios comprising Pioneer Variable Contracts Trust (the Trust), a Delaware
statutory trust registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. The investment
objective of the Portfolio is to maximize total return through a combination of
income and capital appreciation.
The Portfolio offers one class of shares designated as Class II shares. The
Portfolio commenced operations on March 18, 2005.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts, or
by qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
Investing in foreign and/or emerging market securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
Investments in the Portfolio are subject to possible loss due to the financial
failure of underlying securities and their inability to meet their debt
obligations. The Portfolio's prospectus contains unaudited information
regarding the Portfolio's principal risks. Please refer to the document when
considering the Portfolio's principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent with those generally accepted in the investment company
industry:
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Portfolio is computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, securities are valued at the last sale price
on the principal exchange where they are traded. Fixed income securities
with remaining maturity of more than 60 days are valued at prices supplied
by independent pricing services, which consider such factors as Treasury
spreads, yields, maturities and ratings. Valuations may be supplemented by
dealers and other sources, as required. Securities for which there are no
other readily available valuation methods are valued using fair value
methods pursuant to procedures adopted by the Board of Trustees and may
include yield equivalents or a pricing matrix. The Portfolio may also use
the fair value of a security, including a non-U.S. security, when the
closing market price on the primary exchange where the security is traded
no longer accurately reflects the value of the security as of the close of
the NYSE. At December 31, 2008, there were no securities that were valued
using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
Credit default swaps are valued by an independent pricing service based
upon valuation models incorporating default probabilities, estimated
recovery rates, actual reported transactions, and other available market
data.
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 becomes aware of the
ex-dividend data in the exercise of reasonable diligence. Discounts and
premiums on debt securities are accreted or amortized daily, respectively,
on a yield-to-maturity basis into interest income with a corresponding
increase or decrease in the cost basis of the security. Interest income is
recorded on the accrual basis, net of unrecoverable foreign taxes withheld
at the applicable country rates.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on
23
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
investment transactions, or as from paid-in capital, depending on the type
of book/tax differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$340,407, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $19,168 of capital losses
recognized between November 1, 2008 and December 31, 2008 to its fiscal
year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $119,842 to decrease
distributions in excess of net investment income and $119,842 to increase
accumulated net realized loss on investments to reflect permanent book/tax
differences. The reclassification has no impact on the net asset value of
the Portfolio and is designed to present the Portfolio's capital accounts
on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, were as
follows:
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 1,625,944 $1,487,022
Long-term capital gain - 89,279
----------- ----------
Total distributions $ 1,625,944 $1,576,301
----------- ==========
Distributable Earnings:
Capital loss carryforward $ (340,407)
Post-October loss deferral (19,168)
Dividend payable (16,282)
Unrealized depreciation (7,576,472)
-----------
Total $(7,952,329)
===========
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
primarily attributable to the tax deferral of losses on wash sales,
adjustments relating to the mark to market of forward currency contracts
and the tax basis adjustments on defaulted bonds.
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, if any,
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. dollars 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 may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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
(see Note 6).
E. Credit Default Swap Agreements
A credit default swap is a contract between a buyer of protection and a
seller of protection against a pre-defined credit event. The Portfolio may
buy or sell credit default swap contracts to increase the Portfolio's
income, to add leverage to the portfolio or to hedge the risk of default on
portfolio securities. As a seller of protection, the Portfolio would be
required to pay the notional (or other agreed-upon) value of the referenced
debt obligation to the counterparty in the event of a default by a U.S. or
foreign corporate issuer
24
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of a debt obligation, which would likely result in a loss to the Portfolio.
In return, the Portfolio would receive from the counterparty a periodic
stream of payments during the term of the contract provided that no event
of default occurred. The maximum exposure of loss to the seller would be
the notional value of the credit default swaps outstanding. If no default
occurs, the Portfolio would keep the stream of payments and would have no
payment obligation. The Portfolio may also buy credit default swap
contracts in order to hedge against the risk of default of debt securities,
in which case the Portfolio would function as the counterparty referenced
above.
When the Portfolio enters into a credit default swap contract, one party,
the protection buyer, makes an upfront or periodic payment to the
protection seller in exchange for the right to receive a contingent
payment. An upfront payment received by the Portfolio, as the protection
seller, is recorded as a liability in the Portfolio's records. An upfront
payment made by the Portfolio, as the protection buyer, is recorded as an
asset in the Portfolio's records. Periodic payments received or paid by the
Portfolio are recorded as realized gains or losses.
The credit default swap contracts are marked-to-market daily using
valuations supplied by independent sources and the resulting change in
value, if any, is recorded as unrealized gain or loss. Payments received or
made as a result of a credit event or upon termination of the contract are
recognized, net of the appropriate amount of the upfront payment, as
realized gains or losses.
Credit default swap contracts involving the sale of protection may involve
greater risks than if the Portfolio had invested in the referenced debt
instrument directly. Credit default swap contracts are subject to general
market risk, liquidity risk, counterparty risk and credit risk. If the
Portfolio is a protection buyer and no credit event occurs, it will lose
its investment. If the Portfolio is a protection seller and a credit event
occurs, the value of the referenced debt instrument received by the
Portfolio, together with the periodic payments received, may be less than
the amount the Portfolio pays to the protection buyer, resulting in a loss
to the Portfolio.
There were no credit default swap contracts outstanding at December 31,
2008.
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 UniCredit S.p.A. (Unicredit), $633,101 in
commissions on the sale of Trust shares for the year ended December 31,
2008.
Distribution fees are calculated based on the average daily net asset
values attributable to Class II shares of the Portfolio. 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. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average
25
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
daily net assets up to $500 million and 0.60% on assets over $500 million.
Through May 1, 2010, PIM has agreed not to impose all or a portion of its
management fee and, if necessary, to limit other ordinary operating expenses of
the Portfolio to the extent required to reduce Class II expenses to 1.00% of
the average daily net assets attributable to Class II shares.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $6 in management fees,
administrative costs and certain others fees payable to PIM at December 31,
2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly
owned indirect subsidiary of UniCredit, provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in
"Due to affiliates" reflected on the Statement of Assets and Liabilities is
$124 in transfer agent fees payable to PIMSS at December 31, 2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $68 in distribution fees payable to PFD at December 31,
2008.
5. Forward Foreign Currency Contracts
At December 31, 2008, the Portfolio had entered into various contracts that
obligate the Portfolio to deliver currencies at specified future dates. At the
maturity of a contract, the Portfolio must make or take delivery of the foreign
currency. Alternatively, prior to the settlement date of a portfolio hedge, the
Portfolio may close out such contracts by entering into an offsetting hedge
contract. Open Portfolio hedges at December 31, 2008 were as follows:
- ------------------------------------------------------------------------------------------------------
Net
Contracts In Exchange Settlement Unrealized
Currency to Deliver For Date Value Gain
- ------------------------------------------------------------------------------------------------------
EUR (European Dollar) (195,000) $276,703 1/30/09 $(271,794) $4,909
- ------------------------------------------------------------------------------------------------------
6. Affiliated Companies
The Portfolio's investments in securities managed by PIM are deemed affiliates
of the Fund for financial reporting purposes. The following summarizes
transactions with affiliates of the Portfolio for the year ended December 31,
2008:
- --------------------------------------------------------------------------------------------------------------------------
Principal Purchases Sales Principal Net
Amount (principal (principal Amount Interest Realized
Affiliates 12/31/07 amount) amount) 12/31/08 Income (Loss) Gain Value
- --------------------------------------------------------------------------------------------------------------------------
ATF Bank JSC, 9.25%,
4/12/12 (144A) $75,000 -- -- $75,000 $6,938 $-- $51,362
- --------------------------------------------------------------------------------------------------------------------------
7. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
26
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Global High Yield VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Global High Yield VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, and the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2008, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Global High Yield VCT Portfolio at December 31, 2008, the results of
its operations for the year then ended and its changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated therein, in conformity with U.S. generally
accepted accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
27
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentage of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified interest
income was 55.66%.
28
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's
affairs. The officers of the Trust are responsible for the Trust's
Custodian operations. The Trustees and officers are listed below, together with
Brown Brothers Harriman & Co. their principal occupations during the past five years. Trustees who
are interested persons of the Trust within the meaning of the 1940 Act
Independent Registered Public Accounting Firm are referred to as Interested Trustees. Trustees who are not
Ernst & Young LLP interested persons of the Trust are referred to as Independent
Trustees. Each of the Trustees serves as a trustee of each of the 76
Principal Underwriter U.S. registered investment portfolios for which Pioneer serves as
Pioneer Funds Distributor, Inc. investment adviser (the "Pioneer Funds"). The address for all Trustees
and all officers of the Trust is 60 State Street, Boston,
Legal Counsel Massachusetts 02109.
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers
or directors of the Portfolio's investment adviser and certain of its
affiliates.
29
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management,
McGill University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- --------------------------------------------------------------------------------
30
Pioneer Global High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- --------------------------------------------------------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
32
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
33
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
34
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
35
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
36
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
37
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18679-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Opportunities VCT Portfolio -- Class I Shares
ANNUAL REPORT
December 31, 2008
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
Pioneer Growth Opportunities VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 10
Notes to Financial Statements 14
Report of Independent Registered Public Accounting Firm 17
Trustees, Officers and Service Providers 18
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 80.6%
Temporary Cash Investments 16.6%
Depositary Receipts for International Stocks 1.5%
Exchange Traded Fund 1.3%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA IS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Health Care 24.5%
Information Technology 23.3%
Industrials 17.4%
Consumer Discretionary 11.2%
Energy 8.3%
Consumer Staples 5.3%
Materials 4.0%
Financials 4.0%
Utilities 2.0%
Five Largest Holdings
(As a percentage of equity holdings)
1. QUANTA Services, Inc. 2.41%
2. Exterran Holdings, Inc. 2.35
3. Priceline.com, Inc. 2.25
4. KBR, Inc. 2.04
5. Advanced Magnetics, Inc. 2.02
The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 13.24 $ 22.44
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ - $ - $ 1.7962
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Growth Opportunities VCT Portfolio at net asset value, compared to that of the
Russell 2000 Growth Index. Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA IS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Pioneer Growth
Opportunities Russell 2000
VCT Portfolio, Class I Growth Index
12-98 10,000 10,000
10,563 14,309
12-00 9,912 11,100
11,810 10,075
12-02 7,361 7,026
10,522 10,437
12-04 12,871 11,931
13,731 12,426
12-06 14,500 14,084
13,941 15,077
12-08 8,993 9,266
The Russell 2000 Growth Index is an unmanaged measure of the performance of U.S.
small-cap growth stocks. Index returns are calculated monthly, assume
reinvestment of dividends and, unlike Portfolio returns do not reflect any fees,
expenses or sales charges. You cannot invest directly in the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10 Years -1.06%
5 Years -3.09%
1 Year -35.49%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities VCT
Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I
--------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 714.55
Expenses Paid During Period* $ 3.66
* Expenses are equal to the Portfolio's annualized expense ratio of 0.85% for
Class I shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Growth Opportunities VCT
Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I
--------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.86
Expenses Paid During Period* $ 4.32
* Expenses are equal to the Portfolio's annualized expense ratio of 0.85% for
Class I shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
A Word About Risk:
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. Investing in foreign and/or emerging markets securities
involves risks relating to interest rates, currency exchange rates, economic,
and political conditions. The Portfolio may invest a substantial amount of its
assets in issuers located in a limited number of countries and therefore is more
susceptible to adverse developments affecting those countries.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
In the following interview, Brian Stack, portfolio manager of Pioneer Growth
Opportunities VCT Portfolio, discusses the factors that influenced performance
during the 12-month period ended December 31, 2008.
Q: How did the Portfolio perform in 2008?
A: The past year was extremely difficult for investors, as the U.S. market
endured one of the worst years in its history. The Portfolio's benchmark,
the Russell 2000 Growth Index, returned -38.54% over the 12 months ended
December 31, 2008, while the Class I shares of the Pioneer Growth
Opportunities VCT Portfolio returned -35.49% at net asset value. During the
same 12-month period, the average return for the 102 Small Cap Growth
variable portfolios tracked by Lipper, Inc., was -41.12%.
The Portfolio's performance was helped by stock selection in the consumer
discretionary and health care sectors, but selection in industrials and
energy detracted. Among the major contributors were the medical device
maker Thoratec, the food supplier American Italian Pasta, and the drug
maker Cubist Pharmaceuticals. Key detractors included the industrial
filtration supplier Polypore International, the coal miner Alpha Natural
Resources, and the investment manager Affiliated Managers Group.
Q: Your team took over management of the Portfolio on September 2, 2008. How
would you describe your approach?
A: When we took over as managers, we did so with a mandate to apply a purely
fundamental, bottom-up stock-picking strategy. This research-based approach
employs the style known as "GARP," which stands for "growth at a reasonable
price." We focus on growth companies whose stock prices do not fairly
reflect their underlying growth potential and risk profile. These
inefficiently priced stocks typically fall into one of three categories:
unseasoned companies that have not yet drawn the widespread appreciation of
investors, companies that are known but not well understood by investors,
and companies whose difficulties may have been overly discounted into their
share price. We would expect to maintain 80 to 100 holdings in the
Portfolio on average, a reduction from the previous number of Portfolio
holdings, which averaged about 200 or more individual positions.
We look for growth companies that have exceptional secular or cyclical
growth prospects. "Secular" growers typically offer unique and innovative
products addressing a poorly served market need, while "cyclical" growers
are usually more mature companies that can still generate growth due to
imbalances in the supply/demand fundamentals that are characteristic of
their industry. Typically, we would expect the Portfolio to be more heavily
exposed to ideas in the secular growth category.
One such company is Priceline. Although the travel industry is experiencing
severe weakness, Priceline is expanding its geographic footprint into
Europe, which represents a relatively fragmented marketplace for
travel-related services. In the United States, the company's "name your own
price" approach is allowing hoteliers, airlines and auto rental companies
to sell excess inventory. Priceline is gaining market share, and we believe
the stock - which gained ground in the fourth quarter of 2008 - can
continue to perform well in 2009.
Another example of the type of company in which we invest is Grand Canyon
Education, which provides online degree programs in education, business and
4
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
healthcare. For-profit education companies are capturing a growing share of
the market for post-secondary education. They also tend to do well when the
economy weakens, since consumers frequently return to school to develop new
skills and credentials. We purchased the stock at its initial public
offering on November 22, 2008, and it rose approximately 60% by year-end.
American Italian Pasta (AIPC), a supplier of dry pasta products to
retailers and institutional food service providers, also helps illustrate
our investment style. We see AIPC as a good business whose stock was
unfairly discounted due to transitional difficulties. With new management
in place and an accounting controversy resolved, the company is prospering
as consumers "trade down" to less expensive fare and as retailers devote
greater shelf space to more profitable private label products.
It should be evident from the stocks mentioned above that our Portfolio can
be fairly eclectic. In our view, this helps illustrate the benefit of a
pure bottom-up approach. Without being constrained by the need to maintain
certain sector weightings, we are able to construct a Portfolio of what we
believe are the very best growth opportunities in the small-cap asset
class.
Q: What are your thoughts on the year ahead?
A: Expecting that the economic backdrop will remain challenging in 2009, we
are not counting on macroeconomic tailwinds as a driver of the Portfolio's
performance during the year ahead. We believe, however, that recent events
have created opportunities for proficient stock-pickers. According to
Merrill Lynch, 2008 brought the worst performance for small-cap stocks
since 1973. The market action resulted in a massive selloff process, where
virtually all stocks plunged without regard for company-specific
fundamentals. This has created what we feel is a rare opportunity to
purchase compelling, bottom-up growth stories at very attractive
valuations. Finding such stocks will be the focal point of our efforts
during the year ahead.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 96.2%
Energy - 8.1%
Coal & Consumable Fuels - 1.4%
105,200 Foundation Coal Holdings, Inc. $ 1,474,904
-----------
Oil & Gas Equipment & Services - 2.9%
22,704 Bristow Group, Inc.* $ 608,240
114,000 Exterran Holdings, Inc.*(b) 2,428,200
-----------
$ 3,036,440
-----------
Oil & Gas Exploration & Production - 3.8%
48,200 Carrizo Oil & Gas, Inc.*(b) $ 776,020
43,100 Comstock Resources, Inc.*(b) 2,036,475
54,700 Concho Resources, Inc.* 1,248,254
-----------
$ 4,060,749
-----------
Total Energy $ 8,572,093
-----------
Materials - 4.0%
Diversified Metals & Mining - 1.7%
205,200 Titanium Metals Corp. (b) $ 1,807,812
-----------
Gold - 1.4%
29,100 Agnico Eagle Mines, Ltd. (b) $ 1,493,703
-----------
Steel - 0.9%
35,100 Cliffs Natural Resources, Inc. $ 898,911
-----------
Total Materials $ 4,200,426
-----------
Capital Goods - 12.3%
Aerospace & Defense - 3.4%
8,400 Alliant Techsystems, Inc.*(b) $ 720,384
190,400 Hexcel Corp.* 1,407,056
37,500 Orbital Sciences Corp.* 732,375
19,100 Stanley, Inc.* 691,802
-----------
$ 3,551,617
-----------
Construction & Engineering - 4.3%
138,800 KBR, Inc. $ 2,109,760
125,500 Quanta Services, Inc.* 2,484,900
-----------
$ 4,594,660
-----------
Electrical Component &
Equipment - 1.8%
255,800 Polypore International, Inc.* $ 1,933,848
-----------
Industrial Conglomerates - 2.2%
178,300 McDermott International, Inc.* $ 1,761,604
23,000 Otter Tail Corp. (b) 536,590
-----------
$ 2,298,194
-----------
Industrial Machinery - 0.6%
262,300 Flow International Corp.* $ 634,766
-----------
Total Capital Goods $13,013,085
-----------
Commercial Services & Supplies - 4.1%
Diversified Support Services - 1.1%
47,900 Iron Mountain, Inc.* $ 1,184,567
-----------
Shares Value
Environmental & Facilities
Services - 3.0%
44,700 Rollins, Inc. (b) $ 808,176
21,600 Stericycle, Inc.* 1,124,928
40,000 Waste Connections, Inc.*(b) 1,262,800
-----------
$ 3,195,904
-----------
Total Commercial
Services & Supplies $ 4,380,471
-----------
Transportation - 0.5%
Marine - 0.5%
112,000 American Commercial Lines, Inc.*(b) $ 548,800
-----------
Total Transportation $ 548,800
-----------
Consumer Durables & Apparel - 1.1%
Apparel, Accessories & Luxury Goods - 0.8%
41,700 The Warnaco Group, Inc.* $ 818,571
-----------
Leisure Products - 0.3%
86,800 Leapfrog Enterprises, Inc.*(b) $ 303,800
-----------
Total Consumer
Durables & Apparel $ 1,122,371
-----------
Consumer Services - 5.6%
Casinos & Gaming - 0.8%
35,100 Bally Technologies, Inc.*(b) $ 843,453
-----------
Education Services - 4.8%
21,100 American Public Education, Inc.* $ 784,709
29,300 Career Education Corp.* 525,642
15,500 DeVry, Inc. 889,855
100,821 Grand Canyon Education, Inc.* 1,893,418
10,700 ITT Educational Services, Inc.* 1,016,286
-----------
$ 5,109,910
-----------
Total Consumer Services $ 5,953,363
-----------
Retailing - 4.3%
Apparel Retail - 1.6%
26,000 Gymboree Corp.*(b) $ 678,340
31,800 Ross Stores, Inc. 945,414
-----------
$ 1,623,754
-----------
General Merchandise Stores - 0.5%
50,300 99 Cents Only Stores* $ 549,779
-----------
Internet Retail - 2.2%
31,500 Priceline.com, Inc.*(b) $ 2,319,975
-----------
Total Retailing $ 4,493,508
-----------
Food, Beverage & Tobacco - 3.8%
Brewers - 0.7%
24,900 Boston Beer Co.*(b) $ 707,160
-----------
Packaged Foods & Meats - 1.8%
87,775 American Italian Pasta Co.*(b) $ 1,960,894
-----------
6 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Soft Drinks - 1.3%
41,700 Hansen Natural Corp.* $ 1,398,201
-----------
Total Food, Beverage & Tobacco $ 4,066,255
-----------
Household & Personal Products - 1.3%
Household Products - 1.3%
24,900 Church & Dwight Co., Inc. $ 1,397,388
-----------
Total Household &
Personal Products $ 1,397,388
-----------
Health Care Equipment & Services - 13.3%
Health Care Equipment - 8.8%
64,500 Abiomed, Inc.*(b) $ 1,059,090
74,200 Cryolife, Inc.* 720,482
233,200 DexCom, Inc.*(b) 643,632
36,100 IDEXX Laboratories, Inc.*(b) 1,302,488
112,200 Insulet Corp.*(b) 866,184
16,500 Masimo Corp.*(b) 492,195
13,800 NuVasive, Inc.*(b) 478,170
41,800 Quidel Corp.* 546,326
51,200 Thoratec Corp.* 1,663,488
40,200 Vnus Medical Technologies, Inc.* 652,044
39,900 Wright Medical Group, Inc.*(b) 815,157
-----------
$ 9,239,256
-----------
Health Care Services - 4.1%
17,900 Almost Family, Inc.*(b) $ 805,142
38,600 Catalyst Health Solutions, Inc.* 939,910
13,600 Genoptix, Inc.* 463,488
18,300 Lhc Group, Inc.* 658,800
54,700 Lincare Holdings Inc.* 1,473,071
-----------
$ 4,340,411
-----------
Health Care Supplies - 0.4%
24,200 Inverness Medical Innovations, Inc.* $ 457,622
-----------
Total Health Care
Equipment & Services $14,037,289
-----------
Pharmaceuticals & Biotechnology - 10.7%
Biotechnology - 3.5%
17,100 Alexion Pharmaceuticals, Inc.* $ 618,849
57,400 BioMarin Pharmaceutical, Inc.*(b) 1,021,720
64,100 Cubist Pharmaceuticals, Inc.*(b) 1,548,656
7,100 Myriad Genetics, Inc.*(b) 470,446
-----------
$ 3,659,671
-----------
Life Sciences Tools & Services - 3.9%
58,263 Advanced Magnetics, Inc.*(b) $ 2,088,729
155,200 Parexel International Corp.* 1,506,992
7,500 Techne Corp. 483,900
-----------
$ 4,079,621
-----------
Shares Value
Pharmaceuticals - 3.3%
232,656 Cardiome Pharma Corp.*(b) $ 1,058,585
38,400 Endo Pharmaceuticals Holdings, Inc.* 993,792
113,200 ViroPharma, Inc.*(b) 1,473,864
-----------
$ 3,526,241
-----------
Total Pharmaceuticals &
Biotechnology $11,265,533
-----------
Diversified Financials - 2.4%
Consumer Finance - 1.4%
98,385 Ezcorp, Inc.* $ 1,496,436
-----------
Specialized Finance - 1.0%
59,600 MSCI, Inc.* $ 1,058,496
-----------
Total Diversified Financials $ 2,554,932
-----------
Software & Services - 15.2%
Application Software - 6.2%
82,000 Informatica Corp.* $ 1,125,860
120,600 Lawson Software, Inc.* 571,644
12,800 MicroStrategy, Inc.* 475,264
49,300 Net 1 UEPS Technologies, Inc.* 675,410
66,600 Quest Software, Inc.* 838,494
42,200 Synopsys, Inc.* 781,544
47,267 The Ultimate Software Group, Inc.*(b) 690,098
274,700 TIBCO Software, Inc.*(b) 1,425,693
-----------
$ 6,584,007
-----------
Data Processing & Outsourced Services - 1.0%
52,100 Neustar, Inc.* $ 996,673
-----------
Internet Software & Services - 3.3%
160,800 Comscore, Inc.* $ 2,050,200
104,700 Marchex, Inc.* 610,401
116,300 Skillsoft Plc* 830,382
-----------
$ 3,490,983
-----------
IT Consulting & Other Services - 2.9%
19,300 Forrester Research, Inc.*(b) $ 544,453
37,600 Gartner Group, Inc.* 670,408
167,400 Sapient Corp.* 743,256
117,200 Satyam Computer Services, Ltd.* 1,059,488
-----------
$ 3,017,605
-----------
Systems Software - 1.8%
13,700 Quality Systems, Inc. (b) $ 597,594
100,800 Red Hat, Inc.* 1,332,575
$ 1,930,169
-----------
Total Software & Services $16,019,437
-----------
Technology Hardware & Equipment - 3.3%
Communications Equipment - 1.0%
46,200 F5 Networks, Inc.* $ 1,056,132
-----------
The accompanying notes are an integral part of these financial statements. 7
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Computer Hardware - 0.9%
61,800 Teradata Corp.* $ 916,494
------------
Electronic Components - 0.7%
41,900 Digital Theater Systems, Inc.*(b) $ 768,865
------------
Electronic Equipment & Instruments - 0.7%
114,300 L-1 Identity Solutions, Inc.* $ 770,382
------------
Total Technology
Hardware & Equipment $ 3,511,873
------------
Semiconductors - 4.3%
Semiconductor Equipment - 2.4%
53,600 MEMC Electronic Materials, Inc.* $ 765,408
142,300 Teradyne, Inc.* 600,506
103,500 Tessera Technologies, Inc.* 1,229,580
------------
$ 2,595,494
------------
Semiconductors - 1.9%
50,700 Actel Corp.* $ 594,204
120,200 Maxim Integrated Products, Inc. 1,372,684
$ 1,966,888
------------
Total Semiconductors $ 4,562,382
------------
Utilities - 1.9%
Electric Utilities - 0.6%
15,300 ITC Holdings Corp. $ 668,304
------------
Independent Power Producer &
Energy Traders - 1.3%
82,400 Calpine Corp.* $ 599,872
23,800 Ormat Technologies, Inc. (b) 758,506
$ 1,358,378
------------
Total Utilities $ 2,026,682
------------
TOTAL COMMON STOCKS
(Cost $107,402,902) $101,725,888
------------
EXCHANGE TRADED FUNDS - 1.5%
Diversified Financials - 1.5%
Diversified Financial Services - 1.5%
20,800 iShares Russell 2000 Growth Exchange
Traded Fund $ 1,057,888
16,500 iShares Russell Micro Exchange
Traded Fund 525,525
------------
$ 1,583,413
------------
Total Diversified Financials $ 1,583,413
------------
TOTAL EXCHANGE TRADED FUNDS
(Cost $1,554,519) $ 1,583,413
------------
Principal
Amount Value
TEMPORARY CASH INVESTMENTS - 19.5%
Securities Lending Collateral - 19.5% (c)
Certificates of Deposit:
$ 476,559 Abbey National Plc, 3.15%, 8/13/09 $ 476,559
476,494 Bank of Nova Scotia, 3.21%, 5/5/09 476,494
761,578 Bank of Scotland NY, 2.92%, 6/5/09 761,578
857,807 Barclays Bank, 1.5%, 5/27/09 857,807
151,516 Calyon NY, 4.62%, 1/16/09 151,516
953,118 CBA, 4.87%, 7/16/09 953,118
857,807 DNB NOR Bank ASA NY, 3.04%, 6/5/09 857,807
873,056 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 873,056
55,206 NORDEA NY, 4.13%, 4/9/09 55,206
714,839 Royal Bank of Canada NY, 2.7%, 8/7/09 714,839
476,559 Royal Bank of Scotland, 3.06%, 3/5/09 476,559
95,268 Skandinavian Enskilda Bank NY, 3.06%,
2/13/09 95,268
953,118 Societe Generale, 3.29%, 9/4/09 953,118
857,807 Svenska Bank NY, 4.61%, 7/8/09 857,807
953,118 U.S. Bank NA, 2.25%, 8/24/09 953,118
------------
$ 9,513,850
------------
Commercial Paper:
90,822 BBVA U.S., 2.83%, 3/12/09 $ 90,822
953,118 Monumental Global Funding, Ltd., 2.5%,
8/17/09 953,118
476,559 CME Group, Inc., 2.9%, 8/6/09 476,559
476,509 General Electric Capital Corp., 2.86%,
3/16/09 476,509
935,962 American Honda Finance Corp., 4.95%,
7/14/09 935,962
953,118 HSBC Bank, Inc., 2.5%, 8/14/09 953,118
476,559 IBM, 2.39%, 9/25/09 476,559
857,807 Met Life Global Funding, 3.19%,
6/12/09 857,807
857,807 New York Life Global, 2.13%, 9/4/09 857,807
810,151 Westpac Banking Corp., 2.34%, 6/1/09 810,151
------------
$ 6,888,412
------------
Tri-party Repurchase Agreements:
2,096,861 Deutsche Bank, 0.25%, 1/2/09 $ 2,096,861
161,916 Barclays Capital Markets, 0.5%, 1/2/09 161,916
------------
$ 2,258,776
------------
Time Deposit:
953,118 BNP Paribas, 0.01%, 1/2/09 $ 953,118
------------
Money Market Mutual Funds:
238,280 Columbia Government Reserves Fund $ 238,280
714,839 JP Morgan, U.S. Government Money
Market Fund 714,839
------------
$ 953,118
------------
Total Securities Lending Collateral $ 20,567,275
------------
8 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value
TOTAL TEMPORARY
CASH INVESTMENTS
(Cost $20,567,275) $ 20,567,275
------------
TOTAL INVESTMENT IN
SECURITIES - 117.2%
(Cost $129,524,696)(a) $123,876,576
------------
OTHER ASSETS
AND LIABILITIES - (17.2)% $(18,210,719)
------------
TOTAL NET ASSETS - 100.0% $105,665,857
============
* Non-income producing security.
(a) At December 31, 2008, the net unrealized loss on investments based on cost
for federal income tax purposes of $131,201,015 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 8,082,946
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (15,407,385)
-----------
Net unrealized loss $(7,324,439)
===========
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
40,300 Abiomed, Inc. * $ 661,726
30,100 Advanced Magnetics, Inc. * 1,079,085
11,000 Agnico Eagle Mines, Ltd. 564,630
5,000 Alliant Techsystems, Inc. * 428,800
16,000 Almost Family, Inc. * 719,680
15,300 American Commercial Lines, Inc. * 74,970
10,000 American Italian Pasta Co. * 223,400
27,000 Bally Technologies, Inc. * 648,810
36,600 BioMarin Pharmaceutical, Inc. * 651,480
6,900 Boston Beer Co. * 195,960
3,000 Cardiome Pharma Corp. * 13,650
35,400 Carrizo Oil & Gas, Inc. * 569,940
4,200 Comstock Resources, Inc. * 198,450
63,000 Cubist Pharmaceuticals, Inc. * 1,522,080
26,000 DexCom, Inc. * 71,760
35,000 Digital Theater Systems, Inc. * 642,250
110,900 Exterran Holdings, Inc. * 2,362,170
10,000 Forrester Research, Inc. * 282,100
20,500 Gymboree Corp. * 534,845
35,000 IDEXX Laboratories, Inc. * 1,262,800
111,000 Insulet Corp. * 856,920
4,000 Leapfrog Enterprises, Inc. * 14,000
4,000 Masimo Corp. * 119,320
6,100 Myriad Genetics, Inc. * 404,186
13,100 NuVasive, Inc. * 453,915
29,800 Omrix Biopharmaceuticals, Inc.** 744,702
22,300 Ormat Technologies, Inc. 710,701
6,000 Otter Tail Corp. 139,980
2,000 Priceline.com, Inc. * 147,300
11,000 Quality Systems, Inc. 479,820
5,000 Rollins, Inc. 90,400
37,600 The Ultimate Software Group, Inc. * 548,960
67,000 TIBCO Software, Inc. * 347,730
11,000 Titanium Metals Corp. 96,910
100,000 ViroPharma, Inc. * 1,302,000
22,000 Waste Connections, Inc. * 694,540
22,900 Wright Medical Group, Inc. * 467,847
-----------
Total $20,327,817
===========
** Pending sale at 12/31/08.
(c) Security lending collateral is managed by Credit Suisse, New York Branch.
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2008 aggregated $344,135,214 and $373,526,309,
respectively.
Various inputs are used in determining the value of the Portfolio's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------
Level 1 - Quoted Prices $103,309,301
Level 2 - Other Significant Observable Inputs 20,567,275
Level 3 - Significant Unobservable Inputs -
------------
Total $123,876,576
============
The accompanying notes are an integral part of these financial statements. 9
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year End Year End
Class I 12/31/08 12/31/07
Net asset value, beginning of period $ 22.44 $ 26.79
-------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.00)(b) $ (0.07)
Net realized and unrealized gain (loss) on investments (7.40) (0.53)
--------- -------
Net increase (decrease) from investment operations $ (7.40) $ (0.60)
Distributions to shareowners:
Net realized gain (1.80) (3.75)
--------- -------
Net increase (decrease) in net asset value $ (9.20) $ (4.35)
--------- -------
Net asset value, end of period $ 13.24 $ 22.44
--------- -------
Total return* (35.49)% (3.86)%
Ratio of net expenses to average net assets+ 0.85% 0.81%
Ratio of net investment loss to average net assets+ (0.04)% (0.25)%
Portfolio turnover rate 231% 119%
Net assets, end of period (in thousands) $ 105,666 $204,629
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.91% 0.81%
Net investment loss (0.10)% (0.25)%
Year End Year End Year End
Class I 12/31/06 12/31/05 12/31/04 (a)
Net asset value, beginning of period $ 25.37 $ 23.78 $ 19.44
------- ------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.01) $ (0.01) $ (0.01)
Net realized and unrealized gain (loss) on investments 1.43 1.60 4.35
------- ------- -------
Net increase (decrease) from investment operations $ 1.42 $ 1.59 $ 4.34
Distributions to shareowners:
Net realized gain -- -- --
------- ------- -------
Net increase (decrease) in net asset value $ 1.42 $ 1.59 $ 4.34
------- ------- -------
Net asset value, end of period $ 26.79 $ 25.37 $ 23.78
------- ------- -------
Total return* 5.60% 6.69% 22.33%
Ratio of net expenses to average net assets+ 0.79% 0.79% 0.81%
Ratio of net investment loss to average net assets+ (0.05)% (0.02)% (0.06)%
Portfolio turnover rate 105% 75% 19%
Net assets, end of period (in thousands) $276,947 $323,945 $383,468
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.82% 0.80% 0.81%
Net investment loss (0.08)% (0.03)% (0.06)%
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
(a) Effective August 2, 2004, PIM became the sub-adviser of the Fund and
subsequently became the adviser on December 10, 2004.
(b) Amount rounds to less than one cent per share.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $20,327,817) (cost $129,524,696) $ 123,876,576
Cash 1,891,271
Receivables -
Investment securities sold 1,307,376
Portfolio shares sold 40,233
Dividends and interest 16,826
Due from Pioneer Investment Management, Inc. 50,228
-------------
Total assets $ 127,182,510
-------------
LIABILITIES:
Payables -
Investment securities purchased $ 792,589
Portfolio shares repurchased 64,434
Upon return of securities loaned 20,567,275
Due to affiliates 2,330
Accrued expenses 90,025
-------------
Total liabilities $ 21,516,653
-------------
NET ASSETS:
Paid-in capital $ 162,644,969
Accumulated net realized loss on investments (51,330,992)
Net unrealized loss on investments (5,648,120)
-------------
Total net assets $ 105,665,857
-------------
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $105,665,857/7,978,393 shares) $ 13.24
-------------
The accompanying notes are an integral part of these financial statements. 11
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $ 690,791
Interest 141,526
Income from securities loaned, net 404,696
----------
Total investment income $ 1,237,013
-------------
EXPENSES:
Management fees $1,132,613
Transfer agent fees 1,504
Administrative fees 45,903
Custodian fees 90,452
Professional fees 53,125
Printing expense 28,016
Fees and expenses of nonaffiliated trustees 6,737
Miscellaneous 26,658
----------
Total expenses $ 1,385,008
Less management fees waived and expenses reimbursed by Pioneer Investment Management, Inc. (84,474)
-------------
Net expenses $ 1,300,534
-------------
Net investment loss $ (63,521)
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (51,167,020)
-------------
Change in net unrealized loss on investments $ (14,003,561)
-------------
Net loss on investments $ (65,170,581)
-------------
Net decrease in net assets resulting from operations $ (65,234,102)
=============
12 The accompanying notes are an integral part of these financial statements.
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment loss $ (63,521) $ (632,805)
Net realized gain (loss) on investments (51,167,020) 18,397,160
Change in net unrealized loss on investments (14,003,561) (24,194,241)
------------- -------------
Net decrease in net assets resulting from operations $ (65,234,102) $ (6,429,886)
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net realized gain:
Class I ($1.80 and $3.75 per share, respectively) $ (14,795,360) $ (34,465,790)
------------- -------------
Total distributions to shareowners $ (14,795,360) $ (34,465,790)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 8,384,289 $ 11,103,410
Reinvestment of distributions 14,795,360 34,465,317
Cost of shares repurchased (42,113,113) (76,991,199)
------------- -------------
Net decrease in net assets resulting from Portfolio share transactions $ (18,933,464) $ (31,422,472)
------------- -------------
Net decrease in net assets $ (98,962,926) $ (72,318,148)
NET ASSETS:
Beginning of year 204,628,783 276,946,931
------------- -------------
End of year $ 105,665,857 $ 204,628,783
------------- -------------
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 475,761 $ 8,384,289 436,051 $ 11,103,410
Reinvestment of distributions 769,001 14,795,360 1,359,578 34,465,317
Less shares repurchased (2,384,264) (42,113,113) (3,013,945) (76,991,199)
---------- ------------- ---------- -------------
Net decrease (1,139,502) $ (18,933,464) (1,218,316) $ (31,422,472)
========== ============= ========== =============
The accompanying notes are an integral part of these financial statements. 13
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Growth Opportunities VCT Portfolio (the Portfolio) is one of 19
portfolios comprising Pioneer Variable Contracts Trust (the Trust), a Delaware
statutory trust registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The investment objective of
the Portfolio is to seek growth of capital.
The Portfolio offers one class of shares designated as Class I shares. There is
no distribution plan for Class I shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting year. Actual
results could differ from those estimates.
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. Investing in foreign and/or emerging markets securities
involves risks relating to interest rates, currency exchange rates, economic,
and political conditions. The Portfolio may invest a substantial amount of its
assets in issuers located in a limited number of countries and therefore is more
susceptible to adverse developments affecting those countries. The Portfolio's
prospectus contains unaudited information regarding the Portfolio's principal
risks. Please refer to that document when considering the Portfolio's principal
risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements, which
are consistent 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
14
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$36,028,000, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $13,646,856 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $76,957 to decrease
paid in capital, $63,521 to decrease accumulated net investment loss and
$13,436 to decrease accumulated net realized loss on investments to reflect
permanent book/tax differences. The reclassification has no impact on the
net asset value of the Portfolio and is designed to present the Portfolio's
capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, was as
follows:
- --------------------------------------------------------------------------------
2008 2007
----------------- --------------
Distributions paid from:
Long-term capital gain $ 14,795,360 $34,465,790
------------ -----------
Total distributions $ 14,795,360 $34,465,790
============ ===========
Distributable Earnings:
Capital loss carryforward $(36,028,000)
Post-October loss deferred (13,626,673)
Unrealized depreciation (7,324,439)
------------
Total $(56,979,112)
============
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales.
C. 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) are
paid or received by the Portfolio, depending on the daily fluctuation in
the value of the contracts, and are 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, 2008, the
Portfolio had no open futures contracts.
D. 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, if any,
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. dollars 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.
E. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio records realized gains and
losses at the time a portfolio hedge is offset by entry into a closing
15
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
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.
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 UniCredit S.p.A. (UniCredit) $633,101 in commissions
on the sale of Trust shares for the year ended December 31, 2008. 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. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated at the annual rate of 0.74% of the Portfolio's
average daily net assets.
Effective May 1, 2007, PIM has agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Portfolio to the
extent necessary to limit Class I expenses to 0.85% of the average daily net
assets attributable to Class I shares. This expense limitation is in effect
through May 1, 2010.
Prior to May 1, 2007, PIM agreed not to impose all or a portion of its
management fee and to assume other operating expenses of the Portfolio to the
extent necessary to limit Class I expenses to 0.79% of the average daily net
assets attributable to Class I shares.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $2,162 in management fees,
administrative costs and certain other fees payable to PIM at December 31, 2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredit provides substantially all transfer agent and
shareowner services to the Trust at negotiated rates. Included in "Due to
affiliates" reflected on the Statement of Assets and Liabilities is $168 in
transfer agent fees payable to PIMSS at December 31, 2008.
4. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
16
Pioneer Growth Opportunities VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the Shareowners
of Pioneer Growth Opportunities VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Growth Opportunities VCT Portfolio, one of the portfolios constituting Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Growth Opportunities VCT Portfolio at December 31, 2008, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
17
Pioneer Growth Opportunities VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's affairs.
The officers of the Trust are responsible for the Trust's operations. The
Custodian Trustees and officers are listed below, together with their principal
Brown Brothers Harriman & Co. occupations during the past five years. Trustees who are interested persons of
the Trust within the meaning of the 1940 Act are referred to as Interested
Independent Registered Public Accounting Firm Trustees. Trustees who are not interested persons of the Trust are referred to
Ernst & Young LLP as Independent Trustees. Each of the Trustees serves as a Trustee of each of the
76 U.S. registered investment portfolios for which Pioneer serves as investment
Principal Underwriter adviser (the "Pioneer Funds"). The address for all Trustees and all officers of
Pioneer Funds Distributor, Inc. the Trust is 60 State Street, Boston, Massachusetts 02109.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- ------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the Portfolio's investment adviser and certain of
its affiliates.
18
Pioneer Growth Opportunities VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004-2007);
Partner, Federal City Capital Advisors (boutique
merchant bank) (1997 to 2004 and 2008 - present); and
Executive Vice President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage trading
company) (2000 - 2002)
- --------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- --------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- --------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- --------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York
(financial and securities services) (1986 - 2004)
- --------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- --------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- --------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services (credit card
issuer and electronic payment services); Director of
Briggs & Stratton Co. (engine manufacturer); Director
of UAL Corporation (airline holding company);
Director of Mantech International Corporation
(national security, defense, and intelligence
technology firm); and Member, Board of Governors,
Investment Company Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- --------------------------------------------------------------------------------
19
Pioneer Growth Opportunities VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board.
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board.
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
- --------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since
September 2003; Vice President and Senior Counsel
of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice
President, CDC IXIS Asset Management Services from
2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President
and Compliance Officer, MFS Investment Management
(August 2005 to December 2006); Consultant,
Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
21
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is also
available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18655-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer High Yield VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 20
Notes to Financial Statements 25
Report of Independent Registered Public
Accounting Firm 29
Trustees, Officers and Service Providers 31
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment in securities)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
U.S. Corporate Bonds 64.1%
U.S. Common Stocks 11.8%
Convertible Corporate Bonds 9.8%
Convertible Preferred Stocks 6.0%
Temporary Cash Investment 4.9%
Senior Floating Rate Loan Interests 3.1%
Collateralized Mortgage Obligations 0.2%
Other 0.1%
Maturity Distribution
(As a percentage of total investment in securities)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
0-1 year 24.7%
1-3 years 10.6%
3-4 years 27.9%
4-6 years 30.6%
6-8 years 2.3%
8+ years 3.9%
Five Largest Holdings
(As a percentage of long-term holdings)*
1. DRS Technologies, Inc.,
6.875%, 11/1/13 3.51%
2. Wesco Distribution, Inc., 7.5%,
10/15/17 3.34
3. Esterline Technology, 7.75%,
6/15/13 2.76
4. BF Saul Real Estate Investment
Trust, 7.5%, 3/1/14 2.09
5. Crown Cork and Seal Co., Inc.,
7.375%, 12/15/26 2.01
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell
any security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value Per Share 12/31/08 12/31/07
Class I $ 6.46 $ 11.05
Class II $ 6.45 $ 11.04
Net
Distributions Per Share Investment Short-Term Long-Term
1/1/08 - 12/31/08 Income Capital Gains Capital Gains
Class I $ 0.6749 $ 0.1251 $ 0.1000
Class II $ 0.6549 $ 0.1251 $ 0.1000
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
High Yield VCT Portfolio at net asset value, compared to that of Merrill Lynch
(ML) High Yield Master II Index and of the ML Index of Convertible Bonds
(Speculative Quality). Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer High Yield Pioneer High Yield
VCT Portfolio, VCT Portfolio, ML High Yield ML Convertible Bonds
Class I Class II Master II Index (Speculative Quality) Index
5/00 10,000 10,000 10,000 10,000
10,623 10,608 9,769 8,424
12/01 12,387 12,410 10,206 7,883
12,211 12,114 10,013 7,747
12/03 16,215 16,054 12,831 10,535
17,517 17,300 14,226 11,867
12/05 17,859 17,594 14,612 11,485
19,379 19,045 16,335 13,454
12/07 20,532 20,110 16,693 13,661
12/08 13,258 12,944 12,288 7,808
Index comparisons begin on 4/30/00. The ML High Yield Master II Index is a
commonly accepted measure of the performance of high yield securities. The ML
Index of Convertible Bonds (Speculative Quality) is a commonly accepted measure
of the performance of speculative grade convertible bond securities. Index
returns assume reinvestment of dividends and, unlike Portfolio returns, do not
reflect any fees, expenses or sales charges. You cannot invest directly in any
Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class I Class II
Life-of-Class (5/1/00) 3.07% 2.78%
5 Years -3.95% -4.21%
1 Year -35.43% -35.63%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer High Yield VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ------------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 658.81 $ 656.97
Expenses Paid During Period* $ 3.46 $ 4.50
* Expenses are equal to the Portfolio's annualized expense ratio of 0.83% and
1.08% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer High Yield VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.96 $ 1,019.71
Expenses Paid During Period* $ 4.22 $ 5.48
* Expenses are equal to the Portfolio's annualized expense ratio of 0.83% and
1.08% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
Volatility in the capital markets, a credit squeeze and weakness in the U.S.
economy caused high-yield bonds to struggle significantly during 2008. In the
following interview, portfolio managers Tracy Wright and Andrew Feltus discuss
the high-yield market and review the Portfolio's performance during the
12-month period ended December 31, 2008.
Q: How did the Portfolio perform during the 12-month period ended December 31,
2008?
A: For the year ended December 31, 2008, the Pioneer High Yield VCT Portfolio's
Class I shares had a total return at net asset value of -35.43%, while
Class II shares returned -35.63%. By comparison, the Merrill Lynch High
Yield Master II Index returned -26.39% and the Merrill Lynch Index of
Convertible Bonds (Speculative Quality) returned -42.85% over the same
12-month period. In addition, the average return of the 103 variable
portfolios in Lipper's High Current Yield category over the same 12-month
period was -26.93%.
Q: What was the investment environment like for high-yield bonds during the
past year?
A: It was poor. The market for high-yield bonds deteriorated for most of the
year amid fears that the global economy was entering a recession and that
lending activity would freeze up entirely. While high-yield bonds
struggled in the early months of 2008, market conditions hit their nadir
following the September bankruptcy filing of prominent investment bank
Lehman Brothers, when virtually all institutions became hesitant to lend
money. In fact, September, October and November were the worst three
months on record for high-yield bond performance. The U.S. government,
after allowing Lehman Brothers to go under, intervened aggressively to
rescue other financial institutions. The Federal Reserve Board (the Fed)
slashed interest rates, bringing the target Federal funds rate effectively
to zero by the end of the year, and the Treasury Department took other
steps to shore up staggering financial corporations. Congress then passed
a giant $700 billion rescue package that was labeled the Troubled Asset
Relief Program (TARP). While TARP was originally designed to buy
distressed debt securities, the Treasury Department eventually also used
it to directly inject capital into financial institutions by acquiring
equity. Late in the year, the TARP money also started being used to prop
up the troubled automotive industry.
Amid a cascading series of events that included the collapse or
near-collapse of major financial institutions at home and abroad,
fixed-income investors attempted to avoid credit risk whenever possible.
U.S. Treasury yields fell and their prices rose as investors at times
appeared willing to accept no return if they could gain the safety of the
government guarantee. As high-yield corporate bonds fell in value, the
yield spreads between high-yield securities and Treasuries widened
substantially. Default rates on high-yield bonds rose to about 4% at year
end. High-yield spreads of almost 2200 basis points during December implied
a potential default rate of 20%.
Q: Why did the Portfolio underperform the Merrill Lynch High Yield Master II
Index and the Lipper category average?
A: The Portfolio's relative performance was negatively affected primarily by
our strategy of investing across a company's capital structure. We try to
invest optimally in the best companies by holding high-yield bonds,
floating-rate loans, equity holdings and equity-linked exposures --
including convertible preferred stock and convertible bonds. The
Portfolio's underperformance of the Merrill Lynch High Yield Master II
Index and its Lipper peer group average was due to our allocation to
equities, equity-linked convertible securities, and bank loans, all of
which lagged high-yield bonds during the period. It was particularly
surprising that bank loans and convertibles posted worse returns than high
yield, despite their higher-quality status and, for bank loans, their
superior position in the capital
A Word About Risk:
Investments in high-yield or lower-rated securities are subject to
greater-than-average risk. When interest rates rise, the prices of fixed-income
securities in the Portfolio will generally fall. Conversely, when interest
rates fall the prices of fixed income securities in the Portfolio will
generally rise. Investments in the Portfolio are subject to possible loss due
to the financial failure of underlying securities and their inability to meet
their debt obligations. Prepayment risk is the chance that mortgage-backed
bonds will be paid off early if falling interest rates prompt homeowners to
refinance their mortgages. Forced to reinvest the unanticipated proceeds at
lower interest rates, the Portfolio would experience a decline in income and
lose the opportunity for additional price appreciation associated with falling
interest rates. At times, the Portfolio's investments may represent industries
or industry sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may
not be in effect for all portfolios. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
4
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
structure. Both asset classes suffered a dislocation as hedge fund
redemptions forced selling, often indiscriminately. Banks pulled credit
lines and the SEC banned short selling of financials in September, both
reducing the attractiveness of the convertible arbitrage strategy employed
by many hedge funds and leading to further liquidation of convertible
securities.
On the plus side, the Portfolio's performance was helped by our bias toward
higher-quality issues within the high-yield universe -- which declined less
than lower-quality bonds -- and by overweights in health care and
aerospace/defense.
Q: Which Portfolio holdings detracted the most from relative performance during
the 12-month period ended December 31, 2008? Which holdings contributed?
A: Bonds issued by Forest City Enterprises, a real estate operating company,
underperformed due to weakness in the real estate sector. Nova Chemical,
in which the Portfolio held bonds, also detracted as the company struggled
with high raw materials prices and weak demand. Convertible preferred
stock holdings of metal company Freeport McMoRan declined due to weakness
in copper pricing. Preferred shares of banking firm Washington Mutual,
which declared bankruptcy in September, also hurt performance. Lastly, the
stock of electric utility NRG Energy dampened returns because of weak
commodity prices, although its share price rebounded somewhat in the
fourth quarter due to an announced takeover of the company.
Contributions to the Portfolio's relative performance during the 12-month
period came from bonds issued by defense and aerospace company DRS
Technologies, which held up better than the overall market, as it was
announced that the company would be taken over. The stock of Esco
Technology, a utility meter manufacturer, outperformed as the company
posted better-than-expected order trends as utilities looked for ways to
manage demand. Equity holdings of Thoratec, a medical device company,
contributed after the firm received approval for its new heart device.
Lastly, the convertible bonds of Lifepoint Hospitals benefited from a
rebound in the convertibles market late in the year.
Q: What is your outlook?
A: As equities continue to trade within a range, we believe that high-yield
bonds offer considerable value. High-yield bond spreads remain wide and
bond prices are still low. The valuation levels reflect the anticipation
of a significant increase in defaults. The 2008 default rate is in the
4.4% (6.2% of par value), and we anticipate that it will rise to 8% or 10%
by the end of 2009, and if the Big 3 automakers do not survive, we expect
a higher number. By our calculations, we believe that bonds at current
yields in our market would outperform Treasuries even with a default rate
of nearly 20%, which is much higher than our worst case scenario. The
all-time default rate is just above 15%, which was achieved during the
Great Depression in the 1930s; there also was a high 13% default rate
achieved in 1991. The Portfolio itself is designed to avoid defaults, and
we anticipate maintaining a relatively low-risk, more conservative profile
by emphasizing higher-quality issues within the high-yield universe. We
believe that the convertible securities market offers significant value,
having been, in our opinion, oversold due to technical rather than
fundamental factors. In fact, certain convertible bonds have been trading
at dramatic discounts and higher yields than their straight-debt
equivalents, often enabling us to receive the equity opionality of the
convert for free.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
CONVERTIBLE CORPORATE BONDS - 8.7%
Energy - 0.7%
Coal & Consumable Fuels - 0.2%
230,000 BB-/NR Massey Energy Co., 3.25%, 8/1/15 $ 124,775
-----------
Oil & Gas Drilling - 0.4%
625,000 NR/NR Hercules Offshore, 3.375%, 6/1/38 $ 285,938
-----------
Oil & Gas Refining & Marketing - 0.1%
410,000 NR/NR Verenium Corp., 5.5%, 4/1/27 (144A) $ 96,350
-----------
Total Energy $ 507,063
-----------
Capital Goods - 1.5%
Construction & Farm Machinery & Heavy Trucks - 0.1%
250,000 B-/B3 Greenbrier Co., Inc., 2.375%, 5/15/26 $ 99,063
-----------
Electrical Component & Equipment - 0.5%
745,000 BB+/Ba1 Roper Industries, Inc., 1.4813%, 1/15/34 $ 399,506
-----------
Trading Companies & Distributors - 0.9%
1,230,000 B/NR Wesco Distribution, Inc., 1.75%, 11/15/26 $ 678,038
-----------
Total Capital Goods $ 1,176,607
-----------
Transportation - 0.4%
Marine - 0.4%
590,000 B-/Caa1 Horizon Lines, 4.25%, 8/15/12 $ 302,375
-----------
Total Transportation $ 302,375
-----------
Consumer Services - 0.6%
Casinos & Gaming - 0.6%
495,000 B+/B1 Shuffle Master, 1.25%, 4/15/24 $ 443,025
-----------
Total Consumer Services $ 443,025
-----------
Media - 1.4%
Advertising - 1.4%
1,665,000 B+/Ba3 Interpublic Group Cos., 4.25%, 3/15/23 (144A) $ 1,080,167
-----------
Total Media $ 1,080,167
-----------
Retailing - 0.8%
Automotive Retail - 0.8%
750,000 B-/B2 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 637,500
-----------
Total Retailing $ 637,500
-----------
Health Care Equipment & Services - 1.4%
Health Care Facilities - 0.5%
250,000 B/B1 LifePoint Hospitals, Inc., 3.25%, 8/15/25 $ 179,688
325,000 B/NR LifePoint Hospitals, Inc., 3.5%, 5/15/14 219,781
-----------
$ 399,469
-----------
Health Care Services - 0.9%
1,150,000 B+/B3 Omnicare, Inc., 3.25%, 12/15/35 $ 645,438
-----------
Health Care Supplies - 0.0%
35,000 B-/NR Inverness Medical Innovation, 3.0%, 5/15/16 (144A) $ 22,050
-----------
Total Health Care Equipment & Services $ 1,066,957
-----------
6 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Pharmaceuticals & Biotechnology - 0.7%
Biotechnology - 0.7%
590,000 NR/NR Epix Medical, Inc., 3.0%, 6/15/24 $ 179,950
635,000 NR/NR Mannkind Corp., 3.75%, 12/15/13 338,931
-----------
$ 518,881
-----------
Total Pharmaceuticals & Biotechnology $ 518,881
-----------
Real Estate - 0.5%
Office Real Estate Investment Trusts - 0.4%
500,000 NR/NR Alexandria Real, 3.7%, 1/15/27 (144A) $ 338,125
-----------
Retail Real Estate Investment Trusts - 0.1%
1,340,000 NR/NR General Growth Properties, 3.98%, 4/15/27 (144A) $ 102,175
-----------
Total Real Estate $ 440,300
-----------
Technology Hardware & Equipment - 0.7%
Communications Equipment - 0.1%
600,000 B-/Caa2 Nortel Networks, 2.125%, 4/15/14 $ 84,000
-----------
Electronic Equipment & Instruments - 0.4%
500,000 NR/NR Newport Corp., 2.5%, 2/15/12 (144A) $ 292,500
-----------
Technology Distributors - 0.2%
40,000 BB-/NR Anixter International, Inc., 1.0%, 2/15/13 $ 24,950
250,000 BB-/NR Anixter International, Inc., 1.0%, 2/15/13 (144A) 155,938
-----------
$ 180,888
-----------
Total Technology Hardware & Equipment $ 557,388
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $11,801,871) $ 6,730,263
-----------
CONVERTIBLE PREFERRED STOCKS - 5.3%
Energy - 0.4%
Oil & Gas Exploration & Production - 0.4%
12,270 Petroquest Energy, 6.875%, 12/31/49 $ 301,597
-----------
Total Energy $ 301,597
-----------
Materials - 1.0%
Diversified Metals & Mining - 1.0%
965 Freeport-McMoRan Copper & Gold, 5.5%, 12/31/49 $ 599,506
4,000 Freeport-McMoRan Copper & Gold, 6.75%, 5/1/10* 185,400
-----------
$ 784,906
-----------
Total Materials $ 784,906
-----------
Capital Goods - 0.3%
Electrical Component & Equipment - 0.3%
2,000 General Cable Corp., 5.75%, 11/24/13 $ 247,250
-----------
Total Capital Goods $ 247,250
-----------
Health Care Equipment & Services - 0.4%
Health Care Supplies - 0.4%
2,481 Inverness Medica Corp., 3.0%, 12/31/49* $ 303,898
-----------
Total Health Care Equipment & Services $ 303,898
-----------
The accompanying notes are an integral part of these financial statements. 7
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Banks - 0.3%
Thrifts & Mortgage Finance - 0.3%
14,000 Sovereign Cap Trust IV, 4.375%, 3/1/34 $ 265,125
-----------
Total Banks $ 265,125
-----------
Diversified Financials - 0.8%
Asset Management & Custody Banks - 0.2%
5,000 Legg Mason, Inc., 7.0%, 6/30/11 $ 110,000
-----------
Diversified Financial Services - 0.6%
700 Bank of America Corp., 7.25%, 12/31/49 $ 455,000
-----------
Total Diversified Financials $ 565,000
-----------
Insurance - 0.5%
Life & Health Insurance - 0.5%
34,000 Delphi Financial Group, 7.376%, 5/15/37 $ 409,700
-----------
Total Insurance $ 409,700
-----------
Real Estate - 0.9%
Real Estate Operating Companies - 0.9%
75,000 Forest City Enterprises, 7.375%, 2/1/34 $ 716,250
-----------
Total Real Estate $ 716,250
-----------
Utilities - 0.7%
Multi-Utilities - 0.7%
10,000 CMS Energy Corp., 4.5%, 12/31/49 $ 528,125
-----------
Total Utilities $ 528,125
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $8,124,223) $ 4,121,851
-----------
Shares
COMMON STOCKS - 10.4%
Energy - 0.4%
Integrated Oil & Gas - 0.3%
7,500 Marathon Oil Corp. $ 205,200
-----------
Oil & Gas Exploration & Production - 0.1%
7,125 Sandridge Energy, Inc.* $ 43,819
-----------
Total Energy $ 249,019
-----------
Materials - 0.7%
Construction Materials - 0.3%
7,312 Texas Industries, Inc. (b) $ 252,264
-----------
Diversified Metals & Mining - 0.3%
88,500 Polyment Mining Corp.* $ 59,295
13,700 Titanium Metals Corp. 120,697
-----------
$ 179,992
-----------
Gold - 0.1%
1,600 Barrick Gold Corp. (b) $ 58,832
-----------
Total Materials $ 491,088
-----------
Capital Goods - 2.1%
Aerospace & Defense - 0.2%
23,100 Be Aerospace, Inc.* $ 177,639
-----------
8 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Rate (c) Ratings
Shares (unaudited) (unaudited) Value
Building Products - 0.3%
6,752 Lennox International, Inc. $ 218,022
-----------
Construction & Farm Machinery & Heavy Trucks - 0.0%
32,100 Commercial Vehicle Group, Inc.* $ 29,853
-----------
Electrical Component & Equipment - 0.6%
9,500 Cooper Industries, Inc. $ 277,685
10,800 General Cable Corp.* 191,052
-----------
$ 468,737
-----------
Industrial Machinery - 1.0%
9,636 ESCO Electronics Corp.* $ 394,594
8,000 ITT Corp. 367,920
-----------
$ 762,514
-----------
Total Capital Goods $ 1,656,765
-----------
Consumer Services - 0.9%
Casinos & Gaming - 0.6%
19,000 International Game Technology $ 225,910
15,400 Scientific Games Corp.*(b) 270,116
-----------
$ 496,026
-----------
Specialized Consumer Services - 0.3%
42,600 Service Corp. International $ 211,722
-----------
Total Consumer Services $ 707,748
-----------
Media - 0.2%
Movies & Entertainment - 0.0%
4,613 Cinemark Holdings, Inc. $ 34,275
-----------
Publishing - 0.2%
5,800 McGraw-Hill Co., Inc. $ 134,502
-----------
Total Media $ 168,777
-----------
Retailing - 0.2%
Department Stores - 0.2%
8,800 J.C. Penney Co., Inc. $ 173,360
-----------
Total Retailing $ 173,360
-----------
Health Care Equipment & Services - 0.6%
Health Care Equipment - 0.1%
2,808 Thoratec Corp.* $ 91,232
-----------
Health Care Supplies - 0.2%
8,000 Inverness Medical Innovations, Inc.*(b) $ 151,280
-----------
Managed Health Care - 0.3%
6,200 CIGNA Corp.* $ 104,470
4,600 United Healthcare Group, Inc.* 122,360
-----------
$ 226,830
-----------
Total Health Care Equipment & Services $ 469,342
-----------
The accompanying notes are an integral part of these financial statements. 9
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Rate (c) Ratings
Shares (unaudited) (unaudited) Value
Pharmaceuticals & Biotechnology - 1.5%
Life Sciences Tools & Services - 1.5%
6,515 Bio-Rad Laboratories, Inc.* $ 490,645
10,600 Thermo Fisher Scientific, Inc.* 361,142
8,100 Waters Corp.* 296,865
-----------
$ 1,148,652
-----------
Total Pharmaceuticals & Biotechnology $ 1,148,652
-----------
Real Estate - 0.8%
Mortgage Real Estate Investment Trusts - 0.8%
38,974 Annaly Capital Management, Inc. $ 618,517
-----------
Total Real Estate $ 618,517
-----------
Technology Hardware & Equipment - 1.0%
Communications Equipment - 0.2%
10,460 CommScope, Inc.* $ 162,548
-----------
Electronic Equipment & Instruments - 0.6%
7,592 Itron, Inc.*(b) $ 483,914
-----------
Electronic Manufacturing Services - 0.2%
9,700 Tyco Electronics, Ltd. $ 157,237
-----------
Total Technology Hardware & Equipment $ 803,699
-----------
Telecommunication Services - 0.4%
Integrated Telecommunication Services - 0.4%
6,389 General Communication, Inc.* $ 51,687
30,500 Windstream Corp. 280,600
-----------
$ 332,287
-----------
Total Telecommunication Services $ 332,287
-----------
Utilities - 1.6%
Gas Utilities - 0.2%
5,400 Questar Corp. $ 176,526
-----------
Independent Power Producer & Energy Traders - 1.0%
33,400 NRG Energy, Inc.*(b) $ 779,222
-----------
Multi-Utilities - 0.4%
2,800 Public Service Enterprise Group, Inc. $ 81,676
5,320 Sempra Energy 226,792
-----------
$ 308,468
-----------
Total Utilities $ 1,264,216
-----------
TOTAL COMMON STOCKS
(Cost $11,583,203) $ 8,083,470
-----------
10 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
ASSET BACKED SECURITIES - 0.0%
Diversified Financials - 0.0%
Diversified Financial Services - 0.0%
80,000 0.92 AAA/Aaa Bear Stearns Asset Backed Securities, Inc., Floating Rate Note, 1/25/47 $ 23,714
-----------
Total Diversified Financials $ 23,714
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $34,214) $ 23,714
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.2%
Banks - 0.2%
Thrifts & Mortgage Finance - 0.2%
450,000 BB/Ba2 T SRA R 2006-1 F, 7.5296%, 10/15/36 (144A) $ 135,000
-----------
Total Banks $ 135,000
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $453,953) $ 135,000
-----------
CORPORATE BONDS - 56.4%
Energy - 6.2%
Coal & Consumable Fuels - 0.6%
605,000 BB-/B2 Massey Energy Co., 6.875%, 12/15/13 $ 447,700
-----------
Oil & Gas Equipment & Services - 0.5%
190,000 BB-/B2 Complete Production Service, 8.0%, 12/15/16 $ 119,700
500,000 5.53 NR/NR Sevan Marine ASA, Floating Rate Note, 5/14/13 (144A) 250,450
-----------
$ 370,150
-----------
Oil & Gas Exploration & Production - 2.3%
325,000 BB/Ba3 Chesapeake Energy, 2.5%, 5/15/37 $ 189,719
755,000 BB-/B3 Hilcorp Energy, 7.75%, 11/1/15 (144A) 532,275
650,000 B/Caa1 Parallel Petroleum Corp., 10.25%, 8/1/14 412,750
235,000 B/B3 Petrohawk Energy Corp., 7.875%, 6/1/15 (144A) 173,900
425,000 B/B2 Quicksilver Resources, Inc., 7.125%, 4/1/16 227,375
385,000 B-/B3 Sandridge Energy, Inc., 8.0%, 6/1/18 213,675
-----------
$ 1,749,694
-----------
Oil & Gas Refining & Marketing - 1.5%
446,000 BB/Ba3 Frontier Oil Corp., 6.625%, 10/1/11 $ 403,630
165,000 BB+/Ba1 Tesoro Corp., 6.5%, 6/1/17 (144A) 90,544
1,150,000 BB+/Ba1 Tesoro Corp., 6.625%, 11/1/15 667,000
270,000 D/WR Verasun Energy Corp., 9.375%, 6/1/17 (b)(e) 32,400
-----------
$ 1,193,574
-----------
Oil & Gas Storage & Transportation - 1.3%
1,250,000 B+/B1 Holly Energy Partners LP, 6.25%, 3/1/15 $ 837,500
405,000 7.00 BB/Ba1 Teppco Partners LP, Floating Rate Note, 6/1/67 216,955
-----------
$ 1,054,455
-----------
Total Energy $ 4,815,573
-----------
The accompanying notes are an integral part of these financial statements. 11
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Materials - 7.6%
Aluminum - 1.7%
590,000 6.83 B-/B3 Noranda Aluminum Acquisition, Floating Rate Note, 5/15/15 $ 200,600
2,000,000 B/B3 Novelis, Inc., 7.25%, 2/15/15 1,160,000
-----------
$ 1,360,600
-----------
Commodity Chemicals - 0.9%
2,350,000 CCC/Caa1 Georgia Gulf Corp., 9.5%, 10/15/14 (b) $ 705,000
-----------
Diversified Chemical - 0.1%
580,000 CCC/Caa2 Ineos Group Holdings Plc, 8.5%, 2/15/16 (144A) $ 52,200
-----------
Diversified Metals & Mining - 0.4%
530,000 5.88 BBB-/Ba2 Freeport-McMoran Copper & Gold, Floating Rate Note, 4/1/15 (b) $ 349,800
-----------
Metal & Glass Containers - 1.9%
250,000 B-/B2 AEP Industries, Inc., 7.875%, 3/15/13 $ 141,250
1,700,000 B/B2 Crown Cork and Seal Co., Inc., 7.375%, 12/15/26 1,309,000
-----------
$ 1,450,250
-----------
Paper Packaging - 1.1%
140,000 CCC+/Caa1 Graham Packaging Co., 8.5%, 10/15/12 $ 99,750
555,000 CCC+/Caa1 Graham Packaging Co., 9.875%, 10/15/14 341,325
610,000 B-/B3 Graphic Packaging Co., 9.5%, 8/15/13 420,900
-----------
$ 861,975
-----------
Specialty Chemicals - 1.0%
1,000,000 C/Caa3 Arco Chemical Co., 9.8%, 2/1/20 $ 100,000
2,090,000 C/Ca Millenium America, Inc., 7.625%, 11/15/26 62,700
2,500,000 B+/Ba3 Nova Chemicals Corp., 7.875%, 9/15/25 637,500
-----------
$ 800,200
-----------
Steel - 0.5%
930,000 B-/Caa1 Algoma Acquisition Corp., 9.875%, 6/15/15 (144A) $ 353,400
-----------
Total Materials $ 5,933,425
-----------
Capital Goods - 16.7%
Aerospace & Defense - 5.9%
480,000 B-/B3 Aeroflex, Inc., 11.75%, 2/15/15 (144A) $ 312,600
250,000 BB+/Ba3 BE Aerospace, Inc., 8.5%, 7/1/18 225,000
2,295,000 BBB-/Baa1 DRS Technologies, Inc., 6.875%, 11/1/13 2,283,522
2,060,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,792,200
-----------
$ 4,613,322
-----------
Construction & Engineering - 1.2%
570,000 B/B2 Esco Corp., 8.625%, 12/15/13 (144A) $ 399,000
750,000 B+/B1 Mastec, Inc., 7.625%, 2/1/17 563,438
-----------
$ 962,438
-----------
Construction & Farm Machinery & Heavy Trucks - 1.0%
95,000 BB-/B1 American Railcar, 7.5%, 3/1/14 $ 62,700
965,000 B-/B3 Greenbrier Co., Inc., 8.375%, 5/15/15 686,355
-----------
$ 749,055
-----------
12 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Electrical Component & Equipment - 3.5%
1,600,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 1,280,000
840,000 B/B3 Baldor Electric, 8.625%, 2/15/17 625,800
260,000 BB-/Ba1 Belden CDT, Inc., 7.0%, 3/15/17 195,000
885,000 B+/B1 General Cable Corp., 7.125%, 4/1/17 (b) 584,100
-----------
$ 2,684,900
-----------
Industrial Machinery - 2.3%
1,000,000 BB-/B1 Gardner Denver, Inc., 8.0%, 5/1/13 (144A) $ 880,000
1,320,000 B/B3 Mueller Water Products, 7.375%, 6/1/17 897,600
-----------
$ 1,777,600
-----------
Trading Companies & Distributors - 2.8%
3,320,000 B/B1 Wesco Distribution, Inc., 7.5%, 10/15/17 $ 2,170,450
-----------
Total Capital Goods $12,957,765
-----------
Commercial Services & Supplies - 0.2%
Commercial Printing - 0.2%
180,000 B+/B2 Sheridan Acquisition Corp., 10.25%, 8/15/11 $ 126,225
-----------
Total Commercial Services & Supplies $ 126,225
-----------
Automobiles & Components - 1.3%
Auto Parts & Equipment - 1.1%
120,000 B-/Caa1 Allison Transmission, 11.0%, 11/1/15 (144A) (b) $ 58,800
575,000 B-/Caa1 Allison Transmission, 11.25%, 11/1/15 (144A) 227,125
935,000 B-/B3 Lear Corp., 8.75%, 12/1/16 271,150
150,000 B/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (b) 57,000
530,000 BB/B2 TRW Automotive, Inc., 7.25%, 3/15/17 270,300
-----------
$ 884,375
-----------
Tires & Rubber - 0.2%
260,000 C/Caa1 Cooper Standard Auto, 7.0%, 12/15/12 $ 78,000
330,000 C/Caa3 Cooper Standard Auto, 8.375%, 12/15/14 57,750
-----------
$ 135,750
-----------
Total Automobiles & Components $ 1,020,125
-----------
Consumer Durables & Apparel - 1.1%
Homebuilding - 0.4%
560,000 BB-/B1 Meritage Homes Corp., 6.25%, 3/15/15 $ 296,800
-----------
Housewares & Specialties - 0.7%
1,250,000 CCC+/Caa1 Yankee Acquisition Corp., 9.75%, 2/15/17 (b) $ 525,000
-----------
Total Consumer Durables & Apparel $ 821,800
-----------
Consumer Services - 1.7%
Casinos & Gaming - 1.1%
1,335,000 BB-/B1 Manshantucket Pequot Tribe, 8.5%, 11/15/15 (144A) $ 523,988
380,000 BB-/Ba3 Scientific Games Corp., 6.25%, 12/15/12 305,900
-----------
$ 829,888
-----------
Hotels, Resorts & Cruise Lines - 0.4%
500,000 B-/Caa2 Pegasus Solutions, Inc., 10.5%, 4/15/15 $ 340,000
-----------
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Leisure Facilities - 0.2%
280,000 B/B3 Firekeepers Development Authority, 13.875%, 5/1/15 (144A) $ 173,600
-----------
Total Consumer Services $ 1,343,488
-----------
Media - 2.1%
Advertising - 0.9%
1,360,000 B+/Ba3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 707,200
-----------
Broadcasting - 1.2%
550,000 BB-/B3 Intelsat Sub Holdings, 8.5%, 1/15/13 (144A) $ 508,750
160,000 B-/Caa1 Telesat Canada, 11.0%, 11/1/15 114,400
270,000 B-/Caa1 Telesat Canada, 12.5%, 11/1/17 162,000
990,000 CCC/Caa2 Univision Communications, 9.75%, 3/15/15 (144A) PIK 123,750
-----------
$ 908,900
-----------
Total Media $ 1,616,100
-----------
Retailing - 1.1%
Automotive Retail - 0.2%
500,000 B-/B1 Sonic Automotive, Inc., 8.625%, 8/15/13 $ 186,250
-----------
Internet Retail - 0.7%
250,000 BB/Ba2 Expedia, Inc., 8.5%, 7/1/16 (144A) $ 186,250
570,000 BB/Ba3 Ticketmaster, 10.75%, 8/1/16 307,800
-----------
$ 494,050
-----------
Specialty Stores - 0.2%
200,000 B-/Caa1 Sally Holdings LLC, 10.5%, 11/15/16 $ 136,000
-----------
Total Retailing $ 816,300
-----------
Food, Beverage & Tobacco - 0.2%
Tobacco - 0.2%
200,000 B+/B2 Alliance One International, Inc., 8.5%, 5/15/12 $ 147,000
-----------
Total Food, Beverage & Tobacco $ 147,000
-----------
Health Care Equipment & Services - 1.3%
Health Care Facilities - 0.3%
280,000 B/B3 Community Health Systems, 8.875%, 7/15/15 $ 257,600
-----------
Health Care Services - 0.7%
420,000 CCC+/Caa1 Surgical Care Affiliates, 10.0%, 7/15/17 (144A) $ 218,400
540,000 B-/B3 Surgical Care Affiliates, 8.875%, 7/15/15 (144A) PIK 329,400
-----------
$ 547,800
-----------
Health Care Supplies - 0.3%
315,000 B-/B3 Biomet, Inc., 10.375%, 10/15/17 $ 248,850
-----------
Total Health Care Equipment & Services $ 1,054,250
-----------
Pharmaceuticals & Biotechnology - 0.5%
Life Sciences Tools & Services - 0.5%
440,000 BB+/Ba3 Bio-Rad Laboratories, Inc., 6.125%, 12/15/14 $ 353,100
-----------
Total Pharmaceuticals & Biotechnology $ 353,100
-----------
14 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Diversified Financials - 2.8%
Multi-Sector Holding - 1.3%
500,000 BB+/Ba2 Leucadia National, 7.125%, 3/15/17 (144A) $ 371,250
785,000 BB+/Ba2 Leucadia National, 8.125%, 9/15/15 629,963
-----------
$ 1,001,213
-----------
Specialized Finance - 1.5%
1,910,000 7.68 CCC+/B3 NCO Group, Inc., Floating Rate Note, 11/15/13 $ 955,000
250,000 19.42 NR/NR Successor II, Ltd., Floating Rate Note, 4/6/10 241,975
-----------
$ 1,196,975
-----------
Total Diversified Financials $ 2,198,188
-----------
Insurance - 2.2%
Insurance Brokers - 0.9%
630,000 CCC/Caa1 Alliant Holdings, Inc., 11.0%, 5/1/15 (144A) $ 340,200
790,000 CCC+/Caa1 Hub International Holdings, 10.25%, 6/15/15 (144A) 348,588
-----------
$ 688,788
-----------
Multi-Line Insurance - 0.5%
775,000 7.00 BB/Baa3 Liberty Mutual Group, 7.0%, 3/15/37 (144A) $ 369,584
-----------
Property & Casualty Insurance - 0.3%
455,000 14.00 A/Baa3 MBIA, Inc., Floating Rate Note, 1/15/33 (144A) (b) $ 232,050
-----------
Reinsurance - 0.5%
400,000 9.56 BB+/NR Foundation RE II, Ltd., Floating Rate Note, 11/26/10 $ 383,360
-----------
Total Insurance $ 1,673,782
-----------
Real Estate - 3.6%
Real Estate Operating Companies - 1.5%
410,000 B+/B1 Forest City Enterprises, 6.5%, 2/1/17 $ 143,500
2,935,000 B+/B1 Forest City Enterprises, 7.625%, 6/1/15 1,027,250
-----------
$ 1,170,750
-----------
Retail Real Estate Investment Trusts - 2.1%
1,500,000 BB-/Ba3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 1,357,500
800,000 C/Ca Rouse Co. LP/TRC Co., 6.75%, 5/1/13 (144A) 288,000
-----------
$ 1,645,500
-----------
Total Real Estate $ 2,816,250
-----------
Software & Services - 2.5%
Application Software - 0.8%
1,150,000 B-/Caa1 Vangent, Inc., 9.625%, 2/15/15 $ 668,438
-----------
Data Processing & Outsourced Services - 1.4%
1,780,000 B/B3 First Data Corp., 9.875%, 9/24/15 (144A) $ 1,076,900
-----------
IT Consulting & Other Services - 0.3%
450,000 CCC+/Caa1 Activant Solutions, Inc., 9.5%, 5/1/16 $ 209,250
-----------
Total Software & Services $ 1,954,588
-----------
Technology Hardware & Equipment - 0.8%
Electronic Equipment & Instruments - 0.8%
685,000 B-/B3 Itron, Inc., 7.75%, 5/15/12 $ 589,955
-----------
Total Technology Hardware & Equipment $ 589,955
-----------
The accompanying notes are an integral part of these financial statements. 15
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Semiconductors - 0.2%
Semiconductor Equipment - 0.2%
470,000 6.65 B-/B2 Freescale Semiconductor, Floating Rate Note, 12/15/14 $ 159,800
-----------
Total Semiconductors $ 159,800
-----------
Telecommunication Services - 1.1%
Integrated Telecommunication Services - 0.5%
255,000 B/B3 GCI, Inc., 7.25%, 2/15/14 $ 198,900
325,000 CCC+/Caa1 Paetec Holdings, 9.5%, 7/15/15 (b) 193,375
-----------
$ 392,275
-----------
Wireless Telecommunication Services - 0.6%
240,000 B-/B3 Cricket Communications I, 9.375%, 11/1/14 $ 216,000
335,000 B/B1 Hughes Network System, 9.5%, 4/15/14 272,188
-----------
$ 488,188
-----------
Total Telecommunication Services $ 880,463
-----------
Utilities - 3.2%
Electric Utilities - 0.9%
1,070,000 CCC/B3 TXU Energy Co., 10.25%, 11/1/15 $ 759,700
-----------
Independent Power Producer & Energy Traders - 2.1%
500,000 BB-/Ba3 Intergen NV, 9.0%, 6/30/17 $ 410,000
1,333,000 B/B1 NRG Energy, Inc., 7.375%, 1/15/17 1,226,360
-----------
$ 1,636,360
-----------
Multi-Utilities - 0.2%
160,000 BB-/Ba2 Public Service of New Mexico, 9.25%, 5/15/15 $ 127,200
-----------
Total Utilities $ 2,523,260
-----------
TOTAL CORPORATE BONDS
(Cost $71,888,239) $43,801,437
-----------
MUNICIPAL BONDS - 0.0%
Commercial Services & Supplies - 0.0%
Environmental & Facilities Services - 0.0%
100,000 8.46 NR/NR Ohio Air Quality Development, Floating Rate Note, 6/8/22 $ 12,000
-----------
Total Commercial Services & Supplies $ 12,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $100,000) $ 12,000
-----------
SENIOR FLOATING RATE LOAN INTERESTS - 2.7%**
Materials - 0.3%
Steel - 0.3%
527,236 5.46 B/B3 Niagara Corp., Term Loan, 6/29/14 $ 242,528
-----------
Total Materials $ 242,528
-----------
Capital Goods - 0.3%
Aerospace & Defense - 0.2%
218,060 5.44 B+/Ba3 Aeroflex, Inc., Tranche B1 Term Loan, 8/15/14 $ 137,378
-----------
Construction & Engineering - 0.1%
100,000 10.75 BB-/B1 Custom Building Products, 2nd Lien Term Loan, 4/20/12 $ 57,000
-----------
Total Capital Goods $ 194,378
-----------
16 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Automobiles & Components - 0.0%
Tires & Rubber - 0.0%
45,000 2.22 BB/Ba1 Goodyear Tire & Rubber Co., 2nd Lien Term Loan, 4/30/14 $ 28,913
-----------
Total Automobiles & Components $ 28,913
-----------
Consumer Durables & Apparel - 0.0%
Homebuilding - 0.0%
250,000 9.50 B+/B2 Landsource Communities Development, Facility Loan, 2/27/14 (e) $ 8,646
-----------
Total Consumer Durables & Apparel $ 8,646
-----------
Consumer Services - 0.4%
Casinos & Gaming - 0.4%
112,518 6.55 BB-/Ba3 Gateway Casinos & Entertainment, Delayed Draw Term Loan, 9/30/14 $ 50,071
556,965 6.55 BB-/Ba3 Gateway Casinos & Entertainment, Term Advance Loan, 9/30/14 247,849
-----------
$ 297,920
-----------
Total Consumer Services $ 297,920
-----------
Health Care Equipment & Services - 0.4%
Health Care Supplies - 0.4%
450,000 6.14 BB/B1 Inverness Medical Innovations, Term Loan, 6/26/15 $ 274,500
-----------
Total Health Care Equipment & Services $ 274,500
-----------
Semiconductors - 0.0%
Semiconductor Equipment - 0.0%
305 7.07 BB-/Ba1 Flextronics Semiconductor, A1A Delayed Draw Term Loan, 10/1/14 $ 196
1,060 6.16 BB-/Ba1 Flextronics Semiconductor, Closing Date Term Loan, 10/1/14 682
-----------
$ 878
-----------
Total Semiconductors $ 878
-----------
Telecommunication Services - 0.4%
Wireless Telecommunication Services - 0.4%
403,535 3.95 BB-/Ba2 Stratos Global Corp., Term B Facility Loan, 2/13/12 $ 335,943
-----------
Total Telecommunication Services $ 335,943
-----------
Utilities - 0.9%
Independent Power Producer & Energy Traders - 0.9%
286,398 1.36 BB/Ba1 NRG Energy, Inc., Credit Linked Term Loan, 2/1/13 $ 249,810
581,225 2.67 BB/Ba1 NRG Energy, Inc., Term Loan, 2/1/13 506,974
-----------
$ 756,784
-----------
Total Utilities $ 756,784
-----------
TOTAL SENIOR FLOATING RATE LOAN INTERESTS
(Cost $3,453,333) $ 2,140,490
-----------
TEMPORARY CASH INVESTMENTS - 4.3%
Securities Lending Collateral - 4.3% (d)
Certificates of Deposit:
76,795 Abbey National Plc, 3.15%, 8/13/09 $ 76,795
76,785 Bank of Nova Scotia, 3.21%, 5/5/09 76,785
122,725 Bank of Scotland NY, 2.92%, 6/5/09 122,725
138,232 Barclays Bank, 1.5%, 5/27/09 138,232
24,416 Calyon NY, 4.62%, 1/16/09 24,416
153,591 CBA, 4.87%, 7/16/09 153,591
138,232 DNB NOR Bank ASA NY, 3.04%, 6/5/09 138,232
The accompanying notes are an integral part of these financial statements. 17
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
S&P/
Floating Moody's
Principal Rate (c) Ratings
Amount ($) (unaudited) (unaudited) Value
Securities Lending Collateral - (continued)
140,688 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 $ 140,688
8,896 NORDEA NY, 4.13%, 4/9/09 8,896
115,193 Royal Bank of Canada NY, 2.7%, 8/7/09 115,193
76,795 Royal Bank of Scotland, 3.06%, 3/5/09 76,795
15,352 Skandinavian Enskilda Bank NY, 3.06%, 2/13/09 15,352
153,591 Societe Generale, 3.29%, 9/4/09 153,591
138,232 Svenska Bank NY, 4.61%, 7/8/09 138,232
153,591 U.S. Bank NA, 2.25%, 8/24/09 153,591
-----------
$ 1,533,114
-----------
Commercial Paper:
14,636 BBVA U.S., 2.83%, 3/12/09 $ 14,636
153,591 Monumental Global Funding, Ltd., 2.5%, 8/17/09 153,591
76,795 CME Group, Inc., 2.9%, 8/6/09 76,795
76,787 General Electric Capital Corp., 2.86%, 3/16/09 76,787
150,826 American Honda Finance Corp., 4.95%, 7/14/09 150,826
153,591 HSBC Bank, Inc., 2.5%, 8/14/09 153,591
76,795 IBM, 2.39%, 9/25/09 76,795
138,232 Met Life Global Funding, 3.19%, 6/12/09 138,232
138,232 New York Life Global, 2.13%, 9/4/09 138,232
130,552 Westpac Banking Corp., 2.34%, 6/1/09 130,552
-----------
$ 1,110,037
-----------
Tri-party Repurchase Agreements:
337,900 Deutsche Bank, 0.25%, 1/2/09 $ 337,900
26,092 Barclays Capital Markets, 0.5%, 1/2/09 26,092
-----------
$ 363,992
-----------
Time Deposit:
153,591 BNP Paribas, 0.01%, 1/2/09 $ 153,591
-----------
Money Market Mutual Funds:
38,398 Columbia Government Reserves Fund $ 38,398
115,193 JP Morgan, U.S. Government Money Market Fund 115,193
-----------
$ 153,591
-----------
Total Securities Lending Collateral $ 3,314,325
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $3,314,325) $ 3,314,325
-----------
TOTAL INVESTMENT IN SECURITIES - 88.0%
(Cost $110,753,361)(a) $68,362,550
-----------
OTHER ASSETS AND LIABILITIES - 12.0% $ 9,357,635
-----------
TOTAL NET ASSETS - 100.0% $77,720,185
-----------
18 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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- --------------------------------------------------------------------------------
* Non-income producing security.
NR Not rated by either S&P or Moody's.
WR Withdrawn rating
PIK Represents a pay in kind security.
(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, 2008, the value of these securities amounted to $10,643,309
or 13.7% of total net assets.
** Senior floating rate loan interests in which the Portfolio invests
generally pay interest at rates that are periodically redetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate
offered by one or more major United States banks, (iii) the certificate
of deposit or (iv) other base lending rates used by commercial lenders.
The rate shown is the coupon rate at period end.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $110,888,373 was as follows:
Aggregate gross unrealized gain for all investments in which there is an excess of
value over tax cost $ 728,974
Aggregate gross unrealized loss for all investments in which there is an excess of
tax cost over value (43,254,797)
-------------
Net unrealized loss $ (42,525,823)
=============
(b) At December 31, 2008, the following securities were out on loan:
Principal
Amount ($) Description Value
100,000 Allison Transmission, 11.0%, 11/1/15 (144A) $ 49,000
300,000 Freeport-McMoran Copper & Gold, Floating Rate
Note, 4/1/15 198,000
325,000 General Cable Corp., 7.125%, 4/1/17 214,500
55,000 Georgia Gulf Corp., 9.5%, 10/15/14 16,500
450,000 MBIA, Inc., Floating Rate Note, 1/15/33 (144A) 229,500
320,000 Paetec Holdings, 9.5%, 7/15/15 190,400
108,000 Tenneco Automotive, Inc., 8.625%, 11/15/14 41,040
267,000 Verasun Energy Corp., 9.375%, 6/1/17 (e) 32,040
1,230,000 Yankee Acquisition Corp., 9.75%, 2/15/17 516,600
Shares
1,200 Barrick Gold Corp. 44,124
7,000 Inverness Medical Innovations, Inc. * 132,370
7,200 Itron, Inc. * 458,928
26,000 NRG Energy, Inc. * 606,580
14,000 Scientific Games Corp. * 245,560
7,000 Texas Industries, Inc. 241,500
----------
Total $3,216,642
==========
(c) Debt obligation with a variable interest rate. Rate shown is rate at
period end.
(d) Security lending collateral is managed by Credit Suisse.
(e) Security is in default.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $36,749,491 and $53,073,100,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- -------------------------------------------------------------------------------
Level 1 - Quoted Prices $ 9,854,018
Level 2 - Other Significant Observable Inputs 58,508,532
Level 3 - Significant Unobservable Inputs -
-----------
Total $68,362,550
===========
The accompanying notes are an integral part of these financial statements. 19
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 11.05 $ 11.01 $ 10.88 $ 11.67 $ 11.45
-------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.67 $ 0.61 $ 0.59 $ 0.61 $ 0.62
Net realized and unrealized gain (loss) on investments (4.36) 0.04 0.29 (0.41) 0.27
-------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ (3.69) $ 0.65 $ 0.88 $ 0.20 $ 0.89
Distributions to shareowners:
Net investment income (0.67) (0.60) (0.60) (0.61) (0.62)
Net realized gain (0.23) (0.01) (0.15) (0.38) (0.05)
-------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (4.59) $ 0.04 $ 0.13 $ (0.79) $ 0.22
-------- ------- ------- ------- -------
Net asset value, end of period $ 6.46 $ 11.05 $ 11.01 $ 10.88 $ 11.67
======== ======= ======= ======= =======
Total return* (35.43)% 5.95% 8.52% 1.95% 8.03%
Ratio of net expenses to average net assets+ 0.83% 0.75% 0.74% 0.77% 0.78%
Ratio of net investment income to average net assets+ 7.00% 5.37% 5.51% 5.52% 5.40%
Portfolio turnover rate 36% 55% 28% 37% 42%
Net assets, end of period (in thousands) $ 43,923 $74,308 $65,890 $63,452 $70,890
Ratios with no waiver of fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 0.83% 0.75% 0.74% 0.77% 0.78%
Net investment income 7.00% 5.37% 5.51% 5.52% 5.40%
* 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.
+ Ratios assuming no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
20 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 11.04 $ 11.01 $ 10.88 $ 11.67 $ 11.46
-------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.65 $ 0.57 $ 0.57 $ 0.59 $ 0.58
Net realized and unrealized gain (loss) on investments (4.36) 0.04 0.28 (0.42) 0.27
-------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ (3.71) $ 0.61 $ 0.85 $ 0.17 $ 0.85
Distributions to shareowners:
Net investment income (0.65) (0.57) (0.57) (0.58) (0.59)
Net realized gain (0.23) (0.01) (0.15) (0.38) (0.05)
-------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (4.59) $ 0.03 $ 0.13 $ (0.79) $ 0.21
-------- ------- ------- ------- -------
Net asset value, end of period $ 6.45 $ 11.04 $ 11.01 $ 10.88 $ 11.67
======== ======= ======= ======= =======
Total return* (35.63)% 5.59% 8.25% 1.70% 7.76%
Ratio of net expenses to average net assets+ 1.08% 1.00% 0.99% 1.02% 1.03%
Ratio of net investment income to average net assets+ 6.65% 5.12% 5.27% 5.27% 5.12%
Portfolio turnover rate 36% 55% 28% 37% 42%
Net assets, end of period (in thousands) $ 33,797 $57,286 $53,196 $47,169 $51,912
Ratios with no waiver of fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 1.08% 1.00% 0.99% 1.02% 1.04%
Net investment income 6.65% 5.12% 5.27% 5.27% 5.12%
* 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.
+ Ratios assuming no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 21
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $3,216,642) (cost $110,753,361) $ 68,362,550
Cash 8,190,401
Receivables --
Investment securities sold 22,362
Portfolio shares sold 3,104,544
Dividends and interest 1,582,399
-------------
Total assets $ 81,262,256
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 27,900
Portfolio shares repurchased 130,338
Upon return of securities loaned 3,314,325
Due to affiliates 1,766
Accrued expenses 67,742
-------------
Total liabilities $ 3,542,071
-------------
NET ASSETS:
Paid-in capital $ 122,780,817
Undistributed net investment income 15,298
Accumulated net realized loss on investments (2,685,119)
Net unrealized loss on investments (42,390,811)
-------------
Total net assets $ 77,720,185
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $43,923,320/6,798,689 shares) $ 6.46
=============
Class II (based on $33,796,865/5,236,507 shares) $ 6.45
=============
22 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $318) $ 689,784
Interest 7,412,488
Income from securities loaned, net 37,980
----------
Total investment income $ 8,140,252
-------------
EXPENSES:
Management fees $ 679,078
Transfer agent fees
Class I 1,502
Class II 1,502
Distribution fees
Class II 105,075
Administrative fees 30,303
Custodian fees 47,289
Professional fees 55,343
Printing expense 27,605
Fees and expenses of nonaffiliated trustees 6,620
Miscellaneous 17,910
----------
Total expenses $ 972,227
-------------
Net expenses $ 972,227
-------------
Net investment income $ 7,168,025
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (2,480,020)
-------------
Change in net unrealized loss on investments $ (43,009,841)
-------------
Net loss on investments $ (45,489,861)
-------------
Net decrease in net assets resulting from operations $ (38,321,836)
=============
The accompanying notes are an integral part of these financial statements. 23
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 7,168,025 $ 6,596,341
Net realized gain (loss) on investments (2,480,020) 2,439,241
Change in net unrealized loss on investments (43,009,841) (2,247,926)
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (38,321,836) $ 6,787,656
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.67 and $0.60 per share, respectively) $ (4,396,020) $ (3,803,983)
Class II ($0.65 and $0.57 per share, respectively) (2,812,531) (2,752,484)
Net realized gain:
Class I ($0.23 and $0.01 per share, respectively) (1,485,429) (67,578)
Class II ($0.23 and $0.01 per share, respectively) (959,784) (49,854)
------------- -------------
Total distributions to shareowners $ (9,653,764) $ (6,673,899)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 52,668,197 $ 55,247,902
Reinvestment of distributions 9,653,764 6,665,703
Cost of shares repurchased (68,220,539) (49,519,386)
------------- -------------
Net increase (decrease) in net assets resulting from
Portfolio share transactions $ (5,898,578) $ 12,394,219
------------- -------------
Net increase (decrease) in net assets $ (53,874,178) $ 12,507,976
NET ASSETS:
Beginning of year $ 131,594,363 $ 119,086,387
------------- -------------
End of year $ 77,720,185 $ 131,594,363
============= =============
Undistributed net investment income $ 15,298 $ 49,724
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
Class I
Shares sold 1,693,376 $ 15,209,637 1,774,708 $ 19,969,878
Reinvestment of distributions 651,001 5,881,449 343,656 3,863,490
Less shares repurchased (2,271,010) (21,593,341) (1,375,769) (15,441,396)
---------- ------------- ---------- -------------
Net increase (decrease) 73,367 $ (502,255) 742,595 $ 8,391,972
========== ============= ========== =============
Class II
Shares sold 4,187,123 $ 37,458,560 3,136,297 $ 35,278,024
Reinvestment of distributions 412,132 3,772,315 249,283 2,802,213
Less shares repurchased (4,549,704) (46,627,198) (3,030,188) (34,077,990)
---------- ------------- ---------- -------------
Net increase (decrease) 49,551 $ (5,396,323) 355,392 $ 4,002,247
========== ============= ========== =============
24 The accompanying notes are an integral part of these financial statements.
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer High Yield VCT Portfolio (The Portfolio) is one of the 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is to maximize total return through a combination of income and
capital appreciation.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distributions fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
Investments in high-yield or lower-rated securities are subject to
greater-than-average risk. In addition, the non-diversified Portfolio may have
concentrations in certain asset types, which may subject the Portfolio to
additional risks. The Portfolio's prospectuses contain unaudited information
regarding the Portfolio's principal risks. Please refer to those documents when
considering the Portfolio's principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent with those policies generally accepted in the investment
company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Net asset values for
the portfolios are computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. 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. Fixed income securities are valued at prices supplied by
independent pricing services, which consider such factors as Treasury
spreads, yields, maturities and ratings. Valuations may be supplemented by
dealers and other sources, as required. Securities for which market prices
and/or quotations are not readily available are valued using fair value
methods pursuant to procedures adopted by the Board of Trustees. Trading in
foreign equity securities is substantially completed each day at various
times prior to the close of the NYSE. The value of such securities used in
computing the net asset value of the Portfolio's shares is based on the
last sale price on the principal exchange where they traded. The Portfolio
may also use fair value methods to value a security, including a non-U.S.
security, when the closing market price on the primary exchange where the
security is traded no longer accurately reflects the value of the security
as of the close of the NYSE. At December 31, 2008, there were no securities
that were valued using fair value methods (other than securities valued
using prices supplied by independent pricing services). Temporary cash
investments are valued at cost which approximates market value.
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 becomes aware 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. Dividend and interest income are reported net of
unrecoverable foreign taxes withheld at the applicable country rates. All
discounts/premiums are accreted/amortized for financial reporting purposes.
25
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
The Portfolio invests in below investment grade (high yield) debt
securities, preferred and common stocks. These high yield securities may be
convertible into equity securities of the issuer. Debt securities rated
below investment grade are commonly referred to as "junk bonds" and are
considered speculative. These securities involve greater risk of loss, are
subject to greater price volatility, and are less liquid, especially during
years of economic uncertainty or change, than higher rated debt securities.
B. 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, if any,
represent, among other things, the net realized gains and losses on foreign
currency contracts, disposition of foreign currencies, and the difference
between the amount of income accrued and the U.S. dollars actually
received. Further, the effects of changes in foreign currency exchange
rates on investments are not segregated in the Statement of Operations from
the effects of changes in market price of those securities but are included
with the net realized and unrealized gain or loss on investments.
C. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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.
At December 31, 2008, the Portfolio had no open forward contracts.
D. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
In addition to the requirements of the Internal Revenue Code, the Portfolio
may also be required to pay local taxes on the recognition of capital gains
and/or the repatriation of foreign currencies in certain countries. During
the year ended December 31, 2008, no such taxes were paid.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$2,341,302, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $312,405 of capital losses
recognized between November 1, 2008 and December 31, 2008 to its fiscal
year ending December 31, 2009.
At December 31, 2008, the Portfolio has reclassified $6,100 to increase
undistributed net investment income and $6,100 to increase accumulated net
realized loss on investments to reflect permanent book/tax differences. The
reclassification has no impact on the net asset value of the Portfolio and
presents the Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings on a federal income tax basis at December 31, 2008, were as
follows:
26
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
------------ ----------
Distributions paid from:
Ordinary income $ 8,520,858 $6,568,888
Long-term capital gain 1,132,906 105,011
------------ ----------
Total distributions $ 9,653,764 $6,673,899
============ ==========
Distributable Earnings:
Undistributed ordinary income $ 118,898
Capital loss carryforward (2,341,302)
Post-October loss deferred (312,405)
Unrealized depreciation (42,525,823)
------------
Total $(45,060,632)
============
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales, Real Estate
Investment Trust (REIT) holdings, interest accruals on preferred stocks,
adjustments relating to catastrophe bonds, and interest on defaulted bonds.
E. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II are calculated based on the average daily net asset
values attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. The Portfolio declares as daily dividends
substantially all of its respective net investment income. All dividends
are paid on a monthly basis. Short-term capital gain distributions, if any,
may be declared with the daily dividends. Distributions paid by the
Portfolio with respect to each class of shares are calculated in the same
manner and at the same time, except that Class I and Class II shares can
bear different transfer agent and distribution expense rates. Dividends and
distributions to shareowners are recorded on the ex-dividend date.
F. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
27
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average daily net assets.
In addition, under the management and administration agreement, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $1,326 in management fees,
administrative costs and certain others fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $245 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to its Class II shares. Pursuant to
the Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average
daily net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $195 in distribution fees payable to PFD at December 31,
2008.
5. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
28
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer High Yield VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
High Yield VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer High Yield VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
29
Pioneer High Yield VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentages of the Portfolio's ordinary income distributions that are
exempt from nonresident alien (NRA) tax withholding resulting from qualified
interest income and qualified short term gains were 81.48% and 0%,
respectively.
30
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's
affairs. The officers of the Trust are responsible for the Trust's
Custodian operations. The Trustees and officers are listed below, together with
Brown Brothers Harriman & Co. their principal occupations during the past five years. Trustees who are
interested persons of the Trust within the meaning of the 1940 Act are
Independent Registered Public Accounting Firm referred to as Interested Trustees. Trustees who are not interested
Ernst & Young LLP persons of the Trust are referred to as Independent Trustees. Each of the
Trustees serves as a trustee of each of the 76 U.S. registered investment
Principal Underwriter portfolios for which Pioneer serves as investment adviser (the "Pioneer
Pioneer Funds Distributor, Inc. Funds"). The address for all Trustees and all officers of the Trust is
60 State Street, Boston, Massachusetts 02109.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- ----------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc.
(since February 2007); Executive Vice President of all of the Pioneer Funds
(since March 2007); Director of Pioneer Global Asset Management S.p.A.
(since April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- ----------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers
or directors of the Portfolio's investment adviser and certain of its
affiliates.
31
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
Position Held Length of Service
Name and Age with the Trust and Term of Office
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal
- ---------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Name and Age Principal Occupation During Past Five Years
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and
2008 - present); and Executive Vice President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present) ; Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
Other Directorships
Name and Age Held by this Trustee
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- ------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment
Company Institute
- ------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees
17 portfolios in fund complex)
- ------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- ------------------------------------------------------------------------
Thomas J. Perna (58) None
- ------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- ------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- ------------------------------------------------------------------------
32
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- -------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- -------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- -------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- ---------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- ---------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ---------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ---------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- ---------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- ---------------------------------------------------------------------------------------------------------------------------------
33
- --------------------------------------------------------------------------------
This page for your notes.
34
- --------------------------------------------------------------------------------
This page for your notes.
35
- --------------------------------------------------------------------------------
This page for your notes.
36
- --------------------------------------------------------------------------------
This page for your notes.
37
[LOGO]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18662-03-0209
[Logo]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
Moderate Allocation Portfolio -- Portfolio and
Performance Update 2
Growth Allocation Portfolio -- Portfolio and
Performance Update 3
Aggressive Allocation Portfolio -- Portfolio and
Performance Update 4
Comparing Ongoing Portfolio Expenses 5
Market Overview and Strategy 8
Portfolio Reviews 10
Schedule of Investments 11
Financial Statements 14
Notes to Financial Statements 23
Report of Independent Registered Public
Accounting Firm 27
Approval of Sub-Advisory Agreement 29
Trustees, Officers and Service Providers 35
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Moderate Allocation VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
[The following is represented by a pie chart in the printed materials.]
Target Asset Allocations
Equity 60%
Fixed-Income 40%
Actual Asset Allocations
Large Cap Growth Stocks 15.5%
- -----------------------------------------------------------------------------
Large Cap Value Stocks 15.5
- -----------------------------------------------------------------------------
Mid/Small Cap Growth Stocks 6.0
- -----------------------------------------------------------------------------
Mid/Small Cap Value Stocks 6.0
- -----------------------------------------------------------------------------
International Stocks 12.0
- -----------------------------------------------------------------------------
Emerging Markets 2.0
- -----------------------------------------------------------------------------
Real Estate (REITs) 3.0
- -----------------------------------------------------------------------------
High Yield Bonds 8.0
- -----------------------------------------------------------------------------
Bonds 9.0
- -----------------------------------------------------------------------------
Short Term Bonds 17.0
- -----------------------------------------------------------------------------
Cash Equivalents 6.0
- -----------------------------------------------------------------------------
Ten Largest Holdings (Based on total portfolio)
1. Pioneer Bond 13.13%
- --------------------------------------------------------------------------------
2. Pioneer Short Term Income 12.56
- --------------------------------------------------------------------------------
3. Pioneer Research 8.81
- --------------------------------------------------------------------------------
4. Pioneer Fund 8.07
- --------------------------------------------------------------------------------
5. Pioneer Global High Yield 5.01
- --------------------------------------------------------------------------------
6. Pioneer Cullen Value 4.09
- --------------------------------------------------------------------------------
7. AIM Global Aggressive Growth 3.71
- --------------------------------------------------------------------------------
8. Pioneer Mid-Cap Value 3.49
- --------------------------------------------------------------------------------
9. Pioneer Independence 3.26
- --------------------------------------------------------------------------------
10. AIM International Growth 3.03
This list excludes temporary cash and derivative instruments. Portfolio holdings
will vary for other periods.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/08 12/31/07
Net Asset Value per Share
Class I $ 7.61 $ 12.04
Class II $ 7.59 $ 12.01
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.3318 $ 0.0220 $ 0.6358
Class II $ 0.3022 $ 0.0220 $ 0.6358
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Ibbotson Moderate Allocation VCT Portfolio at net asset value, compared to that
of the Standard & Poor's 500 Index and Barclays Capital Aggregate Bond Index.
Portfolio returns are based on net asset value and do not reflect any
applicable insurance fees or surrender charges.
[The following is represented by a mountain chart in the printed materials.]
Pioneer Ibbotson Pioneer Ibbotson
Moderate Allocation Moderate Allocation Barclays Capital
VCT Portfolio VCT Portfolio S&P Aggregate Bond
Class I Class II Index 500 Index
3/05 10,000 10,000 10,000 10,000
12/05 10,683 10,683 10,292 10,721
12/06 11,828 11,818 10,738 12,413
12/07 12,531 12,500 11,486 13,094
12/08 8,648 8,604 12,088 8,251
The Barclays Capital Aggregate Bond Index is a measure of the U.S. bond market.
The Standard & Poor's 500 Index (the S&P 500) is a commonly used measure of the
broad U.S. stock market. 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 an index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
Class I Class II
Life-of-Class*
(3/18/05) -3.89% -4.02%
1 Year -30.81 -30.99
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
* Inception date of the Portfolio's Class II shares. Class I shares commenced
operations on 12/15/06.
The performance of Class I shares for the period prior to commencement of
operations of Class I shares is based on the performance of the Portfolio's
Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Growth Allocation VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
[The following is represented by a pie chart in the printed materials.]
Target Asset Allocations
Equity 75%
Fixed Income 25%
Actual Asset Allocation
Large Cap Growth Stocks 16.5%
Large Cap Value Stocks 17.5
Mid/Small Cap Growth Stocks 8.5
Mid/Small Cap Value Stocks 8.5
International Stocks 16.0
Emerging Markets 4.0
Real Estate (REITs) 4.0
High Yield Bonds 5.0
Bonds 7.5
Short Term Bonds 12.5
Ten Largest Holdings (Based on total portfolio)
1. Pioneer Bond 9.49%
- --------------------------------------------------------------------------------
2. Pioneer Research 8.43
- --------------------------------------------------------------------------------
3. Pioneer Fund 7.89
- --------------------------------------------------------------------------------
4. Pioneer Short Term Income 7.38
- --------------------------------------------------------------------------------
5. Pioneer Cullen Value 5.12
- --------------------------------------------------------------------------------
6. Pioneer Mid-Cap Value 4.88
- --------------------------------------------------------------------------------
7. AIM Global Aggressive Growth 4.48
- --------------------------------------------------------------------------------
8. Pioneer Emerging Markets 3.99
- --------------------------------------------------------------------------------
9. Pioneer Small Cap Value 3.95
- --------------------------------------------------------------------------------
10. Pioneer Growth Opportunities 3.92
This list excludes temporary cash and derivative instruments. Portfolio holdings
will vary for other periods.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/08 12/31/07
Net Asset Value per Share (Class II) $ 7.38 $ 12.41
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class II $ 0.2368 $ 0.0037 $ 0.7493
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Ibbotson Growth Allocation VCT Portfolio at net asset value, compared to that
of the Standard & Poor's 500 Index and Barclays Capital Aggregate Bond Index.
Portfolio returns are based on net asset value and do not reflect any
applicable insurance fees or surrender charges.
[The following is represented by a mountain chart in the printed materials.]
Pioneer Ibbotson Barclays
Aggressive Allocation Capital Aggregate
VCT Portfolio Bond Index S&P 500
3/05 10,000 10,000 10,000
12/05 10,878 10,292 10,721
12/06 12,256 10,738 12,413
12/07 12,960 11,486 13,094
12/08 8,412 12,088 8,251
The Barclays Capital Aggregate Bond Index is a measure of the U.S. bond market.
The Standard & Poor's 500 Index (the S&P 500) is a commonly used measure of the
broad U.S. stock market. 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 an index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
Net Asset Value Class II
Life-of-Class
(3/18/05) -4.69%
1 Year -35.00
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
[The following is represented by a pie chart in the printed materials.]
Target Asset Allocations
Equity 90%
Fixed Income 10%
Actual Asset Allocations
Large Cap Growth Stocks 19.0%
Large Cap Value Stocks 19.0
Mid/Small Cap Growth Stocks 10.5
Mid/Small Cap Value Stocks 10.5
International Stocks 21.0
Emerging Markets 5.0
Real Estate (REITs) 5.0
High Yield Bonds 0.0
Bonds 7.0
Short Term Bonds 3.0
Ten Largest Holdings (Based on total portfolio)
1. Pioneer Research 10.04%
- --------------------------------------------------------------------------------
2. Pioneer Fund 8.88
- --------------------------------------------------------------------------------
3. AIM Global Aggressive Growth 6.82
- --------------------------------------------------------------------------------
4. Pioneer Mid-Cap Value 6.65
- --------------------------------------------------------------------------------
5. Pioneer Growth Opportunities 6.21
- --------------------------------------------------------------------------------
6. Pioneer International Equity 6.11
- --------------------------------------------------------------------------------
7. Pioneer Bond 5.92
- --------------------------------------------------------------------------------
8. Pioneer Emerging Markets 5.17
- --------------------------------------------------------------------------------
9. Pioneer Independence 5.07
- --------------------------------------------------------------------------------
10. Pioneer Cullen Value 4.99
This list excludes temporary cash and derivative instruments. Portfolio holdings
will vary for other periods.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/08 12/31/07
Net Asset Value per Share (Class II) $ 6.76 $ 12.54
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class II $ 0.1726 $ 0.0158 $ 1.0497
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Ibbotson Aggressive Allocation VCT Portfolio at net asset value, compared to
that of the Standard & Poor's 500 Index and Barclays Capital Aggregate Bond
Index. Portfolio returns are based on net asset value and do not reflect any
applicable insurance fees or surrender charges.
[The following is represented by a mountain chart in the printed materials.]
Pioneer Ibbotson Barclays
Aggressive Allocation Capital Aggregate
VCT Portfolio Bond Index S&P 500
3/05 10,000 10,000 10,000
12/05 11,024 10,292 10,721
12/06 12,616 10,738 12,413
1207 13,271 11,486 13,094
12/08 7,989 12,088 8,251
The Barclays Capital Aggregate Bond Index is a measure of the U.S. bond market.
The Standard & Poor's 500 Index (the S&P 500) is a commonly used measure of the
broad U.S. stock market. 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 an the index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
Net Asset Value Class II
Life-of-Class
(3/18/05) -5.85%
1 Year -39.63
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Moderate Allocation VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Moderate Allocation
VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 738.31 $ 737.89
Expenses Paid During the Period* $ 3.98 $ 5.15
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 0.91% for
Class I Shares and 1.18% for Class II Shares, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads). Therefore, the table below is useful in comparing ongoing
costs only and will not help you determine the relative total costs of owning
different variable annuities. In addition, if these transaction costs were
included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Moderate Allocation
VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- -----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.56 $ 1,019.20
Expenses Paid During the Period* $ 4.62 $ 5.99
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 0.91% for
Class I Shares and 1.18% for Class II Shares, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Growth Allocation VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Growth Allocation VCT
Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class II
- ------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 706.62
Expenses Paid During Period* $ 5.15
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 1.20% for
Class II Shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads). Therefore, the table below is useful in comparing ongoing
costs only and will not help you determine the relative total costs of owning
different variable annuities. In addition, if these transaction costs were
included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Growth Allocation VCT
Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class II
- -----------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,019.10
Expenses Paid During Period* $ 6.09
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 1.20% for
Class II Shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
6
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Aggressive Allocation
VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class II
- -----------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 669.34
Expenses Paid During Period* $ 6.00
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 1.43% for
Class II Shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads). Therefore, the table below is useful in comparing ongoing
costs only and will not help you determine the relative total costs of owning
different variable annuities. In addition, if these transaction costs were
included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Ibbotson Aggressive Allocation
VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class II
- -----------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,017.95
Expenses Paid During Period* $ 7.25
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were 1.43% for
Class II Shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
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MARKET OVERVIEW AND STRATEGY 12/31/08
- --------------------------------------------------------------------------------
In the following interview, portfolio manager Peng Chen, Chief Investment
Officer for Ibbotson Associates Advisers LLC, the Portfolios' sub-adviser,
discusses the market environment and investment strategies that applied to the
portfolios in the Pioneer Ibbotson Asset Allocation Series VCT Portfolios for
the annual reporting period ended December 31, 2008.
Q. Could you characterize the economic and market backdrop during 2008?
A. What began in the summer of 2007 as a U.S. subprime real estate mortgage
crisis became in 2008 a full-blown financial crisis that affected all markets
and led to worldwide asset price deflation. Excess leverage, financial
product complexity, lack of transparency and inadequate oversight prevailed
throughout the financial system. The crisis only seemed to worsen during the
year despite bailouts of leading financial institutions, new government
oversight and a Presidential election.
In the United States, Treasury Secretary Paulson, Federal Reserve Chairman
Bernanke and the SEC all took drastic action, cutting short-term lending
rates, restricting short sales, providing capital, arranging bank mergers,
and guaranteeing deposits. As we headed into the fourth quarter of 2008, the
U.S. Congress approved a mammoth financial institution bailout package, while
demanding that the U.S. government would receive some potential upside in the
form of equity, that there would be restrictions on executive compensation,
and that homeowners would reap some of the benefits.
Despite these efforts, the lack of trust in the debt markets spread beyond
the financial system's paper economy to the real economy, and on a global
scale. In the U.S., the National Bureau of Economic Research declared that
the United States entered into a recession in late 2007, confirming what many
had suspected. A weak job market and devalued homes had a predictable impact
on consumers, leading to record-low readings in the Consumer Confidence Index
as the year drew to a close.
In keeping with this backdrop, the stock markets started 2008 poorly, and
only fell further as the year progressed. Most bond markets fell as well,
especially those where any credit or counterparty risk is involved. The newly
named Barclays Capital (formerly Lehman Brothers) Aggregate Bond Index, the
most popular measure of the performance of the U.S. bond market, returned
5.24% in 2008. While this is only slightly lower than average, it masks sharp
declines that occurred in certain U.S. bond segments, as Treasuries
dramatically outperformed other sectors in a risk-sensitive environment. The
U.S. equity market in aggregate provided its worst returns since the 1930s,
as reflected in the Standard and Poor's 500 Index return of -36.99% for the
full one-year period ended December 31, 2008. The damage was essentially
across-the-board among investment styles, as evidenced by the unappealing
-28.92% return of small-cap value stocks as measured by the Russell 2000
Value Index taking top performance honors for the full year ended December
31, 2008. International equities fell even more than the domestic stock
market, with the Morgan Stanley Capital International (MSCI) Europe,
Australasia, Far East (EAFE) Index returning -43.38% for the 12 months ended
December 31, 2008 in part due to a strengthening of the dollar, which clearly
remains a reserve currency during volatile periods in the minds of world
investors.
Q. What were the strategic considerations that you applied to the three
Portfolios in allocating assets?
A. For each portfolio, assets have been invested in keeping with their broad
asset allocation and specific portfolio targets. In addition, over the course
of the year we implemented several tactical shifts across all the portfolios.
During the second quarter, we began to introduce an overweighting of
equities, as we viewed valuations as attractive, especially in relation to
Treasury yields. In addition, we expected the overall stock market at some
point to look ahead to economic recovery. The overweighting of equities was
removed at the end of the third quarter, as our outlook for the duration of
the economy's difficulties became more negative.
Within the equity portion, as we entered the annual reporting period, the
Portfolios were overweight large-cap stocks relative to small-cap stocks
within the U.S. stock portion of the portfolios. An important consideration
in the weighting was our view that large caps had the potential to outperform
as the market anticipated a
A Word About Risk:
A Portfolio's performance depends on the adviser's skill in determining the
strategic asset class allocations, the mix of underlying Pioneer funds, and the
performance of those underlying funds. The underlying funds' performance may be
lower than the performance of the asset class that they were selected to
represent. Stocks and bonds can decline due to adverse issuer, market,
regulatory, or economic developments. These risk factors, including those
associated with currency exchange rates, also apply to investments in
international markets, all of which make international markets more volatile
and less liquid than investments in domestic markets. Some of the underlying
portfolios can invest in either high-yield securities or small/emerging growth
companies. Investments in these types of securities generally are subject to
greater volatility than either higher-grade securities or more-established
companies, respectively. Before making an investment in a Portfolio, you should
consider all the risks associated with it.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for each Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may
not be in effect for all Portfolios. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
8
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
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- --------------------------------------------------------------------------------
recession, given that large-cap stocks have been more resilient under that
scenario in the past. In addition, the tight credit environment seemed to
favor large, cash-rich companies. As the period progressed and it became
clear that a recession was underway, we began to add small-cap exposure and
move to a neutral posture, as small caps often are the first to look ahead to
the prospect of economic recovery. The early weighting toward large caps was
a modest negative for the Portfolios' performance over the first half of
2008, as the segment suffered in the wake of an oil price spike in June.
Over the second half of 2008, the equity portions of the portfolios were
positioned neutrally with respect to the various equity categories. We have
also maintained neutral target weightings in the non-U.S. equity market
alternatives, both developed and emerging.
Within fixed income, the yield spread offered by high-yield bonds versus
investment-grade issues was below its long-term average entering 2008, and we
moved to underweight the high-yield bond offering in favor of equities and
investment-grade bonds. While high-yield bonds indeed lagged investment-grade
issues, the positive impact of the underweighting was negated as equities
overseas encountered weakness and financial stocks dragged down equity
returns in the U.S. Near the end of the first quarter, high-yield spreads
reached more attractive levels and we moved to a neutral weighting. Spreads
continued to widen over the course of the year, however, and closed the
period at record levels.
Finally, we have continued to underweight REITs (Real Estate Investment
Trusts) in favor of equities during the period. For the full one-year period
ended December 31, 2008, REITs performed essentially in line with equities,
falling 37.7% as measured by the FTSE NAREIT Equity Index. However, REITs
experienced even more volatility along the way than the stock market, and we
continue to underweight REITs in view of our risk/reward assessment of the
asset class. REITs generally carry higher degrees of leverage than most
companies. In the current credit crisis, REITs may find it difficult to
refinance debt and will certainly pay higher borrowing costs moving forward.
From a fundamental perspective, hotel occupancy rates are down, businesses
are contracting and retailers are declaring bankruptcy. In addition,
valuations remain above long-term averages for U.S. equity REITs.
Q. What factors are you watching most closely as you determine strategy for the
Portfolios going forward?
A. We believe that the flight to quality that has taken place during the
financial crisis has resulted in riskier assets being over-sold and safe
assets such as the U.S. dollar and U.S. Treasury bills being over-bought. At
the current lows for asset classes such as equities and credit-sensitive
sectors of the bond market, we believe that strategic long-term investors
will be rewarded, although the journey may be fairly bumpy. When the economy
nears the end of this current recession, we think patient investors should
see corporate bonds outperform government bonds, high-yield bonds outperform
investment-grade credit quality issues, non-U.S. bonds outperform U.S. bonds,
and equities outperform bonds.
In this vein, we are considering several dynamic tilts in the Portfolios that
we believe will be profitable when the end of the recession nears. These
include overweighting U.S. investment-grade corporate bonds relative to cash
and U.S. Treasury bills, as well as overweighting non-U.S. bonds over U.S.
bonds. We are also considering overweighting equities relative to bonds.
The big question is, of course, "When will the global economy improve?" In
light of the expected length and depth of the current recession, it may be
some time before we feel that meaningful shifts in the direction of more
risk-sensitive asset classes are merited.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareowner report regarding market or economic trends
or the factors influencing a 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.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
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PORTFOLIO REVIEWS 12/31/08
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Moderate Allocation
The Portfolio's Class I shares had a total return of -30.81% for the 12-month
period ended December 31, 2008, while Class II shares returned -30.99%. Over
the same 12-month period, the S&P 500 returned -36.99%, the Barclays Capital
Aggregate Bond Index returned 5.24%, and the average return of the 157 variable
portfolios in Lipper's Mixed-Asset Target Allocation/Moderate Underlying Funds
category was -25.34%.
The Portfolio targeted an asset allocation of 60% equities, 40% fixed income
during the period. At the end of the period, the Portfolio was positioned
neutrally with respect to the breakdown between equities and fixed income.
Within the equity portion of the Portfolio, Pioneer Research Fund was the
largest holding at 8.81% of assets on December 31, 2008. Pioneer Fund was the
next largest equity holding at 8.07% of assets. Within the fixed- income
portion of the Portfolio, the largest holding at the end of the period was
Pioneer Bond Fund at 13.13% of assets, closely followed by Pioneer Short Term
Income Fund, at 12.57% assets.
Growth Allocation
The Portfolio's Class II shares had a total return of -35.00% for the 12-month
period ended December 31, 2008. Over the same 12-month period, the S&P 500
returned -36.99%, the Barclays Capital Aggregate Bond Index returned 5.24%, and
the average return of the 197 portfolios in Lipper's Mixed-Asset Target
Allocation/Growth Underlying Funds category was -29.60%.
The Portfolio targeted an asset allocation of 75% equities, 25% fixed income
during the period. At the end of the period, the Portfolio was positioned
neutrally with respect to the breakdown between equities and fixed income.
Within the equity portion of the Portfolio, Pioneer Research Fund was the
largest holding at 8.49% of assets on December 31, 2008. Pioneer Fund was the
next largest equity holding at 7.95% of assets. Within the fixed-income portion
of the Portfolio, the largest holding at the end of the period was Pioneer Bond
Fund at 9.56% of assets, followed by a shorter duration bond fund, Pioneer
Short Term Income Fund, at 7.43% of assets.
Aggressive Allocation
The Portfolio's Class II shares had a total return of -39.63% for the 12-month
period ended December 31, 2008. Over the same 12-month period, the S&P 500
returned -36.99%, the Barclays Capital Aggregate Bond Index returned 5.24%, and
the average return of the 197 portfolios in Lipper's Multi-Cap Core Underlying
Funds category was -38.66%.
The Portfolio targeted an asset allocation of 90% equities, 10% fixed income
during the period. At the end of the period, the Portfolio was positioned
neutrally with respect to the breakdown between equities and fixed income.
Within the equity portion of the Portfolio, Pioneer Research Fund was the
largest holding at 10.08% of assets on December 31, 2008. Pioneer Fund was the
next largest equity holding at 8.91% of assets. Within the fixed-income portion
of the Portfolio, the largest allocation was to the Pioneer Bond Fund.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareowner report regarding market or economic trends
or the factors influencing the Portfolios' 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.
A Word About Risk:
A Portfolios' performance depends on the adviser's skill in determining the
strategic asset class allocations, the mix of underlying Pioneer funds, and the
performance of those underlying funds. The underlying funds' performance may be
lower than the performance of the asset class that they were selected to
represent. Stocks and bonds can decline due to adverse issuer, market,
regulatory, or economic developments. These risk factors, including those
associated with currency exchange rates, also apply to investments in
international markets, all of which make international markets more volatile
and less liquid than investments in domestic markets. Some of the underlying
portfolios can invest in either high-yield securities or small/emerging growth
companies. Investments in these types of securities generally are subject to
greater volatility than either higher-grade securities or more established
companies, respectively. Before making an investment in a Portfolio, you should
consider all the risks associated with it.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for each Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all Portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
10
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
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SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
MUTUAL FUNDS - 100.0%
NON-PIONEER FUNDS - 17.1%
265,149 AIM Trimark Small Companies Fund
Institutional Class $ 2,296,186
144,419 AIM Global Real Estate Fund Institutional
Class 1,057,150
402,819 AIM Global Aggressive Growth Fund
Institutional Class 4,358,507
189,419 AIM International Growth Fund
Institutional Class 3,557,296
229,788 BlackRock Fundamental Growth Fund
Institutional Class 3,359,494
310,246 BlackRock International Index Fund
Institutional Class 2,714,654
88,444 BlackRock Value Opportunities Fund
Institutional Class 1,050,715
500,199 Oppenheimer Commodity Strategy Total
Return Fund Class Y 1,555,619
14,364 Oppenheimer Main Street Small-Cap Fund
Class Y 182,855
------------
TOTAL INVESTMENTS IN NON-
PIONEER FUNDS
(Cost $33,362,554) $ 20,132,476
------------
PIONEER FUNDS - 82.9%
1,891,243 Pioneer Bond Fund Class Y $ 15,413,628
338,779 Pioneer Cullen Value Fund Class Y 4,807,276
159,722 Pioneer Emerging Markets Fund Class Y 2,621,042
60,975 Pioneer Europe Select Equity Fund Class Y 1,098,765
339,687 Pioneer Floating Rate Fund Class Y 1,718,818
324,195 Pioneer Fund Class Y 9,472,992
903,639 Pioneer Global High Yield Fund Class Y 5,882,690
179,636 Pioneer Growth Opportunities Fund
Class Y 2,920,885
543,259 Pioneer High Yield Fund Class Y 3,292,147
557,209 Pioneer Independence Fund Class Y 3,828,023
222,481 Pioneer International Equity Fund Class Y 2,907,823
184,302 Pioneer Mid-Cap Growth Fund Class Y 1,618,170
270,015 Pioneer Mid-Cap Value Fund Class Y 4,098,825
286,705 Pioneer Oak Ridge Large Cap Growth Fund
Class Y 2,436,989
176,829 Pioneer Real Estate Shares Fund Class Y 2,295,238
1,596,300 Pioneer Research Fund Class Y 10,344,021
Shares Value
PIONEER FUNDS - (continued)
1,657,304 Pioneer Short Term Income Fund Class Y $ 14,750,002
186,396 Pioneer Small Cap Value Fund Class Y 2,816,441
298,224 Pioneer Strategic Income Fund Class Y 2,525,956
274,387 Pioneer Value Fund Class Y 2,431,066
------------
TOTAL INVESTMENTS IN
PIONEER FUNDS
(Cost $139,769,617) $ 97,280,797
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $173,132,171)(a) $117,413,273
------------
OTHER ASSETS AND
LIABILITIES - (0.0%) $ (33,736)
------------
TOTAL NET ASSETS - 100.0% $117,379,537
============
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal tax purposes of $174,641,496 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ --
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (57,228,223)
------------
Net unrealized loss $(57,228,223)
============
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $71,909,584 and $61,972,777,
respectively.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Fund's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------
Level 1 -- Quoted Prices $117,413,273
Level 2 -- Other Significant Observable Inputs --
Level 3 -- Significant Unobservable Inputs --
------------
Total $117,413,273
============
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
MUTUAL FUNDS - 100.8%
NON-PIONEER FUNDS - 19.5%
632,714 AIM Trimark Small Companies Fund
Institutional Class $ 5,479,304
353,417 AIM Global Real Estate Fund Institutional
Class 2,587,009
785,105 AIM Global Aggressive Growth Fund
Institutional Class 8,494,837
286,080 AIM International Growth Fund
Institutional Class 5,372,589
482,972 BlackRock Fundamental Growth Fund
Institutional Class 7,061,054
286,665 BlackRock International Index Fund
Institutional Class 2,508,319
141,820 BlackRock Value Opportunities Fund
Institutional Class 1,684,820
1,155,653 Oppenheimer Commodity Strategy Total
Return Fund Class Y 3,594,081
------------
TOTAL INVESTMENTS IN NON-
PIONEER FUNDS
(Cost $60,712,443) $ 36,782,013
------------
PIONEER FUNDS - 81.3%
2,208,880 Pioneer Bond Fund Class Y $ 18,002,369
684,585 Pioneer Cullen Value Fund Class Y 9,714,261
461,625 Pioneer Emerging Markets Fund Class Y 7,575,263
202,435 Pioneer Equity Income Fund Class Y 4,062,872
137,100 Pioneer Europe Select Equity Fund Class Y 2,470,543
512,086 Pioneer Fund Class Y 14,963,161
834987 Pioneer Global High Yield Fund Class Y 5,435,768
16,374 Pioneer Government Income Fund Class Y 160,796
457,660 Pioneer Growth Opportunities Fund
Class Y 7,441,548
559,707 Pioneer High Yield Fund Class Y 3,391,825
1,030,502 Pioneer Independence Fund Class Y 7,079,547
564,708 Pioneer International Equity Fund Class Y 7,380,733
418,237 Pioneer Mid-Cap Growth Fund Class Y 3,672,125
610,396 Pioneer Mid-Cap Value Fund Class Y 9,265,809
486,751 Pioneer Oak Ridge Large Cap Growth Fund
Class Y 4,137,383
358,387 Pioneer Real Estate Shares Fund Class Y 4,651,862
2,467,248 Pioneer Research Fund Class Y 15,987,764
1,572,547 Pioneer Short Term Income Fund Class Y 13,995,665
Shares Value
PIONEER FUNDS - (continued)
496,071 Pioneer Small Cap Value Fund Class Y $ 7,495,634
222,708 Pioneer Strategic Income Fund Class Y 1,886,339
475,427 Pioneer Value Fund Class Y 4,212,287
------------
TOTAL INVESTMENTS IN
PIONEER FUNDS
(Cost $232,245,497) $152,983,554
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.8%
(Cost $292,957,940)(a) $189,765,567
------------
OTHER ASSETS AND
LIABILITIES - (0.8%) $ (1,497,237)
------------
TOTAL NET ASSETS - 100.0% $188,268,330
============
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal tax purposes of $294,894,083 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ 9,420
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (105,137,936)
-------------
Net unrealized loss $(105,128,516)
==============
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $116,644,285 and $74,828,499,
respectively.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Fund's assets:
Investments
Valuation Inputs in Securities
- -----------------------------------------------------------------
Level 1 -- Quoted Prices $189,765,567
Level 2 -- Other Significant Observable Inputs --
Level 3 -- Significant Unobservable Inputs --
------------
Total $189,765,567
============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
MUTUAL FUNDS - 100.4%
NON-PIONEER FUNDS - 21.4%
27,453 AIM Trimark Small Companies Fund
Institutional Class $ 237,739
22,022 AIM Global Real Estate Fund Institutional
Class 161,201
50,616 AIM Global Aggressive Growth Fund
Institutional Class 547,668
13,073 AIM International Growth Fund
Institutional Class 245,517
21,729 BlackRock Fundamental Growth Fund
Institutional Class 317,677
6,713 BlackRock Value Opportunities Fund
Institutional Class 79,753
39,120 Oppenheimer Commodity Strategy Total
Return Fund Class Y 121,662
-----------
TOTAL INVESTMENTS IN NON-
PIONEER FUNDS
(Cost $2,826,731) $ 1,711,217
-----------
PIONEER FUNDS - 79.0%
58,269 Pioneer Bond Fund Class Y $ 474,892
28,209 Pioneer Cullen Value Fund Class Y 400,282
25,279 Pioneer Emerging Markets Fund Class Y 414,830
8,067 Pioneer Equity Income Fund Class Y 161,900
13,602 Pioneer Europe Select Equity Fund Class Y 245,106
24,387 Pioneer Fund Class Y 712,596
11,185 Pioneer Global High Yield Fund Class Y 72,816
30,646 Pioneer Growth Opportunities Fund
Class Y 498,308
59,242 Pioneer Independence Fund Class Y 406,992
37,511 Pioneer International Equity Fund Class Y 490,269
18,413 Pioneer Mid-Cap Growth Fund Class Y 161,662
35,140 Pioneer Mid-Cap Value Fund Class Y 533,422
18,511 Pioneer Oak Ridge Large Cap Growth Fund
Class Y 157,340
19,266 Pioneer Real Estate Shares Fund Class Y 250,076
124,370 Pioneer Research Fund Class Y 805,921
24,328 Pioneer Small Cap Value Fund Class Y 367,599
Shares Value
PIONEER FUNDS - (continued)
18,162 Pioneer Value Fund Class Y $ 160,917
-----------
TOTAL INVESTMENTS IN
PIONEER FUNDS
(Cost $9,645,865) $6,314,928
-----------
TOTAL INVESTMENTS IN
SECURITIES - 100.4%
(Cost $12,472,596)(a) $8,026,145
-----------
OTHER ASSETS AND
LIABILITIES - (0.4%) $ (29,950)
===========
TOTAL NET ASSETS - 100.0% $7,996,195
===========
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal tax purposes of $12,859,125 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ --
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (4,832,980)
-----------
Net unrealized loss $(4,832,980)
===========
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $5,374,809 and $4,622,062,
respectively.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Fund's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------
Level 1 -- Quoted Prices $8,026,145
Level 2 -- Other Significant Observable Inputs --
Level 3 -- Significant Unobservable Inputs --
----------
Total $8,026,145
==========
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
12/15/06 (a)
Year Ended Year Ended to
Class I 12/31/08 12/31/07 12/31/06
Moderate Allocation VCT Portfolio
Net asset value, beginning of period $ 12.04 $ 11.62 $ 11.63
-------- ------- --------
Increase (decrease) from investment operations:
Net investment income (b) $ 0.34 $ 0.15 $ 0.05
Net realized and unrealized gain (loss) on investments (3.78) 0.54 (0.06)
-------- ------- ---------
Net increase (decrease) from investment operations $ (3.44) $ 0.69 $ (0.01)
-------- ------- ---------
Distributions to shareowners:
Net investment income $ (0.33) $ (0.12) $ --
Net realized gain (0.66) (0.15) --
-------- -------- ---------
Total distributions to shareowners $ (0.99) $ (0.27) $ --
-------- -------- ---------
Net increase (decrease) in net asset value $ (4.43) $ 0.42 $ (0.01)
-------- -------- ---------
Net asset value, end of period $ 7.61 $ 12.04 $ 11.62
======== ======== =========
Total return* (30.81)% 5.95% (0.09)%(c)
Ratio of net expenses to average net assets+ 0.15% 0.14% 0.90%**
Ratio of net investment income to average net assets+ 3.35% 1.23% 9.80%**
Portfolio turnover rate 40% 12% 1%(c)
Net assets, end of period (in thousands) $ 12,105 $ 20,582 $ 25,009
Ratios with no waivers of management fees and assumption of expenses by PIM and no
reduction for fees paid indirectly:
Net expenses 0.31% 0.27% 0.90%**
Net investment income 3.19% 1.10% 9.80%**
(a) Commencement of operations.
(b) Calculated using average shares outstanding for the period.
(c) Not Annualized.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ In addition to the expenses which the Fund bears directly, the Fund
indirectly bears pro rata shares of the expenses of the funds in which the
Fund invests. Because each of the underlying funds bears its own varying
expense levels and because the Fund may own differing proportions of each
fund at different times, the amount of expenses incurred indirectly by the
Fund will vary from time to time.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges and sales charges.
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
3/18/05 (a)
Year Ended Year Ended Year Ended to
Class II 12/31/08 12/31/07 12/31/06 12/31/05
Moderate Allocation VCT Portfolio
Net asset value, beginning of period $ 12.01 $ 11.61 $ 10.63 $ 10.00
-------- -------- -------- -------
Increase (decrease) from investment operations:
Net investment income (b) $ 0.31 $ 0.31 $ 0.24 $ 0.15
Net realized and unrealized gain (loss) on investments (3.77) 0.36 0.87 0.48
-------- -------- -------- -------
Net increase (decrease) from investment operations $ (3.46) $ 0.67 $ 1.11 $ 0.63
-------- -------- -------- -------
Distributions to shareowners:
Net investment income $ (0.30) $ (0.12) $ (0.04) $ --
Net realized gain (0.66) (0.15) (0.09) --
-------- -------- -------- --------
Total distributions to shareowners $ (0.96) $ (0.27) $ (0.13) $ --
-------- -------- -------- --------
Net increase (decrease) in net asset value $ (4.42) $ 0.40 $ 0.98 $ 0.63
-------- -------- -------- --------
Net asset value, end of period $ 7.59 $ 12.01 $ 11.61 $ 10.63
======== ======== ======== ========
Total return* (30.99)% 5.77% 10.62% 6.30%(c)
Ratio of net expenses to average net assets+ 0.39% 0.39% 0.46% 0.74%**
Ratio of net investment income to average net assets+ 3.10% 2.53% 2.24% 1.73%**
Portfolio turnover rate 40% 12% 1% 27%(c)
Net assets, end of period (in thousands) $105,275 $149,973 $ 97,980 $ 20,067
Ratios with no waivers of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.55% 0.52% 0.60% 1.42%**
Net investment income 2.94% 2.40% 2.10% 1.05%**
(a) Commencement of operations.
(b) Calculated using average shares outstanding for the period.
(c) Not Annualized.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ In addition to the expenses which the Fund bears directly, the Fund
indirectly bears pro rata shares of the expenses of the funds in which the
Fund invests. Because each of the underlying funds bears its own varying
expense levels and because the Fund may own differing proportions of each
fund at different times, the amount of expenses incurred indirectly by the
Fund will vary from time to time.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges and sales charges.
The accompanying notes are an integral part of these financial statements. 15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
3/18/05 (a)
Year Ended Year Ended Year Ended to
Class II 12/31/08 12/31/07 12/31/06 12/31/05
Growth Allocation VCT Portfolio
Net asset value, beginning of period $ 12.41 $ 12.07 $ 10.78 $ 10.00
-------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (b) $ 0.23 $ 0.21 $ 0.22 $ 0.11
Net realized and unrealized gain (loss) on investments (4.27) 0.49 1.14 0.67
-------- -------- ------- --------
Net increase (decrease) from investment operations $ (4.04) $ 0.70 $ 1.36 $ 0.78
-------- -------- -------- --------
Distributions to shareowners:
Net investment income $ (0.24) $ (0.13) $ (0.02) $ --
Net realized gain (0.75) (0.23) (0.05) --
-------- -------- -------- --------
Total distributions to shareowners $ (0.99) $ (0.36) $ (0.07) $ --
-------- -------- -------- --------
Net increase (decrease) in net asset value $ (5.03) $ 0.34 $ 1.29 $ 0.78
-------- -------- -------- --------
Net asset value, end of period $ 7.38 $ 12.41 $ 12.07 $ 10.78
======== ======== ======== ========
Total return* (35.00)% 5.74% 12.67% 7.80%(c)
Ratio of net expenses to average net assets+ 0.38% 0.38% 0.43% 0.74%**
Ratio of net investment income to average net assets+ 2.31% 1.68% 2.00% 1.34%**
Portfolio turnover rate 32% 7% 0% 20%(c)
Net assets, end of period (in thousands) $188,268 $254,713 $148,784 $13,245
Ratios with no waivers of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.53% 0.48% 0.53% 1.74%**
Net investment income 2.16% 1.58% 1.90% 0.34%**
(a) Commencement of operations.
(b) Calculated using average shares outstanding for the period.
(c) Not Annualized.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ In addition to the expenses which the Fund bears directly, the Fund
indirectly bears pro rata shares of the expenses of the funds in which the
Fund invests. Because each of the underlying funds bears its own varying
expense levels and because the Fund may own differing proportions of each
fund at different times, the amount of expenses incurred indirectly by the
Fund will vary from time to time.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges and sales charges.
16 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
3/18/05 (a)
Year Ended Year Ended Year Ended to
Class II 12/31/08 12/31/07 12/31/06 12/31/05
Aggressive Allocation VCT Portfolio
Net asset value, beginning of period $ 12.54 $ 12.42 $ 10.98 $ 10.00
-------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (b) $ 0.12 $ 0.08 $ 0.09 $ 0.08
Net realized and unrealized gain (loss) on investments (4.66) 0.58 1.48 0.90
-------- -------- -------- --------
Net increase (decrease) from investment operations $ (4.54) $ 0.66 $ 1.57 $ 0.98
-------- -------- -------- --------
Distributions to shareowners:
Net investment income $ (0.17) $ (0.16) $ (0.03) $ --
Net realized gain (1.07) (0.38) ( 0.10) --
-------- -------- -------- --------
Total distributions to shareowners $ (1.24) $ (0.54) $ (0.13) $ --
-------- -------- -------- --------
Net increase (decrease) in net asset value $ (5.78) $ 0.12 $ 1.44 $ 0.98
-------- -------- -------- --------
Net asset value, end of period $ 6.76 $ 12.54 $ 12.42 $ 10.98
======== ======== ======== ========
Total return* (39.63)% 5.19% 14.44% 9.80%(c)
Ratio of net expenses to average net assets+ 0.55% 0.74% 0.74% 0.74%**
Ratio of net investment income to average net assets+ 1.19% 0.61% 0.79% 0.90%**
Portfolio turnover rate 43% 18% 7% 17%(c)
Net assets, end of period (in thousands) $ 7,996 $ 12,631 $ 10,672 $ 3,077
Ratios with no waivers of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.20% 0.98% 1.40% 5.94%**
Net investment income (loss) 0.55% 0.37% 0.13% (4.30)%**
(a) Commencement of operations.
(b) Calculated using average shares outstanding for the period.
(c) Not Annualized.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ In addition to the expenses which the Fund bears directly, the Fund
indirectly bears pro rata shares of the expenses of the funds in which the
Fund invests. Because each of the underlying funds bears its own varying
expense levels and because the Fund may own differing proportions of each
fund at different times, the amount of expenses incurred indirectly by the
Fund will vary from time to time.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges and sales charges.
The accompanying notes are an integral part of these financial statements. 17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
Moderate Growth Aggressive
Allocation Allocation Allocation
VCT Portfolio VCT Portfolio VCT Portfolio
ASSETS:
Investments in securities of affiliated issuers, at value (at cost
$139,769,617, $232,245,497 and $9,645,865, respectively) $ 97,280,797 $ 152,983,554 $ 6,314,928
Investments in securities of unaffiliated issuers, at value (at cost
$33,362,554, $60,712,443 and $2,826,731, respectively) 20,132,476 36,782,013 1,711,217
------------- -------------- ------------
Total investments in securities, at value
(at cost $173,132,171, $292,957,940 and $12,472,596
respectively) $ 117,413,273 $ 189,765,567 $ 8,026,145
Cash 118,006 654,370 16,144
Receivables for:
Investment Funds sold 40,638 528,762 --
Due from Pioneer Investment Management, Inc. 20,546 53,038 9,813
------------- -------------- ------------
Total assets $ 117,592,463 $ 191,001,737 $ 8,052,102
------------- -------------- ------------
LIABILITIES:
Payables for:
Investment Funds purchased $ 31,716 $ 783,539 $ --
Capital stock redeemed 48,032 1,767,249 570
Due to affiliates 43,100 73,057 3,226
Accrued expenses and other liabilities 90,078 109,562 52,111
------------- -------------- ------------
Total liabilities $ 212,926 $ 2,733,407 $ 55,907
------------- -------------- ------------
NET ASSETS:
Paid-in capital $ 176,125,629 $ 296,073,657 $ 13,295,302
Undistributed net investment income 4,795,959 5,439,179 126,630
Accumulated net realized loss on investments (7,823,153) (10,052,133) (979,286)
Net unrealized loss on investments (55,718,898) (103,192,373) (4,446,451)
------------- -------------- ------------
Total net assets $ 117,379,537 $ 188,268,330 $ 7,996,195
============= ============== ============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Net Assets of Class I Shares $ 12,104,615 $ -- $ --
Net Assets of Class II Shares $ 105,274,922 $ 188,268,330 $ 7,996,195
------------- -------------- ------------
Class I Shares outstanding 1,590,338 -- --
Class II Shares outstanding 13,862,441 25,514,555 1,183,554
------------- -------------- ------------
Net Asset Value -- Class I Shares $ 7.61 $ -- $ --
Net Asset Value -- Class II Shares $ 7.59 $ 7.38 $ 6.76
18 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
Moderate Growth Aggressive
Allocation Allocation Allocation
VCT Portfolio VCT Portfolio VCT Portfolio
INVESTMENT INCOME:
Dividend income from securities of affiliated issuers $ 4,832,334 $ 5,501,612 $ 148,427
Dividend income from securities of unaffiliated issuers 473,227 805,758 36,510
Interest 20,786 5,893 542
------------- -------------- ------------
Total investment income $ 5,326,347 $ 6,313,263 $ 185,479
------------- -------------- ------------
EXPENSES:
Management fees $ 208,344 $ 321,847 $ 14,635
Transfer agent fees
Class I 1,501 1,501 1,501
Class II 1,890 -- --
Distribution fees (Class II) 339,111 587,206 26,591
Administrative fees 38,134 58,726 2,660
Custodian fees 99,876 139,691 18,491
Professional fees 54,188 64,701 49,065
Printing fees 15,450 17,233 5,402
Fees and expenses of nonaffiliated trustees 6,772 6,772 6,772
Miscellaneous 30,992 44,556 2,557
------------- -------------- ------------
Total expenses $ 796,258 $ 1,242,233 $ 127,674
------------- -------------- ------------
Less management fees waived and expenses reimbursed
by Pioneer Investment Management, Inc. $ (242,552) $ (349,680) $ (69,174)
------------- -------------- ------------
Net expenses $ 553,706 $ 892,553 $ 58,500
------------- -------------- ------------
Net investment income $ 4,772,641 $ 5,420,710 $ 126,979
------------- -------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments, affiliated issuers $ (8,308,492) $ (11,951,400) $ (1,010,000)
Net realized loss on investments, unaffiliated issuers (554,122) (98,648) (63,074)
Realized gain distributions from investment company shares,
affiliated issuers 795,455 1,346,690 65,227
Realized gain distributions from investment company shares,
unaffiliated issuers 415,862 835,185 52,326
Change in net unrealized loss on investments, affiliated issuers (38,468,061) (70,555,156) (3,209,009)
Change in net unrealized loss on investments, unaffiliated issuers (13,230,079) (23,930,430) (1,115,514)
------------- -------------- ------------
Net loss on investments $ (59,349,437) $ (104,353,759) $ (5,280,044)
============= ============== ============
Net decrease in net assets resulting from operations $ (54,576,796) $ (98,933,049) $ (5,153,065)
============= ============== ============
The accompanying notes are an integral part of these financial statements. 19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Moderate Allocation
VCT Portfolio
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 4,772,641 $ 3,517,857
Net realized gain (loss) on investments (7,651,297) 10,490,940
Change in net unrealized loss on investments (51,698,140) (6,353,442)
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (54,576,796) $ 7,655,355
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
From net investment income
Class I ($0.33 and $0.12 per share, respectively) $ (530,455) $ (234,522)
Class II ($0.30 and $0.12 per share, respectively) (3,934,625) (1,284,460)
From net capital gains
Class I ($0.66 and $0.15 per share, respectively) (1,051,637) (285,854)
Class II ($0.66 and $0.15 per share, respectively) (8,564,515) (1,569,430)
------------- -------------
Total distributions to shareowners $ (14,081,232) $ (3,374,266)
------------- -------------
FROM PORTFOLIO TRANSACTIONS:
Net proceeds from sale of shares $ 23,873,439 $ 54,497,618
Reinvestment of distributions 14,081,231 3,374,266
Cost of shares repurchased (22,472,173) (14,587,399)
------------- -------------
Net increase in net assets resulting from Portfolio share transactions $ 15,482,497 $ 43,284,485
------------- -------------
Net increase (decrease) in net assets $ (53,175,531) $ 47,565,574
NET ASSETS:
Beginning of year 170,555,068 122,989,494
------------- -------------
End of year $ 117,379,537 $ 170,555,068
============= =============
Undistributed net investment income $ 4,795,959 $ 4,464,722
============= =============
20 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
Growth Allocation Aggressive Allocation
VCT Portfolio VCT Portfolio
Year Ended Year Ended Year Ended Year Ended
12/31/08 12/31/07 12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 5,420,710 $ 3,586,979 $ 126,979 $ 75,033
Net realized gain (loss) on investments (9,868,173) 18,316,123 (955,521) 1,173,612
Change in net unrealized loss on investments (94,485,586) (12,245,188) (4,324,523) (688,672)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations $ (98,933,049) $ 9,657,914 $ (5,153,065) $ 559,973
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
From net investment income ($0.24, $0.13, $0.17
and $0.16, per share respectively) $ (5,269,408) $ (2,176,164) $ (175,370) $ (149,738)
From net capital gains ($0.75, $0.23, $1.07 and
$0.38, per share respectively) (16,756,182) (3,970,514) (1,082,602) (366,524)
------------- ------------- ------------ ------------
Total distributions to shareowners $ (22,025,590) $ (6,146,678) $ (1,257,972) $ (516,262)
------------- ------------- ------------ ------------
FROM PORTFOLIO TRANSACTIONS:
Net proceeds from sale of shares $ 48,070,087 $ 102,753,113 $ 2,715,336 $ 2,564,241
Reinvestment of distributions 22,025,590 6,146,678 1,257,972 516,262
Cost of shares repurchased (15,582,121) (6,481,769) (2,196,881) (1,165,109)
------------- ------------- ------------ ------------
Net increase in net assets resulting from Portfolio
share transactions $ 54,513,556 $ 102,418,022 $ 1,776,427 $ 1,915,394
------------- ------------- ------------ ------------
Net increase (decrease) in net assets $ (66,445,083) $ 105,929,258 $ (4,634,610) $ 1,959,105
NET ASSETS:
Beginning of year 254,713,413 148,784,155 12,630,805 10,671,700
------------- ------------- ------------ ------------
End of year $ 188,268,330 $ 254,713,413 $ 7,996,195 $ 12,630,805
============= ============= ============ ============
Undistributed net investment income $ 5,439,179 $ 5,268,073 $ 126,630 $ 175,277
============= ============= ============ ============
The accompanying notes are an integral part of these financial statements. 21
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
Moderate Allocation
VCT Portfolio
Year Ended Year Ended
December 31, 2008 December 31, 2007
Shares Amount Shares Amount
Class I
Shares sold 117,745 $ 1,272,049 36,513 $ 438,633
Reinvestment of distributions 151,396 1,582,091 42,935 520,376
Less shares repurchased (388,432) (3,927,917) (522,563) (6,302,382)
-------- ------------- -------- ------------
Net decrease (119,291) $ (1,073,777) (443,115) $ (5,343,373)
======== ============= ======== ============
Class II
Shares sold 2,140,103 $ 22,601,390 4,506,168 $ 54,058,985
Reinvestment of distributions 1,197,236 12,499,140 235,859 2,853,890
Less shares repurchased (1,967,158) (18,544,256) (687,314) (8,285,017)
---------- ------------- --------- ------------
Net increase 1,370,181 $ 16,556,274 4,054,713 $ 48,627,858
========== ============= ========= ============
Growth Allocation
VCT Portfolio
Year Ended Year Ended
December 31, 2008 December 31, 2007
Shares Amount Shares Amount
Class II
Shares sold 4,564,563 $ 48,070,087 8,228,058 $102,753,113
Reinvestment of distributions 2,070,074 22,025,590 486,673 6,146,678
Less shares repurchased (1,643,183) (15,582,121) (523,460) (6,481,769)
---------- ------------- --------- ------------
Net increase 4,991,454 $ 54,513,556 8,191,271 $102,418,022
========== ============= ========= ============
Aggressive Allocation
VCT Portfolio
Year Ended Year Ended
December 31, 2008 December 31, 2007
Shares Amount Shares Amount
Class II
Shares sold 300,833 $ 2,715,336 198,551 $ 2,564,241
Reinvestment of distributions 121,897 1,257,972 39,927 516,262
Less shares repurchased (246,096) (2,196,881) (91,108) (1,165,109)
-------- ------------ ------- ------------
Net increase 176,634 $ 1,776,427 147,370 $ 1,915,394
======== ============ ======= ============
22 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Ibbotson Moderate Allocation VCT Portfolio, Pioneer Ibbotson Growth
Allocation VCT Portfolio and Pioneer Ibbotson Aggressive Allocation VCT
Portfolio (the Portfolios) are three of 19 portfolios of the Pioneer Variable
Contracts Trust, a Delaware statutory trust registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
Each of these Portfolios is a "fund of funds" which means that it seeks to
achieve its investment objective by investing in other funds (underlying funds)
rather than direct investment in securities. These Portfolios indirectly pay a
portion of the expenses incurred by the underlying funds. Consequently, an
investment in these Portfolios entails more direct and indirect expenses than
direct investment in the underlying funds. The investment objective of the
Moderate Portfolio is long-term capital growth and current income. The Growth
Portfolio is long-term capital growth and current income. The Aggressive
Portfolio seeks long-term capital growth.
The Moderate Allocation Portfolio offers two classes of shares designated as
Class I and Class II shares. The Growth Allocation and Aggressive Portfolios
offer one class of shares designated as Class II shares. The Portfolios
commenced operations on March 18, 2005. Each class of shares represents an
interest in the same schedule of investments of each Portfolio and has
identical rights (based on relative net asset values) to assets and liquidation
proceeds. Share classes can bear different class-specific fees and expenses
such as transfer agent and distributions fees. Differences in class-specific
fees and expenses will result in differences in net investment income and,
therefore, the payment of different dividends by each class. The Amended and
Restated Declaration of Trust of the Portfolio gives the Board the flexibility
to specify either per share voting or dollar-weighted voting when submitting
matters for shareholder approval. Under per share voting, each share of a class
of the Portfolio is entitled to one vote. Under dollar-weighted voting, a
shareholder's voting power is determined not by the number of shares owned, but
by the dollar value of the shares on the record date. Share classes have
exclusive voting rights with respect to matters affecting only that class,
including with respect to the distribution plan for that class. There is no
distribution plan for Class I shares.
Portfolio shares may be purchased only by insurance companies for the purpose
of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
Some of the underlying funds can invest in either high-yield securities or
small/emerging growth companies. Investments in these types of securities
generally are subject to greater volatility than either higher-grade securities
or more-established companies, respectively. The Portfolios' prospectuses
contain unaudited information regarding the Portfolio's principal risks. Please
refer to those documents when considering the Portfolio's risks.
The financial statements have been prepared in accordance with U.S. generally
accepted accounting principles that require the management of the Portfolios
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
income, expenses, gains and losses during the reporting year. Actual results
could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements, which are
in conformity with those generally accepted in the investment company industry.
A. Security Valuation
Security transactions are recorded as of the trade date. The net asset
value is computed once daily, on each day the New York Stock Exchange
(NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, holdings of mutual fund shares are valued at
their net asset value. Dividend income and capital gain distribution of
funds are recorded on the ex-dividend date. Interest income is recorded on
the accrual basis. Temporary cash investments are valued at cost which
approximates market value.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and Federal income tax purposes.
B. Federal Income Taxes
It is the Portfolios' policy to comply with the requirements of the
Internal Revenue Service Code applicable to regulated investment companies
and to distribute all taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no Federal income tax provisions are
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amount and characterization of distributions to shareowners for
financial reporting purposes is determined in accordance with federal
income tax rules. Therefore, the source of the Portfolios' distributions
may be shown in the accompanying financial statements as either from or in
excess of net investment income or net realized gain on investment
transactions, or from paid-in capital, depending on the type of book/tax
differences that may exist.
23
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
The Pioneer Ibbotson Moderate Allocation VCT Portfolio, Pioneer Ibbotson
Growth Allocation VCT Portfolio, and Pioneer Ibbotson Aggressive Allocation
VCT Portfolio have net capital loss carryforwards of $6,313,829, $8,107,263,
and $592,407 respectively, which will expire in 2016 if not utilized.
At December 31, 2008, the Portfolios made reclassifications as described below
to reflect permanent book/tax differences. These reclassifications have no
impact on the net asset values of the respective Portfolios and are designed
to present the Portfolios' capital accounts on a tax basis.
- -------------------------------------------------------------------------------
Accumulated
Undistributed net realized
Net Investment gain (loss) on
Portfolio Income (Loss) investments Paid-in capital
- -------------------------------------------------------------------------------------------
Moderate Allocation Portfolio $23,676 $ (23,676) $--
Growth Allocation Portfolio 19,804 (19,804) --
Aggressive Allocation Portfolio (256) 256 --
The tax character of distributions paid during the years ended December
31, 2008 and 2007 was as follows:
- -------------------------------------------------------------------------------
Moderate Portfolio 2008 2007
- ----------------------------------------------------------
Distributions paid from:
Ordinary Income $ 4,787,900 $1,521,459
Long-term capital gain 9,293,332 1,852,807
----------- ----------
Total distributions $14,081,232 $3,374,266
=========== ==========
- -------------------------------------------------------------------------------
Growth Portfolio 2008 2007
- ----------------------------------------------------------
Distributions paid from:
Ordinary Income $ 5,352,067 $2,179,588
Long-term capital gain 16,673,523 3,967,090
----------- ----------
Total distributions $22,025,590 $6,146,678
=========== ==========
- -------------------------------------------------------------------------------
Aggressive Portfolio 2008 2007
- ----------------------------------------------------------
Distributions paid from:
Ordinary Income $ 191,439 $149,738
Long-term capital gain 1,066,533 366,524
---------- --------
Total distributions $1,257,972 $516,262
========== ========
The components of distributable earnings on a federal income tax basis at
December 31, 2008 were as follows:
- -------------------------------------------------------------------------------
Undistributed Capital Net Unrealized
Ordinary Loss Appreciation
Portfolio Income Carryforward (Depreciation)
- --------------------------------------------------------------------------------------------
Moderate Allocation Portfolio $4,795,959 $ (6,313,829) $ (57,228,223)
Growth Allocation Portfolio 5,430,452 (8,107,263) (105,128,516)
Aggressive Allocation Portfolio 126,279 (592,407) (4,832,980)
C. Portfolio Shares
The Portfolios record sales and repurchases of each of their 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting
commissions on the sale of Trust shares for the year ended December 31, 2008.
Distribution fees for Class II shares are calculated based on the average
daily net asset values attributable to Class II shares of each Portfolio.
Dividends and distributions to shareowners are recorded on the ex-dividend
date.
24
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Management Agreement
Pioneer Investment Management, Inc. (PIM), a wholly owned indirect subsidiary
of UniCredit, is the Portfolios' investment adviser, and manages the
Portfolios. Management fees are calculated daily at the following annual rates
on Pioneer managed assets:
- -------------------------------------------------------------------------------
Management Fee as a Percentage
of each Fund's Average
Fund Daily Net Assets
- ---------------------------------------------------------------------
Moderate Allocation Portfolio 0.13%
Growth Allocation Portfolio 0.13%
Aggressive Allocation Portfolio 0.13%
Management fees are calculated daily at the following annual rates on
Non-Pioneer managed assets:
- -------------------------------------------------------------------------------
Management Fee as a Percentage
of each Fund's Average
Fund Daily Net Assets
- ---------------------------------------------------------------------
Moderate Allocation Portfolio 0.17%
Growth Allocation Portfolio 0.17%
Aggressive Allocation Portfolio 0.17%
PIM has entered into a sub-advisory agreement with Ibbotson Associates
Advisors, LLC (Ibbotson). PIM, not the Portfolios, pays a portion of the fee it
receives from each Portfolio to Ibbotson as compensation for its services to
the Portfolios.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolios. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities are the following amounts in
management fees, administrative costs and certain other fees payable to PIM at
December 31, 2008:
- -------------------------------------------------------------------------------
Fund Amount
- ----------------------------------------------
Moderate Allocation Portfolio $18,463
Growth Allocation Portfolio $29,506
Aggressive Allocation Portfolio $ 1,263
From January 1, 2006 through December 31, 2008, PIM did not impose all or a
portion of its management fees and assumed other operating expenses of the
Portfolios to the extent necessary to limit Class II expenses to the following
annual expense limitations:
- -------------------------------------------------------------------------------
Fund Class II
- -----------------------------------------------
Moderate Allocation Portfolio 0.74%
Growth Allocation Portfolio 0.74%
Aggressive Allocation Portfolio 0.74%
Effective August 1, 2006, PIM further agreed to not impose all or a portion of
its management fees and assumed other operating expenses of the Portfolios to
the extent necessary to limit Class II expenses to the following annual expense
limitations:
- -------------------------------------------------------------------------------
Fund Class II
- -----------------------------------------------
Moderate Allocation Portfolio 0.39%
Growth Allocation Portfolio 0.38%
Aggressive Allocation Portfolio 0.74%
25
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Effective January 1, 2008, PIM additionally agreed to not impose all or a
portion of its management fees and assumed other operating expenses of the
Aggressive Allocation Portfolio to the extent necessary to limit Class II
expenses to 0.55%.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly
owned indirect subsidiary of UniCredit, provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in
"Due to affiliates" reflected on the Statement of Assets and Liabilities are
the following amounts in transfer agent fees payable to PIMSS at December 31,
2008:
- -------------------------------------------------------------------------------
Fund Amount
- ----------------------------------------------
Moderate Allocation Portfolio $252
Growth Allocation Portfolio $126
Aggressive Allocation Portfolio $126
4. Distribution Plans
The Portfolios have adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, each Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities are the following amounts in distribution fees payable to PFD
at December 31, 2008:
Fund Amount
- ----------------------------------------------
Moderate Allocation Portfolio $24,385
Growth Allocation Portfolio $43,425
Aggressive Allocation Portfolio $ 1,837
5. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
26
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and Shareowners of
Pioneer Ibbotson Moderate, Growth, and Aggressive Allocation VCT Portfolios:
We have audited the accompanying statements of assets and liabilities of
Pioneer Ibbotson Moderate Allocation VCT Portfolio, Pioneer Ibbotson Growth
Allocation VCT Portfolio and Pioneer Ibbotson Aggressive Allocation VCT
Portfolio, (collectively the "Portfolios"), three of the portfolios
constituting the Pioneer Variable Contracts Trust (the Trust), including the
schedules of investments, as of December 31, 2008, and the related statement of
operations for the year then ended, and the statements of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the Portfolios' custodian or by other appropriate auditing procedures of
the underlying funds. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Pioneer Ibbotson Moderate Allocation, Pioneer Ibbotson Growth Allocation and
Pioneer Ibbotson Aggressive Allocation VCT Portfolios at December 31, 2008, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 6, 2009
27
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
For the fiscal year ended December 31, 2008, certain dividends paid by the
Portfolios may be subject to a maximum tax rate of 15%, as provided for by the
Jobs and Growth Tax Relief Reconciliation Act (the Act) of 2003. The Portfolios
designated up to the maximum amount of such dividends allowable under the Act,
as taxed at a maximum rate of 15%. Complete information was computed and
reported in conjunction with your 2008 Form 1099-DIV.
The qualifying percentage of ordinary income dividends for the purposes of the
corporate dividends received deduction was:
Moderate Allocation Portfolio 18.70%
Growth Allocation Portfolio 28.95%
Aggressive Allocation Portfolio 46.48%
28
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Moderate Allocation VCT Portfolio
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED)
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained Ibbotson Associates Advisors, LLC to serve as the
sub-adviser to the Portfolio pursuant to a sub-advisory agreement between PIM
and the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the third
quintile of its Morningstar category for the one and three year periods ended
June 30, 2008. (In all quintile rankings referred to throughout this
disclosure, first quintile is most favorable to the Portfolio's shareowners.
Thus, highest relative performance would be first quintile and lowest relative
expenses would also be first quintile.) The Trustees concluded that the
investment performance of the Portfolio was satisfactory.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the second quintile relative to the
management fees paid by other funds in its peer group Morningstar category for
the comparable period. The Trustees also considered that the Portfolio's
expense ratio for the twelve months ended June 30, 2008 was in the third
quintile relative to its Strategic Insight peer group. The Trustees noted that
PIM agreed that the contractual expense limitation agreement would be in effect
for the Portfolio until at least December 31, 2009.
29
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Moderate Allocation VCT Portfolio
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
other clients with similar investment strategies as the Portfolio. The Trustees
noted that the fee rates for those clients generally were in line with the
sub-advisory fees paid to the sub-adviser with respect to the Portfolio.
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into account the
contractual expense limitation agreed to by PIM with respect to the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees considered that, although the
Portfolio pays a management fee at a fixed rate as a percentage of the
Portfolio's net assets, without any breakpoints, PIM is subsidizing the
Portfolio because it has not reached adequate scale. The Trustees concluded
that, at current and reasonably foreseeable asset levels, breakpoints in the
management fee currently were not necessary.
Other Benefits
The Trustees considered that the sub-adviser reported that it does not receive
any other benefits from its relationship with the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
30
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Growth Allocation VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained Ibbotson Associates Advisors, LLC to serve as the
sub-adviser to the Portfolio pursuant to a sub-advisory agreement between PIM
and the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the first
quintile of its Morningstar category for the one year period ended June 30,
2008 and that the Portfolio's annualized total return was in the second
quintile of its Morningstar category for the three year period ended June 30,
2008. (In all quintile rankings referred to throughout this disclosure, first
quintile is most favorable to the Portfolio's shareowners. Thus, highest
relative performance would be first quintile and lowest relative expenses would
also be first quintile.) The Trustees concluded that the investment performance
of the Portfolio was satisfactory.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the third quintile relative to the management
fees paid by other funds in its peer group Morningstar category for the
comparable period. The Trustees also considered that the Portfolio's expense
ratio for the twelve months ended June 30, 2008 was in the third quintile
relative to its Strategic Insight peer group. The Trustees noted that PIM
agreed that the contractual expense limitation agreement would be in effect for
the Portfolio until at least December 31, 2009.
31
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Growth Allocation VCT Portfolio
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
other clients with similar investment strategies as the Portfolio. The Trustees
noted that the fee rates for those clients generally were in line with the
sub-advisory fees paid to the sub-adviser with respect to the Portfolio.
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into account the
contractual expense limitation agreed to by PIM with respect to the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees considered that, although the
Portfolio pays a management fee at a fixed rate as a percentage of the
Portfolio's net assets, without any breakpoints, PIM is subsidizing the
Portfolio because it has not reached adequate scale. The Trustees concluded
that, at current and reasonably foreseeable asset levels, breakpoints in the
management fee currently were not necessary.
Other Benefits
The Trustees considered that the sub-adviser reported that it does not receive
any other benefits from its relationship with the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
32
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained Ibbotson Associates Advisors, LLC to serve as the
sub-adviser to the Portfolio pursuant to a sub-advisory agreement between PIM
and the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the second
quintile of its Morningstar category for the one and three year periods ended
June 30, 2008. (In all quintile rankings referred to throughout this
disclosure, first quintile is most favorable to the Portfolio's shareowners.
Thus, highest relative performance would be first quintile and lowest relative
expenses would also be first quintile.) The Trustees concluded that the
investment performance of the Portfolio was satisfactory.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the third quintile relative to the management
fees paid by other funds in its peer group Morningstar category for the
comparable period. The Trustees also considered that the Portfolio's expense
ratio for the twelve months ended June 30, 2008 was in the fourth quintile
relative to its Strategic Insight peer group. The Trustees noted that the
contractual expense limitation agreed to by PIM with respect to the Class II
shares of the Portfolio was lowered in 2008 and that the data included a period
in which the higher contractual expense limitation was in effect. They also
noted that PIM agreed that the contractual expense limitation agreement would
be in effect until at least December 31, 2009.
33
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Ibbotson Aggressive Allocation VCT Portfolio
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
other clients with similar investment strategies as the Portfolio. The Trustees
noted that the fee rates for those clients generally were in line with the
sub-advisory fees paid to the sub-adviser with respect to the Portfolio.
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into account the
contractual expense limitation agreed to by PIM with respect to the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees considered that, although the
Portfolio pays a management fee at a fixed rate as a percentage of the
Portfolio's net assets, without any breakpoints, PIM is subsidizing the
Portfolio because it has not reached adequate scale. The Trustees concluded
that, at current and reasonably foreseeable asset levels, breakpoints in the
management fee currently were not necessary.
Other Benefits
The Trustees considered that the sub-adviser reported that it does not receive
any other benefits from its relationship with the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
34
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are responsible for
Custodian the Trust's operations. The Trustees and officers are listed below,
Brown Brothers Harriman & Co. together with their principal occupations during the past five
years. Trustees who are interested persons of the Trust within the
Independent Registered Public Accounting Firm Brown Brothers Harriman & Co. meaning of the 1940 Act are referred
Ernst & Young LLP to as Interested Trustees. Trustees who are not interested persons
of the Trust are referred to as Independent Trustees. Each of the
Principal Underwriter Trustees serves as a trustee of each of the 76 U.S. registered
Pioneer Funds Distributor, Inc. investment portfolios for which Pioneer serves as investment adviser
(the "Pioneer Funds"). The address for all Trustees and all officers
Legal Counsel of the Trust is 60 State Street, Boston, Massachusetts 02109.
Bingham McCutchen LLP
Shareowner Services and Transfer
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- ---------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc.
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- ---------------------------------------------------------------------------------------------------------
NAME AND AGE OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* None
- --------------------------------------------------------------------
Daniel K. Kingsbury None
(50)*
- --------------------------------------------------------------------
*Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the Portfolio's investment adviser and
certain of its affiliates.
35
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- -------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
Benjamin M. Friedman Professor, Harvard University
(64)
- -------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- -------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- -------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- -------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- -------------------------------------------------------------------------------------------------------
NAME AND AGE OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- --------------------------------------------------------------------------------
36
Pioneer Ibbotson Asset Allocation Series VCT Portfolios
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President -- Legal of Pioneer; Secretary/
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- ----------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- ----------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President -- Fund Accounting, Administration and Controllership
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- ----------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President -- Fund Accounting, Administration and
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ----------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager -- Fund Accounting, Administration and
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ----------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager -- Fund Accounting, Administration and
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President --
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- ----------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- ----------------------------------------------------------------------------------------------------------
NAME AND AGE OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) None
- ---------------------------------------------------------------------
Christopher J. Kelley (44) None
- ---------------------------------------------------------------------
Mark E. Bradley (49) None
- ---------------------------------------------------------------------
Luis I. Presutti (43) None
- ---------------------------------------------------------------------
Gary Sullivan (50) None
- ---------------------------------------------------------------------
Katherine Kim Sullivan None
(35)
- ---------------------------------------------------------------------
Teri W. Anderholm (49) None
- ---------------------------------------------------------------------
37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
38
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
42
[Logo]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18685-03-0209
[Logo]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
NOTE: Effective November 9, 2007, Pioneer Growth Shares VCT Portfolio was
renamed Pioneer Independence VCT Portfolio.
Please refer to your contract prospectus to determine the applicable share class
offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Independence VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 9
Notes to Financial Statements 14
Report of Independent Registered Public
Accounting Firm 17
Trustees, Officers and Service Providers 18
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[The following data was represented as a pie chart in the printed material]
U.S. Common Stocks 89.2%
Temporary Cash Investments 9.8%
Preferred Stocks 1.0%
Sector Distribution
(As a percentage of equity holdings)
[The following data was represented as a pie chart in the printed material]
Information Technology 39.7%
Industrials 29.3%
Health Care 11.7%
Financials 8.3%
Energy 5.7%
Materials 4.2%
Consumer Staples 0.6%
Consumer Discretionary 0.5%
Five Largest Holdings
(As a percentage of equity holdings)
1. IntercontinentalExchange,
Inc. 5.09%
2. Continental Airlines, Inc.
(Class B) 5.03
3. Bristol-Myers Squibb Co. 5.02
4. United Technologies Corp. 5.00
5. Intel Corp. 4.95
The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 8.00 $ 15.69
Class II $ 7.88 $ 15.46
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.0458 $ - $ -
Class II $ 0.0036 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Independence VCT Portfolio at net asset value, compared to that of the Russell
1000 Growth Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[The following data was represented as a line graph in the printed material]
Pioneer Pioneer
Independence VCT Independence VCT
Portfolio, Portfolio, Russell 1000
Class I Class II Growth Index
------- -------- ------------
12/98 $10,000 $10,000 $10,000
12/00 9,943 9,963 10,330
12/02 5,278 5,224 5,928
12/04 7,059 6,931 8,176
12/06 7,982 7,797 9,387
12/08 4,398 4,271 6,462
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth
stocks. Index returns are calculated monthly, assume reinvestment of dividends
and, unlike Portfolio returns, do not reflect any fees, expenses or sales
charges. You cannot invest directly in the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class I Class II
- --------------------------------------------------------------------------------
10 Years -7.89% -8.16%
5 Years -7.84% -8.10%
1 Year -48.84% -49.02%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Class II shares commenced operations on May 1, 2000. Portfolio returns for Class
II shares prior to May 1, 2000 are based on the performance of Class I shares
and reflect higher Class II distribution fees.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Independence VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/08 $ 605.16 $ 603.81
Expenses Paid During Period* $ 4.76 $ 5.85
* Expenses are equal to the Portfolio's annualized expense ratio of 1.18% and
1.45%, for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect
the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Independence VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/08 $ 1,019.20 $ 1,017.85
Expenses Paid During Period* $ 5.99 $ 7.35
* Expenses are equal to the Portfolio's annualized expense ratio of 1.18% and
1.45%, for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect
the one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
Pioneer Independence VCT Portfolio's results for 2008 reflect the year's steep
market declines triggered by the spreading credit crisis. In the following
pages, portfolio manager Andrew Acheson reviews the impact of the year's events
on the Portfolio's performance and offers his outlook for upcoming quarters.
Q: What were market conditions like over the last six months of the 12-month
period ended December 31, 2008?
A: After holding their ground in the spring, stocks weakened in the summer,
then plunged in September as the credit crisis deepened and a bruising
recession took hold. The bankruptcy of Lehman Brothers and dissolution of
other prominent financial institutions triggered fears of systemic failure.
Banks, fearing that loans would not be repaid, stopped lending to
businesses, to individuals and to each other. Shaken investors pulled money
from banks and sold stocks and non-government bonds, redirecting waves of
assets into U.S. Treasury securities. The U.S. government responded to the
burgeoning crisis with unprecedented measures, including record low
interest rates and huge stimulus packages, in an effort to thaw frozen
credit markets and bail out the sinking economy. Stocks responded
favorably, staging a modest rally from their late November lows during the
last weeks of the year.
Q: How did the Portfolio perform against that background?
A: For the twelve months ended December 31, 2008, Pioneer Independence VCT
Portfolio's Class I shares had a total return of -48.84% at net asset
value, and Class II shares returned -49.02%. The Portfolio's results were
well behind the -38.44% return of the benchmark Russell 1000 Growth Index
over the same 12-month period, and the -41.68% average return of the 224
variable portfolios in Lipper's Large-Cap Growth category.
Q: Which of your decisions most affected the Portfolio's performance over the
past six months, from July 1 to December 31, 2008?
A: The Portfolio's performance shortfall compared to the Russell 1000 Growth
Index arose from sector exposures and disappointments among individual
stocks. Throughout the year, the Portfolio was generally overweight
relative to the index in financials and materials, two very weak sectors.
The overweights were the result of our stock selection process that had
identified what we felt were attractive stocks within the sectors, and not
from any decision to emphasize those market segments over others.
Q: Which stocks or sector exposures contributed the most to Portfolio returns
over the same six-month period from July to December, 2008?
A: We took advantage of weakness in airline shares when the price of oil began
to tumble during the summer. Falling energy costs aided the bottom lines at
Delta and Continental Airlines, because they had reduced capacity while the
cost of jet fuel was too high for profitable operations. Both stocks
contributed positively to the Portfolio's returns over the full 12-month
period ended December 31. In health care, Bristol-Myers Squibb, one of the
Portfolio's larger positions, held up better than the overall market,
thanks to effective cost management and an encouraging near-term earnings
outlook. Also in health care, Gilead Sciences, a biotech company that has
been gaining share in the market for HIV therapies, made a small
contribution to the Portfolio's returns. During the latter part of the
year, we purchased shares of IntercontinentalExchange on weakness.
Intercontinental contributed to the Portfolio's results, as its electronic
platforms experienced high trading volumes in commodity and financial
contracts. In the weak industrial sector, conglomerate United Technologies,
which serves both military and private customers, performed comparatively
well for the Portfolio.
A Word About Risk:
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
The Portfolio invests in REIT securities, the value of which can fall for a
variety of reasons, such as declines in rental income, fluctuating interest
rates, poor property management, environmental liabilities, uninsured damage,
increased competition, or changes in real estate tax laws. At times, the
Portfolio's investments may represent industries or industry sectors that are
interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries
and sectors.
Call 800-688-9915 or visit pioneerinvestments.com for the most recent month-end
performance results. Current performance may be lower or higher than the
performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: What were some of the 12-month period's disappointments for the Portfolio?
A: The period's worst performer for the Portfolio was long-time holding
Freeport-MacMoRan, a major copper and gold miner. Freeport had benefited
over the last few years from growing worldwide demand for copper in
particular. However, copper prices dove in 2008 as consumption stalled in a
shrinking global economy. We have retained the holding based on its
appreciation potential if slumping markets strengthen. In the financial
sector, the Portfolio realized sizeable losses when brokerage firm Bear
Stearns began its collapse, but avoided the final rout.
Suntech, which makes and installs solar panels, declined as demand slowed
amid fears that commercial customers might not find capital for costly
solar installations, possibly causing an inventory buildup and putting
pressure on prices. Brazil's Petrobras also became a victim of lower energy
prices, despite its large holdings in a major offshore oil field. Weak oil
prices also clouded the outlook for Transocean Limited, the largest
deepwater driller. Weatherford International, which provides equipment and
services to drilling companies, also suffered from lower prices and fears
of reduced activity.
Q: What is your outlook for the months ahead?
A: At the end of 2008, economic conditions around the world were worse than
most observers might have thought likely a year ago. The U.S. stood at a
critical juncture, with the new administration poised to take action on a
series of important issues, including frozen credit markets, falling home
values and rising unemployment. In our opinion, government stimulus
programs, to be effective, would have to be large and efficiently executed
without wasteful earmarks.
Significant economic risks clearly remain, and we feel the recession could
go on for some time. For that reason, further declines are possible before
any turn in investor sentiment and consumer confidence causes the outlook
to brighten. But if and when private and public efforts bring about a more
stable economy, we think the markets may rebound quite briskly from the
current deeply bearish valuations.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCKS - 1.0%
Materials - 1.0%
Diversified Metals & Mining - 1.0%
2,650 Freeport-McMoran Copper & Gold, Inc.,
6.75%, 5/1/10* $ 122,828
-----------
Total Materials $ 122,828
-----------
TOTAL PREFERRED STOCKS
(Cost $121,301) $ 122,828
-----------
COMMON STOCKS - 97.2%
Energy - 5.6%
Integrated Oil & Gas - 0.7%
1,057 Hess Corp. $ 56,697
1,600 Petrobras Brasileiro SA (A.D.R.) 32,656
-----------
$ 89,353
-----------
Oil & Gas Drilling - 2.4%
6,000 Transocean, Ltd.* $ 283,500
-----------
Oil & Gas Equipment & Services - 2.5%
2,300 National-Oilwell Varco, Inc.* $ 56,212
23,100 Weatherford International, Inc.* 249,942
-----------
$ 306,154
-----------
Total Energy $ 679,007
-----------
Materials - 3.1%
Diversified Metals & Mining - 2.5%
12,300 Freeport-McMoRan Copper & Gold, Inc.
(Class B) (b) $ 300,612
-----------
Industrial Gases - 0.6%
1,300 Praxair, Inc. $ 77,168
-----------
Total Materials $ 377,780
-----------
Capital Goods - 15.6%
Aerospace & Defense - 13.8%
24,196 Be Aerospace, Inc.* $ 186,067
9,300 Boeing Co. 396,831
1,100 General Dynamics Corp. 63,349
13,000 Honeywell International, Inc. 426,790
11,100 United Technologies Corp. 594,960
-----------
$ 1,667,997
-----------
Electrical Component &
Equipment - 1.8%
1,600 First Solar, Inc.* $ 220,736
-----------
Total Capital Goods $ 1,888,733
-----------
Transportation - 13.1%
Airlines - 13.1%
21,200 AMR Corp.* $ 226,204
33,113 Continental Airlines, Inc. (Class B)* 598,021
45,500 Delta Air Lines, Inc.*(b) 521,430
22,400 UAL Corp.*(b) 246,848
-----------
$ 1,592,503
-----------
Total Transportation $ 1,592,503
-----------
Consumer Services - 0.5%
Hotels, Resorts & Cruise Lines - 0.5%
3,400 Starwood Hotels & Resorts Worldwide, Inc. $ 60,860
-----------
Total Consumer Services $ 60,860
-----------
Food & Drug Retailing - 0.5%
Drug Retail - 0.5%
2,300 CVS/Caremark Corp. $ 66,102
-----------
Total Food & Drug Retailing $ 66,102
-----------
Health Care Equipment & Services - 0.6%
Health Care Equipment - 0.6%
9,417 Insulet Corp.*(b) $ 72,699
-----------
Total Health Care Equipment &
Services $ 72,699
-----------
Pharmaceuticals & Biotechnology - 10.9%
Biotechnology - 4.5%
8,500 Gilead Sciences, Inc.* $ 434,690
3,500 Vertex Pharmaceuticals, Inc.* 106,330
-----------
$ 541,020
-----------
Life Sciences Tools & Services - 0.9%
3,000 Advanced Magnetics, Inc.*(b) $ 107,550
-----------
Pharmaceuticals - 5.5%
25,700 Bristol-Myers Squibb Co. $ 597,525
16,800 Cardiome Pharma Corp.*(b) 76,440
-----------
$ 673,965
-----------
Total Pharmaceuticals &
Biotechnology $ 1,322,535
-----------
Diversified Financials - 8.2%
Asset Management & Custody
Banks - 1.6%
4,900 State Street Corp. $ 192,717
-----------
Investment Banking & Brokerage - 1.6%
6,400 Lazard Ltd. $ 190,336
-----------
Specialized Finance - 5.0%
7,345 IntercontinentalExchange, Inc.* $ 605,522
-----------
Total Diversified Financials $ 988,575
-----------
Software & Services - 9.2%
Data Processing & Outsourced
Services - 1.2%
1,000 MasterCard, Inc. $ 142,930
-----------
Internet Software & Services - 1.6%
15,600 Yahoo! Inc.* $ 190,320
-----------
Systems Software - 6.4%
7,800 BMC Software, Inc.* $ 209,898
3,800 McAfee, Inc.* 131,366
24,800 Oracle Corp.* 439,705
-----------
$ 780,969
-----------
Total Software & Services $ 1,114,219
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Technology Hardware & Equipment - 15.0%
Communications Equipment - 4.7%
11,020 F5 Networks, Inc.* $ 251,917
2,300 Research In Motion, Ltd.* 93,334
19,200 Riverbed Technology, Inc.*(b) 218,688
-----------
$ 563,939
-----------
Computer Hardware - 4.6%
6,500 Apple, Inc.* $ 554,775
-----------
Computer Storage & Peripherals - 5.7%
47,200 EMC Corp.* $ 494,184
14,300 Netapp, Inc.* 199,771
-----------
$ 693,955
-----------
Total Technology Hardware &
Equipment $ 1,812,669
-----------
Semiconductors - 14.9%
Semiconductor Equipment - 5.3%
43,000 Applied Materials, Inc. $ 435,590
14,383 MEMC Electronic Materials, Inc.* 205,389
-----------
$ 640,979
-----------
Semiconductors - 9.6%
20,700 Broadcom Corp.* $ 351,279
40,200 Intel Corp. 589,332
43,800 ON Semiconductor Corp.* 148,920
8,700 Taiwan Semiconductor Manufacturing
Co. (A.D.R.) 68,730
-----------
$ 1,158,261
-----------
Total Semiconductors $ 1,799,240
-----------
TOTAL COMMON STOCKS
($15,503,629) $11,774,922
-----------
Principal
Amount ($)
TEMPORARY CASH INVESTMENTS - 10.7%
Securities Lending Collateral - 10.7% (c)
Certificates of Deposit:
30,052 Abbey National Plc, 3.15%, 8/13/09 $ 30,052
30,046 Bank of Nova Scotia, 3.21%, 5/5/09 30,046
48,025 Bank of Scotland NY, 2.92%, 6/5/09 48,025
54,093 Barclays Bank, 1.5%, 5/27/09 54,093
9,555 Calyon NY, 4.62%, 1/16/09 9,555
60,103 CBA, 4.87%, 7/16/09 60,103
54,093 DNB NOR Bank ASA NY, 3.04%,
6/5/09 54,093
55,054 Intesa SanPaolo S.p.A., 1.44%,
5/22/09 55,054
3,481 NORDEA NY, 4.13%, 4/9/09 3,481
45,077 Royal Bank of Canada NY, 2.7%,
8/7/09 45,077
30,052 Royal Bank of Scotland, 3.06%,
3/5/09 30,052
Certificates of Deposit (continued):
6,008 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 $ 6,008
60,103 Societe Generale, 3.29%, 9/4/09 60,103
54,093 Svenska Bank NY, 4.61%, 7/8/09 54,093
60,103 U.S. Bank NA, 2.25%, 8/24/09 60,103
-----------
$ 599,938
-----------
Commercial Paper:
5,727 BBVA U.S., 2.83%, 3/12/09 $ 5,727
60,103 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 60,103
30,052 CME Group, Inc., 2.9%, 8/6/09 30,052
30,048 General Electric Capital Corp.,
2.86%, 3/16/09 30,048
59,021 American Honda Finance Corp.,
4.95%, 7/14/09 59,021
60,103 HSBC Bank, Inc., 2.5%, 8/14/09 60,103
30,052 IBM, 2.39%, 9/25/09 30,052
54,093 MetLife Global Funding, 3.19%,
6/12/09 54,093
54,093 New York Life Global, 2.13%, 9/4/09 54,093
51,087 Westpac Banking Corp., 2.34%,
6/1/09 51,087
-----------
$ 434,379
-----------
Tri-party Repurchase
Agreements:
132,227 Deutsche Bank, 0.25%, 1/2/09 $ 132,227
10,210 Barclays Capital Markets, 0.5%,
1/2/09 10,210
-----------
$ 142,437
-----------
Time Deposit:
60,103 BNP Paribas, 0.01%, 1/2/09 $ 60,103
-----------
Money Market Mutual Funds:
15,026 Columbia Government Reserves Fund $ 15,026
45,077 JPMorgan, U.S. Government Money
Market Fund 45,077
-----------
$ 60,103
-----------
Total Securities Lending
Collateral $ 1,296,960
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $1,296,960) $ 1,296,960
-----------
TOTAL INVESTMENT IN SECURITIES - 108.9%
(Cost $16,921,890)(a) $13,194,710
-----------
OTHER ASSETS
AND LIABILITIES - (8.9)% $(1,081,612)
-----------
TOTAL NET ASSETS - 100.0% $12,113,098
===========
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
* Non-income producing security.
(A.D.R.) American Depositary Receipt.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $17,196,803 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 631,131
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (4,633,224)
------------
Net unrealized loss $ (4,002,093)
============
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
2,900 Advanced Magnetics, Inc.* $ 103,965
10,000 Cardiome Pharma Corp.* 45,500
43,100 Delta Air Lines, Inc.* 493,926
Freeport-McMoRan Copper & Gold,
6,000 Inc. (Class B) 146,640
9,270 Insulet Corp.* 71,564
15,000 Riverbed Technology, Inc.* 170,850
20,300 UAL Corp.* 223,706
----------
Total $1,256,151
==========
(c) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments) for the
year ended December 31, 2008 aggregated $30,908,331 and $34,219,689,
respectively.
Various inputs are used in determining the value of the Portfolio's investments.
These inputs are summarized in the three broad levels listed below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------------------
Level 1 - Quoted Prices $11,897,750
Level 2 - Other Significant Observable Inputs 1,296,960
Level 3 - Significant Unobservable Inputs -
-----------
Total $13,194,710
===========
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 15.69 $ 14.60 $ 13.39 $ 13.04 $ 12.22
--------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.05 $ 0.05 $ 0.03 $ 0.04 $ 0.09
Net realized and unrealized gain (loss) on investments (7.69) 1.07 1.21 0.41 0.73
--------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment operations $ (7.64) $ 1.12 $ 1.24 $ 0.45 $ 0.82
Distributions to shareholders:
Net income (0.05) (0.03) (0.03) (0.10) --
--------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ (7.69) $ 1.09 $ 1.21 $ 0.35 $ 0.82
--------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.00 $ 15.69 $ 14.60 $ 13.39 $ 13.04
========= ========== ========== ========== ==========
Total return* (48.84)% 7.69% 9.27% 3.48% 6.71%
Ratio of net expenses to average net assets+ 1.18% 1.02% 1.05% 0.96% 0.96%
Ratio of net investment income to average net assets+ 0.33% 0.25% 0.21% 0.19% 0.71%
Portfolio turnover rate 156% 82% 62% 79% 206%
Net assets, end of period (in thousands) $ 8,592 $ 19,638 $ 23,322 $ 26,986 $ 32,300
Ratios assuming no waiver of management fees and
assumption of expenses by PIM and no reduction for fees
paid indirectly:
Net expenses 1.18% 1.02% 1.05% 0.96% 0.97%
Net investment income 0.33% 0.25% 0.21% 0.19% 0.71%
* 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.
+ Ratios assuming no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 15.46 $ 14.39 $ 13.20 $ 12.87 $ 12.10
--------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.01 $ (0.00)(a) $ (0.01) $ (0.02) $ 0.06
Net realized and unrealized gain (loss) on investments (7.59) 1.07 1.20 0.43 0.71
--------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment operations $ (7.58) $ 1.07 $ 1.19 $ 0.41 $ 0.77
Distributions to shareholders:
Net income (0.00)(a) -- -- (0.08) --
--------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ (7.58) $ 1.07 $ 1.19 $ 0.33 $ 0.77
--------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.88 $ 15.46 $ 14.39 $ 13.20 $ 12.87
========= ========== ========== ========== ==========
Total return* (49.02)% 7.44% 9.02% 3.19% 6.36%
Ratio of net expenses to average net assets+ 1.45% 1.27% 1.33% 1.24% 1.25%
Ratio of net investment income (loss) to average
net assets+ 0.06% 0.00% (0.07)% (0.09)% 0.74%
Portfolio turnover rate 156% 82% 62% 79% 206%
Net assets, end of period (in thousands) $ 3,521 $ 8,244 $ 7,551 $ 7,096 $ 7,749
Ratios assuming no waiver of management fees and
assumption of expenses by PIM and no reduction for fees
paid indirectly:
Net expenses 1.45% 1.27% 1.33% 1.24% 1.26%
Net investment income (loss) 0.06% 0.00% (0.07)% (0.09)% 0.73%
(a) Amount rounds to less than one cent per share.
* 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.
+ Ratios assuming no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $1,256,151)
(cost $16,921,890) $ 13,194,710
Cash 226,131
Receivables --
Investment securities sold 113,641
Portfolio shares sold 63,534
Dividends 13,776
Other 489
-------------
Total assets $ 13,612,281
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 133,759
Portfolio shares repurchased 120
Upon return of securities loaned 1,296,960
Due to affiliates 4,357
Accrued expenses 63,987
-------------
Total liabilities $ 1,499,183
-------------
NET ASSETS:
Paid-in capital $ 55,406,411
Undistributed net investment income 48,948
Accumulated net realized loss on investments (39,615,081)
Net unrealized loss on investments (3,727,180)
-------------
Total net assets $ 12,113,098
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $8,591,977/1,073,785 shares) $ 8.00
-------------
Class II (based on $3,521,121/446,624 shares) $ 7.88
=============
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $3,362) $ 275,971
Interest 12,108
Income from securities loaned, net 11,218
------------
Total investment income $ 299,297
-------------
EXPENSES:
Management fees $ 139,034
Transfer agent fees
Class I 1,586
Class II 1,586
Distribution fees
Class II 14,670
Administrative fees 5,955
Custodian fees 35,518
Professional fees 42,618
Fees and expenses of nonaffiliated trustees 6,003
Miscellaneous 3,264
------------
Total expenses $ 250,234
-------------
Net expenses $ 250,234
-------------
Net investment income $ 49,063
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments $ (5,496,165)
Written options closed/expired 8,951 $ (5,487,214)
------------ -------------
Change in net unrealized loss on investments $ (7,087,458)
-------------
Net loss on investments $ (12,574,672)
-------------
Net decrease in net assets resulting from operations $ (12,525,609)
=============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Year
Ended Ended
12/31/08 12/31/07
------------ ------------
FROM OPERATIONS:
Net investment income $ 49,063 $ 54,097
Net realized gain (loss) on investments (5,487,214) 1,292,539
Change in net unrealized gain (loss) on investments (7,087,458) 967,806
------------ ------------
Net increase (decrease) in net assets resulting from operations $(12,525,609) $ 2,314,442
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.05 and $0.03 per share, respectively) $ (52,295) $ (47,086)
Class II ($0.00 and $0.00 per share, respectively) (1,790) -
------------ ------------
Total distributions to shareowners $ (54,085) $ (47,086)
------------ ------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 1,354,822 $ 2,152,230
Reinvestment of distributions 54,085 47,086
Cost of shares repurchased (4,598,585) (7,457,523)
------------ ------------
Net decrease in net assets resulting from Portfolio share transactions $ (3,189,678) $ (5,258,207)
------------ ------------
Net decrease in net assets $(15,769,372) $ (2,990,851)
NET ASSETS:
Beginning of year $ 27,882,470 $ 30,873,321
------------ ------------
End of year $ 12,113,098 $ 27,882,470
============ ============
Undistributed net investment income $ 48,948 $ 53,970
============ ============
'08 Shares '08 Amount '07 Shares '07 Amount
----------- ----------- ----------- -----------
Class I
Shares sold 85,433 $ 996,308 41,912 $ 656,114
Reinvestment of distributions 3,834 52,295 2,950 47,086
Less shares repurchased (266,801) (3,230,838) (390,998) (6,091,733)
----------- ----------- ----------- -----------
Net decrease (177,534) $(2,182,235) (346,136) $(5,388,533)
=========== =========== =========== ===========
Class II
Shares sold 30,265 $ 358,514 98,008 $ 1,496,116
Reinvestment of distributions 133 1,790 - -
Less shares repurchased (116,897) (1,367,747) (89,698) (1,365,790)
----------- ----------- ----------- -----------
Net increase (decrease) (86,499) $(1,007,443) 8,310 $ 130,326
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Independence VCT Portfolio, formerly Pioneer Growth Shares VCT Portfolio
(the Portfolio), is one of 19 portfolios comprising Pioneer Variable Contracts
Trust (the Trust), a Delaware statutory trust registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The investment objective of the Portfolio is appreciation of capital.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative asset
values) to assets and liquidation proceeds. Share classes can bear different
class-specific fees and expenses such as transfer agent and distributions fees.
Differences in class-specific fees and expenses will result in differences in
net investment income and, therefore, the payment of different dividends by each
class. The Amended and Restated Declaration of Trust of the Portfolio gives the
Board the flexibility to specify either per share voting or dollar-weighted
voting when submitting matters for shareholder approval. Under per share voting,
each share of a class of the Portfolio is entitled to one vote. Under
dollar-weighted voting, a shareholder's voting power is determined not by the
number of shares owned, but by the dollar value of the shares on the record
date. Share classes have exclusive voting rights with respect to matters
affecting only that class, including with respect to the distribution plan for
that class. There is no distribution plan for Class I shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting year. Actual
results could differ from those estimates.
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors. The Portfolio's prospectuses contain unaudited
information regarding the Portfolio's principal risks. Please refer to those
documents when considering the Portfolio's principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements, which
are consistent with those policies 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$37,636,332 of which the following amounts will expire between 2009 and
2016 if not utilized: $7,510,070 in 2009, $19,245,183 in 2010, $7,319,241
in 2011 and $3,561,838 in 2016.
The Portfolio has elected to defer approximately $1,703,196 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, was as follows:
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 54,085 $ 47,086
------------ ------------
Total distributions $ 54,085 $ 47,086
============ ============
Distributable Earnings:
Undistributed ordinary income $ 48,308
Capital loss carryforward (37,636,332)
Post-October loss deferred (1,703,196)
Unrealized depreciation (4,002,093)
------------
Total $(43,293,313)
============
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales and the tax basis
adjustments on partnerships.
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II shares are calculated based on the average daily net
asset values attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and the
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. Distributions paid by the Portfolio with respect to
each class of shares are calculated in the same manner and at the same
time, except that Class I and Class II shares can bear different transfer
agent and distribution fees.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Investment Management, Inc. (PIM), is responsible for determining that the
value of the collateral remains at least equal to the repurchase price.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.70% 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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $241 in management fees,
administrative costs and certain other fees payable to PIM at December 31, 2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $4,092 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $24 in distribution fees payable to PFD at December 31, 2008.
5. Commission Recapture and Expense Offset Arrangements
Effective July 15, 2005, the Portfolio has entered into commission recapture
arrangements with brokers with whom PIM places trades on behalf of the Portfolio
where they provide services to the Portfolio in addition to trade execution.
These services included payments of certain expenses on behalf of the Portfolio.
For the year ended December 31, 2008, expenses were not reduced under this
agreement. In addition, the Portfolio has entered into certain expense offset
arrangements with PIMSS resulting in a reduction in the Portfolio's total
expenses due to interest earned on cash held by PIMSS. For the year ended
December 31, 2008, the Portfolio's expenses were not reduced under such
arrangements.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Independence VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Independence VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Independence VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of the
five years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
17
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are
Custodian responsible for the Trust's operations. The Trustees and
Brown Brothers Harriman & Co. officers are listed below, together with their principal
occupations during the past five years. Trustees who are
Independent Registered Public Accounting Firm interested persons of the Trust within the meaning of the
Ernst & Young LLP 1940 Act are referred to as Interested Trustees. Trustees
who are not interested persons of the Trust are referred
Principal Underwriter to as Independent Trustees. Each of the Trustees serves
Pioneer Funds Distributor, Inc. as a trustee of each of the 76 U.S. registered investment
portfolios for which Pioneer serves as investment adviser
Legal Counsel (the "Pioneer Funds"). The address for all Trustees and
Bingham McCutchen LLP all officers of the Trust is 60 State Street, Boston,
Massachusetts 02109.
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE AND PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves Deputy Chairman and a Director None
Board, Trustee until a successor trustee is of Pioneer Global Asset
and President elected or earlier Management S.p.A. ("PGAM");
retirement or removal. Non-Executive Chairman and a
Director of Pioneer Investment
Management USA Inc.
("PIM-USA"); Chairman and a
Director of Pioneer; Chairman
and Director of Pioneer
Institutional Asset Management,
Inc. (since 2006); Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited
and affiliated funds; Director
of PIOGLOBAL Real Estate
Investment Fund (Russia) (until
June 2006); Director of Nano-C,
Inc. (since 2003); Director of
Cole Management Inc. (since
2004); Director of Fiduciary
Counseling, Inc.; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD")
(until May 2006); President of
all of the Pioneer Funds; and
Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves Director, CEO and President of None
(50)* Executive Vice until a successor trustee is Pioneer Investment Management
President elected or earlier USA Inc. (since February 2007);
retirement or removal. Director and President of
Pioneer Investment Management,
Inc. and Pioneer Institutional
Asset Management, Inc. (since
February 2007); Executive Vice
President of all of the Pioneer
Funds (since March 2007);
Director of Pioneer Global
Asset Management S.p.A. (since
April 2007); Head of New
Markets Division, Pioneer
Global Asset Management S.p.A.
(2000 - 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment
adviser and certain of its affiliates.
18
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE AND PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock (65) Trustee Trustee since 2005. Serves Executive Vice President and Director of Enterprise
until a successor trustee is Chief Financial Officer, Community Investment,
elected or earlier I-trax, Inc. (publicly traded Inc. (privately-held
retirement or removal. health care services company) affordable housing
(2004 - 2007); Partner, Federal finance company); and
City Capital Advisors (boutique Director of New York
merchant bank) (1997 to 2004 Mortgage Trust
and 2008 - present); and (publicly traded
Executive Vice President and mortgage REIT)
Chief Financial Officer,
Pedestal Inc. (internet-based
mortgage trading company) (2000
- 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves President, Bush International, Director of Marriott
until a successor trustee is LLC (international financial International, Inc.,
elected or earlier advisory firm) Director of Discover
retirement or removal. Financial Services
(credit card issuer and
electronic payment
services); Director of
Briggs & Stratton Co.
(engine manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation (national
security, defense, and
intelligence technology
firm); and Member,
Board of Governors,
Investment Company
Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves Professor, Harvard University Trustee, Mellon
(64) until a successor trustee is Institutional Funds
elected or earlier Investment Trust and
retirement or removal Mellon Institutional
Funds Master Portfolio
(oversees 17 portfolios
in fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves Founding Director, Vice None
(61) until a successor trustee is President and Corporate
elected or earlier Secretary, The Winthrop Group,
retirement or removal. Inc. (consulting firm); and
Desautels Faculty of
Management, McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves Chief Executive Officer, None
until a successor trustee is Quadriserv, Inc. (technology
elected or earlier products for securities lending
retirement or removal. industry) (2008 - present);
Private investor (2004 - 2008);
and Senior Executive Vice
President, The Bank of New York
(financial and securities
services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves President and Chief Executive Director of New America
until a successor trustee is Officer, Newbury, Piret & High Income Fund, Inc.
elected or earlier Company, Inc. (investment (closed-end investment
retirement or removal. banking firm) company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves Senior Counsel, Sullivan & Director, The Swiss
until a successor trustee is Cromwell LLP (law firm) Helvetia Fund, Inc.
elected or earlier (closed-end investment
retirement or removal. company)
- ------------------------------------------------------------------------------------------------------------------------------------
19
Pioneer Independence VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE AND PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the Secretary of PIM-USA; Senior None
discretion of the Board Vice President - Legal of
Pioneer; Secretary/ Clerk of
most of PIM-USA's subsidiaries;
and Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September
2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the Associate General Counsel of None
Secretary discretion of the Board Pioneer since January 2008 and
Assistant Secretary of all of
the Pioneer Funds since
September 2003; Vice President
and Senior Counsel of Pioneer
from July 2002 to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the Vice President - Fund None
discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Treasurer of all
of the Pioneer Funds since
March 2008; Deputy Treasurer of
Pioneer from March 2004 to
February 2008; Assistant
Treasurer of all of the Pioneer
Funds from March 2004 to
February 2008; and Treasurer
and Senior Vice President, CDC
IXIS Asset Management Services
from 2002 to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant
Treasurer of all of the Pioneer
Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant
Treasurer of all of the Pioneer
Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the Fund Administration Manager - None
(35) Treasurer discretion of the Board Fund Accounting, Administration
and Controllership Services
since June 2003 and Assistant
Treasurer of all of the Pioneer
Funds since September 2003;
Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the Chief Compliance Officer of None
Compliance discretion of the Board Pioneer since December 2006 and
Officer of all the Pioneer Funds since
January 2007; Vice President
and Compliance Officer, MFS
Investment Management (August
2005 to December 2006);
Consultant, Fidelity
Investments (February 2005 to
July 2005); Independent
Consultant (July 1997 to
February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
21
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is also
available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18659-03-0209
[LOGO]PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer International Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 9
Notes to Financial Statements 14
Report of Independent Registered Public
Accounting Firm 18
Trustees, Officers and Service Providers 20
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE DATA BELOW WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
International Common Stocks 91.7%
U.S. Common Stocks 4.9%
Depositary Receipts for International Stocks 3.3%
Rights/Warrants 0.1%
Geographical Distribution
(As a percentage of equity holdings)
[THE DATA BELOW WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Other (individually less than 1%) 1.9%
Japan 22.5%
United Kingdom 15.1%
France 13.3%
Switzerland 11.7%
Germany 7.3%
United States 7.0%
Spain 5.0%
Netherlands 4.4%
Ireland 3.6%
Norway 2.6%
Australia 2.3%
Brazil 1.3%
Sweden 1.0%
Singapore 1.0%
Five Largest Holdings
(As a percentage of equity holdings)*
1. Eutelsat Communications 4.11%
2. Ryanair Holdings Plc 3.62
3. Sekisui Chemical Co., Ltd. 3.42
4. Repsol SA 3.34
5. Swiss Reinsurance, Ltd. 3.16
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 9.83 $ 18.76
Class II $ 9.75 $ 18.60
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.2400 $ - $ 0.5380
Class II $ 0.1894 $ - $ 0.5380
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
International Value VCT Portfolio at net asset value, compared to that of the
Morgan Stanley Capital International (MSCI) Europe Australasia, Far East (EAFE)
Index and MSCI All Country World (ex. U.S.) Index. Portfolio returns are based
on net asset value and do not reflect any applicable insurance fees or
surrender charges.
Pioneer Pioneer MSCI All Country
International VCT International VCT World (ex. U.S.)
Portfolio, Class I Portfolio, Class II** MSCI EAFE Index* Index
12/98 $10,000 $10,000 $10,000 $10,000
14,438 14,402 12,730 13,091
12/00 11,189 11,133 10,953 11,116
8,532 8,468 8,630 8,949
12/02 7,396 7,323 7,279 7,636
9,620 9,497 10,130 10,798
12/04 11,420 11,247 12,227 13,105
13,200 12,956 13,940 15,347
12/06 16,228 15,882 17,684 19,515
18,425 17,986 19,741 22,856
12/08 10,132 9,867 11,241 12,516
The Morgan Stanley Capital International (MSCI) EAFE Index is a commonly used
measure of international growth stocks. The MSCI All Country World (ex. U.S.)
Index measures the performance of developed and emerging market stock markets.
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 an Index.
* Effective July 15, 2008 the Portfolio's benchmark index changed to the MSCI
EAFE Index. The securities represented in the MSCI EAFE Index more closely
reflect the types of securities in which the Portfolio is likely to invest.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- ----------------------------------------------------
Class I Class II**
- ----------------------------------------------------
Life-of-Class 3/1/1995 1.51% 1.25%
10 Years 0.13% -0.13%
5 Years 1.04% 0.77%
1 Year -45.01% -45.14%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
** Class II shares commenced operations on May 1, 2003. Portfolio returns for
Class II shares prior to May 1, 2003 are based on the performance of Class I
shares, reduced to reflect the higher Class II expenses.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer International Value VCT
Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
--------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/08 $ 629.32 $ 628.70
Expenses Paid During Period* $ 5.65 $ 6.63
* Expenses are equal to the Portfolio's annualized expense ratio of 1.38% and
1.62% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer International Value VCT
Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
-------------------------------------------------------------------
Beginning Account Value On 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account On 12/31/08 $ 1,018.20 $ 1,016.99
Expenses Paid During Period* $ 7.00 $ 8.21
* Expenses are equal to the Portfolio's annualized expense ratio of 1.38% and
1.62% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
In the following interview, Christopher Smart, Director of Pioneer's
International Investment Department in Boston and manager of the Pioneer
International Value VCT Portfolio, discusses the factors that influenced the
Portfolio's performance from January 1, 2008 through August 25, 2008. Andrea
Salvatori, a member of Pioneer's International Investment team in Dublin,
Ireland, highlights the Portfolio's strategies and positioning since assuming
management responsibilities for the Portfolio on August 25, 2008.
Q. How did the Portfolio perform for the fiscal year ended December 31, 2008?
A. Class I shares of the Pioneer International Value VCT Portfolio posted a
return of -45.01% at net asset value for the 12 months ended December 31,
2008, and Class II shares returned -45.14%. Over the same period, the
Portfolio's benchmark, the Morgan Stanley Capital International (MSCI)
Europe, Australasia, Far East (EAFE) Index, returned -43.06%, while the MSCI
All Country Free Index (excluding the United States), returned -45.24%. Also
over the same 12-month period, the average return for the 111 variable
portfolios in Lipper's International Core Underlying Funds category was
-42.59%.
Q. (Christopher Smart): What factors contributed to the Portfolio's performance
from the start of the fiscal year on January 1, 2008, through August 25,
2008, when you transferred management to the Dublin team?
A. Credit and liquidity concerns, which initially affected the financials
sector, eventually spread to equity markets throughout the world.
Fortunately, our stock selection in financials - especially in Europe -
tended to help results, as the Portfolio avoided many of the companies that
were hardest hit by the subprime mortgage meltdown. However, while our
decision to underweight investments in the financials proved wise, even the
Portfolio's limited exposure to the struggling sector was detrimental.
The worst effects of the crisis were felt in the emerging markets, where
equity valuations fell sharply in the aftermath of a global flight to
quality. The Portfolio's investments in financial and oil-related
investments in Russia, and a shipbuilder in Korea, were particularly hard
hit. Returns from investments in Brazil, while still negative, held up
relatively better than the performance of the rest of the asset class due
to the positive performance of Petrobras Brasileiro.
The Japanese market suffered due to delays in political reforms and
corporate restructuring, and our decision to overweight the Portfolio's
investments there further detracted from the performance. Stock selection
in consumer-related equities, including Sony, was disappointing.
Q. (Andrea Salvatori): How have you managed the Portfolio since assuming
management responsibilities on August 25?
A. When the management of the Portfolio shifted to Dublin in late August, credit
concerns and recession fears had already taken a toll on U.S. stocks and were
beginning to affect the outlook for international equity markets. Since we
believed that global growth would continue to deteriorate, we thought it
would be prudent to take steps to protect the Portfolio from continued
volatility. Consequently, we sold a majority of the Portfolio's holdings in
the emerging markets, as well as well as several stocks in Asia that were
more vulnerable in a slower-growth environment.
A Word About Risk:
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
The Portfolio may invest a substantial amount of its assets in issuers located
in a limited number of countries and therefore is susceptible to adverse
economic, political or regulatory developments affecting those countries. At
times, the Portfolio's investments may represent industries or industry sectors
that are interrelated or have common risks, making it more susceptible to any
economic, political, or regulatory developments or other risks affecting those
industries and sectors.
Call 1-800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We reinvested the proceeds from the sales in holdings that we believe have
the ability to perform well in all market conditions. Two Japanese
companies exemplify our strategy. Sekisui Chemical Group provides
cost-effective and environmentally sensitive plastics, water solutions and
factory-produced housing in 20 countries. Kurita Water is a chemical
company that sells to the semiconductor industry, but also provides water
purification systems.
Given the Portfolio's ability to invest a modest amount of its assets in
the United States, we found some compelling opportunities there at the time
of the management transition. While we thought that the fundamentals of the
new U.S. holdings were noteworthy in their own regard, their stock price
valuations were also quite attractive. Furthermore, the U.S. dollar's
appreciation in recent months versus other leading currencies, such as the
euro, the yen and the ruble, has made it more advantageous to hold U.S.
assets.
In the field of medical technology, we think the United States offers some
niche investment opportunities that are unparalleled in the world. Two new
additions - Medtronic, a leader in providing lifelong medical solutions for
chronic diseases, and Zimmer, which provides a broad range of trauma,
dental implant, and orthopedic surgical products - are in a good position
to grow their businesses, regardless of the direction that health care
reform takes under the new administration.
As part of our effort to position the Portfolio for a slower-growth
environment, we pared back the number of holdings from 140 to 85. The
Portfolio may have become more focused, but it still remains well
diversified across sectors and countries in an effort to reduce downside
risk, while providing long-term growth potential.
Q. (Andrea Salvatori): What is your outlook?
A. We feel the months ahead will be difficult to gauge, but we think that
deleveraging, or the shredding of excess debt, should restore more solid
underpinnings to the global economy. We believe the Portfolio - with its
emphasis on high-quality companies with strong balance sheets and cash flows,
excellent management, and reasonable growth prospects trading at attractive
valuations - should be in a good position to benefit from an improving
economic cycle.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.8%
Energy - 11.3%
Coal & Consumable Fuels - 0.0%
400 Yanzhou Coal Mining* $ 298
-----------
Integrated Oil & Gas - 10.7%
16,231 BG Group Plc $ 228,553
82,678 BP Amoco Plc 642,741
3,780 Petrobras Brasileiro (A.D.R.) 77,150
39,672 Repsol SA 846,024
28,530 Royal Dutch Shell Plc 746,505
10,194 Statoil ASA* 169,339
-----------
$ 2,710,312
-----------
Oil & Gas Equipment & Services - 0.6%
5,333 Technip $ 163,590
-----------
Oil & Gas Exploration & Production - 0.0%
162 CNOOC, Ltd. $ 154
-----------
Total Energy $ 2,874,354
-----------
Materials - 5.7%
Diversified Chemical - 1.2%
6,974 Akzo Nobel $ 288,717
300 Nissan Chemical Industries 2,897
300 UBE Industries, Ltd.* 840
-----------
$ 292,454
-----------
Diversified Metals & Mining - 4.0%
26,954 BHP Billiton, Ltd. $ 577,336
24,782 Companhia Vale do Rio Doce (A.D.R.) 263,928
8,493 Rio Tinto Plc 186,196
-----------
$ 1,027,460
-----------
Fertilizers & Agricultural Chemicals - 0.5%
5,489 Yara International ASA $ 121,002
-----------
Industrial Gases - 0.0%
700 Taiyo Nippon Sanso Corp. $ 5,381
-----------
Total Materials $ 1,446,297
-----------
Capital Goods - 7.1%
Construction & Engineering - 0.0%
700 China Railway Group, Ltd.* $ 491
-----------
Electrical Component & Equipment - 0.5%
15,400 Sumitomo Electric $ 118,081
-----------
Heavy Electrical Equipment - 1.9%
12,371 ABB, Ltd. $ 185,100
47,454 Mitsubishi Electric Corp. 296,136
-----------
$ 481,236
-----------
Industrial Conglomerates - 0.0%
35 Keppel Corp. $ 106
-----------
Industrial Machinery - 3.3%
18,450 Gea Group AG* $ 317,597
47,900 Kawasaki Heavy Industries* 96,877
15,800 Kurita Water Industries, Ltd. 424,473
-----------
$ 838,947
-----------
Trading Companies & Distributors - 1.4%
35,900 Itochu Corp. $ 179,620
400 Marubeni Corp. 1,520
19,800 Sumitomo Corp. 174,022
-----------
$ 355,162
-----------
Total Capital Goods $ 1,794,023
-----------
Commercial Services & Supplies - 2.5%
Environmental & Facilities
Services - 2.5%
15,232 Suez Environnement SA* $ 257,847
107,616 Tomra Systems ASA* 370,417
-----------
$ 628,264
-----------
Total Commercial Services
& Supplies $ 628,264
-----------
Transportation - 5.3%
Airlines - 3.6%
213,384 Ryanair Holdings Plc* $ 916,662
-----------
Marine - 0.2%
12,100 Kawasaki Kisen Kaisha, Ltd. $ 56,302
-----------
Railroads - 1.5%
47 East Japan Railway Co. $ 366,052
-----------
Total Transportation $ 1,339,016
-----------
Automobiles & Components - 2.0%
Automobile Manufacturers - 2.0%
5,000 Honda Motor Co., Ltd. $ 108,138
400 Isuzu Motors, Ltd. 512
12,116 Toyota Motor Co. 395,500
-----------
$ 504,150
-----------
Total Automobiles & Components $ 504,150
-----------
Consumer Durables & Apparel - 3.6%
Apparel, Accessories & Luxury Goods - 0.2%
2,276 Cie Financiere Richemont AG $ 43,860
-----------
Homebuilding - 3.4%
139,000 Sekisui Chemical Co., Ltd. $ 865,830
-----------
Total Consumer Durables & Apparel $ 909,690
-----------
Media - 4.1%
Cable & Satellite - 4.1%
43,871 Eutelsat Communications $ 1,041,617
-----------
Total Media $ 1,041,617
-----------
6 The accompanying notes are an integral part of these financial statements.
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Retailing - 0.0%
Department Stores - 0.0%
600 New World Department Store China* $ 330
700 Takashimaya Co., Ltd.* 5,287
-----------
$ 5,617
-----------
Total Retailing $ 5,617
-----------
Food & Drug Retailing - 3.0%
Hypermarkets & Supercenters - 3.0%
19,703 Carrefour Supermarch $ 759,623
-----------
Total Food & Drug Retailing $ 759,623
-----------
Food, Beverage & Tobacco - 5.5%
Brewers - 1.1%
20,900 Kirin Holdings Co., Ltd.* $ 274,740
-----------
Packaged Foods & Meats - 4.4%
10,887 Nestle SA $ 425,903
13,492 Smithfield Foods, Inc.* 189,832
21,080 Unilever NV 512,774
-----------
$ 1,128,509
-----------
Total Food, Beverage & Tobacco $ 1,403,249
-----------
Household & Personal Products - 0.0%
Household Products - 0.0%
280 Kao Corp. $ 8,456
-----------
Total Household &
Personal Products $ 8,456
-----------
Health Care Equipment & Services - 5.5%
Health Care Equipment - 4.1%
7,091 Medtronic, Inc. $ 222,799
4,370 Synthes, Inc.* 548,300
6,578 Zimmer Holdings, Inc.* 265,883
-----------
$ 1,036,982
-----------
Health Care Services - 1.4%
7,361 Fresenius Medical Care AG $ 349,759
-----------
Total Health Care Equipment &
Services $ 1,386,741
-----------
Pharmaceuticals & Biotechnology - 7.0%
Pharmaceuticals - 7.0%
13,919 Bristol-Myers Squibb Co. $ 323,617
3,556 Novartis* 176,851
4,060 Roche Holdings AG 620,337
6,056 Shire Pharmaceuticals Group Plc (A.D.R.) 271,188
7,609 Takeda Chemical Industries 393,612
-----------
$ 1,785,605
-----------
Total Pharmaceuticals &
Biotechnology $ 1,785,605
-----------
Banks - 9.6%
Diversified Banks - 9.6%
42,850 Banco Santander Central Hispano SA $ 415,172
8,967 BNP Paribas SA* 380,129
36,432 Development Bank of Singapore, Ltd. 216,838
52,659 HSBC Holding Plc 504,914
8,773 Societe Generale 446,073
108 Sumitomo Mitsui Financial Group, Inc. 466,543
-----------
$ 2,429,669
-----------
Total Banks $ 2,429,669
-----------
Diversified Financials - 2.9%
Diversified Capital Markets - 2.9%
26,399 CS Group $ 718,213
-----------
Investment Banking & Brokerage - 0.0%
300 Daiwa Securities Group, Inc. $ 1,783
-----------
Multi-Sector Holding - 0.0%
314 Reinet Investments SCA* $ 3,069
-----------
Total Diversified Financials $ 723,065
-----------
Insurance - 5.9%
Multi-Line Insurance - 2.7%
6,462 Allianz AG $ 695,820
-----------
Reinsurance - 3.2%
16,598 Swiss Reinsurance, Ltd. $ 800,375
-----------
Total Insurance $ 1,496,195
-----------
Real Estate - 1.0%
Diversified Real Estate Activities - 1.0%
14,975 Mitsui Fudosan Co. $ 248,169
-----------
Total Real Estate $ 248,169
-----------
Software & Services - 4.2%
Home Entertainment Software - 4.2%
1,307,236 Eidos Plc* $ 296,108
14,426 Electronic Arts, Inc.* 231,393
32,351 GameLoft* 68,303
1,200 Nintendo Corp., Ltd. 459,767
-----------
$ 1,055,571
-----------
Total Software & Services $ 1,055,571
-----------
Technology Hardware & Equipment - 2.1%
Communications Equipment - 0.6%
9,117 Nokia Oyj $ 141,894
-----------
Electronic Manufacturing Services - 0.8%
53,436 Hon Hai Precision Industry (G.D.R.) $ 212,388
-----------
Office Electronics - 0.7%
5,745 Canon, Inc.* $ 179,848
-----------
Total Technology Hardware
& Equipment $ 534,130
-----------
The accompanying notes are an integral part of these financial statements. 7
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Semiconductors - 0.6%
Semiconductor Equipment - 0.5%
3,985 Tokyo Electron, Ltd. $ 139,561
-----------
Semiconductors - 0.1%
10,422 Infineon Technologies AG* $ 14,266
-----------
Total Semiconductors $ 153,827
-----------
Telecommunication Services - 6.4%
Integrated Telecommunication Services - 4.0%
21,774 Koninklijke KPN NV $ 316,980
82 Nippon Telegraph & Telephone Corp. 439,497
28,692 Tele2 AB (B Shares) 257,023
-----------
$ 1,013,500
-----------
Wireless Telecommunication Services - 2.4%
302,340 Vodafone Group Plc $ 617,303
-----------
Total Telecommunication Services $ 1,630,803
-----------
Utilities - 4.5%
Electric Utilities - 2.2%
11,838 E.On AG* $ 473,475
4,355 Fortum Corp.* 93,910
-----------
$ 567,385
-----------
Independent Power Producer &
Energy Traders - 0.9%
124,634 Clipper Windpower Plc* $ 129,051
24,545 International Power Plc 86,435
-----------
$ 215,486
-----------
Multi-Utilities - 1.4%
4,926 Gaz De France $ 244,927
11,905 National Grid Plc 119,900
-----------
$ 364,827
-----------
Total Utilities $ 1,147,698
-----------
TOTAL COMMON STOCKS
(Cost $35,757,205) $25,305,829
-----------
RIGHTS/WARRANTS - 0.1%
Banks - 0.1%
Diversified Banks - 0.1%
18,216 DBS Group Holdings, Ltd.,
Expires 1/14/09* $ 38,056
-----------
Total Banks $ 38,056
-----------
TOTAL RIGHTS/WARRANTS
(Cost $67,710) $ 38,056
-----------
TOTAL INVESTMENT
IN SECURITIES - 99.9%
(Cost $35,824,915)(a)(b) $25,343,885
-----------
OTHER ASSETS AND
LIABILITIES - 0.1% $ 20,770
-----------
TOTAL NET ASSETS - 100.0% $25,364,655
===========
* Non-income producing security.
(G.D.R.) Global Depositary Receipt.
(A.D.R.) American Depositary Receipt.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $36,086,321 was as follows:
Aggregate gross unrealized gain for all
investments in which there is an excess of
value over tax cost $ 377,187
Aggregate gross unrealized loss for all
investments in which there is an excess of
tax cost over value (11,119,623)
------------
Net unrealized loss $(10,742,436)
============
(b) Distributions of investment by country of issue, as a percentage of
total investment in securities (excluding temporary cash investments),
is as follows:
Japan 22.5%
United Kingdom 15.1
France 13.3
Switzerland 11.7
Germany 7.3
United States 7.0
Spain 5.0
Netherlands 4.4
Ireland 3.6
Norway 2.6
Australia 2.3
Brazil 1.3
Sweden 1.0
Singapore 1.0
Other (individually less than 1%) 1.9
-----
100.0%
=====
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $49,776,469 and $58,491,462,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- --------------------------------------------------------------
Level 1 - Quoted Prices $ 1,845,790
Level 2 - Other Significant Observable Inputs 23,498,095
Level 3 - Significant Unobservable Inputs -
-----------
Total $25,343,885
===========
8 The accompanying notes are an integral part of these financial statements.
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 18.76 $ 16.77 $ 13.71 $ 11.88 $ 10.06
-------- ------- ------- ------- -------
Increase from investment operations:
Net investment income $ 0.27 $ 0.25 $ 0.10 $ 0.10 $ 0.05
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ( 8.42) 2.02 3.03 1.75 1.82
-------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ (8.15) $ 2.27 $ 3.13 $ 1.85 $ 1.87
Distributions to shareowners:
Net investment income ( 0.24) ( 0.07) ( 0.07) ( 0.02) ( 0.05)
Net realized gain ( 0.54) ( 0.21) -- -- --
-------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (8.93) $ 1.99 $ 3.06 $ 1.83 $ 1.82
-------- ------- ------- ------- -------
Net asset value, end of period $ 9.83 $ 18.76 $ 16.77 $ 13.71 $ 11.88
======== ======= ======= ======= =======
Total return* (45.01)% 13.54% 22.94% 15.58% 18.71%
Ratio of net expenses to average net assets+ 1.38% 1.17% 1.39% 1.53% 1.75%
Ratio of net investment income to average net assets+ 1.68% 1.23% 0.82% 0.70% 0.45%
Portfolio turnover rate 117% 95% 153% 108% 129%
Net assets, end of period (in thousands) $ 13,782 $29,287 $32,046 $21,176 $22,859
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expenses risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 9
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 18.60 $ 16.66 $ 13.63 $ 11.84 $ 10.04
-------- ------- -------- ------- -------
Increase from investment operations:
Net investment income (loss) $ 0.29 $ 0.17 $ 0.00(a) $ 0.04 $ (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (8.41) 2.04 3.07 1.76 1.86
-------- ------- -------- ------- -------
Net increase from investment operations $ (8.12) $ 2.21 $ 3.07 $ 1.80 $ 1.84
Distributions to shareowners:
Net investment income (0.19) (0.06) (0.04) (0.01) (0.04)
Net realized gain (0.54) (0.21) -- -- --
-------- ------- -------- ------- -------
Net increase (decrease) in net asset value $ (8.85) $ 1.94 $ 3.03 $ 1.79 $ 1.80
-------- ------- --------- ------- -------
Net asset value, end of period $ 9.75 $ 18.60 $ 16.66 $ 13.63 $ 11.84
-------- ------- -------- ------- -------
Total return* (45.14)% 13.24% 22.59% 15.19% 18.42%
Ratio of net expenses to average net assets+ 1.62% 1.42% 1.69% 1.84% 2.13%
Ratio of net investment income (loss) to average net assets+ 1.47% 0.95% 0.38% 0.36% (0.11)%
Portfolio turnover rate 117% 95% 153% 108% 129%
Net assets, end of period (in thousands) $ 11,583 $29,622 $ 25,605 $ 5,726 $ 4,133
(a) Amount rounds to less than one cent per share.
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expenses risk charges, separate account charges, and sales charges.
10 The accompanying notes are an integral part of these financial statements.
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost $35,824,915) $ 25,343,885
Cash 169,746
Foreign currencies, at value (cost $109,177) 70,692
Receivables --
Investment securities sold 24,226
Portfolio shares sold 80,461
Dividends and foreign taxes withheld 58,573
Other 3,983
-------------
Total assets $ 25,751,566
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 58,148
Portfolio shares repurchased 249,687
Forward foreign currency settlements contracts, net 254
Due to affiliates 951
Accrued expenses 77,871
-------------
Total liabilities $ 386,911
-------------
NET ASSETS:
Paid-in capital $ 40,203,750
Undistributed net investment income 543,432
Accumulated net realized loss on investments and foreign currency transactions (4,877,312)
Net unrealized loss on investments (10,481,030)
Net unrealized gain on forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (24,185)
-------------
Total net assets $ 25,364,655
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $13,781,976/1,401,635 shares) $ 9.83
=============
Class II (based on $11,582,679/1,187,631 shares) $ 9.75
=============
The accompanying notes are an integral part of these financial statements. 11
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $153,367) $ 1,280,255
Interest 11,602
Income from securities loaned, net 32,622
-------------
Total investment income $ 1,324,479
-------------
EXPENSES:
Management fees $ 365,863
Transfer agent fees
Class I 1,509
Class II 1,509
Distribution fees
Class II 52,141
Administrative fees 12,908
Custodian fees 104,779
Professional fees 60,493
Printing expense 20,725
Fees and expenses of nonaffiliated trustees 5,762
Miscellaneous 18,459
-------------
Total expenses $ 644,148
-------------
Net investment income $ 680,331
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on:
Investments (net of foreign capital gains of $1,683) $ (4,559,341)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (99,892) $ (4,659,233)
------------- -------------
Change in net unrealized gain (loss) on:
Investments $ (19,810,776)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (26,325) $ (19,837,101)
------------- -------------
Net loss on investments and foreign currency transactions $ (24,496,334)
-------------
Net decrease in net assets resulting from operations $ (23,816,003)
=============
12 The accompanying notes are an integral part of these financial statements.
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Year
Ended Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 680,331 $ 650,160
Net realized gain (loss) on investments and foreign currency transactions (4,659,233) 5,265,083
Change in net unrealized gain (loss) on investments and foreign currency transactions (19,837,101) 1,343,108
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (23,816,003) $ 7,258,351
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.24 and $0.07 per share, respectively) $ (358,374) $ (127,312)
Class II ($0.19 and $0.06 per share, respectively) (263,064) (90,365)
Net realized gain:
Class I ($0.54 and $0.21 per share, respectively) (803,355) (357,860)
Class II ($0.54 and $0.21 per share, respectively) (747,246) (312,196)
------------- -------------
Total distributions to shareowners $ (2,172,039) $ (887,733)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 7,727,616 $ 17,393,047
Reinvestment of distributions 2,172,038 887,733
Cost of shares repurchased (17,455,749) (23,393,697)
------------- -------------
Net decrease in net assets resulting from
Portfolio share transactions $ (7,556,095) $ (5,112,917)
------------- -------------
Net increase (decrease) in net assets $ (33,544,137) $ 1,257,701
NET ASSETS:
Beginning of year $ 58,908,792 $ 57,651,091
------------- -------------
End of year $ 25,364,655 $ 58,908,792
============= =============
Undistributed net investment income $ 543,432 $ 621,485
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 119,922 $ 1,838,016 64,491 $ 1,176,074
Reinvestment of distributions 73,761 1,161,729 25,903 485,172
Less shares repurchased (353,274) (4,946,850) (440,000) (7,969,587)
-------- ------------- -------- -------------
Net decrease (159,591) $ (1,947,105) (349,606) $ (6,308,341)
======== ============= ======== =============
CLASS II
Shares sold 364,272 $ 5,889,600 891,809 $ 16,216,973
Reinvestment of distributions 64,597 1,010,309 21,655 402,561
Less shares repurchased (833,652) (12,508,899) (857,800) (15,424,110)
-------- ------------- -------- -------------
Net increase (decrease) (404,783) $ (5,608,990) 55,664 $ 1,195,424
======== ============= ======== =============
The accompanying notes are an integral part of these financial statements. 13
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer International Value VCT Portfolio (the Portfolio) is one of 19
portfolios comprising Pioneer Variable Contracts Trust (the Trust), a Delaware
statutory trust registered under the Investment Company Act of 1940 as a
diversified open-end management investment company. The investment objective of
the Portfolio is to seek long-term capital growth.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distributions fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio's investments in emerging markets or countries with limited or
developing markets may subject the Portfolio to a greater degree of risk than
in a developed market. Risks associated with these developing markets include
political, social or economic factors and may affect the price of the
Portfolio's investments and income generated by these investments, as well as
the Portfolio's ability to repatriate such amounts.
The Portfolio's prospectuses contain unaudited information regarding the
Portfolio's principal risks. Please refer to those documents when considering
the Portfolio's principal risks. Investing in foreign and/or emerging markets
securities involves risks relating to interest rates, currency exchange rates,
economic and political conditions.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent 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 portfolios are computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees (management appraised). At
December 31, 2008, there were no securities that were management appraised.
Trading in foreign equity securities is substantially completed each day at
various times prior to the close of the NYSE. The value of such securities
used in computing the net asset value of the Portfolio's shares, based on
the last sale price on the principal exchange where they traded. The
principal exchanges and markets for such securities have closing times
prior to the close of the NYSE. However, the value of these securities may
be influenced by changes in global markets occurring after the closing
times of the local exchanges and markets up to the time the Portfolio
determines its net asset value. Consequently, the Board of Trustees of the
Portfolio has determined that the use of daily fair valuations as provided
by a pricing service is appropriate for the Portfolio. The Portfolio may
also take into consideration other significant events in determining the
fair value of these securities. Thus, the Portfolio's securities valuations
may differ from prices reported by the various local exchanges and markets.
Temporary cash investments are valued at cost which approximates market
value.
All securities that trade in foreign markets whose closing prices are as of
times prior to the close of the NYSE and that are held by the Portfolio are
fair valued
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Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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using vendor-supplied pricing updates for each security to the time of the
close of the NYSE.
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 becomes aware 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. Dividend and interest income are reported net of
unrecoverable foreign taxes withheld at the applicable country rates.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. 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, if any,
represent, among other things, the net realized gains and losses on foreign
currency contracts, disposition of foreign currencies, and the difference
between the amount of income accrued and the U.S. dollars actually
received. Further, the effects of changes in foreign currency exchange
rates on investments are not segregated in the Statement of Operations from
the effects of changes in market price of those securities but are included
with the net realized and unrealized gain or loss on investments.
C. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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
(see Note 5).
D. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
In addition to the requirements of the Internal Revenue Code, the Portfolio
may also be required to pay local taxes on the recognition of capital gains
and/or the repatriation of foreign currencies in certain countries. During
the year ended December 31, 2008, no such taxes were paid.
In determining the daily net asset value, the Portfolio estimates the
reserve for such taxes, if any, associated with investments in certain
countries. The estimated reserve for taxes on capital gains is based on the
net unrealized appreciation on certain portfolio securities, the holding
year of such securities and the related tax rates, tax loss carryforward
(if applicable) and other such factors. The estimated reserve for taxes on
repatriation of foreign currencies is based on principal balances and/or
unrealized appreciation of applicable securities, the holding year of such
investments and the related tax rates and other such factors. As of
December 31, 2008, the Portfolio had no reserves related to taxes on the
repatriation of foreign currencies.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of each Portfolio's distributions
may be shown in the accompanying financial statements as from, or in excess
of, net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
The Portfolio has elected to defer approximately $1,004,056 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$3,646,214, which will expire in 2016 if not utilized.
At December 31, 2008, the Portfolio has reclassified $136,946 to decrease
undistributed net investment
15
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
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income and $136,946 to decrease accumulated net realized loss on
investments to reflect permanent book/
tax differences. The reclassification has no impact on the net asset value
of the Portfolio and presents the Portfolio's capital accounts on a tax
basis.
The tax character of distributions paid during the years ended December 31,
2008 and December 31, 2007 and the components of distributable earnings
(accumulated losses) on a federal income tax basis at December 31, 2008,
was as follows:
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- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 621,556 $217,677
Long-term capital gains 1,550,483 670,056
------------ --------
Total distributions $ 2,172,039 $887,733
============ ========
Distributable Earnings:
Undistributed ordinary income $ 543,178
Capital loss carryforward (3,646,214)
Post-October loss deferred (1,004,056)
Unrealized depreciation (10,732,003)
------------
Total $(14,839,095)
============
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales and the mark to
market on forward currency contracts.
E. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II shares are calculated based on the average daily net
asset values attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. Dividends and distributions to shareowners are
recorded on the ex-dividend date. Distributions paid by the Portfolio with
respect to each class of shares are calculated in the same manner and at
the same time, except that Class I and Class II shares can bear different
transfer agent and distribution fees.
F. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
16
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the portfolio.
Management fees are calculated daily at the annual rate of 0.85% of the
Portfolio's average daily net assets up to $500 million and 0.75% on assets
over $500 million.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $611 in management fees,
administrative costs and certain others fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $259 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $81 payable to PFD at December 31, 2008.
5. Forward Foreign Currency Contracts
At December 31, 2008, the Portfolio had entered into various contracts that
obligate the Portfolio to deliver currencies at specified future dates. At the
maturity of a contract, the Portfolio must make delivery of the foreign
currency. Alternatively, prior to the settlement date of a portfolio hedge, the
Portfolio may close out such contracts by entering into an offsetting hedge
contract. At December 31, 2008, the Portfolio had no outstanding portfolio
hedges. The Portfolio's gross forward currency settlement contracts receivable
and payable were $22,987 and $23,241, respectively, resulting in a net payable
of $254.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
17
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer International Value VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
International Value VCT Portfolio, one of the portfolios constituting the
Pioneer Variable Contracts Trust (the "Trust"), including the schedule of
investments, as of December 31, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer International Value VCT Portfolio at December 31, 2008, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
18
Pioneer International Value VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
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IMPORTANT TAX INFORMATION (unaudited)
For the fiscal year ending December 31, 2008, the Fund has elected to pass
through foreign tax credits of $120,440.
19
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's
affairs. The officers of the Trust are responsible for the Trust's
Custodian operations. The Trustees and officers are listed below, together with
Brown Brothers Harriman & Co. their principal occupations during the past five years. Trustees who
are interested persons of the Trust within the meaning of the 1940 Act
Independent Registered Public Accounting Firm are referred to as Interested Trustees. Trustees who are not
Ernst & Young LLP interested persons of the Trust are referred to as Independent
Trustees. Each of the Trustees serves as a trustee of each of the 76
Principal Underwriter U.S. registered investment portfolios for which Pioneer serves as
Pioneer Funds Distributor, Inc. investment adviser (the "Pioneer Funds"). The address for all Trustees
and all officers of the Trust is 60 State Street, Boston,
Legal Counsel Massachusetts 02109.
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee
and President is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee
President is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc.
(since February 2007); Executive Vice President of all of the Pioneer Funds
(since March 2007); Director of Pioneer Global Asset Management S.p.A.
(since April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment
adviser and certain of its affiliates.
20
Pioneer International Value VCT Portfolio
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TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
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INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee
is elected or earlier
retirement or removal.
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Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee
is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee
is elected or earlier
retirement or removal.
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Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee
is elected or earlier
retirement or removal.
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Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal
City Capital Advisors (boutique merchant bank) (1997 to 2004 and
2008 - present); and Executive Vice President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management,
McGill University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
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Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
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21
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan (35) Assistant Since 2003. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- -------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- -------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- -------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- -------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- -------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan (35) Fund Administration Manager - Fund Accounting, Administration and None
Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- -------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
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29
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
20363-02-0209
[Logo]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 10
Notes to Financial Statements 15
Report of Independent Registered Public
Accounting Firm 19
Trustees, Officers and Service Providers 20
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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PORTFOLIO UPDATE 12/31/08
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Portfolio Diversification
(As a percentage of total investment portfolio)
[The following was represented by a pie chart in the printed materials.]
U.S. Common Stocks 85.1%
Temporary Cash Investments 14.9%
Sector Distribution
(As a percentage of equity holdings)
[The following was represented by a pie chart in the printed materials.]
Financials 26.0%
Information Technology 13.7%
Industrials 12.2%
Utilities 11.1%
Health Care 10.6%
Consumer Staples 9.8%
Consumer Discretionary 7.0%
Materials 5.7%
Energy 3.2%
Telecommunication Services 0.7%
Five Largest Holdings
(As a percentage of equity holdings)*
1. Unum Group 4.15%
2. Omnicare, Inc. 3.68
3. Ball Corp. 3.31
4. Waste Management, Inc. 3.24
5. W.W. Grainger, Inc. 3.19
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
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PERFORMANCE UPDATE 12/31/08
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Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 11.72 $ 19.22
Class II $ 11.66 $ 19.13
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $0.1892 $0.0124 $1.2889
Class II $0.1433 $0.0124 $1.2889
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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.
[The following was represented by a mountain chart in the printed materials.]
Pioneer Pioneer
Mid Cap Value Mid Cap Value
VCT Portfolio, VCT Portfolio, Russell Midcap
Class I Class II Value Index
12/98 10,000 10,000 10,000
11,305 11,277 9,989
12/00 13,340 13,266 11,905
14,206 14,092 12,182
12/02 12,613 12,488 11,007
17,340 17,120 15,197
12/04 21,175 20,847 18,799
22,845 22,440 21,177
12/06 25,721 25,193 25,458
27,157 26,539 25,096
12/08 18,038 17,580 15,448
The Russell Midcap Value Index measures the performance of U.S. mid-cap value
stocks. 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.
Average Annual Total Returns
(As of December 31, 2008)
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Class I Class II
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10 Years 6.08% 5.80%
5 Years 0.79% 0.53%
1 Year -33.58% -33.76%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
The performance of Class II shares for the period prior to the commencement of
operations of Class II shares on May 1, 2000 is based on the performance of the
portfolio's Class I shares, reduced to reflect the higher distribution fee of
Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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COMPARING ONGOING PORTFOLIO EXPENSES
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As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Mid Cap Value VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
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Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 716.35 $ 715.72
Expenses Paid During Period* $ 3.32 $ 4.40
* Expenses are equal to the Portfolio's annualized expense ratio of 0.77% and
1.02% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Mid Cap Value VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ---------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,021.27 $ 1,020.01
Expenses Paid During Period* $ 3.91 $ 5.18
* Expenses are equal to the Portfolio's annualized expense ratio of 0.77% and
1.02% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
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PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
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A Word About Risk:
Investments in mid-sized companies may offer the potential for higher returns,
but are also subject to greater short-term price fluctuations than larger, more
established companies. Investing in foreign and/or emerging markets securities
involves risks relating to interest rates, currency exchange rates, economic,
and political conditions. At times, the Portfolio's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
Stock prices declined dramatically during 2008 as investors grew increasingly
apprehensive that a widening credit crisis would undermine the economy and
drive it into a deep recession. In the following discussion, Rod Wright, leader
of the investment team managing the Pioneer Mid Cap Value VCT Portfolio,
provides an update on the factors that affected the Portfolio's performance
during the 12-month period ended December 31, 2008.
Q: How did the Portfolio perform during the 12-month period ended December 31,
2008?
A: Pioneer Mid Cap Value VCT Portfolio Class I shares returned -33.58% for the
12 months ended December 31, 2008, and Class II shares returned -33.76%.
During the same 12-month period, the Portfolio's benchmark, the Russell
Midcap Value Index, returned -38.44%, while the Standard & Poor's 500 Index,
an index for the entire equity market, returned -36.99%. Over the same
12-month period, the average return of the 83 variable portfolios in Lipper's
Mid Cap Value category was -38.72%.
Q: What were the principal factors affecting the Portfolio's performance during
the 12-month period ended December 31, 2008?
A: The stock market declined virtually throughout the entire year, despite
positive results for some market indices during the final month. After months
of growing fears that the U.S. economy's expansion was coming to an end after
a decade of growth, the downturn was confirmed with the announcement that
U.S. gross domestic product (GDP) contracted in the third quarter of 2008.
GDP growth was widely expected also to be negative for the final quarter of
2008. The widespread difficulties in the credit markets, which began in 2007
with problems in the subprime mortgage area, particularly affected financial
institutions, especially commercial banks and investment banks. The stocks of
many financial institutions performed even more poorly than the overall
market, as investors avoided any institutions carrying credit risk. This
significantly affected the Russell Midcap Value Index, which had a large
exposure to financial institutions compared to indices tracking other parts
of the market. Elsewhere, consumer spending, which had helped to prop up the
economy in recent years, weakened significantly, affecting the performance of
virtually all industries exposed to discretionary spending.
Although the Portfolio outperformed the Russell Midcap Value Index and the
Lipper competitive peer group, we nevertheless were disappointed in the
losses that were incurred. Over the course of the year, we maintained a
defensive positioning for the Portfolio, placing the greatest emphasis on
investments in companies we believed had solid balance sheets and strong
businesses, but whose stock prices were low because of factors we felt could
be remedied. Keeping with the Portfolio's emphasis on bottom-up company
analysis and individual security selection, stock selection was more of a
factor influencing performance than was sector positioning. While the
financials sector was the greatest drag on the Russell index's results, our
selections in the financials group provided the greatest support to the
Portfolio's relative performance. Selections in the industrials, consumer
staples and health care groups also helped the Portfolio's relative
performance. The greatest detractors from the Portfolio's relative
performance were our investments in the energy sector and our de-emphasis of
utilities companies. The Portfolio's energy holdings underperformed the
sector, and the Portfolio was underweighted in the group when energy stocks
performed well early in the year. We believed utilities stocks were priced
too high, but the market nevertheless preferred them because of their
reputations as defensive positions.
Q: What individual investments most affected the Portfolio's performance during
the period?
A: Four of the better performing stocks were from the financials sector. They
included: insurance company Unum; re-insurer RenaissanceRe; insurance broker
Aon; and Annaly Capital, an investor in real estate mortgages. Unum, the
Portfolio's largest individual holding, performed well after a corporate
restructuring program strengthened its financial position, resulting in
rating upgrades by two major credit
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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rating services. RenaissanceRe, a Bermuda-based catastrophe insurer and
reinsurance company, benefited from improved pricing in the reinsurance
business, while insurance broker Aon saw improvements in its operating
margins. While many of Annaly Capital's competitors struggled because of
problems in the mortgage market, Annaly outperformed as interest rate cuts
led to improved operating margins and because the company emphasized
government agency mortgages.
One of the Portfolio's best overall contributors was Omnicare, an
institutional pharmacy services corporation. We invested the Portfolio in the
company because we believed its underlying business was strong and that
improvements in its operational efficiency could yield benefits. When
management instituted a number of changes, Omnicare's earnings improved and
the stock rose from its very low valuation. Waste Management, a leader in
providing solid waste disposal and management services, outperformed when its
new management team improved operational and logistical efficiency. As
pricing strengthened, volumes increased and costs declined, Waste
Management's earnings improved. Also delivering good results were Ball,
producer of containers such as aluminum beverage cans, and W.W. Grainger,
distributor of maintenance and servicing supplies to industrial customers.
Both Ball and Grainger are defensive stocks with strong business
fundamentals. Elsewhere, three holdings were acquired during the year,
resulting in gains for the Portfolio. They were: Wm. Wrigley Jr., the chewing
gum manufacturer purchased by candy maker Mars, a private company;
Anheuser-Busch, which agreed to be acquired by Belgian brewer InBev; and Barr
Pharmaceuticals, which was acquired by Teva Pharmaceuticals.
Energy selections proved to be the greatest drag on the Portfolio's relative
performance, with two companies in the sector producing particularly
disappointing results. Independent refiner Tesoro was hurt when the cost of
crude oil for its refineries increased much faster than the market prices for
its refined products, such as heating oil and gasoline. We sold the position.
However, we retained a position in the other disappointing energy stock, El
Paso, a pipeline company with exploration and production operations that were
hurt when oil prices declined during the second half of the year.
Q: What is your investment outlook?
A: We have a guarded outlook. While we think the market has experienced the
worst of the effects of the economic downturn, the economy nevertheless is in
recession. We don't yet know how deep this recession will be or how long it
will last. We think the stock market could stage a number of potentially
short-lived rallies during 2009, but it will take time for the full effects
of problems in banking and consumer credit to surface and be worked through.
We also think unemployment is likely to continue to increase during the first
part of 2009, especially as the automobile industry starts restructuring and
newly merged financial institutions begin to reduce their overhead by
eliminating redundancies. Nevertheless, the Federal Reserve Board and the
Treasury Department already have acted very aggressively to reinvigorate the
economy, and the new Obama Administration can be expected to push hard for an
additional stimulus package. Eventually, we believe that the efforts of the
federal government will help bring about an economic turnaround.
As always, we intend to continue to concentrate on individual security
analysis and focus on investing in good companies, with solid balance sheets
and healthy businesses, that we are able to buy at attractive prices.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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SCHEDULE OF INVESTMENTS 12/31/08
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Shares Value
COMMON STOCKS - 95.4%
Energy - 3.1%
Oil & Gas Drilling - 0.4%
15,700 Transocean, Ltd.*(b) $ 741,825
------------
Oil & Gas Equipment & Services - 0.5%
82,424 Weatherford International, Inc.*(b) $ 891,828
------------
Oil & Gas Exploration & Production - 1.2%
12,670 Devon Energy Corp. $ 832,546
35,600 XTO Energy, Inc. 1,255,612
------------
$ 2,088,158
------------
Oil & Gas Storage & Transportation - 1.0%
237,490 El Paso Corp. (b) $ 1,859,547
------------
Total Energy $ 5,581,358
------------
Materials - 5.4%
Diversified Chemical - 0.4%
46,100 Dow Chemical Co. $ 695,649
------------
Gold - 0.9%
39,567 Newmont Mining Corp. $ 1,610,377
------------
Industrial Gases - 1.0%
36,400 Air Products & Chemicals, Inc. $ 1,829,828
------------
Metal & Glass Containers - 3.1%
137,941 Ball Corp. (b) $ 5,736,966
------------
Total Materials $ 9,872,820
------------
Capital Goods - 3.8%
Industrial Machinery - 0.7%
33,000 SPX Corp. $ 1,338,150
------------
Trading Companies &
Distributors - 3.1%
70,154 W.W. Grainger, Inc. $ 5,530,941
------------
Total Capital Goods $ 6,869,091
------------
Commercial Services & Supplies - 7.9%
Environmental & Facilities Services - 3.8%
48,868 Republic Services, Inc. $ 1,211,438
169,542 Waste Management, Inc. (b) 5,618,622
------------
$ 6,830,060
------------
Office Services & Supplies - 1.7%
95,220 Avery Dennison Corp. $ 3,116,551
------------
Research & Consulting Services - 2.4%
165,390 Equifax, Inc. $ 4,386,143
------------
Total Commercial Services &
Supplies $ 14,332,754
------------
Consumer Durables & Apparel - 1.0%
Homebuilding - 0.6%
146,110 D.R. Horton, Inc. $ 1,032,998
------------
Shares Value
Housewares & Specialties - 0.4%
18,364 Fortune Brands, Inc. (b) $ 758,066
------------
Total Consumer Durables &
Apparel $ 1,791,064
------------
Media - 4.3%
Advertising - 1.8%
843,394 The Interpublic Group of Co., Inc.* $ 3,339,840
------------
Broadcasting - 0.9%
189,970 CBS Corp. (Class B) (b) $ 1,555,854
------------
Movies & Entertainment - 1.6%
152,062 Viacom, Inc. (Class B)* $ 2,898,302
------------
Total Media $ 7,793,996
------------
Retailing - 1.4%
Apparel Retail - 1.0%
133,982 Gap, Inc. $ 1,794,019
------------
Department Stores - 0.4%
37,175 J.C. Penney Co., Inc. $ 732,348
------------
Total Retailing $ 2,526,367
------------
Food & Drug Retailing - 3.3%
Food Retail - 3.3%
73,669 Kroger Co. $ 1,945,598
172,411 Safeway, Inc. 4,098,209
------------
$ 6,043,807
------------
Total Food & Drug Retailing $ 6,043,807
------------
Food, Beverage & Tobacco - 4.0%
Brewers - 1.4%
51,832 Molson Coors Brewing Co. (Class B) $ 2,535,621
------------
Packaged Foods & Meats - 0.9%
36,900 The J.M. Smucker Co. $ 1,599,984
------------
Tobacco - 1.7%
54,978 Lorillard, Inc. $ 3,098,010
------------
Total Food, Beverage &
Tobacco $ 7,233,615
------------
Household & Personal Products - 2.1%
Household Products - 0.8%
27,000 Energizer Holdings, Inc.*(b) $ 1,461,780
------------
Personal Products - 1.3%
73,380 Estee Lauder Co. $ 2,271,845
------------
Total Household &
Personal Products $ 3,733,625
------------
Health Care Equipment & Services - 7.3%
Health Care Distributors - 1.2%
61,200 Cardinal Health, Inc. $ 2,109,564
------------
Health Care Equipment - 0.9%
41,600 Zimmer Holdings, Inc.* $ 1,681,472
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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Shares Value
Health Care Services - 3.5%
230,299 Omnicare, Inc. (b) $ 6,393,100
------------
Managed Health Care - 1.7%
50,163 Aetna, Inc. $ 1,429,646
99,000 CIGNA Corp.* 1,668,150
------------
$ 3,097,796
------------
Total Health Care Equipment &
Services $ 13,281,932
------------
Pharmaceuticals & Biotechnology - 2.8%
Life Sciences Tools & Services - 1.3%
71,300 Thermo Fisher Scientific, Inc.*(b) $ 2,429,191
------------
Pharmaceuticals - 1.5%
107,800 Forest Laboratories, Inc.* $ 2,745,666
------------
Total Pharmaceuticals &
Biotechnology $ 5,174,857
------------
Banks - 5.6%
Regional Banks - 3.1%
30,650 City National Corp. (b) $ 1,492,655
82,895 First Horizon National Corp.* 876,204
119,149 KeyCorp (b) 1,015,149
27,887 PNC Bank Corp. 1,366,463
34,337 Zions Bancorporation (b) 841,600
------------
$ 5,592,071
------------
Thrifts & Mortgage Finance - 2.5%
134,400 New York Community Bancorp, Inc. (b) $ 1,607,424
168,430 People's Bank 3,003,107
------------
$ 4,610,531
------------
Total Banks $ 10,202,602
------------
Diversified Financials - 3.8%
Asset Management & Custody Banks - 1.9%
24,800 Franklin Resources, Inc. $ 1,581,744
36,536 Legg Mason, Inc. (b) 800,504
18,900 Northern Trust Corp. 985,446
------------
$ 3,367,694
------------
Investment Banking & Brokerage - 1.1%
68,335 Lazard, Ltd. $ 2,032,283
------------
Specialized Finance - 0.8%
7,000 CME Group, Inc. $ 1,456,770
------------
Total Diversified Financials $ 6,856,747
------------
Insurance - 11.1%
Insurance Brokers - 2.5%
99,829 Aon Corp. (b) $ 4,560,189
------------
Life & Health Insurance - 4.0%
386,789 UNUM Group $ 7,194,275
------------
Shares Value
Property & Casualty Insurance - 2.2%
49,100 Axis Capital Holdings, Ltd. $ 1,429,792
176,939 Progressive Corp.* 2,620,467
------------
$ 4,050,259
------------
Reinsurance - 2.4%
85,382 RenaissanceRe Holdings, Ltd. $ 4,402,296
------------
Total Insurance $ 20,207,019
------------
Real Estate - 4.2%
Diversified Real Estate Investment Trusts - 0.5%
15,400 Vornado Realty Trust $ 929,390
------------
Mortgage Real Estate Investment Trusts - 2.2%
255,745 Annaly Capital Management, Inc. $ 4,058,673
------------
Office Real Estate Investment Trusts - 0.4%
14,870 Boston Properties, Inc. (b) $ 817,850
------------
Residential Real Estate Investment Trusts - 0.5%
30,600 Equity Residential Property Trust $ 912,492
------------
Specialized Real Estate Investment Trusts - 0.6%
13,440 Public Storage, Inc. $ 1,068,480
------------
Total Real Estate $ 7,786,885
------------
Software & Services - 4.4%
Data Processing & Outsourced Services - 4.4%
114,100 Western Union Co. $ 1,636,194
128,438 Computer Sciences Corp.* 4,513,311
51,100 Fiserv, Inc.*(b) 1,858,507
------------
$ 8,008,012
------------
Total Software & Services $ 8,008,012
------------
Technology Hardware & Equipment - 6.4%
Computer Hardware - 4.0%
234,280 NCR Corp.* $ 3,312,719
268,320 Teradata Corp.* 3,979,186
------------
$ 7,291,905
------------
Computer Storage & Peripherals - 0.9%
153,500 EMC Corp.* $ 1,607,145
------------
Office Electronics - 1.5%
338,323 Xerox Corp. $ 2,696,434
------------
Total Technology Hardware &
Equipment $ 11,595,484
------------
Semiconductors - 2.3%
Semiconductor Equipment - 0.9%
171,610 Applied Materials, Inc. $ 1,738,409
------------
Semiconductors - 1.4%
73,960 Analog Devices, Inc. $ 1,406,719
133,700 NVIDIA Corp.* 1,078,959
------------
$ 2,485,678
------------
Total Semiconductors $ 4,224,087
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
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Shares Value
Telecommunication Services - 0.6%
Integrated Telecommunication Services - 0.6%
122,700 Windstream Corp. $ 1,128,840
------------
Total Telecommunication
Services $ 1,128,840
------------
Utilities - 10.6%
Electric Utilities - 3.4%
53,316 American Electric Power Co., Inc.* $ 1,774,356
85,543 Edison International 2,747,641
35,391 FirstEnergy Corp. 1,719,295
------------
$ 6,241,292
------------
Gas Utilities - 1.1%
58,801 Questar Corp. $ 1,922,205
------------
Multi-Utilities - 6.1%
120,788 NSTAR (b) $ 4,407,554
36,500 PG&E Corp. 1,412,915
65,784 Public Service Enterprise Group, Inc. 1,918,919
80,110 Sempra Energy 3,415,089
------------
$ 11,154,477
------------
Total Utilities $ 19,317,974
------------
TOTAL COMMON STOCKS
(Cost $211,909,793) $173,562,936
------------
Principal
Amount ($) Value
TEMPORARY CASH INVESTMENTS - 16.7%
Securities Lending Collateral - 16.7% (c)
Certificates of Deposit:
704,263 Abbey National Plc,
3.15%, 8/13/09 $ 704,263
704,167 Bank of Nova Scotia,
3.21%, 5/5/09 704,167
1,125,465 Bank of Scotland NY,
2.92%, 6/5/09 1,125,465
1,267,673 Barclays Bank, 1.5%, 5/27/09 1,267,673
223,911 Calyon NY, 4.62%, 1/16/09 223,911
1,408,525 CBA, 4.87%, 7/16/09 1,408,525
1,267,673 DNB NOR Bank ASA NY,
3.04%, 6/5/09 1,267,673
1,290,209 Intesa SanPaolo S.p.A.,
1.44%, 5/22/09 1,290,209
81,584 NORDEA NY, 4.13%, 4/9/09 81,584
1,056,393 Royal Bank of Canada NY,
2.7%, 8/7/09 1,056,393
704,263 Royal Bank of Scotland,
3.06%, 3/5/09 704,263
140,787 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 140,787
Certificates of Deposit - Continued
1,408,525 Societe Generale, 3.29%, 9/4/09 1,408,525
1,267,673 Svenska Bank NY, 4.61%, 7/8/09 1,267,673
1,408,525 U.S. Bank NA, 2.25%, 8/24/09 1,408,525
------------
$ 14,059,636
------------
Commercial Paper:
134,217 BBVA U.S., 2.83%, 3/12/09 $ 134,217
1,408,525 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 1,408,525
704,263 CME Group, Inc., 2.9%, 8/6/09 704,263
704,188 General Electric Capital Corp.,
2.86%, 3/16/09 704,188
1,383,172 American Honda Finance Corp.,
4.95%, 7/14/09 1,383,172
1,408,525 HSBC Bank, Inc., 2.5%, 8/14/09 1,408,525
704,263 IBM, 2.39%, 9/25/09 704,263
1,267,673 MetLife Global Funding,
3.19%, 6/12/09 1,267,673
1,267,673 New York Life Global,
2.13%, 9/4/09 1,267,673
1,197,246 Westpac Banking Corp.,
2.34%, 6/1/09 1,197,246
------------
$ 10,179,745
------------
Tri-party Repurchase Agreements:
3,098,754 Deutsche Bank, 0.25%, 1/2/09 $ 3,098,754
239,280 Barclays Capital Markets,
0.5%, 1/2/09 239,280
------------
$ 3,338,034
------------
Time Deposit:
1,408,525 BNP Paribas, 0.01%, 1/2/09 $ 1,408,525
------------
Money Market Mutual Funds:
352,131 Columbia Government Reserves
Fund $ 352,131
1,056,394 JPMorgan, U.S. Government Money
Market Fund 1,056,394
------------
$ 1,408,525
------------
Total Securities Lending
Collateral $ 30,394,465
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $30,394,465) $ 30,394,465
------------
TOTAL INVESTMENT IN
SECURITIES - 112.1%
(Cost $242,304,258)(a) $203,957,401
------------
OTHER ASSETS
AND LIABILITIES - (12.1)%
TOTAL NET ASSETS - 100.0% $181,946,480
------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $243,935,530 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 8,186,727
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (48,164,856)
------------
Net unrealized loss $(39,978,129)
============
(b) At December 31, 2008, the following securities were out on loan:
Shares Security Value
98,000 Aon Corp. $ 4,476,640
69,700 Ball Corp. 2,898,823
14,000 Boston Properties, Inc. 770,000
188,000 CBS Corp. (Class B) 1,539,720
10,000 City National Corp. 487,000
200,000 El Paso Corp. 1,566,000
8,000 Energizer Holdings, Inc.* 433,120
49,300 Fiserv, Inc. * 1,793,041
17,915 Fortune Brands, Inc. 739,531
111,200 KeyCorp 947,424
36,000 Legg Mason, Inc. 788,760
116,900 New York Community Bancorp, Inc. 1,398,124
56,700 NSTAR 2,068,983
61,700 Omnicare, Inc. 1,712,792
33,000 Thermo Fisher Scientific, Inc. * 1,124,310
15,000 Transocean, Ltd. * 708,750
160,000 Waste Management, Inc. * 5,302,400
44,000 Weatherford International, Inc. * 476,080
31,900 Zions Bancorporation 781,869
-----------
Total $30,013,367
===========
(c) Security lending collateral is managed by Credit Suisse.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $151,511,229 and $186,159,046,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds,
credit risk, etc.)
Level 3 -- significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- -----------------------------------------------------------------
Level 1 -- Quoted Prices $173,562,936
Level 2 -- Other Significant Observable Inputs 30,394,465
Level 3 -- Significant Unobservable Inputs --
------------
Total $203,957,401
============
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 19.22 $ 20.32 $ 25.00 $ 24.67 $ 20.47
-------- -------- ------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.23 $ 0.21 $ 0.20 $ 0.15 $ 0.08
Net realized and unrealized gain (loss)
on investments (6.24) 1.11 1.98 1.75 4.41
-------- -------- ------- -------- --------
Net increase (decrease) from
investment operations $ (6.01) $ 1.32 $ 2.18 $ 1.90 $ 4.49
Distributions to shareowners:
Net investment income (0.19) (0.17) (0.26) (0.08) (0.08)
Net realized gain (1.30) (2.25) (6.60) (1.49) (0.21)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ (7.50) $ (1.10) $ (4.68) $ 0.33 $ 4.20
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.72 $ 19.22 $ 20.32 $ 25.00 $ 24.67
======== ======== ======== ======== ========
Total return* (33.58)% 5.58% 12.59% 7.88% 22.12%
Ratio of net expenses to average net assets+ 0.77% 0.71% 0.71% 0.71% 0.72%
Ratio of net investment income to average net assets+ 1.23% 0.80% 0.88% 0.58% 0.53%
Portfolio turnover rate 60% 57% 104% 42% 55%
Net assets, end of period (in thousands) $103,527 $192,387 $292,001 $288,837 $303,138
Ratios with no waiver of fees and assumption of
expenses by PIM and no reduction for fees
paid indirectly:
Net expenses 0.77% 0.71% 0.71% 0.71% 0.72%
Net investment income 1.23% 0.80% 0.88% 0.58% 0.53%
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sale charges.
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 19.13 $ 20.24 $ 24.72 $ 24.44 $ 20.32
-------- -------- -------- ------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.16 $ 0.10 $ 0.07 $ 0.35 $ 0.01
Net realized and unrealized gain (loss)
on investments (6.18) 1.17 2.05 1.47 4.38
-------- -------- -------- ------- --------
Net increase (decrease) from
investment operations $ (6.03) $ 1.27 $ 2.12 $ 1.82 $ 4.39
Distributions to shareowners:
Net investment income (0.14) (0.13) -- (0.05) (0.06)
Net realized gain (1.30) (2.25) (6.60) (1.49) (0.21)
-------- -------- -------- ------- --------
Net increase (decrease) in net asset value $ (7.47) $ (1.11) $ (4.48) $ 0.28 $ 4.12
-------- -------- -------- ------- --------
Net asset value, end of period $ 11.66 $ 19.13 $ 20.24 $ 24.72 $ 24.44
======== ======== ======== ======= ========
Total return* (33.76)% 5.35% 12.27% 7.64% 21.77%
Ratio of net expenses to average net assets+ 1.02% 0.96% 0.96% 0.95% 0.97%
Ratio of net investment income to average
net assets+ 1.00% 0.63% 0.63% 0.25% 0.29%
Portfolio turnover rate 60% 57% 104% 42% 55%
Net assets, end of period (in thousands) $ 78,419 $124,722 $100,696 $88,217 $536,837
Ratios with no waiver of fees and assumption of
expenses by PIM and no reduction for fees
paid indirectly:
Net expenses 1.02% 0.96% 0.96% 0.95% 0.97%
Net investment income 1.00% 0.63% 0.63% 0.25% 0.29%
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sale charges.
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $30,013,367) (cost $242,304,258) $ 203,957,401
Cash 7,399,910
Receivables --
Investment securities sold 1,172,867
Portfolio shares sold 171,044
Dividends 454,519
Due from Pioneer Investment Management, Inc. 2,127
-------------
Total assets $ 213,157,868
-------------
LIABILITIES:
Payables --
Portfolio shares repurchased $ 714,001
Upon return of securities loaned 30,394,465
Due to affiliates 7,829
Accrued expenses 95,093
-------------
Total liabilities $ 31,211,388
-------------
NET ASSETS:
Paid-in capital $ 253,177,079
Undistributed net investment income 2,953,502
Accumulated net realized loss on investments (35,837,244)
Net unrealized loss on investments (38,346,857)
-------------
Total net assets $ 181,946,480
=============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized) $ 11.72
=============
Class I (based on $103,527,344/8,835,377 shares) $ 11.66
=============
Class II (based on $78,419,136/6,727,125 shares)
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $4,870,776
Interest 120,645
Income from securities loaned, net 99,768
----------
Total investment income $ 5,091,189
--------------
EXPENSES:
Management fees $1,650,825
Transfer agent fees
Class I 1,204
Class II 1,204
Distribution fees
Class II 261,459
Administrative fees 76,160
Custodian fees 79,718
Professional fees 52,809
Printing expense 41,932
Fees and expenses of non-affiliated trustees 7,404
Miscellaneous 36,341
----------
Total expenses $ 2,209,056
Less fees waived and expenses reimbursed
by Pioneer Investment Management, Inc. (2,127)
--------------
Net expenses $ 2,206,929
--------------
Net investment income $ 2,884,260
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized loss on investments $ (35,476,385)
--------------
Change in net unrealized loss on investments $ (65,690,967)
--------------
Net loss on investments $ (101,167,352)
--------------
Net decrease in net assets resulting from operations $ (98,283,092)
==============
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Year
Ended Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 2,884,260 $ 2,882,598
Net realized gain (loss) on investments (35,476,385) 34,493,566
Change in net unrealized loss on investments (65,690,967) (13,733,161)
-------------- -------------
Net increase (decrease) in net assets resulting from operations $ (98,283,092) $ 23,643,003
-------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.19 and $0.17 per share, respectively) $ (1,707,873) $ (2,382,738)
Class II ($0.14 and $0.13 per share, respectively) (933,034) (697,161)
Net realized gain:
Class I ($1.30 and $2.25 per share, respectively) (11,746,589) (31,800,439)
Class II ($1.30 and $2.25 per share, respectively) (8,472,833) (12,457,611)
-------------- -------------
Total distributions to shareowners $ (22,860,329) $ (47,337,949)
-------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 29,104,880 $ 66,219,835
Reinvestment of distributions 22,860,268 47,337,949
Cost of shares repurchased (65,983,980) (71,645,895)
Redemption in kind -- (93,805,543)
-------------- -------------
Net decrease in net assets resulting from Portfolio share transactions $ (14,018,832) $ (51,893,654)
-------------- -------------
Net decrease in net assets $ (135,162,253) $ (75,588,600)
NET ASSETS:
Beginning of year 317,108,733 392,697,333
-------------- -------------
End of year $ 181,946,480 $ 317,108,733
============== =============
Undistributed net investment income $ 2,953,502 $ 2,869,554
============== =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 488,623 $ 7,499,231 1,080,926 $ 22,793,768
Reinvestment of distributions 805,653 13,454,401 1,641,844 34,183,177
Less shares repurchased (2,468,869) (39,249,992) (2,305,262) (47,604,201)
Redemptions in kind -- -- (4,778,683) (93,805,543)
---------- ------------- ---------- -------------
Net decrease (1,174,593) $ (18,296,360) (4,361,175) $ (84,432,799)
========== ============= ========== =============
CLASS II
Shares sold 1,345,722 $ 21,605,649 2,086,565 $ 43,426,067
Reinvestment of distributions 565,257 9,405,867 633,965 13,154,772
Less shares repurchased (1,704,012) (26,733,988) (1,174,668) (24,041,694)
---------- ------------- ---------- -------------
Net increase 206,967 $ 4,277,528 1,545,862 $ 32,539,145
========== ============= ========== =============
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is capital appreciation by investing in a diversified portfolio of
securities consisting primarily of common stocks.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distributions fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
Investments in mid-sized companies may offer the potential for higher returns,
but are also subject to greater short-term price fluctuations than larger, more
established companies. The Portfolio's prospectuses contain unaudited
information regarding the Portfolio's principal risks. Please refer to those
documents when considering the Portfolio's principal risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements which
are consistent with those policies 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses on sales of investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
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
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
futures contracts (variation margin) are paid or received by the Portfolio,
depending on the daily fluctuation in the value of the contracts, and are
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, 2008, the Portfolio had no open futures 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, if any,
represent, among other things, the net realized gains and losses on foreign
currency contracts, disposition of foreign currencies, and the difference
between the amount of income accrued and the U.S. dollars 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 may enter into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
Portfolio's financial statements. The Portfolio 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.
At December 31, 2008, the Portfolio had no outstanding portfolio or
settlement hedges.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
The Portfolio has elected to defer approximately $12,087,845 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$22,205,829, which will expire in 2016 if not utilized.
At December 31, 2008, the Portfolio has reclassified $2,034 to increase
paid in capital, $159,405 to decrease undistributed net investment income
and $157,371 to decrease accumulated net realized loss on investments to
reflect permanent book/tax differences. The reclassification has no impact
on the net asset value of the Portfolio and presents the Portfolio's
capital accounts on a tax basis.
The tax character of distributions paid during the years ended December 31,
2008 and December 31, 2007 and the components of distributable earnings
(accumulated losses) on a federal income tax basis at December 31, 2008,
was as follows:
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 2,833,769 $10,060,740
Long-term capital gain 20,026,560 37,277,209
------------ -----------
Total distributions $ 22,860,329 $47,337,949
============ ===========
Distributable Earnings:
Undistributed ordinary income $ 2,928,654
Capital loss carryforward (22,205,829)
Post-October loss deferred (11,975,295)
Unrealized depreciation (39,978,129)
------------
Total $(71,230,599)
============
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales and the tax
treatment on partnership adjustments.
F. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008. Distribution
fees for Class II shares are calculated based on the average daily net
asset values attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. Distributions paid by a Portfolio with respect to
each class of shares are calculated in the same manner and at the same
time, except that Class I and Class II shares can bear different transfer
agent and distribution expense rates. 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. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive interest or payments in lieu of dividends on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average daily net assets.
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $3,346 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Fund at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $3,955 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $528 in distribution fees payable to PFD at December 31,
2008.
5. Expense Offsets Arrangements
The Portfolio has entered into an expense offset arrangement with PIMSS
resulting in a reduction in the Portfolio's total expenses due to interest
earned on cash held by PIMSS. For the year ended December 31, 2008, the
Portfolio's expenses were not reduced under this arrangement.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio financial statement disclosures.
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Mid Cap Value VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Mid Cap Value VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Mid Cap Value VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
19
- --------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's
affairs. The officers of the Trust are responsible for the Trust's
Custodian operations. The Trustees and officers are listed below, together with
Brown Brothers Harriman & Co. their principal occupations during the past five years. Trustees who
are interested persons of the Trust within the meaning of the 1940 Act
Independent Registered Public Accounting Firm are referred to as Interested Trustees. Trustees who are not
Ernst & Young LLP interested persons of the Trust are referred to as Independent
Trustees. Each of the Trustees serves as a trustee of each of the 76
Principal Underwriter U.S. registered investment portfolios for which Pioneer serves as
Pioneer Funds Distributor, Inc. investment adviser (the "Pioneer Ernst & Young LLP Funds"). The
address for all Trustees and all officers of the Trust is 60 State
Legal Counsel Street, Boston, Massachusetts 02109.
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee
and President is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee
President is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment
adviser and certain of its affiliates.
20
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee
is elected or earlier
retirement or removal
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee
is elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- ------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- ------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- ------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- ------------------------------------------------------------------------
Thomas J. Perna (58) None
- ------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- ------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- ------------------------------------------------------------------------
21
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of
the Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all None
the Pioneer Funds since January 2007; Vice President and Compliance
Officer, MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- --------------------------------------------------------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
29
[Logo]Pioneer
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18647-03-0209
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio -- Class I Shares
ANNUAL REPORT
December 31, 2008
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Money Market VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Schedule of Investments 4
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public
Accounting Firm 15
Trustees, Officers and Service Providers 17
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year on
Form N-Q. Shareowners may view the filed Form N-Q by visiting the Commission's
web site at http://www.sec.gov. The filed form may also be viewed and copied at
the Commission's Public Reference Room in Washington, D.C. Information regarding
the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO AND PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Against the backdrop of a spreading credit crisis that threatened many major
financial institutions and undermined investor confidence, the U.S. Federal
Reserve Board (the Fed) slashed short-term interest rates throughout 2008.
Yields on short-term securities declined markedly over the 12 months ended
December 31, 2008, while investors became increasingly cautious about any
exposure to credit risk as the year progressed. In the following interview, Seth
Roman reviews the investment environment and the strategies that affected
Pioneer VCT Money Market Portfolio during 2008. Mr. Roman is a member of
Pioneer's Fixed Income Group, which is responsible for the daily management of
the Portfolio.
Pioneer VCT Money Market Portfolio invests exclusively in high-quality money
market instruments issued by the U.S. government and domestic corporations and
banks.
Q: How did the Portfolio perform during the 12 months ended December 31, 2008?
A: Pioneer Money Market VCT Portfolio's Class I shares had a total return of
2.38% at net asset value for the 12 months ended December 31, 2008. During
the same period, the average return of the 106 variable portfolios in
Lipper's Money Market category was 2.23%. On December 31, 2008, the 7-day
effective SEC yield on Class I shares was 1.51%. The Portfolio's net asset
value per share remained stable at $1.00 throughout the year.
Q: What were the principal factors affecting the Portfolio's performance
during 2008?
A: During a year of heightened anxiety in the capital markets, we placed the
greatest emphasis on paying careful attention to any potential credit risks
and maintaining liquidity in the Portfolio. During the course of the year,
the Fed, as part of its effort to inject liquidity into the financial
system and slow the deterioration in the health of the overall economy, cut
interest rates repeatedly. In two separate moves during the first month of
2008, the Fed slashed the target fed funds rate from 4.25% to 2.75%. In
March, as investment bank Bear Stearns collapsed and investors became
increasingly anxious, the Fed cut the target rate to 2.25%. In April, the
rate was lowered to 2.00%. In October, as investment bank Lehman Brothers
filed for bankruptcy and the federal government rushed to the rescue of
other financial institutions, the Fed made two more cuts in the fed funds
rate, bringing the influential rate to 1.00%. Finally, on December 16,
2008, the Fed brought the target rate down to a range of 0.00% to 0.25%.
Q: What were your principal strategies during the 12-month period and how did
they affect the Portfolio's performance?
A: We focused primarily on preserving capital and maintaining liquidity, while
typically maintaining an average duration (a measure of sensitivity to
changes in interest rates) of between 40 and 50 days to capture whatever
yields were available in the market. In general, we avoided those parts of
the market that posed credit risk or were potentially illiquid. While we
did have exposure to Bear Stearns securities early in the year, they
matured at par value, incurring no loss. While the Portfolio had exposure
to Bear Stearns, Lehman, AIG, and Morgan Stanley during the year,
securities matured, were sold, or were not renewed. As a result, the
Portfolio did not incur any losses. We considered the brokerage industry to
be a particularly risky area.
In our effort to maintain high quality and liquidity, we made investments
in Treasury bills, which, despite their low yields, added to the
Portfolio's performance when we were able to sell them at a profit. We also
invested in bank certificates of deposit (CDs). The bank CDs offered added
protection to the Portfolio's net asset value because they are higher in
the capital structure than many other securities. The investments in both
Treasury bills and bank CDs helped support the Portfolio's performance
during the 12-month period.
The primary factor holding back the Portfolio's performance during the
period was the dramatic decline in short-term interest rates in the market,
which reduced the Portfolio's ability to produce higher yields.
During the year, we also decided to join the new insurance program for
money market mutual funds and variable portfolios that was introduced by
the Treasury Department in September in an effort to stabilize the market
for short-term corporate securities.
Q: What is your investment outlook?
A: As we start 2009, the target fed funds rate is effectively at zero, which
makes it particularly challenging to find attractive yields in short-term
securities. We anticipate that the economy will continue to be weak for
much of the first half of the year, and so we expect to continue to be very
cautious, with an emphasis on highly liquid securities such as government
agency securities and bank certificates of deposit. When considering
commercial paper, we intend to invest only in very high-quality products
backed by top-tier corporations. When the opportunity presents itself, we
may extend the Portfolio's duration to capture more yield, but we do not
intend to do so at any risk to the Portfolio's credit quality or liquidity.
Prices and Distributions
12/31/08 12/31/07
Net Asset Value per Share $ 1.00 $ 1.00
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
$ 0.0235 $ - $ -
A Word About Risk:
Although the Portfolio seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Portfolio. Portfolio
shares are not federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
At times, the Portfolio's investments may represent industries or industry
sectors that are interrelated or have common risks, making it more susceptible
to any economic, political, or regulatory developments or other risks affecting
those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
- ---------------------
Average Annual Total Returns
(As of December 31, 2008)
Net Asset Value
Life-of-Class
(3/1/95) 3.47%
10 Years 2.99%
5 Years 2.95%
1 Year 2.38%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Money Market VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I
- -----------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,009.57
Expenses Paid During Period* $ 3.89
* Expenses are equal to the Portfolio's annualized expense ratio of 0.77% for
Class I shares multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Money Market VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I
- -----------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,021.27
Expenses Paid During Period* $ 3.91
* Expenses are equal to the Portfolio's annualized expense ratio of 0.77% for
Class I shares multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (b) Ratings
Amount (unaudited) (unaudited) Value
CORPORATE BONDS - 17.4%
Household & Personal Products - 0.6%
Personal Products - 0.6%
$ 225,000 2.46 AA-/Aa3 Procter & Gamble International, Floating Rate Note, 8/19/09 $ 224,310
-----------
Total Household & Personal Products $ 224,310
-----------
Banks - 8.0%
Diversified Banks - 4.6%
300,000 3.67 AA-/AA3 ABN AMRO Bank NV, Floating Rate Note, 1/30/09 $ 300,327
305,000 3.01 AA+/Aa1 BNP Paribas, Floating Rate Note, 2/13/09 305,000
250,000 2.58 AAA/AAA Rabobank Nederland, Floating Rate Note, 11/9/09 (144A) 249,974
250,000 4.42 A+/Aa1 Svenska Handelsbanken AB, Variable Rate Note, 8/6/09 249,867
200,000 AA/Aa1 Wells Fargo Co., 3.125%, 4/1/09 200,123
500,000 2.95 AA/AA1 Westpac Banking, Floating Rate Note, 2/6/09 (144A) 499,981
-----------
$ 1,805,272
-----------
Regional Banks - 3.4%
460,000 4.35 AA+/AAA Bank of America, Floating Rate Note, 10/3/09 (Extendable) $ 458,095
120,000 AA-/Aa3 Mellon Funding Corp., 3.25%, 4/1/09 120,050
750,000 2.29 AA+/AA1 U.S. Bank NA Cincinnati, Floating Rate Note, 9/10/09 750,000
-----------
$ 1,328,145
-----------
Total Banks $ 3,133,417
-----------
Diversified Financials - 6.6%
Asset Management & Custody Banks - 0.3%
100,000 AA-/Aa2 Bank of New York Mellon, 3.625%, 1/15/09 $ 100,031
-----------
Consumer Finance - 2.0%
800,000 2.51 AAA/Aaa Toyota Motor Credit Corp., Floating Rate Note, 1/12/09 $ 800,000
-----------
Diversified Financial Services - 3.3%
200,000 A+/Aa2 Bank of America Corp., 5.875%, 2/15/09 $ 200,657
100,000 3.10 A+/Aa2 Bear Stearns Co., Inc., Floating Rate Note, 9/30/09 100,004
350,000 2.83 AAA/Aaa General Electric Capital Corp., Floating Rate Note, 1/5/09 350,014
190,000 2.48 AAA/Aaa General Electric Capital Corp., Floating Rate Note, 5/8/09 189,978
100,000 2.23 A+/A1 IBM International Group Capital, Floating Rate Note, 2/13/09 100,014
345,000 2.86 A+/Aa2 JPMorgan Chase & Co., Floating Rate Note, 3/9/09 345,121
-----------
$ 1,285,788
-----------
Specialized Finance - 1.0%
405,000 2.79 AA/Aa1 BP Capital Markets Plc, Floating Rate Note, 1/9/09 $ 405,000
-----------
Total Diversified Financials $ 2,590,819
-----------
Insurance - 1.1%
Multi-Line Insurance - 1.1%
415,000 3.16 AA/Aa2 MetLife Global Funding I, Floating Rate Note, 6/12/09 $ 415,030
-----------
Total Insurance $ 415,030
-----------
Technology Hardware & Equipment - 1.1%
Computer Hardware - 1.1%
415,000 3.13 A+/A1 IBM International Group Capital, Floating Rate Note, 7/29/09 $ 415,839
-----------
Total Technology Hardware & Equipment $ 415,839
-----------
TOTAL CORPORATE BONDS
(Cost $6,779,415) $ 6,779,415
-----------
4 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (b) Ratings
Amount (unaudited) (unaudited) Value
U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.6%
$ 175,000 NR/NR Fannie Mae Discount Note, 0.0%, 8/3/09 $ 172,972
575,000 AAA/Aaa Fannie Mae Discount Note, 2.18%, 1/15/09 574,513
220,000 AAA/Aaa Fannie Mae Discount Note, 2.8%, 4/30/09 217,964
410,000 2.68 AAA/Aaa Federal Farm Credit Bank, Floating Rate Note, 2/11/10 411,131
450,000 2.64 AAA/Aaa Federal Home Loan Bank, Floating Rate Note, 12/15/09 448,979
345,000 NR/AAA Federal National Mortgage Association Discount Note, 0.0%, 1/29/09 344,578
200,000 2.32 AAA/Aaa Federal National Mortgage Association, Floating Rate Note, 2/8/10 199,937
390,000 0.33 AAA/Aaa Federal National Mortgage Association, Floating Rate Note, 9/3/09 390,000
195,000 AAA/AAA Freddie Mac Discount Note, 0.0%, 4/6/09 193,559
220,000 AAA/AAA Freddie Mac Discount Note, 2.1%, 1/7/09 219,923
380,000 AAA/AAA Freddie Mac Discount Note, 2.2%, 1/13/09 379,721
105,000 2.40 AAA/Aaa Freddie Mac, Floating Rate Note, 10/19/09 104,969
100,000 2.44 AAA/Aaa Freddie Mac, Floating Rate Note, 9/18/09 99,978
-----------
$ 3,758,224
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $3,758,224) $ 3,758,224
-----------
MUNICIPAL BONDS - 6.5%
Municipal Government - 2.3%
890,000 8.00 AA/Aa1 Texas State Tax & Revenue Antic, Floating Rate Note, 12/1/27 $ 890,000
-----------
Municipal Development - 0.7%
200,000 1.05 AA/Aa1 Jackson County Mississippi, Floating Rate Note, 6/1/23 $ 200,000
100,000 1.05 AAA/Aaa Syracuse New York Industrial Development,
Floating Rate Note, 12/1/37 100,000
-----------
$ 300,000
-----------
Municipal Higher Education - 1.1%
245,000 1.05 NR/NR Athens-Clarke County Georgia, Floating Rate Note, 8/1/33 $ 245,000
200,000 1.10 AA+/Aa2 University of Michigan, Floating Rate Note, 12/1/37 200,000
-----------
$ 445,000
-----------
Municipal Medical - 1.1%
200,000 0.95 AA/Aaa Harris County Texas Health, Floating Rate Note, 12/1/41 $ 200,000
220,000 1.15 AA+/Aa1 Weber County Utah Hospital Revenue, Floating Rate Note, 2/15/31 220,000
-----------
$ 420,000
-----------
Municipal Single Family Housing - 1.3%
500,000 3.00 AAA/Aaa Iowa Finance Authority Revenue, Floating Rate Note, 7/1/37 $ 500,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $2,555,000) $ 2,555,000
-----------
MUTUAL FUND - 3.1%
Diversified Financials - 3.1%
Diversified Financial Services - 3.1%
1,200,000 1.68 BlackRock Liquidity Funds TempCash Portfolio $ 1,200,000
-----------
TOTAL MUTUAL FUND
(Cost $1,200,000) $ 1,200,000
-----------
The accompanying notes are an integral part of these financial statements. 5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (b) Ratings
Amount (unaudited) (unaudited) Value
COMMERCIAL PAPER - 54.0%
$ 400,000 2.70 NR/AA3 Abbey National Treasury Service, Floating Rate Note, 2/13/09 $ 400,000
330,000 A-1/P-1 ABN Amro Bank NV, 2.06%, 4/1/09 330,500
400,000 A-1/P-1 AT&T, Inc., 2.23%, 1/23/09 (144A) 399,719
390,000 A-1/P-1 Banco Bilbao Vizcaya, 0.0%, 1/14/09 389,920
225,000 AA/AA1 Banco Bilbao Vizcaya, 2.155%, 2/11/09 225,001
230,000 A-1+/AA1 Banco Bilbao Vizcaya, 2.22%, 3/4/09 230,008
550,000 A-1/P-1 Bank of America Corp., 0.03%, 1/2/09 550,000
440,000 AA/Aaa Bank of New York, 5.05%, 3/3/09 441,434
710,000 2.89 A-1+/P-1 Bank of Nova Scotia, Floating Rate Note, 1/16/09 710,004
400,000 3.15 AA/AA1 Bank of Nova Scotia, Floating Rate Note, 5/6/09 400,000
105,000 AA-/Aa1 Barclays Bank Plc, 2.878%, 3/13/09 104,788
340,000 1.94 A-1+/AA1 Barclays Bank Plc, Floating Rate Note, 2/11/09 339,752
390,000 AA-/AA3 BNP Paribas, 2.43%, 4/27/09 390,000
635,000 A-1+/P-1 CBA Delaware Finance, 1.85%, 3/9/09 632,814
200,000 A-1+/AA3 Chase Bank U.S.A. N.A., 2.82%, 1/1/09 200,000
220,000 A-1/P-1 Citibank N.A., 0.0%, 3/2/09 220,000
225,000 A-1/P-1 Citibank N.A., 1.1%, 2/23/09 225,000
390,000 A-1/P-1 Conoco Philips, 1.2%, 1/8/09 389,909
390,000 A-1/P-1 Conoco Philips, 2.31%, 1/30/09 389,607
780,000 1.88 A+/Aa1 Credit Suisse New York, Floating Rate Note, 1/8/09 779,786
300,000 2.94 NR/AA3 Credit Suisse New York, Floating Rate Note, 1/30/09 299,978
410,000 3.41 AA/NR Deutsche Bank New York, Floating Rate Note, 7/21/09 410,000
765,000 A-1+/P-1 HSBC U.S.A., Inc., 0.0%, 1/2/09 764,999
600,000 A-1/P-1 MetLife, Inc., 1.25%, 1/9/09 (144A) 599,833
452,000 A-1/P-1 National Rural Utilities Cooperative Finance Corp., 0.55%, 1/14/09 451,917
870,000 A-1+/AA1 Nordea Bank New York, 3.23%, 7/10/09 870,044
400,000 2.82 A-1+/AA1 Nordea Bank New York, Floating Rate Note, 2/12/09 400,000
255,000 A-1+/P-1 Nordea North America, Inc., 1.2%, 4/15/09 254,116
100,000 A-1+/P-1 Nordea North America, Inc., 1.75%, 1/16/09 99,927
230,000 A-1/P-1 Philip Morris International, Inc., 0.7%, 2/20/09 229,776
295,000 A-1/P-1 Philip Morris International, Inc., 2.5%, 1/23/09 294,550
250,000 A-1+/P-1 Procter & Gamble Co., 0.0%, 1/30/09 249,617
250,000 A-1+/P-1 Procter & Gamble Co., 1.6%, 2/4/09 (144A) 249,622
565,000 AAA/Aaa Rabobank Nederland NV, 1.75%, 3/2/09 565,000
250,000 A-1+/AAA Rabobank Nederland NV, 2.99%, 2/17/09 250,113
100,000 A-1+/AAA Rabobank Nederland NV, 3.02% 3/9/09 100,011
570,000 AA-/AAA Royal Bank of Canada, 1.89%, 5/22/09 570,000
800,000 AA-/Aaa Royal Bank of Canada, 5.29%, 2/2/09 801,347
250,000 1.74 AA-/Aaa Royal Bank of Canada, Floating Rate Note, 10/1/09 250,000
100,000 3.00 AA/AAA Royal Bank of Canada, Floating Rate Note, 8/7/09 100,000
565,000 AA/AA1 Royal Bank of Scotland Plc, 2.18%, 3/10/09 565,011
570,000 A-1+/AA3 Societe General, 2.95%, 1/5/09 570,050
500,000 A-1+/P-1 State Street Corp., 0.0%, 1/5/09 499,846
565,000 A-1+/AA1 Svenska Handelsbanken, 1.95%, 1/20/09 565,003
190,000 2.76 NR/Aa1 Svenska Handelsbanken, Floating Rate Note, 1/5/09 190,009
110,000 5.14 AA-/Aa1 Svenska Handelsbanken, Floating Rate Note, 7/13/09 110,076
100,000 3.11 NR/AA1 Svenska Handelsbanken, Floating Rate Note, 7/8/09 100,000
260,000 4.91 AA-/AAA The Bank of New York Mellon, Floating Rate Note, 10/14/09 258,628
580,000 A-1+/AAA Toronto Dominion Bank, 0.0%, 2/19/09 580,000
110,000 A-1+/P-1 Toronto Dominion Bank, 1.96%, 10/6/09 110,008
565,000 A-1+/AAA Toronto Dominion Bank, 2.48%, 5/26/09 565,023
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Principal Rate (b) Ratings
Amount (unaudited) (unaudited) Value
COMMERCIAL PAPER - (continued)
$ 225,000 A-1+/P-1 Vanderbilt University, 0.0%, 1/8/09 $ 224,895
565,000 A-1+/AA3 Westpac Banking Corp., 1.5%, 6/15/09 565,000
105,000 A-1+/NR Yale University, 0.0%, 1/9/09 104,910
225,000 NR/P-1 Yale University, 0.0%, 3/2/09 224,411
100,000 A-1+/P-1 Yale University, 1.97%, 2/6/09 99,803
100,000 A-1+/P-1 Yale University, 2.2%, 2/10/09 99,755
110,000 A-1+/P-1 Yale University, 3.8%, 1/7/09 109,930
-----------
TOTAL COMMERCIAL PAPER
(Cost $21,101,450) $21,101,450
-----------
REPURCHASE AGREEMENTS - 8.7%
1,000,000 Bank of America, 0.07%, dated 12/31/08, repurchase price of
$1,000,000 plus accrued interest on 1/2/09 collateralized by
$1,002,798 Federal National Mortgage Association, 6.0%, 10/1/38 $ 1,000,000
195,000 Barclays Plc, 0.03%, dated 12/31/08, repurchase price of $195,000
plus accrued interest on 1/2/09 collateralized by the following:
$69,979 Federal National Mortgage Association, 4.0 - 5.0%,
9/1/23 - 12/1/33
$19,052 Federal Home Loan Mortgage Corp., 5.924%, 1/1/37
$158,510 Federal National Mortgage Association (ARM),
4.684 - 5.551%, 9/1/35 - 4/1/38 195,000
1,200,000 Deutsche Bank, 0.10%, dated 12/31/08, repurchase price of
$1,200,000 plus accrued interest on 1/2/09 collateralized by
$1,607,227 Freddie Mac Giant, 7.0%, 11/1/37 1,200,000
1,000,000 JPMorgan Chase & Co., 0.04%, dated 12/31/08, repurchase price of
$1,000,000 plus accrued interest on 1/2/09 collateralized by
$1,545,103 Federal National Mortgage Association, 4.0 - 7.5%,
12/1/13 - 1/1/39 1,000,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $3,395,000) $ 3,395,000
-----------
TOTAL INVESTMENT IN SECURITIES - 99.3%
(Cost $38,789,089)(a) $38,789,089
-----------
OTHER ASSETS AND LIABILITIES - 0.7% $ 281,319
-----------
TOTAL NET ASSETS - 100.0% $39,070,408
===========
NR Not rated by either S&P or Moody's.
(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, 2008, the value of these securities amounted to $1,999,129
or 5.1% of total net assets.
(a) At December 31, 2008, cost for federal income tax purposes was
$38,789,089.
(b) Debt obligation with a variable interest rate. Rate shown is the rate
at year end.
Purchases and sales of securities (excluding temporary cash
investments) for the year ended December 31, 2008 aggregated
$60,487,273 and $64,000,075, respectively.
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 -- significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- -------------------------------------------------------------------------------
Level 1 -- Quoted Prices $ --
Level 2 -- Other Significant Observable Inputs 38,789,089
Level 3 -- Significant Unobservable Inputs --
-----------
Total $38,789,089
===========
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
Increase from investment operations:
Net investment income $ 0.023 $ 0.047 $ 0.040 $ 0.025 $ 0.007
Net realized and unrealized loss (gain) on investments -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase from investment operations $ 0.023 $ 0.047 $ 0.040 $ 0.025 $ 0.007
Distributions to shareowners:
Net investment income (0.023) (0.047) (0.040) (0.025) (0.007)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== =========== =========== ===========
Total return* 2.38% 4.83% 4.50% 2.47% 0.65%
Ratio of net expenses to average net assets+ 0.77% 0.63% 0.61% 0.73% 0.74%
Ratio of net investment income to average net assets+ 2.25% 4.70% 4.43% 2.40% 0.66%
Net assets, end of year (in thousands) $ 39,070 $ 37,555 $ 34,334 $ 33,216 $ 42,896
Ratios with no waiver of fees and assumption of
expenses by PIM and no reduction for fees paid
indirectly:
Net expenses 0.77% 0.63% 0.61% 0.73% 0.74%
Net investment income 2.25% 4.70% 4.43% 2.40% 0.66%
* 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.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (cost 38,789,089) $ 38,789,089
Cash 71,871
Receivables -
Portfolio shares sold 321,705
Interest 138,186
Other 4,066
------------
Total assets $ 39,324,917
------------
LIABILITIES:
Payables -
Portfolio shares repurchased $ 185,009
Dividends 3,617
Due to affiliates 4,239
Accrued expenses 61,644
------------
Total liabilities $ 254,509
------------
NET ASSETS:
Paid-in capital $ 39,074,025
Distributions in excess of net investment income (3,617)
------------
Total net assets $ 39,070,408
------------
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $39,070,408/39,107,722 shares) $ 1.00
============
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Interest $1,176,469
----------
Total investment income $1,176,469
----------
EXPENSES:
Management fees $ 155,778
Transfer agent fees 1,494
Administrative fees 11,681
Custodian fees 61,118
Professional fees 46,365
Printing expense 8,732
Fees and expenses of nonaffiliated trustees 6,033
Miscellaneous 9,813
----------
Total expenses $ 301,014
----------
Net expenses $ 301,014
----------
Net investment income $ 875,455
----------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments $ 14,526
----------
Net gain on investments $ 14,526
----------
Net increase in net assets resulting from operations $ 889,981
==========
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 875,455 $ 1,753,383
Net realized gain (loss) on investments 14,526 (2,325)
------------ ------------
Net increase in net assets resulting from operations $ 889,981 $ 1,751,058
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.023 and $0.047 per share, respectively) $ (917,876) $ (1,753,137)
------------ ------------
Total distributions to shareowners $ (917,876) $ (1,753,137)
------------ ------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 17,165,161 $ 23,782,229
Reinvestment of distributions 917,876 1,753,137
Cost of shares repurchased (16,539,942) (22,311,664)
------------ ------------
Net increase in net assets resulting from
Portfolio share transactions $ 1,543,095 $ 3,223,702
------------ ------------
Net increase in net assets $ 1,515,200 $ 3,221,623
NET ASSETS:
Beginning of year 37,555,208 34,333,585
------------ ------------
End of year $ 39,070,408 $ 37,555,208
============ ============
Undistributed (distributions in excess of) net investment income $ (3,617) $ 246
============ ============
'08 Shares '08 Amount '07 Shares '07 Amount
Class I
Shares sold 17,165,161 $ 17,165,161 23,782,227 $ 23,782,229
Reinvestment of distributions 917,876 917,876 1,753,137 1,753,137
Less shares repurchased (16,539,942) (16,539,942) (22,311,664) (22,311,664)
------------ ------------ ------------ ------------
Net increase 1,543,095 $ 1,543,095 3,223,700 $ 3,223,702
============ ============ ============ ============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Money Market VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified,
open-end management investment company. The investment objective of the
Portfolio is to seek current income consistent with preserving capital and
providing liquidity.
The Portfolio offers one class of shares designated as Class I shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio's prospectus contains unaudited information regarding the
Portfolio's principal risks. Please refer to that document when considering the
Portfolio's principal risks. Although the Portfolio seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by
investing in the Portfolio.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, which are in conformity with those policies
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 in income
bearing cash accounts, is recorded on the accrual basis.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of each Portfolio's distributions
may be shown in the accompanying financial statements as either from or in
excess of net investment income or net realized gain on investment
transactions, or from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio has reclassified $29,331 to decrease
paid in capital, $38,558 to increase undistributed net investment income
and $9,227 to decrease accumulated net realized gain on investments to
reflect permanent book/tax differences. The reclassification has no impact
on the net asset value of the Portfolio and presents the Portfolio's
capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, were as follows:
- -------------------------------------------------------------------------------
2008 2007
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 917,876 $1,753,137
---------- ----------
Total distributions $ 917,876 $1,753,137
========== ==========
Distributable Earnings:
Dividend payable $ (3,617)
----------
Total $ (3,617)
==========
- -------------------------------------------------------------------------------
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in underwriting commissions on
the sale of Trust shares for the year ended December 31, 2008.
D. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.40% of the
Portfolio's average daily net assets up to $1 billion and 0.35% on assets over
$1 billion.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities, is $450 in management fees,
administrative costs and certain other fees payable to PIM at December 31, 2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredit, provides substantially all transfer agent and
shareowner services to the Trust at negotiated rates. Included in "Due to
affiliates" reflected on the Statement of Assets and Liabilities is $3,789 in
transfer agent fees payable to PIMSS at December 31, 2008.
4. Money Market Temporary Guarantee Program
The Portfolio has enrolled in the U.S. Treasury Department's Temporary Guarantee
Program for Money Market Funds (the Program). The Program provides a guarantee
to participating money market fund shareholders based on the number of shares
invested in the Portfolio at the close of business on September 19, 2008. The
guarantee would be triggered in the event the market-based net asset value of a
participating fund falls below $0.995 and that situation has not been cured.
Recovery under the Program would require the Portfolio to liquidate. Upon
liquidation, and subject to the availability of assets under the Program,
eligible shareholders would be entitled to receive a payment equal to any
shortfall between the amount received by a shareholder in liquidation and $1.00
per share.
Only shareholders of record as of September 19, 2008 are eligible to receive the
benefit of the guarantee. Any increase in the number of shares held in the
Portfolio in excess of shares held at the close of business on September 19,
2008 will not be covered. If the number of shares held in an account fluctuates
over the period, shareholders will be covered for either the number of shares
held as of the close of business on September 19, 2008 or the number of shares
held on the date of the trigger event, whichever is less. If a shareholder's
account is closed with the Portfolio or a broker-dealer, any future investments
in the Portfolio will not be guaranteed.
The Treasury has extended the Program's expiration date from December 18, 2008
to April 30, 2009. The Treasury has discretion to continue the Program until
September 18, 2009.
In order to participate in the initial three month period and the extended
period of the Program, the Portfolio paid to the U.S. Treasury Department fees
in the amount of 0.01% and 0.015% of the Portfolio's net asset value as of the
close of business on September 19, 2008, respectively. These expenses will be
borne by the Portfolio without regard to any expense limitation currently in
effect for the Portfolio and are reflected in the Statement of Operations.
5. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Money Market VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Money Market VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Money Market VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and financial highlights for each of the
five years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentages of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified interest
income and qualified short term gains were 90.41% and 0%, respectively.
16
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are
Custodian responsible for the Trust's operations. The Trustees and
Brown Brothers Harriman & Co. officers are listed below, together with their principal
occupations during the past five years. Trustees who are
Independent Registered Public Accounting Firm interested persons of the Trust within the meaning of the
Ernst & Young LLP 1940 Act are referred to as Interested Trustees. Trustees
who are not interested persons of the Trust are referred to
Principal Underwriter as Independent Trustees. Each of the Trustees serves as a
Pioneer Funds Distributor, Inc. trustee of each of the 76 U.S. registered investment
portfolios for which Pioneer serves as investment adviser
Legal Counsel (the "Pioneer Funds"). The address for all Trustees and all
Bingham McCutchen LLP officers of the Trust is 60 State Street, Boston,
Massachusetts 02109.
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves Deputy Chairman and a Director None
Board, Trustee until a successor trustee is of Pioneer Global Asset
and President elected or earlier Management S.p.A. ("PGAM");
retirement or removal. Non-Executive Chairman and a
Director of Pioneer Investment
Management USA Inc.
("PIM-USA"); Chairman and a
Director of Pioneer; Chairman
and Director of Pioneer
Institutional Asset Management,
Inc. (since 2006); Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited
and affiliated funds; Director
of PIOGLOBAL Real Estate
Investment Fund (Russia) (until
June 2006); Director of Nano-C,
Inc. (since 2003); Director of
Cole Management Inc. (since
2004); Director of Fiduciary
Counseling, Inc.; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD")
(until May 2006); President of
all of the Pioneer Funds; and
Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves Director, CEO and President of None
(50)* Executive Vice until a successor trustee is Pioneer Investment Management
President elected or earlier USA Inc. (since February 2007);
retirement or removal. Director and President of
Pioneer Investment Management,
Inc. and Pioneer Institutional
Asset Management, Inc. (since
February 2007); Executive Vice
President of all of the Pioneer
Funds (since March 2007);
Director of Pioneer Global
Asset Management S.p.A. (since
April 2007); Head of New
Markets Division, Pioneer
Global Asset Management S.p.A.
(2000 - 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the
Portfolio's investment adviser and certain of its affiliates.
17
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock (65) Trustee Trustee since 2005. Serves Executive Vice President and Director of Enterprise
until a successor trustee is Chief Financial Officer, Community Investment,
elected or earlier I-trax, Inc. (publicly traded Inc. (privately-held
retirement or removal. health care services company) affordable housing
(2004 - 2007); Partner, Federal finance company); and
City Capital Advisors (boutique Director of New York
merchant bank) (1997 to 2004 Mortgage Trust (publicly
and 2008 - present); and traded mortgage REIT)
Executive Vice President and
Chief Financial Officer,
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves President, Bush International, Director of Marriott
until a successor trustee is LLC (international financial International, Inc.,
elected or earlier advisory firm) Director of Discover
retirement or removal. Financial Services
(credit card issuer and
electronic payment
services); Director of
Briggs & Stratton Co.
(engine manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation (national
security, defense, and
intelligence technology
firm); and Member, Board
of Governors, Investment
Company Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves Professor, Harvard University Trustee, Mellon
(64) until a successor trustee is Institutional Funds
elected or earlier Investment Trust and
retirement or removal. Mellon Institutional
Funds Master Portfolio
(oversees 17 portfolios
in fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves Founding Director, Vice None
(61) until a successor trustee is President and Corporate
elected or earlier Secretary, The Winthrop Group,
retirement or removal. Inc. (consulting firm); and
Desautels Faculty of
Management, McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves Chief Executive Officer, None
until a successor trustee is Quadriserv, Inc. (technology
elected or earlier products for securities lending
retirement or removal. industry) (2008 - present);
Private investor (2004 - 2008);
and Senior Executive Vice
President, The Bank of New York
(financial and securities
services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves President and Chief Executive Director of New America
until a successor trustee is Officer, Newbury, Piret & High Income Fund, Inc.
elected or earlier Company, Inc. (investment (closed-end investment
retirement or removal. banking firm) company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves Senior Counsel, Sullivan & Director, The Swiss
until a successor trustee is Cromwell LLP (law firm) Helvetia Fund, Inc.
elected or earlier (closed-end investment
retirement or removal. company)
- ------------------------------------------------------------------------------------------------------------------------------------
18
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the Secretary of PIM-USA; Senior Vice None
discretion of the Board President - Legal of Pioneer;
Secretary/ Clerk of most of
PIM-USA's subsidiaries; and
Secretary of all of the Pioneer
Funds since September 2003
(Assistant Secretary from
November 2000 to September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the Associate General Counsel of None
Secretary discretion of the Board Pioneer since January 2008 and
Assistant Secretary of all of the
Pioneer Funds since September
2003; Vice President and Senior
Counsel of Pioneer from July 2002
to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the Vice President - Fund Accounting, None
discretion of the Board Administration and Controllership
Services of Pioneer; and
Treasurer of all of the Pioneer
Funds since March 2008; Deputy
Treasurer of Pioneer from March
2004 to February 2008; Assistant
Treasurer of all of the Pioneer
Funds from March 2004 to February
2008; and Treasurer and Senior
Vice President, CDC IXIS Asset
Management Services from 2002 to
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the Fund Administration Manager - None
(35) Treasurer discretion of the Board Fund Accounting, Administration
and Controllership Services since
June 2003 and Assistant Treasurer
of all of the Pioneer Funds since
September 2003; Assistant Vice
President - Mutual Fund
Operations of State Street
Corporation from June 2002 to
June 2003 (formerly Deutsche Bank
Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the Chief Compliance Officer of None
Compliance discretion of the Board Pioneer since December 2006 and
Officer of all the Pioneer Funds since
January 2007; Vice President and
Compliance Officer, MFS
Investment Management (August
2005 to December 2006);
Consultant, Fidelity Investments
(February 2005 to July 2005);
Independent Consultant (July 1997
to February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
21
[LOGO] PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is also
available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18654-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Oak Ridge Large Cap Growth VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2008
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public
Accounting Firm 16
Approval of Investment Sub-Advisory Agreement 18
Trustees, Officers and Service Providers 20
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 92.2%
Temporary Cash Investments 5.9%
Depository Receipts for International Stocks 1.9%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Information Technology 26.4%
Health Care 23.5%
Industrials 10.9%
Financials 9.7%
Consumer Staples 9.1%
Energy 8.9%
Consumer Discretionary 7.5%
Materials 4.0%
Five Largest Holdings
(As a percentage of equity holdings)
1. Procter & Gamble Co. 4.01%
2. Qualcomm, Inc. 3.89
3. Abbott Laboratories 3.46
4. XTO Energy, Inc. 3.33
5. Raytheon Co. 3.24
The Portfolio is actively managed and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class II $ 7.65 $ 13.04
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class II $ 0.0423 $ 0.0977 $ 0.4323
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Oak Ridge Large Cap Growth VCT Portfolio at net asset value, compared to that
of the Russell 1000 Growth Index and the Standard & Poor's 500 Index. Portfolio
returns are based on net asset value and do not reflect any applicable
insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Oak Ridge
Large Cap Growth
VCT Portfolio, Russell 1000
Class II Growth Index S&P 500 Index
3/04 10,000 10,000 10,000
12/04 10,851 10,547 10,903
12/05 11,739 11,102 11,438
12/06 12,066 12,110 13,243
12/07 13,046 13,540 13,970
12/08 8,045 8,336 8,802
The Russell 1000 Growth Index measures the performance of large-cap U.S. growth
stocks. The S&P 500 Index is a commonly used measure of the broad U.S. stock
market. 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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Life-of-Class
(3/15/04) -4.00%
1 Year -38.34%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers the Portfolio's performance would be lower.
Waivers may not be in effect for all funds. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
2
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value - $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Oak Ridge Large Cap Growth VCT
Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class II
- -----------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 710.29
Expenses Paid During Period* $ 4.08
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Oak Ridge Large Cap Growth VCT
Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class II
- -----------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.36
Expenses Paid During Period* $ 4.82
* Expenses are equal to the Portfolio's annualized expense ratio of 0.95% for
Class II shares, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
In the following interview, David Klaskin, Pioneer Oak Ridge Large Cap Growth
VCT Portfolio's Lead Portfolio Manager, discusses the factors that influenced
the Portfolio's performance during the 12 months ended December 31, 2008.
Q: How did the Portfolio's perform during 2008?
A: The Portfolio produced a negative absolute return during the annual period,
reflecting the fact that the U.S. market endured one of the worst years in
its history. Class II shares of Pioneer Oak Ridge Large Cap Growth VCT
Portfolio returned -38.34% at net asset value over the 12 months ended
December 31, 2008, while the Russell 1000 Growth Index returned -38.44%
and the broad-market Standard and Poor's 500 Index (the S&P 500) returned
-36.99%. Over the same 12 months, the average return of the 224 large cap
growth variable portfolios tracked by Lipper, Inc. returned -41.68%.
We recognize that the past year has been difficult for investors. Still, we
are encouraged by the fact that the Portfolio's relative performance
improved in the second half of the year, thereby allowing it to track
closely to its benchmark for the full period. Our goal has been to preserve
capital to the greatest extent possible by focusing on higher-quality
companies with attractive valuations and good earnings visibility. The
approach proved helpful when the deterioration in the broader environment
accelerated during the September-December period.
Q: What elements of the Portfolio's positioning helped and hurt performance
during the 12 months ended December 31, 2008?
A: The Portfolio generated the best relative performance in the financial
sector, a potential minefield given that many large-cap financials went
bankrupt during the period. While our holdings in the area produced a
negative absolute return, they outperformed the financial stocks in the
benchmark by a wide margin. The primary reason for the positive divergence
was our decision to avoid stocks with exposure to the mortgage and credit
crises in favor of those with more reliable earnings, such as the
insurance company Aflac and the broker Charles Schwab.
The energy sector also was a source of relative strength for the Portfolio.
While our holdings lost ground in the aggregate - a reflection of the poor
performance of energy stocks in general - their collective strength in
comparison to the broader energy group was a positive for the Portfolio's
relative performance.
The basic materials sector was a further area of outperformance for the
Portfolio. We typically hold an underweight position in the sector, where
the high percentage of cyclical companies means that most stocks do not fit
our strict requirements for earnings visibility. Since reaching a peak in
June, the materials sector has plummeted on fears of slower economic
growth. The result has been a boost to the Portfolio's relative performance
and a validation of our view that investing in deeply cyclical stocks is
not consistent with a growth strategy that emphasizes quality.
Our worst relative performance occurred in the consumer staples sector,
which outperformed the broader market amid investors' search for safe
havens. The reason for the underweight is that many consumer staples stocks
looked expensive coming into the period. During the unusual environment of
the past year, however, investors' need for safety trumped valuation,
causing our underweight in the group to hurt relative performance.
A Word About Risk:
The Portfolio invests in a limited number of securities and, as a result, the
Portfolio's performance may be more volatile than the performance of other
portfolios holding more securities. At times, the Portfolio's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In the consumer discretionary sector, stocks fell sharply due to fears that
consumers will curtail their spending to cope with declining wealth and
slowing economic growth. These concerns weighed on our positions in Target,
Best Buy and Abercrombie & Fitch. Our positioning in technology further
weighed on performance. Here, we underestimated the impact of slower growth
on many of the stocks we held in the Portfolio, including Apple, Google,
Cisco Systems, and the graphics chip maker Nvidia Corp.
Q: What is your outlook for the U.S. equity market?
A: We continue to hold a cautious view on the outlook for the broader market.
The ultimate length of the downturn is unknowable, and the potential is
high that economic growth, when it finally returns to positive territory,
will be on the low end of the historical range. Having said this, we are
finding a growing number of compelling opportunities among individual
companies. The extreme nature of this bear market, along with the "forced
selling" that it has brought about, has meant that the stocks of
higher-quality companies have sold off alongside their lower-quality
counterparts. We believe this indicates that even if the broader market
does not make much headway in the year ahead, there will still be numerous
individual companies that can perform extremely well. Our goal is to
populate the Portfolio with stocks that we believe fit in this category.
We encourage shareholders to remain focused on the potential benefits of
investing in higher-quality growth companies, even if the market remains
volatile in the months ahead.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 92.0%
Energy - 8.2%
Oil & Gas Drilling - 1.0%
3,010 Transocean, Ltd.* $ 142,223
-----------
Oil & Gas Equipment & Services - 1.9%
6,035 Schlumberger, Ltd. $ 255,462
-----------
Oil & Gas Exploration & Production - 5.3%
7,275 Petrohawk Energy Corp.* $ 113,708
6,745 Southwestern Energy Co.* 195,403
11,952 XTO Energy, Inc. 421,547
-----------
$ 730,658
-----------
Total Energy $ 1,128,343
-----------
Materials - 3.7%
Fertilizers & Agricultural Chemicals - 0.8%
1,625 Monsanto Co. $ 114,319
-----------
Industrial Gases - 1.0%
2,195 Praxair, Inc. $ 130,295
-----------
Specialty Chemicals - 1.9%
7,450 Ecolab, Inc. $ 261,868
-----------
Total Materials $ 506,482
-----------
Capital Goods - 8.7%
Aerospace & Defense - 6.4%
2,790 Precision Castparts Corp. $ 165,948
8,035 Raytheon Co. 410,106
5,685 United Technologies Corp. 304,716
-----------
$ 880,770
-----------
Industrial Machinery - 2.3%
5,540 Danaher Corp. $ 313,619
-----------
Total Capital Goods $ 1,194,389
-----------
Commercial Services & Supplies - 1.4%
Diversified Support Services - 1.4%
7,515 Iron Mountain, Inc.* $ 185,846
-----------
Total Commercial Services &
Supplies $ 185,846
-----------
Automobiles & Components - 1.4%
Auto Parts & Equipment - 1.4%
10,640 Johnson Controls, Inc. $ 193,222
-----------
Total Automobiles & Components $ 193,222
-----------
Retailing - 5.5%
Computer & Electronics Retail - 1.5%
7,270 Best Buy Co., Inc. (b) $ 204,360
-----------
General Merchandise Stores - 1.7%
6,985 Target Corp. (b) $ 241,192
-----------
Specialty Stores - 2.3%
17,572 Staples, Inc. $ 314,890
-----------
Total Retailing $ 760,442
-----------
Shares Value
Food & Drug Retailing - 1.9%
Food Retail - 1.9%
9,820 Kroger Co. $ 259,346
-----------
Total Food & Drug Retailing $ 259,346
-----------
Food, Beverage & Tobacco - 2.7%
Soft Drinks - 2.7%
6,900 PepsiCo, Inc. $ 377,913
-----------
Total Food, Beverage & Tobacco $ 377,913
-----------
Household & Personal Products - 3.7%
Household Products - 3.7%
8,230 Procter & Gamble Co.* $ 508,779
-----------
Total Household & Personal Products $ 508,779
-----------
Health Care Equipment & Services - 6.8%
Health Care Distributors - 1.8%
6,645 Henry Schein, Inc.* $ 243,805
-----------
Health Care Equipment - 5.0%
4,500 Becton, Dickinson & Co. $ 307,755
11,320 Hologic, Inc.*(b) 147,952
5,950 Stryker Corp. 237,703
-----------
$ 693,410
-----------
Total Health Care Equipment &
Services $ 937,215
-----------
Pharmaceuticals & Biotechnology - 14.8%
Biotechnology - 7.9%
5,725 Celgene Corp.* $ 316,478
4,535 Genentech, Inc.* 375,997
7,605 Gilead Sciences, Inc.* 388,920
-----------
$ 1,081,395
-----------
Life Sciences Tools & Services - 2.0%
8,200 Thermo Fisher Scientific, Inc.* $ 279,374
-----------
Pharmaceuticals - 4.9%
8,210 Abbott Laboratories $ 438,168
6,015 Allergan, Inc. 242,525
-----------
$ 680,693
-----------
Total Pharmaceuticals &
Biotechnology $ 2,041,462
-----------
Diversified Financials - 6.0%
Asset Management & Custody Banks - 1.7%
16,630 Invesco, Ltd. $ 240,137
-----------
Investment Banking & Brokerage - 2.1%
17,790 Charles Schwab Corp. $ 287,664
-----------
Specialized Finance - 2.2%
405 CME Group, Inc. $ 84,285
2,670 IntercontinentalExchange, Inc.* 220,115
-----------
$ 304,400
-----------
Total Diversified Financials $ 832,201
-----------
6 The accompanying notes are an integral part of these financial statements.
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Insurance - 2.9%
Life & Health Insurance - 2.9%
8,675 Aflac, Inc. $ 397,662
-----------
Total Insurance $ 397,662
-----------
Software & Services - 9.4%
Application Software - 3.4%
10,020 Adobe Systems, Inc.* $ 213,326
6,910 SAP AG (A.D.R.)*(b) 250,280
-----------
$ 463,606
-----------
Data Processing & Outsourced
Services - 1.2%
3,235 Visa, Inc. $ 169,676
-----------
Internet Software & Services - 2.7%
1,199 Google, Inc.* $ 368,872
-----------
Systems Software - 2.1%
15,305 Microsoft Corp. $ 297,528
-----------
Total Software & Services $ 1,299,682
-----------
Technology Hardware & Equipment - 11.4%
Communications Equipment - 6.4%
23,955 Cisco Systems, Inc.* $ 390,467
13,760 Qualcomm, Inc. 493,021
-----------
$ 883,488
-----------
Computer Hardware - 4.2%
3,045 Apple, Inc.* $ 259,891
8,850 Hewlett-Packard Co. 321,167
-----------
$ 581,058
-----------
Electronic Components - 0.8%
4,655 Amphenol Corp. $ 111,627
-----------
Total Technology Hardware &
Equipment $ 1,576,173
-----------
Semiconductors - 3.5%
Semiconductors - 3.5%
18,055 Intel Corp. $ 264,686
13,560 Texas Instruments, Inc. 210,451
-----------
$ 475,137
-----------
Total Semiconductors $ 475,137
-----------
TOTAL COMMON STOCKS
(Cost $16,174,447) $12,674,294
-----------
Principal
Amount ($) Value
TEMPORARY CASH INVESTMENTS - 5.8%
Securities Lending Collateral - 5.8% (c)
Certificates of Deposit:
18,457 Abbey National Plc, 3.15%, 8/13/09 $18,457
18,454 Bank of Nova Scotia, 3.21%, 5/5/09 18,454
29,495 Bank of Scotland NY, 2.92%, 6/5/09 29,495
33,222 Barclays Bank, 1.5%, 5/27/09 33,222
5,868 Calyon NY, 4.62%, 1/16/09 5,868
Principal
Amount ($) Value
Securities Lending Collateral - (continued)
36,913 CBA, 4.87%, 7/16/09 $ 36,913
33,222 DNB NOR Bank ASA NY, 3.04%, 6/5/09 33,222
33,813 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 33,813
2,138 NORDEA NY, 4.13%, 4/9/09 2,138
27,685 Royal Bank of Canada NY, 2.7%, 8/7/09 27,685
18,457 Royal Bank of Scotland, 3.06%, 3/5/09 18,457
3,690 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 3,690
36,913 Societe Generale, 3.29%, 9/4/09 36,913
33,222 Svenska Bank NY, 4.61%, 7/8/09 33,222
36,913 U.S. Bank NA, 2.25%, 8/24/09 36,913
-----------
$ 368,462
-----------
Commercial Paper:
3,517 BBVA U.S., 2.83%, 3/12/09 $ 3,517
36,913 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 36,913
18,457 CME Group, Inc., 2.9%, 8/6/09 18,457
18,455 General Electric Capital Corp.,
2.86%, 3/16/09 18,455
36,249 American Honda Finance Corp.,
4.95%, 7/14/09 36,249
36,913 HSBC Bank, Inc., 2.5%, 8/14/09 36,913
18,457 IBM, 2.39%, 9/25/09 18,457
33,222 Met Life Global Funding, 3.19%, 6/12/09 33,222
33,222 New York Life Global, 2.13%, 9/4/09 33,222
31,376 Westpac Banking Corp., 2.34%, 6/1/09 31,376
-----------
$ 266,781
-----------
Tri-party Repurchase Agreements:
81,209 Deutsche Bank, 0.25%, 1/2/09 $ 81,209
6,271 Barclays Capital Markets, 0.5%, 1/2/09 6,271
-----------
$ 87,480
-----------
Time Deposit:
36,913 BNP Paribas, 0.01%, 1/2/09 $ 36,913
-----------
Money Market Mutual Funds:
9,228 Columbia Government Reserves Fund $ 9,228
27,685 JP Morgan, U.S. Government Money
Market Fund 27,685
-----------
$ 36,913
-----------
Total Securities Lending Collateral $ 796,550
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $796,550) $ 796,550
-----------
TOTAL INVESTMENT IN SECURITIES - 97.8%
(Cost $16,970,997)(a) $13,470,844
-----------
OTHER ASSETS AND
LIABILITIES - 2.2% $ 303,235
-----------
TOTAL NET ASSETS - 100.0% $13,774,079
===========
The accompanying notes are an integral part of these financial statements. 7
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
* Non-income producing security.
(A.D.R.) American Depositary Receipt.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $17,096,376 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 374,038
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (3,999,570)
-----------
Net unrealized loss $(3,625,532)
===========
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
7,200 Best Buy Co., Inc. $202,392
10,000 Hologic, Inc. * 130,700
6,900 SAP AG (A.D.R.) * 249,918
6,000 Target Corp. 207,180
--------
Total $790,190
========
(c) Security lending collateral is managed by Credit Suisse, New York Branch.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $5,395,684 and $9,644,454,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- --------------------------------------------------------------------------------
Level 1 - Quoted Prices $12,674,294
Level 2 - Other Significant Observable Inputs 796,550
Level 3 - Significant Unobservable Inputs -
-----------
Total $13,470,844
===========
8 The accompanying notes are an integral part of these financial statements.
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended
Class II 12/31/08 12/31/07
Net asset value, beginning of period $ 13.04 $ 12.13
------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.04 $ 0.04
Net realized and unrealized gain (loss) on investments (4.86) 0.94
------- -------
Net increase (decrease) from investment operations $ (4.82) $ 0.98
Distributions to shareowners:
Net investment income (0.04) (0.02)
Net realized gain (0.53) (0.05)
------- -------
Net increase (decrease) in net asset value $ (5.39) $ 0.91
------- -------
Net asset value, end of period $ 7.65 $ 13.04
======= =======
Total return* (38.34)% 8.12%
Ratio of net expenses to average net assets 0.95% 0.95%
Ratio of net investment income to average net assets 0.30% 0.29%
Portfolio turnover rate 27% 44%
Net assets, end of period (in thousands) $13,774 $27,428
Ratios with no waiver of management fees and assumption of
expenses by PIM:
Net expenses 1.55% 1.29%
Net investment income (loss) (0.30)% 0.05%
3/15/04 (a)
Year Ended Year Ended to
Class II 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 11.98 $ 11.09 $10.00
------- ------- ------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.02 $ (0.01) $ 0.03
Net realized and unrealized gain (loss) on investments 0.30 0.92 1.06
------- ------- ------
Net increase (decrease) from investment operations $ 0.32 $ 0.91 $ 1.09
Distributions to shareowners:
Net investment income (0.00)(c) (0.02) --
Net realized gain (0.17) -- --
------- ------- ------
Net increase (decrease) in net asset value $ 0.15 $ 0.89 $ 1.09
------- ------- ------
Net asset value, end of period $ 12.13 $ 11.98 $11.09
======= ======= ======
Total return* 2.79% 8.18% 10.90%(b)
Ratio of net expenses to average net assets 0.95% 0.95% 0.95%**
Ratio of net investment income to average net assets 0.21% 0.08% 0.79%**
Portfolio turnover rate 52% 131% 21%(b)
Net assets, end of period (in thousands) $27,683 $25,908 $4,397
Ratios with no waiver of management fees and assumption of
expenses by PIM:
Net expenses 1.37% 1.93% 6.22%**
Net investment income (loss) (0.21)% (0.90)% (4.48)%**
(a) The Portfolio commenced operations on March 15, 2004.
(b) Not annualized.
(c) Amount rounds to less than one cent per share.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions, the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 9
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $790,190)
(cost $16,970,997) $ 13,470,844
Cash 978,177
Receivables --
Investment securities sold 146,154
Portfolio shares sold 3,302
Dividends 21,002
Due from Pioneer Investment Management, Inc. 16,331
------------
Total assets $ 14,635,810
------------
LIABILITIES:
Payables --
Portfolio shares repurchased $ 579
Upon return of securities loaned 796,550
Due to affiliates 6,018
Accrued expenses 58,584
------------
Total liabilities $ 861,731
------------
NET ASSETS:
Paid-in capital $ 19,039,539
Undistributed net investment income 61,120
Accumulated net realized loss on investments (1,826,427)
Net unrealized loss on investments (3,500,153)
------------
Total net assets $ 13,774,079
============
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class II (based on $13,774,079/1,799,520 shares) $ 7.65
============
10 The accompanying notes are an integral part of these financial statements.
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $2,723) $198,529
Interest 18,409
Income from securities loaned, net 4,450
Other 36,686
--------
Total investment income $ 258,074
------------
EXPENSES:
Management fees $155,328
Transfer agent fees 1,504
Distribution fees 51,776
Administrative fees 6,210
Custodian fees 52,565
Professional fees 33,995
Printing expense 9,486
Fees and expenses of nonaffiliated trustees 5,747
Miscellaneous 3,996
--------
Total expenses $ 320,607
Less management fees waived and expenses assumed by Pioneer Investment Management, Inc. (124,044)
------------
Net expenses $ 196,563
------------
Net investment income $ 61,511
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (1,369,108)
------------
Change in net unrealized gain (loss) on investments $ (8,149,867)
------------
Net loss on investments $ (9,518,975)
------------
Net decrease in net assets resulting from operations $ (9,457,464)
============
The accompanying notes are an integral part of these financial statements. 11
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 61,511 $ 81,906
Net realized gain (loss) on investments (1,369,108) 634,626
Change in net unrealized gain (loss) on investments (8,149,867) 1,507,160
------------- ------------
Net decrease (increase) in net assets resulting from operations $ (9,457,464) $ 2,223,692
------------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class II ($0.04 and $0.02 per share, respectively) $ (81,869) $ (54,770)
Net realized gain:
Class II ($0.53 and $0.05 per share, respectively) (1,025,778) (111,561)
------------- ------------
Total distributions to shareowners $ (1,107,647) $ (166,331)
------------- ------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 1,253,576 $ 3,142,582
Reinvestment of distributions 1,107,647 166,332
Cost of shares repurchased (5,449,568) (5,621,257)
------------- ------------
Net decrease in net assets resulting from Portfolio share transactions $ (3,088,345) $ (2,312,343)
------------- ------------
Net decrease in net assets $ (13,653,456) $ (254,982)
NET ASSETS:
Beginning of year 27,427,535 27,682,517
------------- ------------
End of year $ 13,774,079 $ 27,427,535
============= ============
Undistributed net investment income $ 61,120 $ 81,710
============= ============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS II
Shares sold 115,343 $ 1,253,576 247,445 $ 3,142,582
Reinvestment of distributions 98,897 1,107,647 12,934 166,332
Less shares repurchased (517,438) (5,449,568) (439,107) (5,621,257)
-------- ------------ -------- ------------
Net decrease (303,198) $ (3,088,345) (178,728) $ (2,312,343)
======== ============ ======== ============
12 The accompanying notes are an integral part of these financial statements.
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Oak Ridge Large Cap Growth VCT Portfolio (the Portfolio) is one of
19 portfolios comprising Pioneer Variable Contracts Trust (the Trust), a
Delaware statutory trust registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company. The investment objective
of the Portfolio is to seek capital appreciation.
The Portfolio offers one class of shares designated as Class II shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio invests in a limited number of securities and, as a result, the
Portfolio's performance may be more volatile than the performance of other
portfolios holding more securities. The Portfolio's prospectuses contain
unaudited information regarding the Portfolio's principal risks. Please refer
to those documents when considering the Portfolio's risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements which
are consistent 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 (NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset values, securities are valued at the last sale
price on the principal exchange where they are traded. Securities for which
market prices and/or quotations are not readily available are valued using
fair value methods pursuant to procedures adopted by the Board of Trustees.
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. The Portfolio may also use fair
value methods to value a security, including a non-U.S. security, when the
closing market price on the primary exchange where the security is traded
no longer accurately reflects the value of the security as of the close of
the NYSE. At December 31, 2008, there were no securities that were valued
using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$1,555,294, which will expire in 2016 if not utilized.
The Portfolio has elected to defer approximately $145,754 of capital losses
recognized between November 1, 2008 and December 31, 2008 to its fiscal
year ending December 31, 2009.
13
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
At December 31, 2008, the Portfolio has reclassified $232 to decrease
undistributed net investment income and $232 to decrease accumulated net
realized loss on investments to reflect permanent book/tax differences. The
reclassification has no impact on the net asset value of the Portfolio and
is designed to present the Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, was as follows:
- --------------------------------------------------------------------------------
2008 2007
----------- --------
Distributions paid from:
Ordinary income $ 271,020 $ 54,770
Long-term capital gain 836,627 111,561
----------- --------
Total distributions $ 1,107,647 $166,331
=========== ========
Distributable Earnings:
Undistributed ordinary income $ 61,120
Capital loss carryforward (1,555,294)
Post-October loss deferral (145,754)
Unrealized depreciation (3,625,532)
-----------
Total $(5,265,460)
===========
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
primarily attributable to the tax deferral of losses on wash sales.
C. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in commissions on the sale of
Trust shares for the year ended December 31, 2008.
Distribution fees for Class II shares are calculated based on the average
daily net asset values attributable to Class II shares of the Portfolio.
Dividends and distributions to shareowners are recorded on the ex-dividend
date.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.75% of the
Portfolio's average daily net assets up to $1 billion and 0.70% on assets over
$1 billion.
14
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer, and not the Portfolio, pays a portion of the fee it receives from the
Portfolio to Oak Ridge Investments, LLC (Oak Ridge) as compensation for Oak
Ridge's subadvisory services to the Portfolio.
On January 7, 2005, Pioneer Investment Management USA Inc. ("PIMUSA") acquired
a 49% ownership interest in Oak Ridge from the existing shareholders of Oak
Ridge. As part of the acquisition, PIMUSA also obtained the right to purchase
from the existing shareholders of Oak Ridge (i) an additional 11% ownership
interest in Oak Ridge two years from the date on which the acquisition was
consummated, and (ii) the remaining ownership interest twelve years from the
date on which the acquisition was consummated. Consequently, the acquisition
provides PIMUSA the ability to own 100% of Oak Ridge over time. PIMUSA is the
direct parent of PIM.
Through May 1, 2010, PIM has agreed not to impose all or a portion of its
management fee and, if necessary, to limit other ordinary operating expenses of
the Portfolio to the extent required to reduce Class II expenses to 0.95% of
the average daily net assets attributable to Class II shares.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $5,801 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly
owned indirect subsidiary of UniCredit, provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in
"Due to affiliates" reflected on the Statement of Assets and Liabilities is
$124 in transfer agent fees payable to PIMSS at December 31, 2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's
Class II shares. Included in "Due to affiliates" reflected on the Statement of
Assets and Liabilities is $93 in distribution fees payable to PFD at
December 31, 2008.
5. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of
SFAS 161 will have on the Fund's financial statement disclosures.
15
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Oak Ridge Large Cap Growth VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Oak Ridge Large Cap Growth VCT Portfolio, one of the portfolios constituting
the Pioneer Variable Contracts Trust (the "Trust"), including the schedule of
investments, as of December 31, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Oak Ridge Large Cap Growth VCT Portfolio as of December 31, 2008, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and financial
highlights for each of periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2009
16
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentage of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified short
term gains was 75.44%.
17
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED)
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained Oak Ridge Investments, LLC to serve as the
sub-adviser to the Portfolio pursuant to a sub-advisory agreement between PIM
and the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the fourth
quintile of its Morningstar category for the one year period ended June 30,
2008 and that the Portfolio's annualized total return was in the fifth quintile
of its Morningstar category for the three year period ended June 30, 2008. (In
all quintile rankings referred to throughout this disclosure, first quintile is
most favorable to the Portfolio's shareowners. Thus, highest relative
performance would be first quintile and lowest relative expenses would also be
first quintile.) After discussing the reasons for the Portfolio's
underperformance with PIM, the Trustees agreed that they would monitor the
performance of the Portfolio especially closely.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the fourth quintile relative to the
management fees paid by other funds in its peer group Morningstar category for
the comparable period. The Trustees also considered that the Portfolio's
expense ratio for the twelve months ended June 30, 2008 was in the first
quintile relative to its Strategic Insight peer group. The Trustees noted that
PIM agreed that the contractual expense limitation agreement would be in effect
for the Portfolio until at least December 31, 2009.
18
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
separate account clients with similar investment strategies as the Portfolio.
The Trustees noted that the fee rates for those separate accounts generally
were higher than the sub-advisory fees paid to the sub-adviser with respect to
the Portfolio.
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into account the size
of the Portfolio and the contractual expense limitation agreed to by PIM with
respect to the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees concluded that, because of the
breakpoints in the management and sub-advisory fee schedules and the reduced
fee rates above certain asset levels, any perceived or potential economies of
scale would be shared with the Portfolio.
Other Benefits
The Trustees considered the other benefits to the sub-adviser from its
relationship with the Portfolio, including the benefits to the sub-adviser and
its affiliates from the use of "soft" commission dollars generated by the
Portfolio to pay for research and brokerage services. The Trustees further
considered the intangible benefits to the sub-adviser by virtue of its
relationship with the Portfolio and certain of the other Pioneer funds. The
Trustees concluded that the receipt of these benefits was reasonable in the
context of the overall relationship between the sub-adviser and the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
19
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers The Board of Trustees provides broad supervision
Pioneer Investment Management, Inc. over the Portfolio's affairs. The officers of the Trust are responsible
for the Trust's operations. The Trustees and officers are listed below,
Custodian together with their principal occupations during the past five years.
Brown Brothers Harriman & Co. Trustees who are interested persons of the Trust within the meaning of the
1940 Act are referred to as Interested Trustees. Trustees who are not
Independent Registered Public Accounting Firm interested persons of the Trust are referred to as Independent Trustees.
Ernst & Young LLP Each of the Trustees serves as a trustee of each of the 76 U.S. registered
investment portfolios for which Pioneer serves as investment adviser (the
Principal Underwriter "Pioneer Funds"). The address for all Trustees and all officers of the
Pioneer Funds Distributor, Inc. Trust is 60 State Street, Boston, Massachusetts 02109.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- ---------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- -------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- -------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers
or directors of the Portfolio's investment adviser and certain of its
affiliates.
20
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal
- --------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
- ----------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- ------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment
Company Institute
- ------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- ------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- ------------------------------------------------------------------------
Thomas J. Perna (58) None
- ------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- ------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
- ------------------------------------------------------------------------
21
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board
- -------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board
- -------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board
- -------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board
- -------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board
Officer
- -------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- --------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- --------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- --------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President --
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- --------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- --------------------------------------------------------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
This page for your notes.
23
- --------------------------------------------------------------------------------
This page for your notes.
24
- --------------------------------------------------------------------------------
This page for your notes.
25
- --------------------------------------------------------------------------------
This page for your notes.
26
- --------------------------------------------------------------------------------
This page for your notes.
27
- --------------------------------------------------------------------------------
This page for your notes.
28
- --------------------------------------------------------------------------------
This page for your notes.
29
[LOGO]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18675-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Real Estate Shares VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Real Estate Shares VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 8
Notes to Financial Statements 13
Report of Independent Registered Public
Accounting Firm 16
Approval of Sub-Advisory Agreement 17
Trustees, Officers and Service Providers 19
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
U.S. Common Stocks 82.8%
Temporary Cash Investments 17.2%
Sector Distribution
(As a percentage of equity holdings)
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Apartment 16.6%
Office 13.6%
Shopping Center 13.5%
Industrial 12.0%
Regional Mall 12.0%
Health Care 11.3%
Storage 8.6%
Diversified 6.4%
Hotel 4.6%
Triple-Net Lease 1.4%
Five Largest Holdings
(As a percentage of equity holdings)*
1. Simon Property Group, Inc. 8.62%
2. Equity Residential
Property Trust 6.60
3. Public Storage, Inc. 5.80
4. Boston Properties, Inc. 5.39
5. Nationwide Health
Properties, Inc. 5.11
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell
any security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 10.41 $ 23.49
Class II $ 10.38 $ 23.45
Net
Distributions per Share Investment Short-Term Long-Term Non-taxable
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains Distributions
Class I $ 0.4894 $ - $ 5.9550 $ 0.2536
Class II $ 0.4531 $ - $ 5.9550 $ 0.2536
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Real Estate Shares VCT Portfolio at net asset value, compared to that of the
Morgan Stanley Capital International (MSCI) U.S. REIT Index. Portfolio returns
are based on net asset value and do not reflect applicable insurance fees and
surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Real Estate Pioneer Real Estate
Shares VCT Portfolio, Shares VCT Portfolio, MSCI US
Class I Class II REIT Index
12/98 10,000 10,000 10,000
9,583 9,559 9,545
12/00 12,411 12,328 12,104
13,379 13,256 13,657
12/02 13,718 13,557 14,155
18,485 18,229 19,356
12/04 25,090 24,680 25,450
28,888 28,347 28,538
12/06 39,526 38,688 38,789
32,061 31,300 32,267
12/08 19,815 19,297 20,015
The MSCI U.S. REIT Index is a widely-used index comprising a broad
representation of the most actively traded real estate trusts and is designed
to be a measure of real estate equity performance. 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 an
Index.
Note to Shareowners: Effective April 1, 2008, the Portfolio's benchmark changed
to the MSCI U.S. REIT Index. The securities represented in the new index better
reflect the types of securities in which the Portfolio is likely to invest.
Previously, the benchmark was the Dow Jones Wilshire Real Estate Securities
Index (RESI), which changed investment models in mid-2007, thus rendering it
less appropriate as a benchmark for the Portfolio. Returns for the Dow Jones
Wilshire RESI were no longer available for Pioneer's shareowner reporting
purposes after June 30, 2008.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
- --------------------------------------------------------------------------------
Class I Class II*
10 Years 7.08% 6.79%
5 Years 1.40% 1.15%
1 Year -38.19% -38.35%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
* Class II shares commenced operations on August 1, 2000. The performance of
Class II shares for the period prior to commencement of operations of Class II
shares on August 1, 2000 is based on the performance of the Portfolio's Class I
shares, reduced to reflect the higher distribution fee of Class II shares.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers, performance would be lower. Waivers may
not be in effect for all portfolios. Certain fee waivers are contractual
through a specified period. Otherwise, fee waivers can be rescinded at any
time. See the prospectus and financial statements for more information.
2
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other mutual funds. The example is based on an
investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value - $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Real Estate Shares VCT
Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 634.53 $ 633.80
Expenses Paid During Period* $ 4.27 $ 5.34
* Expenses are equal to the Portfolio's annualized expense ratio of 1.04% and
1.30% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
Expenses Paid on a $1,000 Investment in Pioneer Real Estate Shares VCT
Portfolio
Based on a hypothetical 5% return per year return before expenses, reflecting
the period from July 1, 2008 through December 31, 2008.
Share Class I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,019.91 $ 1,018.60
Expenses Paid During Period* $ 5.28 $ 6.60
* Expenses are equal to the Portfolio's annualized expense ratio of 1.04% and
1.30% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
With many long-standing pillars of the financial community collapsing, the
credit markets sharply contracting, and the economy tipping into recession,
real estate investment trust (REIT) prices came under significant pressure in
2008, as Matthew Troxell of AEW Capital Management, L.P., the Portfolio's
subadvisor, explains in the following interview.
Q: How did the Pioneer Real Estate Shares VCT Portfolio perform amidst the
extreme volatility and challenging market conditions of the past year?
A: For the 12 months ended December 31, 2008, Class I shares of the Portfolio
posted a return of -38.19% at net asset value, and Class II shares returned
-38.35%. Over the same 12-month period, the Portfolio's benchmark, the Morgan
Stanley Capital International (MSCI) U.S. REIT Index, returned -37.97%, and
the average return for the 61 variable portfolios in Lipper's Real Estate
Underlying Funds category was -40.08%.
Q: How did the problems in the credit markets directly impact the REIT sector?
A: There was a dramatic decrease in the amount of third-party commercial
mortgage capital available for property investment. Consequently, the cost of
available debt increased considerably. That resulted in a sharp decline in
commercial real estate transactions, which, in turn, put downward pressure on
stock price valuations. The market also punished companies with excessive
debt on their balance sheets or those with significant development exposure.
Q: Which holdings helped the Portfolio's performance over the 12-month period
ended December 31, 2008?
A: Among the top performers for the Portfolio over the 12-month period were
Public Storage, which benefited from solid earnings results, minimal debt and
significant cash flow; Omega Healthcare, whose positive performance reflected
the defensive characteristics of the company's solid balance sheet and stable
income stream; and the industrial REIT Liberty Property Trust, which,
although it was down for the fiscal year, was one of the top relative
performers in the battered industrial sector after a dismal year in 2007.
Q: Which holdings proved most disappointing for the Portfolio over the 12- month
period?
A: The biggest disappointments during the period were Developers Diversified
Realty, Starwood Hotels & Resorts Worldwide, and Brookfield Office
Properties. Developers Diversified, a shopping center REIT, suffered in large
part due to concerns over the company's near-term debt maturities and the
weakening retail environment. Starwood's decline was reflective of problems
in the hotel sector in general, which suffered as a result of the slowing
economy and the impact of rising fuel costs on travel. Brookfield lost ground
due to the company's significant exposure to New York City office space in
its portfolio. Concerns that job losses will increase vacancy levels in the
city also weighed on the company's stock price. We continue to believe the
companies represent solid values relative to their peers, and we've
maintained the Portfolio's overweight positions in all three stocks.
A Word About Risk:
The Portfolio invests in REIT securities, the value of which can fall for a
variety of reasons, such as declines in rental income, fluctuating interest
rates, poor property management, environmental liabilities, uninsured damage,
increased competition, or changes in real estate tax laws. At times, the
Portfolio's investments may represent industries or industry sectors that are
interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries
and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q: How have the property sectors been holding up given the recession?
A: In our view, the underlying property market fundamentals have deteriorated
due to the ongoing economic slowdown, particularly in those markets most
affected by the housing market downturn. In the retail sector, property
vacancies have increased quickly for several consecutive quarters, as
American consumers have become increasingly reluctant to spend, and retailers
have curtailed expansion plans and, in some cases, closed stores. Continued
sluggishness is expected into 2009 as a weak housing sector and very
depressed consumer sentiment may put restraints on spending. We do believe,
however, that the sector should be fairly well positioned when demand
recovers, since supply growth has been moderate.
Conditions in the apartment sector have been impacted, both negatively and
positively, by troubles in the single-family housing sector. Rising
foreclosures and stricter loan underwriting standards are forcing some home
buyers and would-be buyers to become renters, while rentals of investor-owned
homes and condominiums are providing housing alternatives to would-be
renters. We feel the conditions are likely to persist until a clear bottom is
reached in single-family fundamentals.
Office property vacancies have begun to climb in central business district
locations, especially those closely tied to the fortunes of financial
employers, and to an even greater degree, those in suburban locations. With
unemployment rising, demand remains the primary concern, as supply has
remained in check and may even further weaken in the wake of the credit
crunch. Within the industrial sector, fundamentals have been deteriorating
for much of the past year and space availability has been climbing.
In the hotel sector, occupancy figures were approximately 8% lower than a
year ago, and room rates have been weakening after holding up for much of
2008. Consequently, revenues per available room have been declining. We
expect hotel occupancies to remain under pressure as both leisure and
business travelers become more cautious in a slowing economy.
Q: What is your outlook?
A: We believe that the market environment in 2009 will be challenging -
particularly for real estate owners - given our belief that debt capital will
be scarcer and higher-priced than it has been in the past. However, we think
the likely effect of this challenging environment has been, to a degree,
already priced into real estate securities. In this market, we will remain
focused on companies that have high-quality assets, solid management teams
and stable balance sheets. We will continue to make incremental changes to
the Portfolio as values and catalysts continue to change.
Past performance is no guarantee of future results, and there is no guarantee
that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 92.6%
Consumer Services - 1.4%
Hotels, Resorts & Cruise Lines - 1.4%
33,700 Starwood Hotels & Resorts
Worldwide, Inc. (b) $ 603,230
-----------
Total Consumer Services $ 603,230
-----------
Real Estate - 91.2%
Diversified Real Estate Investment Trusts - 8.7%
68,000 Liberty Property Trust (b) $ 1,552,440
4,100 PS Business Parks, Inc.* 183,106
32,000 Vornado Realty Trust 1,931,200
-----------
$ 3,666,746
-----------
Industrial Real Estate Investment Trusts - 7.2%
34,300 AMB Property Corp. (b) $ 803,306
167,000 DCT Industrial Trust, Inc. 845,020
40,700 Dupont Fabros Technology, Inc. 84,249
43,000 First Potomac Realty Trust 399,900
64,900 ProLogis Trust 901,461
-----------
$ 3,033,936
-----------
Office Real Estate Investment Trusts - 11.7%
47,500 BioMed Property Trust, Inc. $ 556,700
38,300 Boston Properties, Inc. (b) 2,106,500
44,300 Brandywine Realty Trust (b) 341,553
3,300 Corporate Office Properties Trust, Inc. 101,310
15,700 Digital Realty Trust, Inc. 515,745
85,700 HRPT Properties Trust 288,809
30,900 Kilroy Realty Corp. 1,033,914
-----------
$ 4,944,531
-----------
Real Estate Operating Companies - 2.0%
110,300 Brookfield Properties Corp. $ 852,619
-----------
Residential Real Estate Investment Trusts - 15.4%
47,092 Apartment Investment &
Management Co. (b) $ 543,913
30,500 AvalonBay Communities, Inc.*(b) 1,847,690
49,000 Camden Property Trust* 1,535,660
86,500 Equity Residential Property Trust 2,579,430
-----------
$ 6,506,693
-----------
Retail Real Estate Investment Trusts - 24.9%
62,900 Developers Diversified Realty Corp. $ 306,952
28,800 Federal Realty Investment Trust (b) 1,787,904
53,000 Kimco Realty Corp. 968,840
62,100 Kite Realty Group Trust 345,276
9,200 National Retail Properties, Inc. 158,148
16,500 Realty Income Corp. (b) 381,975
39,900 Regency Centers Corp. (b) 1,863,330
63,400 Simon Property Group (b) 3,368,442
15,600 Taubman Centers, Inc. (b) 397,176
52,000 The Macerich Co. (b) 944,320
-----------
$10,522,363
-----------
Shares Value
Specialized Real Estate
Investment Trusts - 21.3%
105,600 Extra Space Storage, Inc. $ 1,089,792
40,500 HCP, Inc. 1,124,685
153,900 Host Hotels & Resorts, Inc. 1,165,023
2,900 Lasalle Hotel Properties, Inc. 32,045
69,500 Nationwide Health Properties, Inc. (b) 1,996,040
80,700 Omega Healthcare Investors, Inc. (b) 1,288,779
28,500 Public Storage, Inc. 2,265,750
-----------
$ 8,962,114
-----------
Total Real Estate $38,489,002
-----------
TOTAL COMMON STOCKS
(Cost $45,649,667) $39,092,232
-----------
TEMPORARY CASH INVESTMENTS - 19.2%
Securities Lending Collateral - 19.2% (c)
Certificates of Deposit:
187,507 Abbey National Plc, 3.15%, 8/13/09 $ 187,507
187,482 Bank of Nova Scotia, 3.21%, 5/5/09 187,482
299,650 Bank of Scotland NY, 2.92%, 6/5/09 299,650
337,513 Barclays Bank, 1.5%, 5/27/09 337,513
59,615 Calyon NY, 4.62%, 1/16/09 59,615
375,014 CBA, 4.87%, 7/16/09 375,014
337,513 DNB NOR Bank ASA NY,
3.04%, 6/5/09 337,513
343,513 Intesa SanPaolo S.p.A.,
1.44%, 5/22/09 343,513
21,721 NORDEA NY, 4.13%, 4/9/09 21,721
281,260 Royal Bank of Canada NY,
2.7%, 8/7/09 281,260
187,507 Royal Bank of Scotland,
3.06%, 3/5/09 187,507
37,484 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 37,484
375,014 Societe Generale, 3.29%, 9/4/09 375,014
337,513 Svenska Bank NY, 4.61%, 7/8/09 337,513
375,014 U.S. Bank NA, 2.25%, 8/24/09 375,014
-----------
$ 3,743,319
-----------
Commercial Paper:
35,735 BBVA U.S., 2.83%, 3/12/09 $ 35,735
375,014 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 375,014
187,507 CME Group, Inc., 2.9%, 8/6/09 187,507
187,487 General Electric Capital Corp.,
2.86%, 3/16/09 187,487
368,264 American Honda Finance Corp.,
4.95%, 7/14/09 368,264
375,014 HSBC Bank, Inc., 2.5%, 8/14/09 375,014
187,507 IBM, 2.39%, 9/25/09 187,507
337,513 Met Life Global Funding,
3.19%, 6/12/09 337,513
6 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Commercial Paper - (continued)
337,513 New York Life Global, 2.13%, 9/4/09 $ 337,513
318,762 Westpac Banking Corp.,
2.34%, 6/1/09 318,762
-----------
$ 2,710,314
-----------
Tri-party Repurchase Agreements:
825,031 Deutsche Bank, 0.25%, 1/2/09 $ 825,031
63,707 Barclays Capital Markets,
0.5%, 1/2/09 63,707
-----------
$ 888,738
-----------
Time Deposit:
375,014 BNP Paribas, 0.01%, 1/2/09 $ 375,014
-----------
Money Market Mutual Funds:
93,753 Columbia Government Reserves Fund $ 93,753
281,260 JP Morgan, U.S. Government Money
Market Fund 281,260
-----------
$ 375,014
-----------
Total Securities Lending
Collateral $ 8,092,400
-----------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $8,092,400) $ 8,092,400
-----------
TOTAL INVESTMENT IN
SECURITIES - 111.8%
(Cost $53,742,067)(a) $47,184,632
-----------
OTHER ASSETS AND
LIABILITIES (11.8)% $(4,959,688)
-----------
TOTAL NET ASSETS - 100.0% $42,224,944
===========
* Non-income producing security.
(a) At December 31, 2008, the net unrealized gain on investments based on
cost for federal income tax purposes of $54,686,368 was as follows:
Aggregate gross unrealized gain for all investments in which
there is an excess of value over tax cost $ 6,537,439
Aggregate gross unrealized loss for all investments in which
there is an excess of tax cost over value (14,039,175)
-----------
Net unrealized gain $(7,501,736)
===========
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
2,700 AMB Property Corp. $ 63,234
42,000 Apartment Investment &
Management Co. 485,100
7,000 AvalonBay Communities, Inc.* 424,060
7,000 Boston Properties, Inc. 385,000
39,000 Brandywine Realty Trust 300,690
9,000 Federal Realty Investment Trust 558,720
60,000 Liberty Property Trust 1,369,800
4,000 Nationwide Health Properties, Inc. 114,880
23,200 Omega Healthcare Investors, Inc. 370,504
14,700 Realty Income Corp. 340,305
10,000 Regency Centers Corp. 467,000
39,000 Simon Property Group 2,072,070
14,000 Starwood Hotels & Resorts
Worldwide, Inc. 250,600
6,000 Taubman Centers, Inc. 152,760
49,000 The Macerich Co. 889,840
----------
Total $8,244,563
==========
(c) Security lending collateral is managed by Credit Suisse, New York
Branch.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008, aggregated $13,891,336 and $18,029,004,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------- --------------
Level 1 - Quoted Prices $39,092,232
Level 2 - Other Significant Observable Inputs 8,092,400
Level 3 - Significant Unobservable Inputs -
-----------
Total $47,184,632
===========
The accompanying notes are an integral part of these financial statements. 7
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 23.49 $ 33.01 $ 26.13 $ 24.30 $ 18.57
-------- -------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.49 $ 0.55 $ 0.45 $ 0.43 $ 0.52
Net realized and unrealized gain (loss) on investments ( 6.87) ( 6.29) 8.70 3.10 5.99
-------- -------- ------- ------- -------
Net increase (decrease) from investment operations $ (6.38) $ (5.74) $ 9.15 $ 3.53 $ 6.51
Distributions to shareowners:
Net investment income ( 0.49) ( 0.47) ( 0.39) ( 0.39) ( 0.45)
Net realized gain ( 5.96) ( 3.31) ( 1.88) ( 1.31) ( 0.33)
Tax return of capital ( 0.25) -- -- -- --
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value $ (13.08) $ (9.52) $ 6.88 $ 1.83 $ 5.73
-------- -------- ------- ------- -------
Net asset value, end of period $ 10.41 $ 23.49 $ 33.01 $ 26.13 $ 24.30
======== ======== ======= ======= =======
Total return* (38.19)% (18.88)% 36.82% 15.13% 35.74%
Ratio of net expenses to average net assets+ 1.04% 0.91% 0.91% 0.94% 0.98%
Ratio of net investment income to average net assets+ 2.57% 1.65% 1.43% 1.65% 2.41%
Portfolio turnover rate 22% 15% 18% 12% 35%
Net assets, end of period (in thousands) $ 9,513 $ 19,636 $34,597 $32,086 $36,447
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
8 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 23.45 $ 32.96 $ 26.09 $ 24.26 $ 18.55
-------- -------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.45 $ 0.46 $ 0.36 $ 0.36 $ 0.44
Net realized and unrealized gain (loss) on investments ( 6.86) ( 6.27) 8.70 3.11 6.00
-------- -------- ------- ------- -------
Net increase (decrease) from investment operations $ (6.41) $ (5.81) $ 9.06 $ 3.47 $ 6.44
Distributions to shareowners:
Net investment income ( 0.45) ( 0.39) ( 0.31) ( 0.33) ( 0.40)
Net realized gain ( 5.96) ( 3.31) ( 1.88) ( 1.31) ( 0.33)
Tax return of capital ( 0.25) -- -- -- --
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value $ (13.07) $ (9.51) $ 6.87 $ 1.83 $ 5.71
-------- -------- ------- ------- -------
Net asset value, end of period $ 10.38 $ 23.45 $ 32.96 $ 26.09 $ 24.26
======== ======== ======= ======= =======
Total return* (38.35)% (19.09)% 36.48% 14.86% 35.39%
Ratio of net expenses to average net assets+ 1.30% 1.16% 1.16% 1.18% 1.23%
Ratio of net investment income to average net assets+ 2.41% 1.44% 1.22% 1.46% 2.20%
Portfolio turnover rate 22% 15% 18% 12% 35%
Net assets, end of period (in thousands) $ 32,712 $ 54,005 $85,175 $67,383 $61,799
* 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.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 9
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities (including securities loaned of $8,244,563) (cost $53,742,067) $ 47,184,632
Cash 1,450,345
Receivables --
Investment securities sold 60,888
Portfolio shares sold 1,498,157
Dividends 451,342
------------
Total assets $ 50,645,364
------------
LIABILITIES:
Payables --
Investment securities purchased $ 250,047
Portfolio shares repurchased 19,823
Upon return of securities loaned 8,092,400
Due to affiliates 5,001
Accrued expenses 53,149
------------
Total liabilities $ 8,420,420
------------
NET ASSETS:
Paid-in capital $ 49,726,680
Accumulated net realized loss on investments (944,301)
Net unrealized loss on investments (6,557,435)
------------
Total net assets $ 42,224,944
------------
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class I (based on $9,512,954/914,268 shares) $ 10.41
------------
Class II (based on $32,711,990/3,150,385 shares) $ 10.38
------------
10 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $9,351) $2,262,980
Interest 18,137
Income from securities loaned, net 80,314
----------
Total investment income $ 2,361,431
-------------
EXPENSES:
Management fees $ 513,135
Transfer agent fees
Class I 1,316
Class II 1,496
Distribution fees
Class II 119,668
Administrative fees 19,237
Custodian fees 44,914
Professional fees 53,705
Printing expense 20,107
Fees and expenses of nonaffiliated trustees 5,449
Miscellaneous 10,975
----------
Total expenses $ 790,002
-------------
Net investment income $ 1,571,429
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments $ (616,332)
-------------
Change in net unrealized loss on investments $ (27,288,834)
-------------
Net loss on investments $ (27,905,166)
-------------
Net decrease in net assets resulting from operations $ (26,333,737)
=============
The accompanying notes are an integral part of these financial statements. 11
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Year
Ended Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 1,571,429 $ 1,552,391
Net realized gain (loss) on investments (616,332) 17,723,011
Change in net unrealized loss on investments (27,288,834) (38,266,788)
------------- -------------
Net decrease in net assets resulting from operations $ (26,333,737) $ (18,991,386)
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.49 and $0.47 per share, respectively) $ (415,464) $ (423,910)
Class II ($0.45 and $0.39 per share, respectively) (1,155,965) (945,970)
Net realized gain:
Class I ($5.96 and $03.31 per share, respectively) (4,546,517) (2,997,064)
Class II ($5.96 and $3.31per share, respectively) (12,412,981) (8,014,140)
Tax return of capital:
Class I ($0.25 and $0.00 per share, respectively) (217,861) --
Class II ($0.25 and $0.00 per share, respectively) (661,350) --
------------- -------------
Total distributions to shareowners $ (19,410,138) $ (12,381,084)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 17,127,652 $ 9,530,034
Reinvestment of distributions 19,410,137 12,381,084
Cost of shares repurchased (22,209,808) (36,669,805)
------------- -------------
Net increase (decrease) in net assets resulting from Portfolio share transactions $ 14,327,981 $ (14,758,687)
------------- -------------
Net decrease in net assets $ (31,415,894) $ (46,131,157)
NET ASSETS:
Beginning of year 73,640,838 119,771,995
------------- -------------
End of year $ 42,224,944 $ 73,640,838
============= =============
Undistributed net investment income, end of year $ -- $ 336,091
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 61,723 $ 1,241,482 32,324 $ 1,017,503
Reinvestment of distributions 296,242 5,179,841 123,829 3,420,974
Less shares repurchased (279,533) (4,970,663) (368,242) (10,959,525)
-------- ------------- -------- -------------
Net increase (decrease) 78,432 $ 1,450,660 (212,089) $ (6,521,048)
-------- ------------- -------- -------------
CLASS II
Shares sold 998,324 $ 15,886,170 271,292 $ 8,512,531
Reinvestment of distributions 818,875 14,230,296 325,278 8,960,110
Less shares repurchased (969,641) (17,239,145) (878,052) (25,710,280)
-------- ------------- -------- -------------
Net increase (decrease) 847,558 $ 12,877,321 (281,482) $ (8,237,639)
======== ============= ======== =============
12 The accompanying notes are an integral part of these financial statements.
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) is one of 19
portfolios comprising Pioneer Variable Contracts Trust (the Trust), a Delaware
statutory trust registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The investment objective
of the Portfolio is to pursue long-term capital growth, with current income as
a secondary objective.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distribution fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares. There is no distribution plan for Class I shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts or by
qualified pension and retirement plans.
The Portfolio financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
Because the Portfolio invests a substantial portion of its assets in real
estate investment trusts (REITs), the Portfolio may be subject to certain risks
associated with direct investments in REITs. REITs may be affected by changes
in the value of their underlying properties and by defaults by borrowers or
tenants. REITs depend generally on their ability to generate cash flow to make
distributions to shareowners, and certain REITs have self-liquidation
provisions by which mortgages held may be paid in full and return of capital
distributions may be made at any time. In addition, the performance of a REIT
may be affected by its failure to qualify for tax-free pass-through of income
under the Internal Revenue Code or its failure to maintain exemption from
registration under the Investment Company Act of 1940. The Portfolio's
prospectuses contain unaudited information regarding the Portfolio's principal
risks. Please refer to those documents when considering the Portfolio's risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements which
are consistent 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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. Dividend and interest income are reported net of
unrecoverable foreign taxes withheld at the applicable country rates.
13
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes withheld on capital
gains at the applicable country rates.
B. 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, if any,
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. dollars actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
C. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
A portion of the dividend income recorded by the Portfolio is from
distributions by publicly traded REITs, and such distributions for tax
purposes may also consist of capital gains and return of capital. The
actual return of capital and capital gains portions of such distributions
will be determined by formal notifications from the REITs subsequent to the
calendar year-end. Distributions received from the REITs that are
determined to be a return of capital are recorded by the Portfolio as a
reduction of the cost basis of the securities held and those determined to
be capital gain are reflected as such on the statement of operations.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, was as follows:
- --------------------------------------------------------------------------------
2008 2007
---------------- --------------
Distributions paid from:
Ordinary income $ 1,571,429 $ 1,406,494
Long-term capital gain 16,959,498 10,974,590
----------- -----------
$18,530,927 --
----------- -----------
Return of capital 879,211 --
----------- -----------
Total distributions $19,410,138 $12,381,084
=========== ===========
Distributable Earnings:
Unrealized depreciation $(7,501,736)
-----------
Total $(7,501,736)
===========
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales.
D. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (Unicredit), $633,101 in commissions on the sale of
Trust shares for the year ended December 31, 2008. Distribution fees for
Class II shares are calculated based on the average daily net asset values
attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment
14
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Management Shareholder Services, Inc. (PIMSS), for its services, which are
allocated based on the number of accounts in each class and the ratable
allocation of related out-of-pocket expenses (see Note 3). Income, common
expenses (excluding transfer agent and distribution fees) and realized and
unrealized gains and losses are calculated at the Portfolio level and
allocated daily to each class of shares based on the respective percentage
of the adjusted net assets at the beginning of the day. Distributions paid
by a Portfolio with respect to each class of shares are calculated in the
same manner, at the same time, and in the same amount, except that Class I
and Class II shares can bear different transfer agent and distribution
fees.
E. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
F. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the portfolio.
Management fees are calculated daily at the annual rate of 0.80% 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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $942 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Fund at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $3,857 in transfer agent fees and shareholder communications
expense payable to PIMSS at December 31, 2008.
3. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $202 in distribution fees payable to PFD at December 31,
2008.
4. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
15
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Real Estate Shares VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Real Estate Shares VCT Portfolio, one of the portfolios constituting the
Pioneer Variable Contracts Trust (the "Trust"), including the schedule of
investments, as of December 31, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Real Estate Shares VCT Portfolio at December 31, 2008, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 12, 2009
16
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED)
- --------------------------------------------------------------------------------
Pioneer Investment Management, Inc. (PIM) serves as the Portfolio's investment
adviser pursuant to an investment advisory agreement between PIM and the
Portfolio. PIM has retained AEW Capital Management, L.P. to serve as the sub-
adviser to the Portfolio pursuant to a sub-advisory agreement between PIM and
the sub-adviser.
At a meeting held on January 8, 2008, the Trustees of the Portfolio approved an
amended and restated investment advisory agreement between the Portfolio and
PIM. Shareholders of the Portfolio approved the amended and restated investment
advisory agreement on May 13, 2008. The material factors and conclusions with
respect thereto that formed the basis for the Trustees' approval of the amended
and restated investment advisory agreement are included in the Portfolio's
semi-annual report for the period ended June 30, 2008.
At a meeting held on November 11, 2008, based on their evaluation of the
information provided by PIM and the sub-adviser, the Trustees of the Portfolio,
including the independent Trustees voting separately, unanimously approved the
continuation of the sub-advisory agreement for the Portfolio for another year.
In considering the continuation of the sub-advisory agreement, the Trustees
considered various factors that they determined were relevant, including the
factors described below. The Trustees did not identify any single factor as the
controlling factor in determining to approve the continuation of the
sub-advisory agreement.
Nature, Extent and Quality of Services
The Trustees considered the nature, extent and quality of the services provided
to the Portfolio by the sub-adviser, taking into account the investment
objective and strategy of the Portfolio and the information related to the
Portfolio provided to the Trustees at each quarterly meeting. The Trustees
reviewed the terms of the sub-advisory agreement. The Trustees also reviewed
the sub-adviser's investment approach for the Portfolio and its research
process. The Trustees considered the resources of the sub-adviser and the
personnel of the sub-adviser who provide investment management services to the
Portfolio.
Based on these considerations, the Trustees concluded that the nature, extent
and quality of services provided by the sub-adviser to the Portfolio were
satisfactory and consistent with the terms of the sub-advisory agreement.
Performance of the Portfolio
The Trustees considered the performance results of the Portfolio over various
time periods. They reviewed information comparing the Portfolio's performance
with the average performance of its peer group of funds as classified by
Morningstar, Inc. (Morningstar), an independent provider of investment company
data, and with the performance of the Portfolio's benchmark index. The Trustees
considered that the Portfolio's annualized total return was in the third
quintile of its Morningstar category for the one year period ended June 30,
2008 and that the Portfolio's annualized total return was in the fourth
quintile of its Morningstar category for the three year period ended June 30,
2008. (In all quintile rankings referred to throughout this disclosure, first
quintile is most favorable to the Portfolio's shareowners. Thus, highest
relative performance would be first quintile and lowest relative expenses would
also be first quintile.) The Trustees concluded that the investment performance
of the Portfolio was satisfactory.
Sub-advisory Fee and Expenses
The Trustees considered the fees payable to the sub-adviser under the
sub-advisory agreement. They also considered that PIM, not the Portfolio, paid
the sub-adviser out of the management fees paid to PIM under the investment
advisory agreement. The Trustees considered information regarding the
management fees and expenses of the Portfolio in comparison to the management
fees of its peer group of funds as classified by Morningstar and the expense
ratios of a peer group of funds selected on the basis of criteria determined by
the independent Trustees for this purpose using data provided by Strategic
Insight Mutual Fund Research and Consulting, LLC (Strategic Insight), an
independent third party.
The Trustees considered that the Portfolio's management fee for the twelve
months ended June 30, 2008 was in the second quintile relative to the
management fees paid by other funds in its peer group Morningstar category for
the comparable period. The Trustees also considered that the Portfolio's
expense ratio for the twelve months ended June 30, 2008 was in the third
quintile relative to its Strategic Insight peer group.
17
Pioneer Real Estate Shares VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
APPROVAL OF SUB-ADVISORY AGREEMENT (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
The Trustees also reviewed the advisory fees charged by the sub-adviser to its
separate account clients with investment strategies that were similar to the
Portfolio. The Trustees noted that the fee rates for those separate accounts
generally were in line with the sub-advisory fees paid to the sub-adviser with
respect to the Portfolio.
The Trustees concluded that the sub-advisory fee payable by PIM to the
sub-adviser of the Portfolio was reasonable in relation to the nature and
quality of services provided by the sub-adviser. The Trustees also concluded
that the Portfolio's expense ratio was reasonable, taking into the quality of
services provided by PIM and the sub-adviser and the investment performance of
the Portfolio.
Profitability
The Trustees considered information provided by PIM regarding the profitability
of PIM with respect to the advisory services provided by PIM to the Portfolio,
including the methodology used by PIM in allocating certain of its costs to the
management of the Portfolio. They also considered PIM's profit margin in
connection with the overall operation of the Portfolio. The Trustees further
considered the sub-advisory fees received by the sub-adviser with respect to
the Portfolio and the percentage that such fees represented of the
sub-adviser's overall revenues (for the 12-month period ended December 31,
2007). They also reviewed the financial results realized by PIM and its
affiliates from non-fund businesses. The Trustees considered the profit margins
with respect to the Portfolio in comparison to the limited industry data
available and noted that the profitability of any adviser was affected by
numerous factors, including its organizational structure and method for
allocating expenses. The Trustees recognized that each of PIM and the
sub-adviser should be entitled to earn a reasonable level of profit for the
services provided to the Portfolio. The Trustees concluded that the profit
margins with respect to the management of the Portfolio were not unreasonable.
Economies of Scale
The Trustees considered the economies of scale with respect to the management
of the Portfolio, whether the Portfolio had appropriately benefited from any
economies of scale, and whether there was potential for realization of any
further economies of scale. The Trustees considered that, although the
Portfolio pays a management fee at a fixed rate as a percentage of the
Portfolio's net assets, without any breakpoints, the management fee rate paid
by the Portfolio for the twelve months ended June 30, 2008 was in the second
quintile relative to the management fees paid by other funds in its peer group
Morningstar category for the comparable period and that, on a hypothetical
basis, such fee would be in the third quintile relative to the peer group at
higher asset levels. The Trustees concluded that, at current and reasonably
foreseeable asset levels, breakpoints in the management fee currently were not
necessary.
Other Benefits
The Trustees considered that the sub-adviser reported that it does not receive
any other benefits from its relationship with the Portfolio.
Conclusion
After consideration of the factors described above as well as other factors,
the Trustees, including all of the independent Trustees, concluded that the
sub-advisory agreement for the Portfolio between PIM and the sub-adviser,
including the fees payable thereunder, was fair and reasonable and voted to
approve the continuation of the sub-advisory agreement for the Portfolio.
18
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the
Portfolio's affairs. The officers of the Trust are
Custodian responsible for the Trust's operations. The Trustees and
Brown Brothers Harriman & Co. officers are listed below, together with their principal
occupations during the past five years. Trustees who are
Independent Registered Public Accounting Firm interested persons of the Trust within the meaning of the
Ernst & Young LLP 1940 Act are referred to as Interested Trustees. Trustees
who are not interested persons of the Trust are referred to
Principal Underwriter as Independent Trustees. Each of the Trustees serves as a
Pioneer Funds Distributor, Inc. trustee of each of the 76 U.S. registered investment
portfolios for which Pioneer serves as investment adviser
Legal Counsel (the "Pioneer Funds"). The address for all Trustees and all
Bingham McCutchen LLP officers of the Trust is 60 State Street, Boston,
Massachusetts 02109.
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves
Board, Trustee until a successor trustee is
and President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves
(50)* Executive Vice until a successor trustee is
President elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Deputy Chairman and a Director of Pioneer Global Asset Management None
S.p.A. ("PGAM"); Non-Executive Chairman and a Director of Pioneer
Investment Management USA Inc. ("PIM-USA"); Chairman and a Director of
Pioneer; Chairman and Director of Pioneer Institutional Asset Management,
Inc. (since 2006); Director of Pioneer Alternative Investment Management
Limited (Dublin); President and a Director of Pioneer Alternative Investment
Management (Bermuda) Limited and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund (Russia) (until June 2006);
Director of Nano-C, Inc. (since 2003); Director of Cole Management Inc.
(since 2004); Director of Fiduciary Counseling, Inc.; President and Director
of Pioneer Funds Distributor, Inc. ("PFD") (until May 2006); President of all
of the Pioneer Funds; and Of Counsel, Wilmer Cutler Pickering Hale and
Dorr LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Director, CEO and President of Pioneer Investment Management USA Inc. None
(50)* (since February 2007); Director and President of Pioneer Investment
Management, Inc. and Pioneer Institutional Asset Management, Inc. (since
February 2007); Executive Vice President of all of the Pioneer Funds (since
March 2007); Director of Pioneer Global Asset Management S.p.A. (since
April 2007); Head of New Markets Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers or directors of the Portfolio's investment adviser
and certain of its affiliates.
19
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
David R. Bock (65) Trustee Trustee since 2005. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves
(64) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves
(61) until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves
until a successor trustee is
elected or earlier
retirement or removal.
- --------------------------------------------------------------------------------
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock (65) Executive Vice President and Chief Financial Officer, I-trax, Inc. (publicly
traded health care services company) (2004 - 2007); Partner, Federal City
Capital Advisors (boutique merchant bank) (1997 to 2004 and 2008 -
present); and Executive Vice President and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading company) (2000 - 2002)
- ----------------------------------------------------------------------------------------------------------
Mary K. Bush (60) President, Bush International, LLC (international financial advisory firm)
Benjamin M. Friedman Professor, Harvard University
(64)
- ----------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Founding Director, Vice President and Corporate Secretary, The Winthrop
(61) Group, Inc. (consulting firm); and Desautels Faculty of Management, McGill
University
- ----------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Chief Executive Officer, Quadriserv, Inc. (technology products for securities
lending industry) (2008 - present); Private investor (2004 - 2008); and
Senior Executive Vice President, The Bank of New York (financial and
securities services) (1986 - 2004)
- ----------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) President and Chief Executive Officer, Newbury, Piret & Company, Inc.
(investment banking firm)
- ----------------------------------------------------------------------------------------------------------
Stephen K. West (80) Senior Counsel, Sullivan & Cromwell LLP (law firm)
- ----------------------------------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE HELD BY THIS TRUSTEE
David R. Bock (65) Director of Enterprise Community
Investment, Inc. (privately-held affordable
housing finance company); and Director of
New York Mortgage Trust (publicly traded
mortgage REIT)
- --------------------------------------------------------------------------------
Mary K. Bush (60) Director of Marriott International, Inc.,
Director of Discover Financial Services
(credit card issuer and electronic payment
services); Director of Briggs & Stratton Co.
(engine manufacturer); Director of UAL
Corporation (airline holding company);
Director of Mantech International
Corporation (national security, defense, and
intelligence technology firm); and Member,
Board of Governors, Investment Company
Institute
- --------------------------------------------------------------------------------
Benjamin M. Friedman Trustee, Mellon Institutional Funds
(64) Investment Trust and Mellon Institutional
Funds Master Portfolio (oversees 17
portfolios in fund complex)
- --------------------------------------------------------------------------------
Margaret B.W. Graham None
(61)
- --------------------------------------------------------------------------------
Thomas J. Perna (58) None
- --------------------------------------------------------------------------------
Marguerite A. Piret (60) Director of New America High Income Fund,
Inc. (closed-end investment company)
- --------------------------------------------------------------------------------
Stephen K. West (80) Director, The Swiss Helvetia Fund, Inc.
(closed-end investment company)
20
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the
Secretary discretion of the Board.
- --------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the
discretion of the Board.
- --------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the
Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the
(35) Treasurer discretion of the Board.
- --------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the
Compliance discretion of the Board.
Officer
- --------------------------------------------------------------------------------
OTHER DIRECTORSHIPS
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary of PIM-USA; Senior Vice President - Legal of Pioneer; Secretary/ None
Clerk of most of PIM-USA's subsidiaries; and Secretary of all of the Pioneer
Funds since September 2003 (Assistant Secretary from November 2000 to
September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Associate General Counsel of Pioneer since January 2008 and Assistant None
Secretary of all of the Pioneer Funds since September 2003; Vice President
and Senior Counsel of Pioneer from July 2002 to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Vice President - Fund Accounting, Administration and Controllership None
Services of Pioneer; and Treasurer of all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from March 2004 to February 2008;
Assistant Treasurer of all of the Pioneer Funds from March 2004 to
February 2008; and Treasurer and Senior Vice President, CDC IXIS Asset
Management Services from 2002 to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Vice President - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Fund Accounting Manager - Fund Accounting, Administration and None
Controllership Services of Pioneer; and Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Fund Administration Manager - Fund Accounting, Administration and None
(35) Controllership Services since June 2003 and Assistant Treasurer of all of
the Pioneer Funds since September 2003; Assistant Vice President -
Mutual Fund Operations of State Street Corporation from June 2002 to
June 2003 (formerly Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Compliance Officer of Pioneer since December 2006 and of all the None
Pioneer Funds since January 2007; Vice President and Compliance Officer,
MFS Investment Management (August 2005 to December 2006);
Consultant, Fidelity Investments (February 2005 to July 2005);
Independent Consultant (July 1997 to February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
21
[LOGO]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18653-03-0209
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Small Cap Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 12
Notes to Financial Statements 17
Report of Independent Registered Public
Accounting Firm 21
Trustees, Officers and Service Providers 23
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
- --------------------------------------------------------------------------------
[The following data was represented as a pie chart in the printed material]
Portfolio Diversification
(As a percentage of total investment portfolio)
U.S. Common Stocks 81.1%
Temporary Cash Investments 17.6%
Exchange Traded Funds 1.3%
Sector Distribution
(As a percentage of equity holdings)
Information Technology 19.1%
Financials 19.1%
Health Care 18.7%
Industrials 17.0%
Consumer Discretionary 9.8%
Energy 4.9%
Utilities 4.0%
Consumer Staples 3.5%
Materials 2.8%
Telecommunication Services 1.1%
Five Largest Holdings
(As a percentage of equity holdings)*
1. VAALCO Energy, Inc. 1.04%
2. Prosperity Bancshares, Inc. 0.98
3. Interdigital, Inc. 0.93
4. Validus Holdings Ltd. 0.92
5. Par Pharmaceutical Co., Inc. 0.86
* The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/08
- --------------------------------------------------------------------------------
Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 6.84 $ 12.97
Class II $ 6.76 $ 12.82
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.0658 $ 0.3143 $ 1.4445
Class II $ 0.0259 $ 0.3143 $ 1.4445
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Small Cap Value VCT Portfolio at net asset value, compared to that of the
Russell 2000 Value Index and the Russell 2000 Index. Portfolio returns are
based on net asset value and do not reflect any applicable insurance fees or
surrender charges.
[The following data was represented as a line chart in the printed material]
Pioneer Small Cap Pioneer Small Cap Russell Russell
Value VCT Portfolio, Value VCT Portfolio, 2000 Index 2000 Value Index
Class I Class II
11/01 10,000 10,000 10,000 10,000
10,574 10,572 10,617 10,612
12/02 8,979 8,955 8,442 9,400
12,160 12,088 12,432 13,726
12/04 14,611 14,492 14,711 16,780
16,275 16,101 15,380 17,570
12/06 18,624 18,378 18,205 21,695
17,328 17,058 17,920 19,574
12/08 10,743 10,558 11,866 13,912
The Russell 2000 Index measures the performance of U.S. small-cap stocks. The
Russell 2000 Value Index measures the performance of U.S. small-cap value
stocks. The Russell 2000 Value Index is now the Portfolio's secondary benchmark
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 an Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2008)
Class I Class II
Life-of-Class#
(11/8/01) 1.40% 1.15%
5 Years -2.45% -2.67%
1 Year -38.00% -38.11%
All total returns shown assume reinvestment of distributions at net asset
value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
# Inception date of the Portfolio's Class I shares. Class II shares commenced
operations on May 1, 2003. The performance of Class II shares for the period
prior to the commencement of operations of Class II on May 1, 2003, is based
on the performance of the Portfolio's Class I shares, reduced to reflect the
higher distribution fee of Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value - $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 686.07 $ 685.53
Expenses Paid During Period* $ 4.28 $ 5.34
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were of 1.01%
and 1.26% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Small Cap Value VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
- ----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.06 $ 1,018.80
Expenses Paid During Period* $ 5.13 $ 6.39
* Expenses are equal to the Portfolio's annualized expense ratio plus the
expense ratios of the underlying funds. These combined totals were of 1.01%
and 1.26% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
- --------------------------------------------------------------------------------
Against a backdrop of a widening credit crisis and deteriorating business
conditions, the domestic equity market experienced extraordinary volatility
during 2008, with most major stock indices falling substantially. In the
following interview, Portfolio Managers Peter Wiley and Scott Zilora discuss
the factors that influenced the performance of Pioneer Small Cap Value VCT
Portfolio during the 12 months ended December 31, 2008. Mr. Wiley and Mr.
Zilora are members of the investment team responsible for the day-to-day
management of Pioneer Small Cap Value VCT Portfolio.
Q: How did the Portfolio perform during the 12-month period ended December 31,
2008?
A: Pioneer Small Cap Value VCT Portfolio's Class I shares returned -38.00% at
net asset value for the 12 months ended December 31, 2008, and Class II
shares returned -38.11%. During the same period, the Russell 2000 Value Index
returned -28.92%, while the Russell 2000 Index returned -33.79%. Over the
same 12 months, the average return of the 130 variable portfolios in Lipper's
Small Cap Core category was -35.54%.
Q: What was the investment environment like during 2008?
A: It was a very challenging year in the stock market. Stock prices began
declining sharply during the summer after rising very early in 2008.
Investors lost confidence as major financial institutions began failing after
credit markets froze up and subprime-mortgage-related securities created huge
losses. At the same time, consumers lost confidence in the face of falling
housing prices, rapidly rising mortgage foreclosures and sharply increasing
energy costs. The loss in consumer confidence removed one of the important
underpinnings of growth in the overall economy.
Q: How did the Portfolio's positioning affect performance in this difficult
environment?
A: We were disappointed by the Portfolio's performance overall, despite
relatively good results in the consumer discretionary, financials and health
care sectors, and some successful stock selections.
Several health care investments produced good results for the Portfolio in
a difficult market environment. Thoratec, the developer and producer of
ventricular pumps for patients waiting for heart transplants, did
particularly well. One of the catalysts for its performance was the
introduction of a smaller pump that it developed for female patients. Also
contributing to the Portfolio's return was the investment in Cubist
Pharmaceuticals, which enjoyed strong gains in the hospital market for its
Cubicin product, an antibiotic formulation for severe infections. In
addition, vaccine maker Emergent Bio Solutions did well following FDA
approval of BioThrax, which protects against anthrax. The company also
signed a significant contract with the U.S. Department of Health and Human
Services to supply BioThrax.
In the consumer discretionary sector, we focused the Portfolio's holdings
on corporations that we believe can generate sufficient free cash flow to
sustain their growth. One of the top performers in the group was Big Lots
Stores, a discount retailer that benefited from its efforts to revitalize
merchandising, improve same-store sales and reduce costs. Among the
Portfolio's financials holdings, we saw some opportunities among
Texas-based banks because of the state's energy-based economy and the
absence of speculative excesses in real estate. One particularly healthy
performer was Prosperity Bank Shares,
A Word About Risk:
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. At times, the Portfolio's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
a Houston-based institution. Its solid balance sheet and favorable credit
trends helped it hold up well, despite plunging oil prices during the
second half of 2008. In energy, the Portfolio took profits early in the
year from a successful investment in Basic Energy Services, an oil field
services corporation that had benefited from growing exploration activity.
Q: What were some of the investments that detracted from the Portfolio's results
during the 12-month period ended December 31, 2008?
A: Overall stock selection in the energy sector was disappointing. We focused
the Portfolio's holdings on companies with the ability to generate cash
through current production, but the market favored companies with growing
reserves that could serve as a source of future production. Nevertheless, the
Portfolio's relative performance in energy improved somewhat in the second
half of the fiscal year.
One of the poorer performers was Callon Petroleum, an exploration and
production company operating primarily in Louisiana and in the Gulf of
Mexico. Callon was forced to curtail operations in the Gulf of Mexico,
where most of its proven reserves are located, because of falling oil
prices and rising operating costs. Mariner Energy, an independent oil and
gas exploration and production company, also lagged.
Outside energy, the Portfolio saw disappointing results from Crane
Aerospace and Meredith. Crane, which provides contract engineering and
other services to the aerospace industry, was a victim of production delays
in Boeing's newest jetliner. Meredith, a publisher of a number of magazines
targeted to women and the operator of several television stations, suffered
as a result of shrinking advertising revenues in the slowing economy.
Q: What is your investment outlook?
A: We are approaching 2009 with caution, as we do not anticipate a sharp
economic recovery. While investors scrutinize the various U.S. government
stimulus programs that either have been enacted or proposed, we think it is
likely to be some time before consumers regain confidence. Record levels of
personal debt and rising unemployment have been restraining consumers, who
are showing greater discipline in their household budgets, saving rather than
spending whenever possible. Although there may be some easing in the credit
markets, lenders still have been holding back, thus curtailing capital from
both corporate borrowers and individuals.
In this environment, stock-picking will become even more important. We
believe that after the major stock price declines of 2008, the market is
offering some attractive opportunities that ultimately can reward investors
once the situation begins to improve.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 92.1%
Energy - 4.7%
Oil & Gas Equipment & Services - 0.9%
12,300 Basic Energy Services, Inc.* $ 160,392
17,800 Complete Production Services, Inc.* 145,070
-----------
$ 305,462
-----------
Oil & Gas Exploration & Production - 3.8%
40,000 Callon Petroleum Co.* $ 104,000
4,100 Clayton Williams Energy, Inc.* 186,304
4,900 Comstock Resources, Inc.* 231,525
17,600 Mariner Energy, Inc.* 179,520
21,100 Rosetta Resources, Inc.* 149,388
11,112 Stone Energy Corp.* 122,454
45,700 VAALCO Energy, Inc.* 340,008
-----------
$ 1,313,199
-----------
Total Energy $ 1,618,661
-----------
Materials - 2.7%
Commodity Chemicals - 0.2%
9,300 Spartech Corp. $ 58,218
-----------
Diversified Metals & Mining - 0.5%
3,200 Compass Minerals International, Inc. $ 187,712
-----------
Fertilizers & Agricultural Chemicals - 0.3%
5,800 Terra Industries, Inc. $ 96,686
-----------
Paper Products - 0.3%
28,400 Buckeye Technologies, Inc.* $ 103,376
-----------
Steel - 1.4%
13,500 A.M. Castle & Co. $ 146,205
3,100 Olympic Steel, Inc. 63,147
4,600 Reliance Steel & Aluminum Co. 91,724
15,700 Worthington Industries, Inc. (b) 173,014
-----------
$ 474,090
-----------
Total Materials $ 920,082
-----------
Capital Goods - 9.9%
Aerospace & Defense - 0.3%
5,500 Ceradyne, Inc.* $ 111,705
-----------
Building Products - 1.1%
16,300 Apogee Enterprise, Inc. $ 168,868
17,900 Insteel Industries, Inc. 202,091
-----------
$ 370,959
-----------
Construction & Engineering - 0.6%
9,616 EMCOR Group, Inc.* $ 215,687
-----------
Construction, Farm Machinery &
Heavy Trucks - 0.4%
5,300 AGCO Corp.*(b) $ 125,027
-----------
Shares Value
Electrical Component & Equipment - 1.9%
7,400 Acuity Brands, Inc. (b) $ 258,334
7,100 Brady Corp.* 170,045
7,300 Hubbell, Inc. (Class B) 238,564
-----------
$ 666,943
-----------
Industrial Machinery - 3.7%
15,700 Altra Holdings, Inc.* $ 124,187
6,000 Chart Industries, Inc.* 63,780
4,600 Circor International, Inc. 126,500
10,900 Columbus Mckinnon Corp.*(b) 148,785
9,100 Crane Co. 156,884
6,900 Enpro Industries, Inc.* 148,626
6,000 Graham Corp.*(b) 64,920
3,900 Lincoln Electric Holdings, Inc. (b) 198,627
16,600 NN, Inc. 38,014
8,200 Robbins & Myers, Inc. 132,594
10,300 Tecumseh Products Co.* 98,674
-----------
$ 1,301,591
-----------
Trading Companies & Distributors - 1.9%
10,800 Aircastle, Ltd. $ 51,624
10,400 Applied Industrial Technologies, Inc. (b) 196,768
13,700 H&E Equipment Services, Inc.* 105,627
7,800 Rush Enterprises, Inc.* 66,846
6,200 Tal International Group, Inc. (b) 87,420
8,300 Wesco International, Inc.* 159,609
-----------
$ 667,894
-----------
Total Capital Goods $ 3,459,806
-----------
Commercial Services & Supplies - 6.0%
Commercial Printing - 0.2%
3,300 Consolidated Graphics, Inc.* $ 74,712
-----------
Diversified Support Services - 1.0%
7,100 Copart, Inc.* $ 193,049
22,300 EnerNoc, Inc.*(b) 165,912
-----------
$ 358,961
-----------
Environmental & Facilities Services - 0.7%
12,800 Rollins, Inc. $ 231,424
-----------
Office Services & Supplies - 2.1%
15,900 American Reprographics Co.* $ 109,710
6,400 HNI Corp. (b) 101,376
22,500 Interface, Inc. 104,400
6,800 Mine Safety Appliances Co. 162,588
13,600 Sykes Enterprises, Inc.* 260,032
-----------
$ 738,106
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Research & Consulting Services - 2.0%
8,700 Equifax, Inc.* $ 230,724
15,000 Hill International, Inc.* 105,600
11,100 Resources Connection, Inc.*(b) 181,818
9,200 School Specialty, Inc.*(b) 175,904
-----------
$ 694,046
-----------
Total Commercial Services
& Supplies $ 2,097,249
-----------
Consumer Durables & Apparel - 2.7%
Apparel, Accessories & Luxury Goods - 0.4%
4,400 Columbia Sportswear Co. $ 155,628
-----------
Footwear - 1.8%
9,900 Steven Madden, Ltd.* $ 211,068
17,800 The Timberland Co.* 205,590
9,800 Wolverine World Wide, Inc. 206,192
-----------
$ 622,850
-----------
Household Appliances - 0.5%
10,100 Helen of Troy, Ltd.* $ 175,336
-----------
Total Consumer Durables & Apparel $ 953,814
-----------
Consumer Services - 3.9%
Education Services - 0.9%
3,800 American Public Education, Inc.* $ 141,322
2,900 DeVry, Inc. 166,489
-----------
$ 307,811
-----------
Leisure Facilities - 0.7%
9,000 Vail Resorts, Inc.*(b) $ 239,400
-----------
Restaurants - 0.5%
10,800 Papa John's International, Inc.* $ 199,044
-----------
Specialized Consumer Services - 1.8%
4,200 Matthews International Corp.* $ 154,056
16,500 Regis Corp.* 239,745
7,700 Steiner Leisure, Ltd.* 227,304
-----------
$ 621,105
-----------
Total Consumer Services $ 1,367,360
-----------
Media - 0.3%
Movies & Entertainment - 0.3%
3,800 Marvel Entertainment, Inc.* $ 116,850
-----------
Total Media $ 116,850
-----------
Retailing - 2.2%
Apparel Retail - 1.6%
14,200 Charlotte Russe, Inc.*(b) $ 92,158
5,600 Children's Place Retail Stores, Inc.* 121,408
23,900 The Finish Line, Inc. 133,840
76,300 Wet Seal, Inc.* 226,611
-----------
$ 574,017
-----------
Specialty Stores - 0.6%
12,700 Jo-Ann Stores, Inc.* $ 196,723
-----------
Total Retailing $ 770,740
-----------
Shares Value
Food & Drug Retailing - 0.7%
Food Retail - 0.7%
41,400 The Great Atlantic & Pacific Tea Co., Inc.* $ 259,578
-----------
Total Food & Drug Retailing $ 259,578
-----------
Food, Beverage & Tobacco - 1.3%
Packaged Foods & Meats - 1.3%
6,500 Cal-Maine Foods, Inc. $ 186,550
1,600 Ralcorp Holdings, Inc.* 93,440
16,500 Synutra International, Inc.*(b) 181,830
-----------
$ 461,820
-----------
Total Food, Beverage & Tobacco $ 461,820
-----------
Household & Personal Products - 1.2%
Personal Products - 1.2%
800 Chattem, Inc.* $ 57,224
9,400 Herbalife Ltd. 203,792
15,500 Nu Skin Enterprises, Inc. 161,665
-----------
$ 422,681
-----------
Total Household & Personal
Products $ 422,681
-----------
Health Care Equipment & Services - 6.7%
Health Care Equipment - 2.5%
15,900 American Medical Systems
Holdings, Inc.*(b) $ 142,941
10,800 ArthroCare Corp.*(b) 51,516
18,900 Cryolife, Inc.* 183,519
13,300 Cyberonics, Inc.*(b) 220,381
10,400 Kensey Nash Corp.* 201,864
4,500 Somanetics Corp.* 74,295
-----------
$ 874,516
-----------
Health Care Facilities - 1.4%
10,700 Amsurg Corp.* $ 249,738
7,300 Sun Healthcare Group, Inc.* 64,605
9,400 VCA Antech, Inc.*(b) 186,872
-----------
$ 501,215
-----------
Health Care Services - 1.8%
3,800 Air Methods Corp.* $ 60,762
3,800 Amedisys, Inc.* 157,092
3,700 DaVita, Inc.* 183,409
3,000 Landauer, Inc. 219,900
-----------
$ 621,163
-----------
Health Care Technology - 1.0%
6,000 MedAssets, Inc.*(b) $ 87,600
20,800 Omnicell, Inc.* 253,968
-----------
$ 341,568
-----------
Total Health Care Equipment &
Services $ 2,338,462
-----------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
Pharmaceuticals & Biotechnology - 10.8%
Biotechnology - 4.9%
23,100 Alkermes, Inc.* $ 246,015
12,800 BioMarin Pharmaceutical, Inc.*(b) 227,840
14,700 Celera Corp.* 163,611
6,425 Cubist Pharmaceuticals, Inc.*(b) 155,228
8,900 CV Therapeutics, Inc.* 81,969
7,800 Emergent Biosolution, Inc.* 203,658
13,600 Enzon, Inc.*(b) 79,288
2,300 Myriad Genetics, Inc.*(b) 152,398
6,800 Onyx Pharmaceuticals, Inc.* 232,288
2,700 United Therapeutics Corp.* 168,885
-----------
$ 1,711,180
-----------
Life Sciences Tools & Services - 1.4%
59,300 Affymetrix, Inc.* $ 177,307
5,200 Luminex Corp.* 111,072
21,500 Parexel International Corp.* 208,765
-----------
$ 497,144
-----------
Pharmaceuticals - 4.5%
27,625 Cardiome Pharma Corp.*(b) $ 125,694
7,700 Endo Pharmaceuticals Holdings, Inc.* 199,276
24,500 KV Pharmaceuticals Co.* 70,560
14,400 Medicis Pharmaceutical Corp. (b) 200,160
21,000 Par Pharmaceutical Co., Inc.* 281,610
18,900 Salix Pharmaceuticals, Ltd.*(b) 166,887
11,100 The Medicines Co.* 163,503
8,500 Valeant Pharmaceuticals International*(b) 194,650
13,600 ViroPharma, Inc.*(b) 177,072
-----------
$ 1,579,412
-----------
Total Pharmaceuticals
& Biotechnology $ 3,787,736
-----------
Banks - 4.3%
Regional Banks - 4.3%
5,200 Bank of Hawaii Corp. $ 234,884
4,400 BOK Financial Corp. 177,760
45,965 Cardinal Financial Corp. 261,541
10,900 Prosperity Bancshares, Inc. (b) 322,531
41,852 Sterling Bancshares, Inc. (b) 254,460
18,309 Texas Capital Bancshares, Inc.* 244,608
-----------
$ 1,495,784
-----------
Total Banks $ 1,495,784
-----------
Diversified Financials - 2.8%
Asset Management & Custody Banks - 0.8%
8,300 Federated Investors, Inc.* $ 140,768
8,000 Waddell & Reed Financial Inc.* 123,680
-----------
$ 264,448
-----------
Shares Value
Consumer Finance - 0.6%
14,900 Ezcorp, Inc.* $ 226,629
-----------
Investment Banking & Brokerage - 1.4%
15,600 Knight Capital Group, Inc.* $ 251,940
10,800 OptionsXpress Holdings, Inc.*(b) 144,288
4,900 SWS Group, Inc. 92,855
-----------
$ 489,083
-----------
Total Diversified Financials $ 980,160
-----------
Insurance - 4.9%
Property & Casualty Insurance - 2.7%
18,800 Amtrust Financial Services, Inc. $ 218,080
10,400 Aspen Insurance Holdings, Ltd. 252,200
16,100 Assured Guaranty, Ltd. 183,540
9,900 Tower Group, Inc. 279,279
-----------
$ 933,099
-----------
Reinsurance - 2.2%
5,400 Greenlight Capital, Inc.* $ 70,146
4,800 IPC Holdings, Ltd. 143,520
7,500 Platinum Underwriter Holdings, Ltd. (b) 270,600
11,500 Validus Holdings, Ltd. (b) 300,840
-----------
$ 785,106
-----------
Total Insurance $ 1,718,205
-----------
Real Estate - 4.4%
Diversified Real Estate Investment Trust - 0.5%
6,100 Washington Real Estate Investment
Trust (b) $ 172,630
-----------
Office Real Estate Investment Trusts - 1.2%
7,395 BioMed Property Trust, Inc. $ 86,669
5,400 Corporate Office Properties Trust, Inc. 165,780
5,700 Highwoods Properties, Inc. 155,952
-----------
$ 408,401
-----------
Residential Real Estate Investment Trust - 0.4%
3,700 Home Properties, Inc.*(b) $ 150,220
-----------
Retail Real Estate Investment Trusts - 1.8%
600 Alexander's, Inc. $ 152,940
8,900 Equity One, Inc. (b) 157,530
8,700 National Retail Properties, Inc. (b) 149,553
7,900 Realty Income Corp. (b) 182,885
-----------
$ 642,908
-----------
Specialized Real Estate Investment Trust - 0.5%
9,200 Senior Housing Properties Trust, Inc. (b) $ 164,864
-----------
Total Real Estate $ 1,539,023
-----------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Software & Services - 8.7%
Application Software - 3.5%
4,000 Ansys, Inc.* $ 111,560
19,800 Mentor Graphics Corp.*(b) 102,366
4,300 MicroStrategy, Inc.* 159,659
19,100 Netscout Systems, Inc.* 164,642
9,600 Parametric Technology Corp.* 121,440
19,700 Quest Software, Inc.* 248,023
13,000 Synopsys, Inc.* 240,760
13,900 TIBCO Software, Inc.* 72,141
-----------
$ 1,220,591
-----------
Internet Software & Services - 1.9%
5,400 Comscore, Inc.* $ 68,850
20,054 DivX, Inc.* 104,882
7,200 Interwoven, Inc.* 90,720
12,300 J2 Global Communications, Inc.* 246,492
41,000 RealNetworks, Inc.* 144,730
-----------
$ 655,674
-----------
IT Consulting & Other Services - 0.3%
3,900 Forrester Research, Inc.* $ 110,019
-----------
Systems Software - 3.0%
17,000 Commvault Systems, Inc.* $ 227,970
22,500 Double - Take Software, Inc.* 201,825
10,500 Progress Software Corp.*(b) 202,230
8,872 Sybase, Inc.* 219,759
23,400 Wind River Systems, Inc.* 211,302
-----------
$ 1,063,086
-----------
Total Software & Services $ 3,049,370
-----------
Technology Hardware & Equipment - 6.6%
Communications Equipment - 3.9%
43,000 Acme Packet, Inc.*(b) $ 226,180
11,600 Adtran, Inc. (b) 172,608
16,300 Blue Coat Systems, Inc.*(b) 136,920
32,600 Harmonic, Inc.* 182,886
28,500 Infinera Corp.*(b) 255,360
11,100 Interdigital, Inc.* 305,250
5,700 Neutral Tandem, Inc.* 92,454
-----------
$ 1,371,658
-----------
Computer Storage & Peripherals - 0.7%
8,800 Lexmark International Group, Inc.* $ 236,720
-----------
Electronic Components - 0.2%
18,600 Technitrol, Inc. $ 64,728
-----------
Electronic Manufacturing Services - 0.8%
9,500 Plexus Corp.* $ 161,025
22,200 TTM Technologies, Inc.*(b) 115,662
-----------
$ 276,687
-----------
Shares Value
Technology Distributors - 1.0%
4,000 Anixter International, Inc.*(b) $ 120,480
34,300 Brightpoint, Inc.* 149,205
11,800 Insight Enterprises, Inc.* 81,420
-----------
$ 351,105
-----------
Total Technology Hardware
& Equipment $ 2,300,898
-----------
Semiconductors - 2.6%
Semiconductor Equipment - 0.5%
16,900 Amkor Technology, Inc.* $ 36,842
10,500 Brooks Automation, Inc.* 61,005
4,900 MKS Instruments, Inc.* 72,471
-----------
$ 170,318
-----------
Semiconductors - 2.1%
57,600 Anadigics, Inc.*(b) $ 85,248
41,800 Applied Micro Circuits Corp.* 164,274
24,500 Omnivision Technologies, Inc.*(b) 128,625
16,500 Sigma Designs, Inc.*(b) 156,750
31,800 Zoran Corp.*(b) 217,194
-----------
$ 752,091
-----------
Total Semiconductors $ 922,409
-----------
Telecommunication Services - 1.0%
Integrated Telecommunication Services - 0.4%
12,100 Fairpoint Communications, Inc. $ 39,688
3,600 NTELOS Holdings Corp. 88,777
-----------
$ 128,465
-----------
Wireless Telecommunication Services - 0.6%
6,700 IPCS, Inc.* $ 45,962
15,000 Syniverse Holdings, Inc.* 179,100
-----------
$ 225,062
-----------
Total Telecommunication Services $ 353,527
-----------
Utilities - 3.7%
Electric Utilities - 2.0%
5,400 ITC Holdings Corp. $ 235,872
11,400 Portland General Electric Co. 221,958
12,100 Western Resources, Inc. 248,171
-----------
$ 706,001
-----------
Gas Utilities - 0.5%
5,500 Energen Corp. $ 161,315
-----------
Independent Power Producer
& Energy Traders - 0.5%
5,900 Ormat Technologies, Inc. (b) $ 188,033
-----------
Multi-Utilities - 0.7%
8,500 Alliant Energy Corp. $ 248,030
-----------
Total Utilities $ 1,303,379
-----------
TOTAL COMMON STOCKS
(Cost $45,550,588) $32,237,594
-----------
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Shares Value
EXCHANGE TRADED FUNDS - 1.5%
Real Estate - 1.5%
Diversified Real Estate Investment
Trusts - 1.5%
4,400 DJ Wilshire Real Estate
Investment Trust (b) $ 178,332
4,830 iShare Dow Jones U.S. Real Estate
Index Fund 179,821
4,000 iShares Cohen & Steers Realty Majors
Index Fund 176,720
-----------
$ 534,873
-----------
TOTAL EXCHANGE TRADED FUNDS
(Cost $1,206,378) $ 534,873
-----------
Principal
Value ($)
TEMPORARY CASH INVESTMENTS - 19.9%
Securities Lending Collateral - 19.9% (c)
Certificates of Deposit:
161,827 Abbey National Plc, 3.15%, 8/13/09 $ 161,827
161,805 Bank of Nova Scotia, 3.21%, 5/5/09 161,805
258,612 Bank of Scotland NY, 2.92%, 6/5/09 258,612
291,288 Barclays Bank, 1.5%, 5/27/09 291,288
51,451 Calyon NY, 4.62%, 1/16/09 51,451
323,654 CBA, 4.87%, 7/16/09 323,654
291,288 DNB NOR Bank ASA NY, 3.04%,
6/5/09 291,288
296,467 Intesa SanPaolo S.p.A., 1.44%,
5/22/09 296,467
18,746 NORDEA NY, 4.13%, 4/9/09 18,746
242,740 Royal Bank of Canada NY, 2.7%,
8/7/09 242,740
161,827 Royal Bank of Scotland, 3.06%,
3/5/09 161,827
32,350 Skandinavian Enskilda Bank NY,
3.06%, 2/13/09 32,350
323,654 Societe Generale, 3.29%, 9/4/09 323,654
291,288 Svenska Bank NY, 4.61%, 7/8/09 291,288
323,654 U.S. Bank NA, 2.25%, 8/24/09 323,654
------------
$ 3,230,651
------------
Commercial Paper:
30,841 BBVA U.S., 2.83%, 3/12/09 $ 30,841
323,654 Monumental Global Funding, Ltd.,
2.5%, 8/17/09 323,654
161,827 CME Group, Inc., 2.9%, 8/6/09 161,827
161,810 General Electric Capital Corp.,
2.86%, 3/16/09 161,810
317,828 American Honda Finance Corp.,
4.95%, 7/14/09 317,828
323,654 HSBC Bank, Inc., 2.5%, 8/14/09 323,654
161,827 IBM, 2.39%, 9/25/09 161,827
Principal
Value ($) Value
Commercial Paper (continued):
291,288 Met Life Global Funding, 3.19%,
6/12/09 $ 291,288
291,288 New York Life Global, 2.13%, 9/4/09 291,288
275,106 Westpac Banking Corp., 2.34%,
6/1/09 275,106
------------
$ 2,339,122
------------
Tri-party Repurchase Agreements:
712,038 Deutsche Bank, 0.25%, 1/2/09 $ 712,038
54,982 Barclays Capital Markets, 0.5%,
1/2/09 54,982
------------
$ 767,020
------------
Time Deposit:
323,654 BNP Paribas, 0.01%, 1/2/09 $ 323,654
------------
Money Market Mutual Funds:
80,913 Columbia Government Reserves Fund $ 80,913
242,740 JP Morgan, U.S. Government Money
Market Fund 242,740
------------
$ 323,654
------------
Total Securities Lending
Collateral $ 6,984,100
------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $6,984,100) $ 6,984,100
------------
TOTAL INVESTMENT IN SECURITIES - 113.5 %
(Cost $53,741,066)(a) $ 39,756,567
------------
OTHER ASSETS AND
LIABILITIES - (13.5)% $ (4,714,905)
------------
TOTAL NET ASSETS - 100.0% $ 35,041,662
------------
* Non-income producing security.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $53,973,387 was as follows:
Aggregate gross unrealized gain for all investments in
which there is an excess of value over tax cost $ 1,503,924
Aggregate gross unrealized loss for all investments in
which there is an excess of tax cost over value (15,720,744)
------------
Net unrealized loss $(14,216,820)
------------
(b) At December 31, 2008, the following securities were out on loan:
Shares Description Value
42,000 Acme Packet, Inc.* $ 220,920
7,000 Acuity Brands, Inc. 244,370
2,400 Adtran, Inc. 35,712
5,000 AGCO Corp.* 117,950
15,700 American Medical Systems Holdings, Inc.* 141,143
7,000 Anadigiics, Inc.* 10,360
3,900 Anixter International, Inc.* 117,468
10,000 Applied Industrial Technologies, Inc. 189,200
10,400 ArthroCare Corp.* 49,608
12,000 BioMarin Pharmaceutical, Inc.* 213,600
14,600 Blue Coat Systems, Inc.* 122,640
26,900 Cardiome Pharma Corp.* 122,395
14,000 Charlotte Russe, Inc.* 90,860
4,500 Columbus Mckinnon Corp.* 61,425
5,600 Cubist Pharmaceuticals, Inc.* 135,296
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
13,000 Cyberonics, Inc.* $ 215,410
100 DJ Wilshire Real Estate Investment Trust 4,053
18,800 EnerNoc, Inc.* 139,872
13,000 Enzon, Inc.* 75,790
8,800 Equity One, Inc. 155,760
6,000 Graham Corp.* 64,920
5,000 Hni Corp. 79,200
3,600 Home Properties, Inc.* 146,160
28,000 Infinera Corp.* 250,880
3,800 Lincoln Electric Holdings, Inc. 193,534
5,900 MedAssets, Inc.* 86,140
2,500 Medicis Pharmaceutical Corp. 34,750
6,700 Mentor Graphics Corp.* 34,639
2,000 Myriad Genetics, Inc.* 132,520
8,600 National Retail Properties, Inc. 147,834
12,000 Omnivision Technologies, Inc.* 63,000
300 OptionsXpress Holdings, Inc.* 4,008
5,000 Ormat Technologies, Inc. 159,350
6,000 Platinum Underwriter Holdings, Ltd. 216,480
6,300 Progress Software Corp.* 121,338
8,000 Prosperity Bancshares, Inc. 236,720
7,800 Realty Income Corp. 180,570
10,000 Resources Connection, Inc.* 163,800
18,000 Salix Pharmaceuticals, Ltd.* 158,940
9,000 School Specialty, Inc.* 172,080
9,000 Senior Housing Properties Trust, Inc. 161,280
10,000 Sigma Designs, Inc.* 95,000
25,400 Sterling Bancshares, Inc. 154,432
3,300 Synutra International, Inc.* 36,366
6,000 Tal International Group, Inc. 84,600
2,000 TTM Technologies, Inc.* 10,420
8,600 Vail Resorts, Inc.* 228,760
8,200 Valeant Pharmaceuticals International* 187,780
9,000 Validus Holdings, Ltd. 235,440
6,000 VCA Antech, Inc.* 119,280
13,000 ViroPharma, Inc.* 169,260
5,200 Washington Real Estate Investment Trust 147,160
15,500 Worthington Industries, Inc. 170,810
5,000 Zoran Corp.* 34,150
-----------
Total $ 6,945,433
-----------
(c) Security lending collateral is managed by Credit Suisse, New York
Branch.
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 aggregated $97,112,958 and $109,098,799,
respectively.
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments
Valuation Inputs in Securities
- ----------------------------------------------------------------
Level 1 - Quoted Prices $32,772,467
Level 2 - Other Significant Observable Inputs 6,984,100
Level 3 - Significant Unobservable Inputs -
-----------
Total $39,756,567
-----------
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of year $ 12.97 $ 17.92 $ 16.19 $ 15.02 $ 12.50
-------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.07 $ 0.10 $ 0.10 $ 0.05 $ (0.03)
Net realized and unrealized gain (loss) on investments,
futures contracts and foreign currency transactions (4.37) (0.81) 2.17 1.61 2.55
-------- ------- ------- ------- --------
Net increase (decrease) from investment operations $ (4.30) $ (0.71) $ 2.27 $ 1.66 $ 2.52
Distributions to shareowners:
Net investment income (0.07) (0.13) (0.02) -- --
Net realized gain (1.76) (4.11) (0.52) (0.49) --
-------- ------- ------- ------- --------
Net increase (decrease) in net asset value $ (6.13) $ (4.95) $ 1.73 $ 1.17 $ 2.52
-------- ------- ------- ------- --------
Net asset value, end of period $ 6.84 $ 12.97 $ 17.92 $ 16.19 $ 15.02
-------- ------- ------- ------- --------
Total return* (38.00)% (6.96)% 14.43% 11.39% 20.16%
Ratio of net expenses to average net assets+ 1.00% 0.91% 0.93% 1.15% 1.25%
Ratio of net investment income (loss) to average net assets+ 0.56% 0.50% 0.89% 0.35% (0.21)
Portfolio turnover rate 186% 148% 78% 38% 36%
Net assets, end of period (in thousands) $ 18,901 $39,076 $55,670 $20,555 $ 17,993
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.08% 0.91% 0.93% 1.15% 1.30%
Net investment income (loss) 0.48% 0.50% 0.89% 0.35% (0.26)
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.00% 0.90% 0.93% 1.15% 1.25%
Net investment income (loss) 0.56% 0.51% 0.89% 0.35% (0.21)
* 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 the net asset value at the end of each period.
+ Ratios with no reduction for fee paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of year $ 12.82 $ 17.76 $ 16.07 $ 14.95 $ 12.47
--------- ------- --------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.03 $ 0.04 $ 0.07 $ 0.02 $ (0.03)
Net realized and unrealized gain (loss) on investments,
futures contracts and foreign currency transactions (4.30) (0.78) 2.14 1.59 2.51
--------- ------- --------- ------- --------
Net increase (decrease) from investment operations $ (4.27) $ (0.74) $ 2.21 $ 1.61 $ 2.48
Distributions to shareowners:
Net investment income (0.03) (0.09) (0.00)(c) -- --
Net realized gain (1.76) (4.11) (0.52) (0.49) --
--------- ------- --------- ------- --------
Net increase (decrease) in net asset value $ (6.06) $ (4.94) $ 1.69 $ 1.12 $ 2.48
--------- ------- --------- ------- --------
Net asset value, end of period $ 6.76 $ 12.82 $ 17.76 $ 16.07 $ 14.95
--------- ------- --------- ------- --------
Total return* (38.11)% ( 7.18)% 14.14% 11.10% 19.89%
Ratio of net expenses to average net assets+ 1.25% 1.15% 1.21% 1.39% 1.54%
Ratio of net investment income (loss) to average net assets+ 0.32% 0.27% 0.58% 0.16% (0.41)
Portfolio turnover rate 186% 148% 78% 38% 36%
Net assets, end of period (in thousands) $ 16,140 $30,667 $ 35,726 $21,700 $ 10,845
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.33% 1.15% 1.21% 1.39% 1.59%
Net investment income (loss) 0.24% 0.27% 0.58% 0.16% (0.46)
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.25% 1.15% 1.21% 1.39% 1.54%
Net investment income (loss) 0.32% 0.27% 0.58% 0.16% (0.41)
(c) Amount rounds to less than one cent per share.
* 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 the net asset value at the end of each period.
+ Ratios with no reduction for fee paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality
and expense risk charges, separate account charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $6,945,433)
(cost $53,741,066) $ 39,756,567
Cash 2,265,995
Receivables --
Investment securities sold 5,246
Portfolio shares sold 77,987
Dividends 32,894
Due from Pioneer Investment Management, Inc. 10,093
Other 664
-------------
Total assets $ 42,149,446
-------------
LIABILITIES:
Payables --
Portfolio shares repurchased $ 54,987
Upon return of securities loaned 6,984,100
Due to affiliates 958
Accrued expenses 67,739
-------------
Total liabilities $ 7,107,784
-------------
NET ASSETS:
Paid-in capital $ 62,453,794
Undistributed net investment income 257,756
Accumulated net realized loss on investments and foreign currency transactions (13,685,389)
Net unrealized loss on investments (13,984,499)
-------------
Total net assets $ 35,041,662
-------------
NET ASSET VALUE PER SHARE
(No par value, unlimited number of shares authorized)
Class 1 (based on $18,901,186/2,762,939 shares) $ 6.84
-------------
Class 2 (based on $16,140,476/2,388,955 shares) $ 6.76
-------------
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $ 687,234
Interest 28,538
Income from securities loaned, net 112,777
-------------
Total investment income $ 828,549
-------------
EXPENSES:
Management fees $ 397,440
Transfer agent fees
Class I 1,379
Distribution fees
Class II 59,871
Administrative fees 15,890
Custodian fees 79,275
Professional fees 43,286
Printing expense 18,905
Fees and expenses of nonaffiliated trustees 6,700
Miscellaneous 8,468
-------------
Total expenses $ 631,214
Less management fees waived and expenses reimbursed by Pioneer Investment
Management, Inc. (42,378)
-------------
Net expenses $ 588,836
-------------
Net investment income $ 239,713
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized loss on:
Investments ($13,110,869)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (1,618) $ (13,112,487)
------------- -------------
Change in net unrealized loss on investments $ (10,621,969)
-------------
Net loss on investments and foreign currency transactions $ (23,734,456)
-------------
Net decrease in net assets resulting from operations $ (23,494,743)
-------------
The accompanying notes are an integral part of these financial statements. 15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 239,713 $ 345,933
Net realized gain (loss) on investments and foreign currency transactions (13,112,487) 7,784,840
Change in net unrealized loss on investments (10,621,969) (13,405,025)
------------- -------------
Net decrease in net assets resulting from operations $ (23,494,743) $ (5,274,252)
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.07 and $0.13 per share, respectively) $ (173,738) $ (345,087)
Class II ($0.03 and $0.09 per share, respectively) (56,838) (177,998)
Net realized gain:
Class I ($1.76 and $4.11 per share, respectively) (4,643,916) (11,297,886)
Class II ($1.76 and $4.11 per share, respectively) (3,859,747) (8,266,636)
------------- -------------
Total distributions to shareowners $ (8,734,239) $ (20,087,607)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 7,919,098 $ 10,345,335
Reinvestment of distributions 8,734,238 20,087,607
Cost of shares repurchased (19,124,982) (26,724,583)
------------- -------------
Net increase (decrease) in net assets resulting from Portfolio share transactions $ (2,471,646) $ 3,708,359
------------- -------------
Net decrease in net assets $ (34,700,628) $ (21,653,500)
NET ASSETS:
Beginning of year $ 69,742,290 $ 91,395,790
------------- -------------
End of year $ 35,041,662 $ 69,742,290
------------- -------------
Undistributed net investment income $ 257,756 $ 361,628
------------- -------------
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 314,421 $ 3,026,194 233,778 $ 3,723,066
Reinvestment of distributions 463,682 4,817,653 785,626 11,642,973
Less shares repurchased (1,027,862) (10,295,059) (1,113,791) (17,436,445)
---------- ------------- ---------- -------------
Net decrease (249,759) $ (2,451,212) (94,387) $ (2,070,406)
---------- ------------- ---------- -------------
CLASS II
Shares sold 458,411 $ 4,892,904 429,235 $ 6,622,269
Reinvestment of distributions 381,362 3,916,585 575,640 8,444,634
Less shares repurchased (842,607) (8,829,923) (624,500) (9,288,138)
---------- ------------- ---------- -------------
Net increase (decrease) (2,834) $ (20,434) 380,375 $ 5,778,765
---------- ------------- ---------- -------------
16 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Pioneer Small Cap Value VCT Portfolio (the Portfolio) is one of 19 portfolios
comprising Pioneer Variable Contracts Trust (the Trust), a Delaware statutory
trust registered under the Investment Company Act of 1940 as a diversified
open-end management investment company. The investment objective of the
Portfolio is to seek capital appreciation.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same schedule of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distribution fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either 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 Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
The Portfolio invests in small capitalization stocks. Small capitalization
stocks, while offering the potential for higher returns, may be subject to
greater short-term price fluctuations than securities of larger companies. The
Portfolio's prospectuses contain unaudited information regarding the
Portfolio's principal risks. Please refer to those documents when considering
the Portfolio's risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio, in the preparation of its financial statements,
which are consistent 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 (NYSE) is open, as of the close of regular trading on the NYSE. 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 prices and/or quotations are not
readily available are valued using fair value methods pursuant to
procedures adopted by the Board of Trustees. The Portfolio may also use
fair value methods to value a security, including a non-U.S. security, when
the closing market price on the primary exchange where the security is
traded no longer accurately reflects the value of the security as of the
close of the NYSE. At December 31, 2008, there were no securities that were
valued using fair value methods (other than securities valued using prices
supplied by independent pricing services). Temporary cash investments are
valued at cost which approximates market value.
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 becomes aware 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.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes withheld on capital
gains at the applicable country rates.
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) are
paid or received by the Portfolio,
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
depending on the daily fluctuation in the value of the contracts, and are
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, 2008, the Portfolio had no open futures 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, if any,
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. dollars 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
Portfolio's 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.
As of December 31, 2008, the Portfolio had no open contracts.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
The Portfolio has elected to defer approximately $3,068,625 of capital
losses recognized between November 1, 2008 and December 31, 2008 to its
fiscal year ending December 31, 2009.
At December 31, 2008, the Portfolio had a net capital loss carryforward of
$10,370,480 which will expire in 2016 if not utilized.
At December 31, 2008, the Portfolio has reclassified $113,009 to decrease
undistributed net investment income and $113,009 to decrease accumulated
net realized loss on investments and foreign currency transactions to
reflect permanent book/tax differences. The reclassification has no impact
on the net asset value of the Portfolio and is designed to present the
Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, were as follows:
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 1,750,378 $ 1,656,784
Long-term capital gain 6,983,861 18,430,823
------------ -----------
Total distributions $ 8,734,239 $20,087,607
------------ -----------
Distributable Earnings:
Undistributed ordinary income $ 243,793
Capital loss carryforward (10,370,480)
Post-October loss deferred (3,068,625)
Unrealized depreciation (14,216,820)
------------
Total $(27,412,132)
------------
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
primarily attributable to the tax deferral of losses on wash sales and tax
basis adjustments on Real Estate Investment Trust (REIT) holdings and
exchange traded funds.
F. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in commissions on the sale of
Trust shares for the year ended December 31, 2008. Distribution fees are
calculated based on the average daily net asset values attributable to
Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. Distributions paid by a Portfolio with respect to
each class of shares are calculated in the same manner, at the same time,
and in the same amount, except that Class I and Class II shares can bear
different transfer agent and distribution fees.
G. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit, manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.75% of the
Portfolio's average daily net assets.
Through May 1, 2010, PIM has agreed not to impose all or a portion of its
management fee and, if necessary, to limit
19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
other ordinary operating expenses of the Portfolio to the extent required to
reduce Class I expenses to 1.00% of the average daily net assets attributable
to Class I shares.
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. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $726 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit, provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $125 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II shares. Pursuant to the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $107 in distribution fees payable to PFD at December 31,
2008.
5. Commission Recapture and Expense Offset Arrangements
Effective July 15, 2005, the Portfolio has entered into commission recapture
arrangements with brokers with whom PIM places trades on behalf of the
Portfolio, where they provide services to the Portfolio in addition to trade
execution. These services included payments of certain expenses on behalf of
the Portfolio. For the year ended December 31, 2008, expenses were not reduced
under this agreement. In addition, the Portfolio has entered into certain
expense offset arrangements with PIMSS resulting in a reduction in the
Portfolio's total expenses due to interest earned on cash held by PIMSS. For
the year ended December 31, 2008, the Portfolio's expenses were not reduced
under such arrangements.
6. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Fund's financial statement disclosures.
20
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the
Shareowners of Pioneer Small Cap Value VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Small Cap Value VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Small Cap Value VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young, LLP
Boston, Massachusetts
February 6, 2009
21
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentage of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified short
term gains was 86.13%.
22
Pioneer Small Cap Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Board of Trustees provides broad supervision over the Portfolio's affairs.
The officers of the Trust are responsible for the Trust's operations. The
Custodian Trustees and officers are listed below, together with their principal
Brown Brothers Harriman & Co. occupations during the past five years. Trustees who are interested persons of
the Trust within the meaning of the 1940 Act are referred to as Interested
Independent Registered Trustees. Trustees who are not interested persons of the Trust are referred to
Public Accounting Firm as Independent Trustees. Each of the Trustees serves as a trustee of each of the
76 U.S. registered investment portfolios for which Pioneer serves as investment
Principal Underwriter adviser (the "Pioneer Ernst & Young LLP Funds"). The address for all Trustees
Pioneer Funds Distributor, Inc. and all officers of the Trust is 60 State Street, Boston, Massachusetts 02109.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Deputy Chairman and a Director of None
Board, Trustee Serves until a Pioneer Global Asset Management S.p.A.
and President successor trustee is ("PGAM"); Non-Executive Chairman and a
elected or earlier Director of Pioneer Investment
retirement or Management USA Inc. ("PIM-USA");
removal. Chairman and a Director of Pioneer;
Chairman and Director of Pioneer
Institutional Asset Management, Inc.
(since 2006); Director of Pioneer
Alternative Investment Management
Limited (Dublin); President and a
Director of Pioneer Alternative
Investment Management (Bermuda) Limited
and affiliated funds; Director of
PIOGLOBAL Real Estate Investment Fund
(Russia) (until June 2006); Director of
Nano-C, Inc. (since 2003); Director of
Cole Management Inc. (since 2004);
Director of Fiduciary Counseling, Inc.;
President and Director of Pioneer Funds
Distributor, Inc. ("PFD") (until May
2006); President of all of the Pioneer
Funds; and Of Counsel, Wilmer Cutler
Pickering Hale and Dorr LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Director, CEO and President of Pioneer None
(50)* Executive Vice Serves until a Investment Management USA Inc. (since
President successor trustee is February 2007); Director and President
elected or earlier of Pioneer Investment Management, Inc.
retirement or and Pioneer Institutional Asset
removal. Management, Inc. (since February 2007);
Executive Vice President of all of the
Pioneer Funds (since March 2007);
Director of Pioneer Global Asset
Management S.p.A. (since April 2007);
Head of New Markets Division, Pioneer
Global Asset Management S.p.A. (2000 -
2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are officers
or directors of the Portfolio's investment adviser and certain of its
affiliates.
23
Pioneer Small Cap Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
David R. Bock (65) Trustee Trustee since 2005. Executive Vice President and Chief Director of
Serves until a Financial Officer, I-trax, Inc. Enterprise Community
successor trustee is (publicly traded health care services Investment, Inc.
elected or earlier company) (2004 - 2007); Partner, Federal (privately-held
retirement or City Capital Advisors (boutique merchant affordable housing
removal. bank) (1997 to 2004 and 2008 - present); finance company);
and Executive Vice President and Chief and Director of New
Financial Officer, Pedestal Inc. York Mortgage Trust
(internet-based mortgage trading (publicly traded
company) (2000 - 2002) mortgage REIT)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. President, Bush International, LLC Director of Marriott
Serves until a (international financial advisory firm) International, Inc.,
successor trustee is Director of Discover
elected or earlier Financial Services
retirement or (credit card issuer
removal. and electronic
payment services);
Director of Briggs &
Stratton Co. (engine
manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation
(national security,
defense, and
intelligence
technology firm);
and Member, Board of
Governors,
Investment Company
Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman (64) Trustee Trustee since 2008. Professor, Harvard University Trustee, Mellon
Serves until a Institutional Funds
successor trustee is Investment Trust and
elected or earlie Mellon Institutional
retirement or Funds Master
removal. Portfolio (oversees
17 portfolios in
fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Founding Director, Vice President and None
(61) Serves until a Corporate Secretary, The Winthrop Group,
successor trustee is Inc. (consulting firm); and Desautels
elected or earlier Faculty of Management, McGill University
retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Chief Executive Officer, Quadriserv, None
Serves until a Inc. (technology products for securities
successor trustee is lending industry) (2008 - present);
elected or earlier Private investor (2004 - 2008); and
retirement or Senior Executive Vice President, The
removal. Bank of New York (financial and
securities services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. President and Chief Executive Officer, Director of New
Serves until a Newbury, Piret & Company, Inc. America High Income
successor trustee is (investment banking firm) Fund, Inc.
elected or earlier (closed-end
retirement or investment company)
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Senior Counsel, Sullivan & Cromwell LLP Director, The Swiss
Serves until a (law firm) Helvetia Fund, Inc.
successor trustee is (closed-end
elected or earlier investment company)
retirement or
removal.
- ------------------------------------------------------------------------------------------------------------------------------------
24
Pioneer Small Cap Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS HELD BY THIS OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
Dorothy E. Bourassa (60) Secretary Since 2000. Serves Secretary of PIM-USA; Senior Vice None
at the discretion of President - Legal of Pioneer; Secretary/
the Board Clerk of most of PIM-USA's subsidiaries;
and Secretary of all of the Pioneer
Funds since September 2003 (Assistant
Secretary from November 2000 to
September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves Associate General Counsel of Pioneer None
Secretary at the discretion of since January 2008 and Assistant
the Board Secretary of all of the Pioneer Funds
since September 2003; Vice President and
Senior Counsel of Pioneer from July 2002
to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves Vice President - Fund Accounting, None
at the discretion of Administration and Controllership
the Board Services of Pioneer; and Treasurer of
all of the Pioneer Funds since March
2008; Deputy Treasurer of Pioneer from
March 2004 to February 2008; Assistant
Treasurer of all of the Pioneer Funds
from March 2004 to February 2008; and
Treasurer and Senior Vice President, CDC
IXIS Asset Management Services from 2002
to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves Assistant Vice President - Fund None
Treasurer at the discretion of Accounting, Administration and
the Board Controllership Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves Fund Accounting Manager - Fund None
Treasurer at the discretion of Accounting, Administration and
the Board Controllership Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves Fund Administration Manager - Fund None
(35) Treasurer at the discretion of Accounting, Administration and
the Board Controllership Services since June 2003
and Assistant Treasurer of all of the
Pioneer Funds since September 2003;
Assistant Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves Chief Compliance Officer of Pioneer None
Compliance at the discretion of since December 2006 and of all the
Officer the Board Pioneer Funds since January 2007; Vice
President and Compliance Officer, MFS
Investment Management (August 2005 to
December 2006); Consultant, Fidelity
Investments (February 2005 to July
2005); Independent Consultant (July 1997
to February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
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26
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27
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28
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29
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Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
18650-03-0209
[LOGO]PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio -- Class I and II Shares
ANNUAL REPORT
December 31, 2008
Please refer to your contract prospectus to determine the applicable share
class offered under your contract.
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
Pioneer Strategic Income VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 25
Notes to Financial Statements 30
Report of Independent Registered Public
Accounting Firm 35
Trustees, Officers and Service Providers 37
This report is authorized for distribution only when preceded or accompanied by
a prospectus for the Portfolio being offered.
The Trust files a complete schedule of investments with the Securities and
Exchange Commission for the first and the third quarters for each fiscal year
on Form N-Q. Shareowners may view the filed Form N-Q by visiting the
Commission's web site at http://www.sec.gov. The filed form may also be viewed
and copied at the Commission's Public Reference Room in Washington, D.C.
Information regarding the operations of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/08
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Portfolio Diversification
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
U.S. Corporate Bonds 50.1%
U.S. Government Securities 21.7%
Foreign Government Bonds 6.9%
Senior Floating Rate Loan Interests 5.6%
Collateralized Mortgage Obligations 4.5%
Asset Backed Securities 3.5%
Convertible Corporate Bonds 3.3%
Temporary Cash Investment 2.4%
Municipal Bonds 1.4%
U.S. Preferred Stocks 0.5%
U.S. Common Stocks 0.1%
Maturity Distribution
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
0-1 year 17.0%
1-3 years 28.0%
3-4 years 22.1%
4-6 years 13.1%
6-8 years 14.5%
8+ years 5.3%
Five Largest Holdings
(As a percentage of long-term holdings)*
1. Government of France, 3.75% 4/25/17 1.96%
2. Federal National Mortgage Association, 6.0%, 7/1/37 1.90
3. U.S. Treasury Bonds, 4.375%, 2/15/38 1.77
4. Japan Government, 1.1%, 12/10/16 1.31
5. Government National Mortgage Association, 6.0%, 4/15/38 1.22
*The Portfolio is actively managed, and current holdings may be different. The
holdings listed should not be considered recommendations to buy or sell any
security listed.
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PERFORMANCE UPDATE 12/31/08
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Prices and Distributions
Net Asset Value per Share 12/31/08 12/31/07
Class I $ 8.91 $ 10.83
Class II $ 8.92 $ 10.83
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/08 - 12/31/08) Income Capital Gains Capital Gains
Class I $ 0.7198 $ 0.0157 $ -
Class II $ 0.6946 $ 0.0157 $ -
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Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Strategic Income VCT Portfolio at net asset value, compared to that of the
Barclays Capital U.S. Universal Index. Portfolio returns are based on net asset
value and do not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Strategic Income Pioneer Strategic Income Barclays Capital
VCT Portfolio, Class I VCT Portfolio, Class II U.S. Universal Index
7/99 10000 10000 10000
10070 10060 10136
12/00 10525 10488 11233
11252 11184 12142
12/02 12458 12352 13337
15104 14937 14113
12/04 16651 16423 14814
17108 16832 15216
12/06 18217 17882 15973
19387 18984 17012
12/08 17144 16765 17416
Index comparison begins July 31, 1999. The Barclays Capital U.S. Universal
Index is the union of the U.S. Aggregate Index, the U.S. High Yield Corporate
Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the
non-ERISA portion of the CMBS Index and the CMBS High Yield Index. Municipal
debt, private placements and non-dollar-denominated issues are excluded from
the 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 the Index.
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Average Annual Total Returns
(As of December 31, 2008)
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Class I Class II*
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Life-of-Class
(7/29/99)* 5.89% 5.63%
5 Years* 2.57% 2.34%
1 Year -11.57% -11.69%
All total returns shown assume reinvestment of distributions at net asset value.
The performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
* Class II shares commenced operations on May 1, 2003. Portfolio returns for
Class II shares prior to May 1, 2003 are based on the performance of Class I
shares, reduced to reflect the higher expenses of Class II shares.
Call 800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
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COMPARING ONGOING PORTFOLIO EXPENSES
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As a shareowner in the Portfolio, you incur two types of costs:
(1) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, and other Portfolio expenses; and
(2) transaction costs, including sales charges (loads) on purchase payments.
This example is intended to help you understand your ongoing expenses (in
dollars) of investing in the Portfolio and to compare these costs with the
ongoing costs of investing in other variable annuities. The example is based on
an investment of $1,000 at the beginning of the Portfolio's latest six-month
period and held throughout the six months.
Using the Tables
Actual Expenses
The first table below provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period as
follows:
1. Divide your account value by $1,000
Example: an $8,600 account value [divided by] $1,000 = 8.6
2. Multiply the result in (1) above by the corresponding share class's number
in the third row under the heading entitled "Expenses Paid During Period"
to estimate the expenses you paid on your account during this period.
Expenses Paid on a $1,000 Investment in Pioneer Strategic Income VCT Portfolio
Based on actual returns from July 1, 2008 through December 31, 2008.
Share Class I II
----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $1,000.00 $1,000.00
Ending Account Value on 12/31/08 $ 870.63 $ 870.48
Expenses Paid During Period* $ 4.18 $ 5.36
* Expenses are equal to the Portfolio's annualized expense ratio of 0.89% and
1.14% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on the Portfolio's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the
Portfolio's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period.
You may use this information to compare the ongoing costs of investing in the
Portfolio and other variable annuities. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other variable annuities.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) that are charged at the time of the transaction. Therefore, the
table below is useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different variable annuities. In
addition, if these transaction costs were included, your costs would have been
higher.
Expenses Paid on a $1,000 Investment in Pioneer Strategic Income VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2008 through December 31, 2008.
Share Class I II
----------------------------------------------------------------------------
Beginning Account Value on 7/1/08 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/08 $ 1,020.66 $ 1,019.41
Expenses Paid During Period* $ 4.52 $ 5.79
* Expenses are equal to the Portfolio's annualized expense ratio of 0.89% and
1.14% for Class I and Class II shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
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PORTFOLIO MANAGEMENT DISCUSSION 12/31/08
Higher-risk fixed-income investments, particularly corporate high-yield bonds
and emerging market debt, performed very poorly during 2008, as a widening
credit crisis encouraged investors to flee to the highest-quality securities.
In the following interview, Kenneth J. Taubes discusses the factors influencing
the performance of Pioneer Strategic Income VCT Portfolio during the 12 months
ended December 31, 2008. Mr. Taubes, Head of U.S. Portfolio Management at
Pioneer Investments, is responsible for the daily management of the Portfolio.
Q: How did the Portfolio perform during the 12 months ended December 31, 2008?
A: Pioneer Strategic Income VCT Portfolio's Class I shares returned -11.57% at
net asset value during the 12 months ended December 31, 2008, and Class II
shares returned -11.69%. Over the same period, the Portfolio's benchmark,
the Barclays Capital (formerly Lehman Brothers) U.S. Universal Bond Index
returned 2.38%, while the average return of the 59 variable portfolios in
Lipper's General Bond category was -9.18%. On December 31, 2008, the 30-day
SEC yield of the Portfolio's Class I shares was 9.79%
Q: What were the principal factors affecting the Portfolio's performance over
the 12 months ended December 31, 2008?
A: The year presented very difficult challenges for any portfolio investing in
corporate debt. Investors fled to the highest-quality securities amid fears
that the economy would continue to deteriorate. Such fears were exacerbated
as a worsening crisis in credit markets sharply restricted lending
activity, choking corporate investments and consumer spending. The
problems, which first appeared in 2007, worsened considerably during 2008
as unemployment rose, manufacturing activity weakened, housing values
declined and consumer spending fell. Many observers had hoped that the
economic slowdown would not lead to recession, but those hopes were crushed
in September 2008 when investment bank Lehman Brothers was forced into
bankruptcy and several other major financial institutions required
emergency government rescues because of their exposures to deteriorating
credit. The shock waves extended overseas, as major European financial
institutions also suffered because of their exposure to troubled debt.
Stocks and corporate bond prices fell precipitously in the final months of
the year, particularly in October and November, as major commercial and
investment banks teetered on the edge of collapse, economic production
contracted and consumer spending plummeted. Overseas, national governments
from the United Kingdom to China announced rescue plans to halt the
economic slowdown and re-stimulate growth. In the United States, the Federal
Reserve Board (the Fed) lowered short-term interest rates to near-zero while
making other policy changes to inject liquidity into the financial system.
Congress and the Bush administration agreed upon a $700 billion financial
rescue plan, and the incoming Obama administration began preparing an
additional economic stimulus plan for consideration in 2009. As the economic
outlook continued to deteriorate, the yield spreads between corporate bonds
and U.S. Treasury obligations widened, particularly in the final six months
of 2008, as investors bid up Treasury prices while trying to avoid
investments with credit risk. Treasury securities and the sovereign debt of
developed nations were the best-performing groups in the fixed-income
markets. Government agency mortgages trailed Treasuries, but outperformed
investment-grade corporates, which in turn fared better than high-yield
bonds.
In this environment, the Portfolio's exposure to high-yield investments
detracted from its performance during the 12-month period, especially
relative to the Barclays Capital U.S. Universal Bond Index, which has very
little high-yield exposure. Overall security selection also detracted from
the Portfolio's relative results, particularly in high-yield. In addition,
the Portfolio's investments in foreign high-yield investments, notably
emerging market corporates, did not help.
Q: What were your principal strategies for the Portfolio in this environment?
A: At the start of 2008, we had positioned the Portfolio relatively
defensively, with less exposure to corporate bonds than in the past. We
believed corporate bond valuations were relatively expensive and that it
was increasingly likely that economic growth would begin to decelerate. In
the high-yield sector, we reduced our positions in the lower-quality tiers
of the market and pared back holdings among financials institutions. As we
searched for higher-quality investments with superior yields for the
Portfolio, we maintained healthy exposures to U.S. government agency
mortgage-backed securities, including Ginnie Mae, Fannie Mae and Freddie Mac
mortgages. We favored them because they had substantially less credit risk
than corporate bonds, but had higher yields than Treasuries. These
mortgage-backed securities underperformed Treasuries, which rallied, but
they outperformed corporate bonds. In the final three months of the year we
began to see attractive values re-appear and we started to re-establish
Portfolio positions in distressed parts of the market, including
A Word About Risk:
When interest rates rise, the prices of fixed-income securities in the
Portfolio will generally fall. Conversely, when interest rates fall the prices
of fixed-income securities in the Portfolio will generally rise. Investments in
the Portfolio are subject to possible loss due to the financial failure of
underlying securities and their inability to meet their debt obligations.
Prepayment risk is the chance that mortgage-backed bonds will be paid off early
if falling interest rates prompt homeowners to refinance their mortgages.
Forced to reinvest the unanticipated proceeds at lower interest rates, the
Portfolio would experience a decline in income and lose the opportunity for
additional price appreciation associated with falling interest rates. The
securities issued by U.S. Government sponsored entities (i.e., FNMA, Freddie
Mac) are neither guaranteed nor issued by the U.S. Government. The Portfolio
may invest in mortgage-backed securities, which during times of fluctuating
interest rates may increase or decrease more than other fixed-income
securities. Mortgage-backed securities are also subject to pre-payments.
Investments in high yield or lower-rated securities are subject to
greater-than-average risk. Investing in foreign and/or emerging markets
securities involves risks relating to interest rates, currency exchange rates,
economic, and political conditions. At times, the Portfolio's investments may
represent industries or industry sectors that are interrelated or have common
risks, making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 1-800-688-9915 or visit www.pioneerinvestments.com for the most recent
month-end performance results. Current performance may be lower or higher than
the performance data quoted.
The performance data quoted represents past performance, which is no guarantee
of future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
The returns for the Portfolio do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges. These expenses would reduce the
overall returns shown.
Performance results reflect any applicable expense waivers in effect during the
periods shown. Without such waivers performance would be lower. Waivers may not
be in effect for all portfolios. Certain fee waivers are contractual through a
specified period. Otherwise, fee waivers can be rescinded at any time. See the
prospectus and financial statements for more information.
4
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
investment-grade and high-yield corporate bonds. In addition, we invested
the Portfolio in some financials sector bonds whose values had fallen to
very low levels, and we initiated investments in deeply discounted
convertible securities that offered attractive yields and the potential of
future price appreciation. We also began to invest the Portfolio in non-
government agency residential mortgages, where we believed prices had
dropped to levels that were inconsistent with the default records of those
mortgages. We reduced the Portfolio's exposure to foreign currencies over
the course of 2008, as we believed the multi-year appreciation in
non-dollar currencies had begun to run its course.
At December 31, 2008, 27.6% of the Portfolio's assets were invested in
domestic high-yield debt, including bank loans, while 20.9% of assets were
invested in investment-grade corporate securities. International
investment-grade debt accounted for 10.8% of assets, and foreign high-yield
investments, including emerging market debt, represented 9.6% of assets.
Government-agency mortgages accounted for more than 28% of assets, while
2.7% of assets were invested in Treasuries. Average credit quality of
Portfolio holdings was BBB. Just 3.1% of Portfolio assets were denominated
in foreign currencies.
Q: What types of investments most influenced the Portfolio's performance over
the 12 months ended December 31, 2008?
A: Exposure to U.S. high-yield debt was the primary factor holding back the
Portfolio's performance relative to the Barclays index. Our investments in
emerging market corporate bonds, which are not part of the index, also were
a drag on relative results. Individual investments that detracted included:
securities of Forest City Enterprises, a real estate developer whose bonds
were pulled down despite continuing to meet all obligations; pizza chain
Domino's asset-backed securities; Spanish language broadcaster Univision,
whose bond performance was affected by concerns about a legal dispute with
a company providing programming; and Glencore International, a broker of
commodities and derivative products that was affected by the fallout from
the credit crisis. In addition, the Portfolio had a small position in
Washington Mutual bonds that defaulted when the banking company failed.
Because of the size of our position, the investment had a negligible impact
on overall Portfolio performance.
Several investments had a positive influence on Portfolio performance,
including: bank loans to Talecris, a health care services company
specializing in processing blood supplies; bonds of Alltel, a wireless
communications operator that agreed to be acquired by Verizon; and debt of
Corporacion Interamericana de Entretenimiento (CIE) of Mexico, an
entertainment producer that bought back its bonds. In addition, the
Portfolio's position in the Japanese yen helped performance as that currency
strengthened.
Q: What is your investment outlook?
A: We think low valuations for many corporate securities offer significant
opportunities. Prices have approached Depression-like lows, but we don't
think either the domestic or global economy is heading into depression. In
the United States, actions of the Federal government show that officials
are determined not to repeat the mistakes that preceded the Depression of
the 1930s. The Fed has eased the flow of money into the credit markets, and
the incoming administration has made it clear that stimulating the economy
is more important than balancing the budget during a time of economic
contraction. Outside the United States, other central governments also are
working to keep the economic downturn from worsening.
We think the fixed-income markets now offer extraordinary values in
corporate debt, and other securities whose prices reflect an extremely
pessimistic view of the economy which we do not believe is realistic, given
the determination of the U.S. government to reinvigorate growth. As a
consequence, we have been increasing our investments in investment-grade
corporates, non-agency mortgages, and selectively in high-yield bonds, which
we think have excellent potential once the economy starts to reverse its
downslide and begins to recover. At the same time, we intend to keep the
Portfolio well diversified.
Past performance is no guarantee of future results, and there is no
guarantee that market forecasts discussed will be realized.
Any information in this shareholder 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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
CONVERTIBLE CORPORATE BONDS - 3.2%
Energy - 0.2%
Coal & Consumable Fuels - 0.2%
240,000 BB-/NR Massey Energy Co., 3.25%, 8/1/15 $ 130,200
-----------
Total Energy $ 130,200
-----------
Capital Goods - 0.3%
Construction, Farm Machinery & Heavy Trucks - 0.0%
25,000 B-/B3 Greenbrier Co., Inc., 2.375%, 5/15/26 $ 9,906
-----------
Trading Companies & Distributors - 0.3%
275,000 B/NR Wesco Distribution, Inc., 1.750%, 11/15/26 $ 151,594
-----------
Total Capital Goods $ 161,500
-----------
Transportation - 0.3%
Marine - 0.3%
335,000 B-/Caa1 Horizon Lines, 4.25%, 8/15/12 $ 171,688
-----------
Total Transportation $ 171,688
-----------
Consumer Services - 0.2%
Casinos & Gaming - 0.2%
175,000 BB-/NR Scientific Games Corp. 0.75%, 12/1/24 $ 151,594
-----------
Total Consumer Services $ 151,594
-----------
Health Care Equipment & Services - 0.6%
Health Care Facilities - 0.3%
65,000 B/B1 LifePoint Hospitals, Inc., 3.25%, 8/15/25 $ 46,719
215,000 B/NR LifePoint Hospitals, Inc., 3.5%, 5/15/14 145,394
-----------
$ 192,113
-----------
Health Care Services - 0.3%
345,000 B+/B3 Omnicare, Inc., 3.25%, 12/15/35 $ 193,631
-----------
Total Health Care Equipment & Services $ 385,744
-----------
Pharmaceuticals & Biotechnology - 0.2%
Pharmaceuticals - 0.2%
155,000 B+/NR Mylan Labs, Inc., 1.25%, 3/15/12 $ 113,925
-----------
Total Pharmaceuticals & Biotechnology $ 113,925
-----------
Banks - 0.1%
Regional Banks - 0.1%
95,000 A-/A1 National City Corp., 4.0%, 2/1/11 $ 84,669
-----------
Total Banks $ 84,669
-----------
Diversified Financials - 0.1%
Asset Management & Custody Banks - 0.1%
90,000 BBB-/NR Affiliated Managers Group, Inc., 3.95%, 8/15/38 $ 61,538
-----------
Total Diversified Financials $ 61,538
-----------
Technology Hardware & Equipment - 0.3%
Electronic Equipment & Instruments - 0.2%
270,000 BB-/NR L-1 Identity Solutions, Inc., 3.75%, 5/15/27 $ 144,113
-----------
Electronic Manufacturing Services - 0.1%
30,000 BB-/NR Flextronics International, Ltd., 1.0%, 8/1/10 $ 24,750
-----------
Total Technology Hardware & Equipment $ 168,863
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
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- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Telecommunication Services - 0.9%
Integrated Telecommunication Services - 0.4%
290,000 B+/B1 Qwest Communications International, 3.5%, 11/15/25 $ 243,963
-----------
Wireless Telecommunication Services - 0.5%
535,000 NR/NR NII Holdings, 3.125%, 6/15/12 $ 324,344
-----------
Total Telecommunication Services $ 568,307
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $2,142,484) $ 1,998,028
-----------
ASSET BACKED SECURITIES - 3.5%
Materials - 0.2%
Steel - 0.2%
98,730 AAA/Aaa Morgan Stanley Capital Trust, 0.57125%, 8/25/36 $ 91,197
38,414 0.56 AAA/Aaa Option One Mortgage Trust, Floating Rate Note, 5/25/37 34,385
-----------
$ 125,582
-----------
Total Materials $ 125,582
-----------
Consumer Services - 0.3%
Restaurants - 0.3%
300,000 BB/Ba3 Dunkin Brands Master Finance LLC, 8.28%, 6/20/31 (144A) $ 193,416
-----------
Total Consumer Services $ 193,416
-----------
Food & Drug Retailing - 0.2%
Food Retail - 0.2%
355,000 BB/Aaa Dominos Pizza Master Issuer LLC, 7.629%, 4/25/37 $ 142,000
-----------
Total Food & Drug Retailing $ 142,000
-----------
Banks - 1.7%
Thrifts & Mortgage Finance - 1.7%
113,881 3.08 AA+/Aa1 ACE 2004-HE4 M1, Floating Rate Note, 12/25/34 $ 72,111
100,000 2.57 AAA/Aaa Carrington Mortgage, Floating Rate Note, 10/25/36 84,851
124,491 2.61 AAA/Aaa CMLTI 2006-WFH2 A2A, Floating Rate Note, 8/25/36 92,657
140,000 2.98 AA+/Aa1 Countrywide Asset-Backed Certificates, Floating Rate Note, 11/25/35 120,757
86,896 0.93 AAA/Aaa Countrywide Asset-Backed Certificates, Floating Rate Note, 7/25/36 66,590
258,000 2.89 AA+/Aa1 Countrywide Asset-Backed Certificates, Floating Rate Note, 8/25/35 235,656
183,591 AAA/Aaa FBR Securitization Trust, 2.76188%, 9/25/35 156,094
56,031 2.58 AAA/Aaa Fremont Home Loan Trust, Floating Rate Note, 2/25/36 50,851
46,899 AAA/Aaa Lehman XS Trust, 3.34875%, 5/25/46 46,212
193,355 2.82 AAA/Aaa Lehman XS Trust, Floating Rate Note, 12/25/35 57,389
83,240 2.67 AAA/Aaa Residential Asset Mortgage Products, Inc., Floating Rate Note, 3/25/36 59,229
-----------
$ 1,042,397
-----------
Total Banks $ 1,042,397
-----------
Diversified Financials - 1.1%
Consumer Finance - 0.2%
100,000 0.91 AA+/Aa1 RASC 2005-KS7 M1, Floating Rate Note, 8/25/35 $ 77,431
-----------
Diversified Financial Services - 0.1%
30,000 0.91 AA/Aa2 Asset Backed Securities Corp., Floating Rate Note, 4/25/35 $ 24,870
50,480 2.67 AAA/Aaa FFML 2006-FF4 A2, Floating Rate Note, 3/25/36 38,224
14,151 3.02 AAA/Aaa First Franklin Mortgage Loan Asset Backed Certificate, Floating Rate
Note, 9/24/34 11,633
-----------
$ 74,727
-----------
The accompanying notes are an integral part of these financial statements. 7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Investment Banking & Brokerage - 0.7%
74,778 2.73 AAA/Aaa GSAMP Trust, Floating Rate Note, 11/25/35 $ 68,825
294,292 2.89 AA+/Aa1 GSAMP Trust, Floating Rate Note, 11/25/35 219,401
87,933 2.90 A/Aa2 GSAMP Trust, Floating Rate Note, 3/25/35 80,879
120,000 2.62 AAA/B2 MLMI 2006-AR1 A2C, Floating Rate Note, 3/25/37 81,290
-----------
100,000 4.95 A/Baa3 $ 450,395
-----------
Specialized Finance - 0.1%
Aegis Asset Backed Securities, Floating Rate Note, 1/25/34 $ 46,702
-----------
Total Diversified Financials $ 649,255
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $2,712,552) $ 2,152,650
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 4.5%
Banks - 3.0%
Thrifts & Mortgage Finance - 3.0%
160,000 2.86 AAA/Aaa Adjustable Rate Mortgage Trust, Floating Rate Note, 6/25/35 $ 66,192
306,669 AAA/Ba1 Chase Mortgage Finance Corp., 5.5%, 5/25/37 247,026
109,510 AAA/Aaa Countrywide Alternative Loan Trust, 3.53688%, 10/25/35 50,576
74,244 2.82 AAA/Aaa Countrywide Alternative Loan Trust, Floating Rate Note, 9/25/35 33,482
6,029 5.38 AAA/Aaa Countrywide Home Loans, Floating Rate Note, 9/25/33 5,116
49,518 2.95 AAA/Aaa Global Tower Partners Acquisition, Floating Rate Note, 10/25/44 28,137
275,892 2.68 AAA/Aaa Harborview Mortgage Loan Trust, Floating Rate Note, 11/19/36 118,657
74,489 2.87 NR/Aaa IMPAC CMB Trust, Floating Rate Note, 11/25/35 36,902
36,788 3.11 AAA/Aaa IMPAC CMB Trust, Floating Rate Note, 9/25/34 20,273
297,205 AAA/Aaa JP Morgan Mortgage Trust, 6.0%, 8/25/34 261,355
178,657 2.73 B/B1 Luminent Mortgage Trust, Floating Rate Note, 7/25/36 27,903
93,181 AAA/Aaa MASTR Asset Securitization Trust, 5.5% , 11/25/33 81,705
110,000 NR/Ba2 SBA CMBS Trust, 6.904%, 11/15/36 73,700
61,509 2.78 AAA/Aaa Structured Asset Mortgage Investments, Inc., Floating Rate Note, 9/25/45 27,903
365,000 BB/Ba2 T SRA R 2006-1 F, 7.5296%, 10/15/36 (144A) 109,500
40,000 AAA/Aaa TSTAR 2006-1A A, 5.668%, 10/15/36 32,120
148,556 AAA/Aaa WAMU Mortgage Pass-Through Certificate, 4.5%, 8/25/18 117,155
213,769 2.70 AAA/Aaa WAMU Mortgage Pass-Through Certificate, Floating Rate Note, 4/25/45 100,917
243,472 AAA/NR Wells Fargo Mortgage Backed Securities, 5.0%, 11/25/20 230,386
213,353 NR/Aaa Wells Fargo Mortgage Backed Securities, 5.0%, 3/25/21 154,947
-----------
$ 1,823,952
-----------
Total Banks $ 1,823,952
-----------
Diversified Financials - 1.5%
100,000 BBB/Baa2 Diversified Financial Services - 1.5%
122,307 2.84 AAA/Aaa American Tower Trust, 5.9568%, 4/15/37 $ 68,430
80,000 NR/Ba1 DSLA 2005-AR6 2A1C, Floating Rate Note, 10/19/45 50,359
124,214 2.82 AAA/Aaa Global Signal, 7.036%, 2/15/36 (144A) 52,591
179,263 AAA/NR Impac Securities Assets Corp., Floating Rate Note, 5/25/36 88,177
353,068 AAA/AAA J.P. Morgan Alternative Loan Trust, 6.0%, 3/25/36 131,437
183,847 AAA/Aaa Master Alternative Loans Trust, 6.0%, 7/25/34 275,173
155,000 NR/Ba2 Residential Funding Mortgage Securities I, 5.5%, 11/25/35 155,122
Tower 2004-2A F, 6.376%, 12/15/14 117,180
-----------
$ 938,469
-----------
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Specialized Finance - 0.0%
12,410 3.07 AAA/Aaa INDX 2004-AR1 2A, Floating Rate Note, 4/25/34 $ 7,870
-----------
Total Diversified Financials $ 946,339
-----------
Real Estate - 0.0%
Mortgage Real Estate Investment Trust - 0.0%
44,607 3.12 BBB/Baa3 CS First Boston Mortgage Security, Floating Rate Note, 9/25/34 $ 8,141
-----------
Total Real Estate $ 8,141
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $3,785,621) $ 2,778,432
-----------
CORPORATE BONDS - 49.6%
Energy - 5.4%
Coal & Consumable Fuels - 0.6%
500,000 BB-/B2 Massey Energy Co., 6.875%, 12/15/13 $ 370,000
-----------
Oil & Gas Drilling - 0.6%
267,603 NR/NR DDI Holdings AS, 9.3%, 1/19/12 (144A) $ 133,802
66,962 NR/NR DDI Holdings AS, 9.3%, 4/23/12 (144A) 33,481
NOK 500,000 NR/NR Petromena AS, 9.75%, 5/24/12 (144A) 21,606
125,000 BBB+/Baa2 Transocean Sedco, 1.5%, 12/15/37 101,250
100,000 BBB+/Baa2 Transocean Sedco, 1.625%, 12/15/37 87,125
-----------
$ 377,264
-----------
Oil & Gas Equipment & Services - 0.3%
195,000 BB-/B2 Complete Production Service, 8.0%, 12/15/16 $ 122,850
100,000 5.78 NR/NR Sevan Marine ASA, Floating Rate Note, 5/14/13 (144A) 50,090
-----------
$ 172,940
-----------
Oil & Gas Exploration & Production - 1.8%
145,000 BBB/Baa2 Canadian Natural Resource, 5.9%, 2/1/18 $ 125,277
217,352 BBB+/NR Gazprom International SA, 7.201%, 2/1/20 158,667
170,000 CCC+/Caa1 Harvest Operations Corp., 7.875%, 10/15/11 122,400
165,000 BB-/B3 Hilcorp Energy, 7.75%, 11/1/15 (144A) 116,325
300,000 B/Caa1 Parallel Petroleum Corp., 10.25%, 8/1/14 190,500
200,000 B/B2 Quicksilver Resources, Inc., 7.125%, 4/1/16 107,000
200,000 B/B3 Sandridge Energy, Inc., 8.625%, 4/1/15 105,000
150,000 6.42 B-/B3 Sandridge Energy, Inc., Floating Rate Note, 4/1/14 79,772
175,741 BBB-/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 133,563
-----------
$ 1,138,504
-----------
Oil & Gas Refining & Marketing - 0.4%
200,000 BBB/Baa1 Spectra Energy Capital, 6.2%, 4/15/18 $ 173,550
125,000 B-/B1 Verasun Energy Corp., 9.875%, 12/15/12 (b) (e) 75,000
-----------
$ 248,550
-----------
Oil & Gas Storage & Transportation - 1.7%
105,000 BBB/Baa2 Buckeye Partners LP, 6.05%, 1/15/18 $ 88,017
30,000 B+/B1 Copano Energy LLC, 8.125%, 3/1/16 21,750
275,000 BBB/Baa2 Kinder Morgan Energy, 5.95%, 2/15/18 (b) 234,703
215,000 BBB-/Baa3 NGPL Pipeco LLC, 6.514%, 12/15/12 (144A) 204,039
200,000 BBB-/Baa3 Plains All American Pipeline, 6.125%, 1/15/17 159,038
300,000 A-/A3 Questar Pipeline Co., 5.83%, 2/1/18 277,319
125,000 7.20 BB/Ba1 Southern Union Co., 7.2%, 11/1/66 43,125
-----------
$ 1,027,991
-----------
Total Energy $ 3,335,249
-----------
The accompanying notes are an integral part of these financial statements. 9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Materials - 3.3%
Aluminum - 0.4%
225,000 CCC+/B3 CII Carbon LLC, 11.125%, 11/15/15 $ 144,000
75,000 6.83 B-/B3 Noranda Aluminum Acquisition, Floating Rate Note, 5/15/15 25,500
140,000 B/B3 Novelis, Inc., 7.25%, 2/15/15 81,200
-----------
$ 250,700
-----------
Commodity Chemicals - 0.2%
130,000 C/Ca Basell Finance Co., 8.1%, 3/15/27 (144A) $ 2,600
420,000 CCC/Caa1 Georgia Gulf Corp, 9.5%, 10/15/14 126,000
EURO 145,000 C/Ca Nell AF Sarl, 8.375%, 8/15/15 (144A)* 6,070
-----------
$ 134,670
-----------
Construction Materials - 0.2%
170,000 6.64 BB+/NR C8 Capital SPV Ltd., Floating Rate Note, 12/31/49 $ 86,190
120,000 B-/B3 U.S. Concrete, Inc., 8.375%, 4/1/14 64,800
-----------
$ 150,990
-----------
Diversified Chemical - 0.1%
EURO 225,000 CCC/Caa2 Ineos Group Holdings Plc, 7.875%, 2/15/16 (144A) $ 37,679
-----------
Diversified Metals & Mining - 0.4%
230,000 5.88 BBB-/Ba2 Freeport-McMoran Copper & Gold, Floating Rate Note, 4/1/15 $ 151,800
100,000 BBB+/Baa2 Vale Overseas, Ltd., 6.25%, 1/11/16 94,850
-----------
$ 246,650
-----------
Fertilizers & Agricultural Chemicals - 0.6%
385,000 BBB/Baa2 Agrium, Inc., 6.75%, 1/15/19 $ 368,540
-----------
Forest Products - 0.0%
38,121 B-/Caa3 Ainsworth Lumber, 11.0%, 7/29/15 (144A) $ 22,873
-----------
Metal & Glass Containers - 0.1%
EURO 65,000 BB-/B1 Consol Glass, Ltd., 7.625%, 4/15/14 (144A) $ 54,425
-----------
Paper Packaging - 0.7%
415,000 CCC+/Caa1 Graham Packaging Co., 8.5%, 10/15/12 (b) $ 295,688
15,000 B-/B3 Graphic Packaging Co., 8.5%, 8/15/11 12,525
205,000 B-/B3 Graphic Packaging Co., 9.5%, 8/15/13 141,450
-----------
$ 449,663
-----------
Specialty Chemicals - 0.1%
110,000 C/Caa3 Arco Chemical Co., 9.8%, 2/1/20 $ 11,000
EURO 100,000 B/B2 Kronos International, Inc., 6.5%, 4/15/13 30,701
-----------
$ 41,701
-----------
Steel - 0.5%
225,000 BBB+/Baa2 ArcelorMittal, 6.125%, 6/1/18 $ 154,071
90,000 BBB/Baa2 Commercial Metals Co., 7.35%, 8/15/18 72,064
140,000 BB-/B1 Evraz Group SA, 8.875%, 4/24/13 (144A) 71,400
-----------
$ 297,535
-----------
Total Materials $ 2,055,426
-----------
Capital Goods - 5.2%
Aerospace & Defense - 0.4%
250,000 B-/B3 Aeroflex, Inc., 11.75%, 2/15/15 (144A) $ 162,813
110,000 BB+/Ba3 BE Aerospace, Inc., 8.5%, 7/1/18 99,000
-----------
$ 261,813
-----------
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Building Products - 0.2%
205,000 B-/B3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 63,550
105,000 BB+/BBB- C10 Capital SPV, Ltd, Floating Rate Note, 12/31/49 49,962
-----------
$ 113,512
-----------
Construction & Engineering - 0.4%
160,000 BB-/Ba3 Dycom Industries, 8.125%, 10/15/15 $ 112,800
205,000 B+/B1 Mastec, Inc., 7.625%, 2/1/17 154,006
-----------
$ 266,806
-----------
Construction, Farm Machinery & Heavy Trucks - 0.7%
185,000 BB-/B1 American Railcar, 7.5%, 3/1/14 $ 122,100
130,000 B/B2 Commercial Vehicle Group, 8.0%, 7/1/13 61,100
270,000 B-/B3 Greenbrier Co., Inc., 8.375%, 5/15/15 192,038
65,000 B-/Caa1 Titan Wheel International, Inc., 8.0%, 1/15/12 48,100
-----------
$ 423,338
-----------
Electrical Component & Equipment - 1.5%
311,000 BB+/Ba1 Anixter International Corp., 5.95%, 3/1/15 $ 248,800
170,000 B/B3 Baldor Electric, 8.625%, 2/15/17 126,650
210,000 BB-/Ba1 Belden CDT, Inc., 7.0%, 3/15/17 157,500
240,000 B+/B1 General Cable Corp., 1.0%, 10/15/12 149,700
330,571 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 244,623
-----------
$ 927,273
-----------
Industrial Conglomerates - 0.5%
225,000 BB-/B2 Kansas City Southern, 8.0%, 6/1/15 $ 178,875
145,000 B-/B3 Park-Ohio Industries, Inc., 8.375%, 11/15/14 59,450
EURO 120,000 BB+/Ba2 Stena AB, 6.125%, 2/1/17 (144A) 70,333
-----------
$ 308,658
-----------
Industrial Machinery - 0.7%
150,000 BB-/B1 Gardner Denver, Inc., 8.0%, 5/1/13 (144A) $ 132,000
190,000 B/NR Industrias Metalurgicas Pescar, 11.25%, 10/22/14 85,500
300,000 B/B3 Mueller Water Products, 7.375%, 6/1/17 204,000
-----------
$ 421,500
-----------
Trading Companies & Distributors - 0.8%
375,000 BBB+/Baa1 GATX Financial Corp., 6.0%, 2/15/18 $ 333,380
325,000 BBB-/Baa2 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 131,559
-----------
$ 464,939
-----------
Total Capital Goods $ 3,187,839
-----------
Commercial Services & Supplies - 0.5%
Commercial Printing - 0.4%
330,000 B+/B2 Sheridan Acquisition Corp., 10.25%, 8/15/11 $ 231,413
-----------
Environmental & Facilities Services - 0.0%
95,000 CCC+/Caa2 Aleris International, Inc., 9.0%, 12/15/14 $ 5,700
14,000 BB-/Ba2 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) 14,035
-----------
$ 19,735
-----------
Research & Consulting Services - 0.1%
50,000 BB-/Ba2 FTI Consulting, 7.75%, 10/1/16 $ 41,125
-----------
Total Commercial Services & Supplies $ 292,273
-----------
The accompanying notes are an integral part of these financial statements. 11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Transportation - 1.3%
Air Freight & Couriers - 0.3%
75,000 B-/B3 Ceva Group Plc, 10.0%, 9/1/14 (144A) $ 55,594
EURO 210,000 B-/B3 Ceva Group Plc, 8.5%, 12/1/14 (144A) 108,430
-----------
$ 164,024
-----------
Airlines - 0.2%
126,156 B+/NR Delta Airlines, 7.779%, 1/2/12 $ 109,125
-----------
Marine - 0.1%
85,000 BB-/NR CMA CGM SA, 7.25%, 2/1/13 (144A) $ 38,250
-----------
Railroads - 0.7%
140,000 BBB/Baa1 Burlington Northern Santa Fe Corp., 5.75%, 3/15/08 $ 134,957
220,000 BB-/B1 Kansas City Southern de Mexico, 7.375%, 6/1/14 180,004
95,000 BB-/B1 Kansas City Southern de Mexico, 7.625%, 12/1/13 77,900
65,000 BBB/Baa2 Union Pacific Corp., 7.875%, 1/15/19 74,258
-----------
$ 467,119
-----------
Total Transportation $ 778,518
-----------
Automobiles & Components - 0.7%
Auto Parts & Equipment - 0.6%
155,000 B-/Caa1 Allison Transmission, 11.0%, 11/1/15 (144A) (b) $ 75,950
370,000 B-/B3 Lear Corp., 8.75%, 12/1/16 107,300
190,000 B/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (b) 72,200
305,000 BB/B2 TRW Automotive, Inc., 7.25%, 3/15/17 155,550
-----------
$ 411,000
-----------
Tires & Rubber - 0.1%
155,000 C/Caa1 Cooper Standard Auto, 7.0%, 12/15/12 $ 46,500
-----------
Total Automobiles & Components $ 457,500
-----------
Consumer Durables & Apparel - 1.2%
Homebuilding - 0.4%
318,000 BB-/B1 Meritage Homes Corp., 6.25%, 3/15/15 $ 168,540
90,000 BB-/Ba3 Urbi Desarrollos Urbanos, 8.5%, 4/19/16 (144A) 66,600
-----------
$ 235,140
-----------
Household Appliances - 0.4%
280,000 BBB/Baa2 Whirlpool Corp., 5.5%, 3/1/13 $ 221,531
-----------
Housewares & Specialties - 0.4%
360,000 B+/B2 Oceanografia SA DE CV, 11.25%, 7/15/15 $ 187,200
200,000 CCC+/Caa1 Yankee Acquisition Corp., 9.75%, 2/15/17 (b) 84,000
-----------
$ 271,200
-----------
Total Consumer Durables & Apparel $ 727,871
-----------
Consumer Services - 1.3%
Casinos & Gaming - 1.0%
EURO 310,000 B+/B2 Codere Finance SA, 8.25%, 6/15/15 (144A) $ 209,813
EURO 325,000 8.25 BB/Ba3 Lottomatica S.p.A., Floating Rate Note, 3/31/66 (144A) 272,123
105,000 BB-/B1 Manshantucket Pequot Tribe, 8.5%, 11/15/15 (144A) 41,213
EURO 115,000 B/B3 Peermont Global, Ltd., 7.75%, 4/30/14 (144A) 81,846
225,000 C/Ca Station Casinos, Inc., 6.625%, 3/15/18* 12,938
-----------
$ 617,933
-----------
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Education Services - 0.2%
160,000 AAA/Aaa President & Fellows of Harvard, 3.7%, 4/1/13 $ 157,832
-----------
Leisure Facilities - 0.1%
75,000 B/B3 Firekeepers Development Authority, 13.875%, 5/1/15 (144A) $ 46,500
-----------
Total Consumer Services $ 822,265
-----------
Media - 1.6%
Broadcasting - 1.5%
195,000 BBB+/Baa1 Grupo Televisa SA, 6.0%, 5/15/18 $ 163,976
450,000 BB-/B3 Intelsat Sub Holding, 8.5%, 1/15/13 (144A) 416,250
310,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 275,900
75,000 B-/Caa1 Telesat Canada, 12.5%, 11/1/17 45,000
340,000 CCC/Caa2 Univision Communications, 9.75%, 3/15/15 (144A) 42,500
-----------
$ 943,626
-----------
Cable & Satellite - 0.1%
35,000 BBB+/Baa2 Time Warner Cable, Inc., 8.75, 2/14/19 $ 38,057
-----------
Total Media $ 981,683
-----------
Retailing - 0.7%
Apparel Retail - 0.3%
140,000 B+/B1 Brown Shoe Co., Inc., 8.75%, 5/1/12 $ 103,600
EURO 135,000 8.21 BB-/B2 Edcon Proprietary, Ltd., Floating Rate Note, 6/15/14 (144A) 75,357
-----------
$ 178,957
-----------
Internet Retail - 0.2%
205,000 BB/Ba3 Ticketmaster, 10.75%, 8/1/16 $ 110,700
-----------
Specialty Stores - 0.2%
135,000 B/B3 Sally Holdings, 9.25%, 11/15/14 (144A) (b) $ 116,100
-----------
Total Retailing $ 405,757
-----------
Food & Drug Retailing - 0.1%
Food Distributors - 0.1%
105,000 B/B2 Independencia International, 9.875%, 5/15/15 (144A) $ 57,750
-----------
Total Food & Drug Retailing $ 57,750
-----------
Food, Beverage & Tobacco - 1.7%
Agricultural Products - 0.5%
70,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 63,350
175,000 A/A2 Cargill, Inc., 5.2%, 1/22/13 (144A) 160,317
130,000 BB-/Ba3 Cosan Finance, Ltd., 7.0%, 2/1/17 (144A) 85,800
-----------
$ 309,467
-----------
Brewers - 0.6%
68,000 B+/Ba3 Cerveceria Nacio, 8.0%, 3/27/14 (144A) $ 54,400
80,000 BBB/Baa1 Cia Brasileira de Bebida, 10.5%, 12/15/11 87,800
220,000 BBB/Baa1 Cia Brasileira de Bebida, 8.75%, 9/15/13 231,000
-----------
$ 373,200
-----------
Distillers & Vintners - 0.5%
290,000 BB-/Ba3 Constellation Brands, Inc., 8.375%, 12/15/14 $ 275,500
-----------
The accompanying notes are an integral part of these financial statements. 13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Tobacco - 0.1%
70,000 B+/B2 Alliance One International, Inc., 11.0%, 5/15/12 $ 58,100
30,000 B+/B2 Alliance One International, Inc., 8.5%, 5/15/12 22,050
-----------
$ 80,150
-----------
Total Food, Beverage & Tobacco $ 1,038,317
-----------
Household & Personal Products - 0.1%
Household Products - 0.1%
130,000 CCC+/Caa1 Central Garden, 9.125%, 2/1/13 (b) $ 76,700
-----------
Total Household & Personal Products $ 76,700
-----------
Health Care Equipment & Services - 1.1%
Health Care Facilities - 0.3%
265,000 BB-/B2 HCA Inc., 9.625%, 11/15/16 $ 206,700
-----------
Health Care Services - 0.2%
165,000 B-/B2 Rural/Metro Corp., 9.875%, 3/15/15 $ 132,000
-----------
Health Care Supplies - 0.4%
290,000 B-/B3 Biomet, Inc., 10.375%, 10/15/17 $ 229,100
-----------
Managed Health Care - 0.2%
150,000 A-/Baa1 United Health Group, 4.875%, 2/15/13 $ 140,044
-----------
Total Health Care Equipment & Services $ 707,844
-----------
Pharmaceuticals & Biotechnology - 1.0%
Biotechnology - 0.7%
370,000 BBB+/Baa3 Biogen Idec, Inc., 6.0%, 3/1/13 $ 365,962
116,000 B-/B3 Warner Chilcott Corp., 8.75%, 2/1/15 103,240
-----------
$ 469,202
-----------
Pharmaceuticals - 0.3%
135,000 C/C Angiotech Pharmaceutical, 7.75%, 4/1/14 $ 29,025
160,000 B/B2 Phibro Animal Health Corp., 10.0%, 8/1/13 (144A) 128,000
-----------
$ 157,025
-----------
Total Pharmaceuticals & Biotechnology $ 626,227
-----------
Banks - 4.3%
Diversified Banks - 2.1%
100,000 NR/Ba2 ALB Finance BV, 9.25%, 9/25/13 (144A) $ 39,000
192,000 4.68 BBB-/Ba1 Alfa Div Pymt Rights Fin, Floating Rate Note, 12/15/11 (144A) 124,800
160,000 NR/Baa2 ATF Bank JSC, 9.25%, 4/12/12 (144A)+ 109,571
100,000 NR/Baa2 ATF Capital BV, 9.25%, 2/21/14 (144A) 65,000
100,000 9.54 NR/Ba1 Banco Macro SA, Floating Rate Note, 6/7/12 29,000
135,000 BB/Ba1 Kazkommerts International BV, 8.0%, 11/3/15 63,450
150,000 B+/Ba2 Russian Stand Bank, 7.5%, 10/7/10 (144A) 54,750
300,000 NR/Ba3 Sibacademfinance Plc, 9.0%, 5/12/09 (144A) (b) 301,722
175,000 BB/Ba1 Turanalem Finance BV, 8.5%, 2/10/15 (144A) (b) 75,250
230,000 A+/A1 Wachovia Corp., 5.75%, 6/15/17 228,928
215,000 AA/Aa1 Wells Fargo Co., 4.375%, 1/31/13 210,531
-----------
$ 1,302,002
-----------
14 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Regional Banks - 2.2%
250,000 A/A1 American Express Bank FSB, 5.5%, 4/16/13 $ 236,810
70,000 A-/A2 Keycorp, 6.5%, 5/14/13 64,532
160,000 A+/Aa3 Mellon Funding Corp., 5.5%, 11/15/18 137,927
250,000 A+/A1 PNC Bank NA, 6.0%, 12/7/17 248,454
260,000 8.25 A-/A3 PNC Funding Corp., Floating Rate Note, 5/29/49 209,506
230,000 A+/Aa3 Wachovia Bank NA, 6.0%, 11/15/17 222,025
100,000 A+/Aa2 Wells Fargo Capital, 9.75%, 12/29/49 101,000
65,000 BBB/NR Zions Bancorporation, 5.5%, 11/16/15 45,969
100,000 BBB/Baa1 Zions Bancorporation, 6.0%, 9/15/15 74,366
-----------
$ 1,340,589
-----------
Thrifts & Mortgage Finance - 0.0%
DKK 12,764 AAA/Aaa Realkredit Danmark, 7.0%, 10/1/32 $ 2,489
-----------
Total Banks $ 2,645,080
-----------
Diversified Financials - 6.8%
Consumer Finance - 1.4%
355,000 BBB/Baa1 American General Finance, 6.9%, 12/15/17 $ 153,634
340,000 A+/Aa3 American Honda Finance, 6.7%, 10/1/13 (144A) 342,723
235,000 CCC+/Caa1 Ford Motor Credit Co., 5.7%, 1/15/10 199,710
35,000 CCC+/Caa1 Ford Motor Credit Co., 5.8%, 1/12/09 34,901
320,000 4.00 BBB-/Baa2 SLM Corp., Floating Rate Note, 7/25/14 161,354
-----------
$ 892,322
-----------
Diversified Financial Services - 1.9%
250,000 7.1925 BB/NR Australis, Ltd., Floating Rate Note, 2/3/09 $ 247,575
125,000 8.4 BBB/Baa2 Citi, Floating Rate Note, Perpetual 82,536
400,000 A-/A1 JPMorgan Chase & Co. 7.9%, 4/29/49 332,732
133,750 A-/Baa1 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) 132,411
150,546 BBB/Baa2 Power Receivables Finance LLC, 6.29%, 1/1/12 (144A) 147,471
100,000 BB/Baa2 TNK-BP Finance SA, 6.625%, 3/20/17 (144A) 48,000
240,000 BB/Baa2 TNK-BP Finance SA, 7.5%, 7/18/16 (144A) 124,800
100,000 BB/Baa2 TNK-BP Finance SA, 7.875%, 3/13/18 (144A) 50,000
-----------
$ 1,165,525
-----------
Investment Banking & Brokerage - 1.3%
840,000 5.79 BBB/A3 Goldman Sachs Capital, Floating Rate Note, 12/29/49 $ 322,915
220,000 A/A2 Merrill Lynch & Co., 5.45%, 2/5/13 211,474
335,000 A/A2 Morgan Stanley Dean Witter, Floating Rate Note, 4/1/18 293,892
-----------
$ 828,281
-----------
Specialized Finance - 2.2%
390,000 BBB+/Baa1 CIT Group, Inc., 7.625%, 11/30/12 $ 329,226
421,429 NR/Baa3 Coso Geothermal Power, 7.0%, 7/15/26 (144A) 351,893
20,000 A-/Baa1 International Lease, 6.625%, 11/15/13 13,476
170,000 A-/Baa1 International Lease Finance Corp., 6.375%, 3/25/13 115,480
225,000 A+/A1 National Rural Utilities Corp., 10.375%, 11/1/18 263,342
500,000 7.68 CCC+/B3 NCO Group, Inc., Floating Rate Note, 11/15/13 250,000
-----------
$ 1,323,417
-----------
Total Diversified Financials $ 4,209,545
-----------
The accompanying notes are an integral part of these financial statements. 15
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- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Insurance - 3.0%
Insurance Brokers - 0.1%
100,000 6.68 CCC/B3 USI Holdings Corp., Floating Rate Note, 11/15/14 $ 40,625
-----------
Life & Health Insurance - 0.8%
330,000 B+/B1 Presidential Life Corp., 7.875%, 2/15/09 $ 310,613
210,000 A+/A3 Prudential Financial, 5.15%, 1/15/13 170,573
-----------
$ 481,186
-----------
Multi-Line Insurance - 0.4%
370,000 BB/Baa3 Liberty Mutual Group, 7.0%, 3/15/37 (144A) $ 176,446
80,000 BBB-/Baa2 Liberty Mutual Group, 7.3%, 6/15/14 (144A) 74,909
65,000 10.75 BB/Baa3 Liberty Mutual Group, Floating Rate Note, 6/15/58 (144A) 35,750
-----------
$ 287,105
-----------
Property & Casualty Insurance - 0.9%
350,000 BBB-/Baa3 Hanover Insurance Group, 7.625%, 10/15/25 $ 210,000
285,000 BB/NR Kingsway America, Inc., 7.5%, 2/1/14 237,447
265,000 14.00 A/Baa3 MBIA, Inc., Floating Rate Note, 1/15/33 (144A) (b) 135,150
-----------
$ 582,597
-----------
Reinsurance - 0.8%
250,000 BB+/NR Fhu-Jin Ltd., Floating Rate Note, 8/10/11 (144A) $ 241,425
365,000 BBB+/NR Platinum Underwriters Holding, 7.5%, 6/1/17 236,936
-----------
$ 478,361
-----------
Total Insurance $ 1,869,874
-----------
Real Estate - 1.5%
Diversified Real Estate Activities - 0.3%
300,000 A-/A2 WEA Finance LLC, 7.125%, 4/15/18 $ 212,817
-----------
Real Estate Operating Companies - 0.3%
50,000 9.76 B-/NR Alto Palermo SA, Floating Rate Note, 6/11/12 (144A) $ 21,030
375,000 B+/B1 Forest City Enterprises, 7.625%, 6/1/15 131,250
-----------
$ 152,280
-----------
Retail Real Estate Investment Trusts - 0.8%
120,000 BB-/Ba3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 108,600
370,000 AAA/Aaa Trustreet Properties, Inc., 7.5%, 4/1/15 401,470
-----------
$ 510,070
-----------
Specialized Real Estate Investment Trust - 0.1%
90,000 BBB-/Ba1 Ventas Realty Capital Corp., 7.125%, 6/1/15 (144A) $ 70,425
-----------
Total Real Estate $ 945,592
-----------
Software & Services - 0.8%
Data Processing & Outsourced Services - 0.5%
475,000 B/B3 First Data Corp., 9.875%, 9/24/15 (144A) $ 287,375
-----------
IT Consulting & Other Services - 0.3%
325,000 B-/Caa1 Sungard Data Systems, Inc., 10.25%, 8/15/15 $ 214,500
-----------
Total Software & Services $ 501,875
-----------
Technology Hardware & Equipment - 0.1%
Electronic Manufacturing Services - 0.1%
60,000 BB-/Ba2 Flextronics International, Ltd., 6.5%, 5/15/13 $ 47,400
-----------
Total Technology Hardware & Equipment $ 47,400
-----------
16 The accompanying notes are an integral part of these financial statements.
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Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Semiconductors - 0.4%
Semiconductor Equipment - 0.4%
160,000 B-/B2 Freescale Semiconductor, 9.125%, 12/15/14 $ 36,800
90,000 6.65 B-/B2 Freescale Semiconductor, Floating Rate Note, 12/15/14 30,600
230,000 BBB/Baa1 KLA Instruments Corp., 6.9%, 5/1/18 173,956
-----------
$ 241,356
-----------
Total Semiconductors $ 241,356
-----------
Telecommunication Services - 2.9%
Integrated Telecommunication Services - 2.4%
360,000 NR/B2 Digicel, Ltd., 9.25%, 9/1/12 (144A) $ 306,000
175,000 BBB-/Baa3 Embarq Corp., 7.082%, 6/1/16 134,750
300,000 B-/B2 GC Impsat Holdings I Plc, 9.872%, 2/15/17 (144A) 210,000
150,000 B/B3 GCI, Inc., 7.25%, 2/15/14 117,000
EUR 175,000 10.46 B+/B2 Nordic Telephone Co., Floating Rate Note, 5/1/16 (144A) 164,842
280,000 CCC+/Caa1 Paetec Holdings, 9.5%, 7/15/15 166,600
175,000 A/A3 Verizon Communications, Inc., 8.75%, 11/1/18 205,314
225,000 BB/Ba3 Windstream Corp., 8.625%, 8/1/16 199,125
-----------
$ 1,503,631
-----------
Wireless Telecommunication Services - 0.5%
140,000 B/B1 Hughes Network System, 9.5%, 4/15/14 $ 113,750
290,000 B-/B2 True Move Co., Ltd., 10.75%, 12/16/13 (144A) 107,300
140,000 BB+/Ba2 Vip Fin, 9.125%, 4/30/18 (144A) 75,600
-----------
$ 296,650
-----------
Total Telecommunication Services $ 1,800,281
-----------
Utilities - 4.6%
Electric Utilities - 2.0%
245,000 NR/B3 Caiua Serv Electricidad, 11.125%, 4/2/49 (144A) $ 105,350
163,505 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 153,490
200,000 BBB+/Baa2 Israel Electric Corp., Ltd., 7.25%, 1/15/19 (144A) 186,530
200,000 1.33 NR/NR Power Contract Financing LLC, Floating Rate Note, 2/5/10 (144A) 162,000
75,000 BB+/Baa3 Public Service of New Mexico, 7.95%, 5/15/18 61,032
40,000 A/A2 Southern California Edison Co., 5.75%, 3/15/14 41,918
310,000 CCC/B3 TXU Energy Co., 10.25%, 11/1/15 220,100
250,000 BBB+/Baa2 West Penn Power Co., 5.95%, 12/15/17 210,613
100,000 NR/NR White Pine Hydro Portfolio, 7.26%, 7/20/15 91,717
-----------
$ 1,232,750
-----------
Gas Utilities - 0.7%
95,000 B+/B1 Inergy LP, 8.25%, 3/1/16 $ 74,100
110,000 A+/Aa2 Nakilat, Inc., 6.067%, 12/31/33 (144A) 73,724
260,000 A/Aa3 Nakilat, Inc., 6.267%, 12/31/33 (144A) 174,223
260,000 B+/B2 Transport De Gas Del Sur, 7.875%, 5/14/17 (144A) 135,200
-----------
$ 457,247
-----------
Independent Power Producer & Energy Traders - 1.5%
330,000 BB-/Ba3 Intergen NV, 9.0%, 6/30/17 $ 270,600
195,329 NR/Ba1 Juniper Generation, 6.79%, 12/31/14 (144A) 211,309
250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 191,340
170,000 BBB-/Baa3 Panoche Energy Center, 6.885%, 7/31/29 (144A) 143,928
165,962 BB/Ba2 Tenaska Alabama, 7.0%, 6/30/21 (144A) 130,170
-----------
$ 947,347
-----------
The accompanying notes are an integral part of these financial statements. 17
PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Multi-Utilities - 0.4%
180,000 BB/Ba2 NSG Holdings LLC, 7.75%, 12/15/25 (144A) $ 140,400
100,000 BB-/Ba2 Public Service of New Mexico, 9.25%, 5/15/15 79,500
-----------
$ 219,900
-----------
Total Utilities $ 2,857,244
-----------
TOTAL CORPORATE BONDS
(Cost $42,772,011) $30,669,466
-----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 21.4%
876,330 AAA/Aaa Federal Home Loan Mortgage Corp., 4.5%, 4/1/20 - 7/1/20 $ 898,355
132,226 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 - 6/1/35 135,320
92,555 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 - 1/1/35 95,223
149,607 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 - 1/1/33 154,860
225,008 AAA/Aaa Federal National Mortgage Association, 4.0%, 7/1/18 230,874
978,444 AAA/Aaa Federal National Mortgage Association, 4.5%, 5/1/20 - 9/1/35 996,829
2,874,353 AAA/Aaa Federal National Mortgage Association, 5.0%, 2/1/20 - 3/1/37 2,955,186
293,595 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 - 5/1/34 302,425
34,448 AAA/Aaa Federal National Mortgage Association, 5.575%, 1/1/37 35,078
1,113,181 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 1,147,311
9,414 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/31 - 2/1/32 9,852
816 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 863
777,184 AAA/Aaa Government National Mortgage Association, 4.5%, 9/15/33 - 4/15/35 794,256
609,580 AAA/Aaa Government National Mortgage Association, 5.0%, 12/1/21 - 4/15/35 626,979
1,560,284 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 - 11/15/35 1,615,080
1,238,569 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 - 4/15/38 1,282,620
59,520 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/29 - 11/15/32 62,613
322 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 341
8,239 AAA/Aaa Government National Mortgage Association, 7.5%, 5/15/23 8,744
1,682 AAA/Aaa Government National Mortgage Association I, 7.0%, 3/15/31 1,778
83,997 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 86,518
153,138 AAA/Aaa Government National Mortgage Association II, 6.0%, 11/20/33 158,079
788,000 AAA/Aaa U.S. Treasury Bonds, 4.375%, 2/15/38 1,055,428
62,000 AAA/Aaa U.S. Treasury Bonds, 5.0%, 5/15/37 89,832
130,000 AAA/Aaa U.S. Treasury Bonds, 6.25%, 8/15/23 177,308
215,000 AAA/Aaa U.S. Treasury Bonds, 8.75%, 5/15/17 316,386
5,371 AAA/Aaa U.S. Treasury Inflation Notes, 2.375%, 1/15/17 5,329
-----------
$13,243,467
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $12,435,870) $13,243,467
-----------
FOREIGN GOVERNMENT BONDS - 6.9%
ITL 195,000,000 BBB-/Baa3 Banco Nac De Desen Econo, 8.0%, 4/28/10 $ 138,431
SEK 3,445,000 AAA/Aaa Government of Sweden, 5.25%, 3/15/11 474,340
SEK 2,955,000 AAA/Aaa Government of Sweden, 5.5%, 10/8/12 426,907
EURO 810,000 AAA/Aaa Government of France, 3.75%, 4/25/17 1,168,278
JPY 81,863,200 AA/Aa3 Japan Government, 1.1%, 12/10/16 782,609
100,000 A/Aa3 Korea Development Bank, 5.3%, 1/17/13 91,040
NOK 1,320,000 AAA/Aaa Norwegian Government, 6.0%, 5/16/11 203,633
NOK 1,500,000 AAA/Aaa Norwegian Government, 5.5%, 5/15/09 218,091
AUD 532,000 AA/Aa1 Ontario Province, 5.5%, 4/23/13 397,930
18 The accompanying notes are an integral part of these financial statements.
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Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
FOREIGN GOVERNMENT BONDS - (continued)
AUD 207,000 AAA/Aaa Queensland Treasury, 6.0%, 8/14/13 $ 154,586
184,536 BBB-/Ba1 Republic of Columbia, 9.75%, 4/9/11 190,995
-----------
$ 4,246,840
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $4,035,037) $ 4,246,840
-----------
MUNICIPAL BONDS - 1.4%
Muni Airport - 0.2%
175,000 B/B3 New Jersey Economic Development Authority Special Facility Revenue,
7.0%, 11/15/30 $ 92,416
50,000 B/B3 New Jersey Economic Development Authority, 6.25%, 9/15/29 26,013
-----------
$ 118,429
-----------
Municipal Higher Education - 1.2%
295,000 AAA/Aa3 California State University Revenue, 5.0%, 11/1/39 $ 271,677
300,000 AAA/Aaa Connecticut State Health & Education, 5.0%, 7/1/42 296,157
175,000 AAA/Aaa New York State Dormitory Authority, 5.0%, 7/1/38 173,401
-----------
$ 741,235
-----------
TOTAL MUNICIPAL BONDS
(Cost $917,726) $ 859,664
-----------
SENIOR FLOATING RATE LOAN INTERESTS - 5.5%**
Energy - 0.5%
Integrated Oil & Gas - 0.2%
159,600 8.0000 NR/Ba3 Hudson Products Holdings, Inc., Term Loan, 8/24/15 $ 126,084
-----------
Oil & Gas Exploration & Production - 0.3%
226,559 4.3350 B+/B2 Calpine Corp., First Priority Term Loan, 3/31/14 $ 168,058
-----------
Total Energy $ 294,142
-----------
Materials - 0.4%
Steel - 0.4%
233,251 4.4200 BB-/B3 Essar Steel Algoma, Inc., Term Loan, 6/20/13 $ 144,616
197,000 5.4613 B/B3 Niagara Corp., Term Loan, 6/29/14 90,620
-----------
$ 235,236
-----------
Total Materials $ 235,236
-----------
Capital Goods - 0.4%
Aerospace & Defense - 0.3%
281,935 5.4375 B+/Ba3 Aeroflex, Inc., Tranche B-1 Term Loan, 8/15/14 $ 177,619
-----------
Construction & Engineering - 0.1%
34,524 8.0000 NR/NR Custom Building Products, Term Loan, 10/20/11 $ 23,764
79,555 5.7263 BB+/Ba1 URS Corp., Tranche B Term Loan, 5/15/13 69,213
-----------
$ 92,977
-----------
Total Capital Goods $ 270,596
-----------
Commercial Services & Supplies - 0.1%
Diversified Commercial Services - 0.1%
250,000 3.7088 CCC+/Caa1 J.G. Wentworth, First Lien Loan, 3/1/14 $ 75,833
-----------
Total Commercial Services & Supplies $ 75,833
-----------
The accompanying notes are an integral part of these financial statements. 19
PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Transportation - 0.1%
Air Freight & Couriers - 0.1%
16,866 3.1000 B/Ba2 TNT Logistics, Additional Pre-Term Loan, 11/4/13 $ 10,457
45,367 5.0463 NR/Ba2 TNT Logistics, U.S. Term Loan, 11/4/13 28,128
-----------
$ 38,585
-----------
Total Transportation $ 38,585
-----------
Automobiles & Components - 0.2%
Tires & Rubber - 0.2%
230,000 2.2200 BB/Ba1 Goodyear Tire & Rubber Co., Second Term Loan, 4/30/14 $ 147,775
-----------
Total Automobiles & Components $ 147,775
-----------
Consumer Durables & Apparel - 0.3%
Homebuilding - 0.1%
232,318 8.2500 B+/B2 LandSource Communities, Roll Up Facility Loan, 6/1/09 $ 53,433
-----------
Housewares & Specialties - 0.2%
147,750 3.9588 BB-/Ba3 Jarden Corp., Term Loan B3, 1/24/12 $ 115,393
-----------
Total Consumer Durables & Apparel $ 168,826
-----------
Consumer Services - 0.3%
Casinos & Gaming - 0.3%
58,333 6.5525 BB-/Ba3 Gateway Casinos & Entertainment, Delayed Draw Loan, 9/30/14 $ 25,958
288,750 6.5525 BB-/Ba3 Gateway Casinos & Entertainment, Term Advance Loan, 9/30/14 128,494
-----------
$ 154,452
-----------
Total Consumer Services $ 154,452
-----------
Media - 0.1%
Cable & Satellite - 0.1%
99,250 8.5000 B+/B1 Charter Communications, Incremental Term Loan, 3/6/14 $ 79,152
-----------
Total Media $ 79,152
-----------
Retailing - 0.3%
Specialty Stores - 0.3%
244,987 3.8733 BB-/B2 Sally Holdings LLC, Term B Loan, 11/16/13 $ 175,574
-----------
Total Retailing $ 175,574
-----------
Health Care Equipment & Services - 0.9%
Health Care Equipment - 0.5%
305,888 5.6416 B+/B2 Talecris Biotherapeutics, Inc., First Term Loan, 12/6/13 $ 268,416
-----------
Health Care Facilities - 0.4%
116,064 4.4454 BB/Ba3 CHS/Community Health Systems, Inc., Funded Term Loan, 7/25/14 $ 90,936
1,979 1.8013 BB/Ba3 CHS/Community Health Systems, Inc., Delayed Draw Loan, 7/25/14 1,550
177,246 4.8234 B+/Ba2 Sun Healthcare Group, Inc., Term Loan, 4/19/14 122,299
40,230 1.3588 B+/Ba2 Sun Healthcare Group, Inc., Synthetic LC Loan, 4/19/15 27,759
23,852 3.7443 B+/Ba2 Sun Healthcare Group, Inc., Delayed Draw Loan, 4/19/16 16,458
-----------
$ 259,002
-----------
Total Health Care Equipment & Services $ 527,418
-----------
Insurance - 0.2%
Insurance Brokers - 0.2%
246,875 4.4588 B-/B3 Alliant Holdings I, Inc., Term Loan, 8/21/14 $ 148,125
-----------
Total Insurance $ 148,125
-----------
20 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
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Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Technology Hardware & Equipment - 0.5%
Electronic Equipment & Instruments - 0.5%
96,822 6.7013 BB/Ba2 Huawei-3Com Co., Ltd., Tranche B Term Loan, 9/28/12 $ 79,878
79,000 7.4994 BB+/Ba3 L-1 Identity Solutions, Inc., Term Loan, 8/15/13 69,718
195,073 4.7200 B/B3 Scitor Corp., Term Loan, 9/26/14 172,639
-----------
$ 322,235
-----------
Total Technology Hardware & Equipment $ 322,235
-----------
Semiconductors - 0.4%
Semiconductor Equipment - 0.3%
77,148 7.0688 BB-/Ba1 Flextronics Semiconductor, A-1-A Delayed Loan, 10/1/14 $ 49,632
268,476 6.1554 BB-/Ba1 Flextronics Semiconductor, A Closing Date Loan, 10/1/14 172,720
-----------
$ 222,352
-----------
Semiconductors - 0.1%
98,000 3.9313 BB/NR Freescale Semiconductor, Term Loan, 11/29/13 $ 57,384
-----------
Total Semiconductors $ 279,736
-----------
Telecommunication Services - 0.6%
Integrated Telecommunication Services - 0.3%
21,150 4.4600 B+/B2 Telesat Canada, U.S. Term II Loan, 10/31/14 $ 14,616
246,253 6.1043 B+/B2 Telesat Canada, U.S. Term I Loan, 10/31/14 170,178
-----------
$ 184,794
-----------
Wireless Telecommunication Services - 0.3%
237,374 3.9517 BB-/Ba2 Stratos Global Corp., Term B Facility Loan, 2/13/12 $ 197,614
-----------
Total Telecommunication Services $ 382,408
-----------
Utilities - 0.2%
Independent Power Producer & Energy Traders - 0.2%
83,639 2.6750 BB/Ba1 NRG Energy, Inc., Term Loan, 2/1/13 $ 72,954
41,213 1.3588 BB/Ba1 NRG Energy, Inc., Credit-Linked Loan, 2/1/13 35,948
-----------
$ 108,902
-----------
Total Utilities $ 108,902
-----------
TOTAL SENIOR FLOATING RATE LOAN INTERESTS
(Cost $5,051,968) $ 3,408,995
-----------
Shares
PREFERRED STOCK - 0.5%
Diversified Financials - 0.5%
Diversified Finance Services - 0.5%
495 Bank of America Corp. 7.25%, 12/31/49 $ 321,750
-----------
Total Diversified Financials $ 321,750
-----------
TOTAL PREFERRED STOCK
(Cost $382,961) $ 321,750
-----------
COMMON STOCK - 0.1%
Materials - 0.0%
Forest Products - 0.0%
11,450 Ainsworth Lumber Co., Ltd.* $ 9,336
-----------
Total Materials $ 9,336
-----------
The accompanying notes are an integral part of these financial statements. 21
PIONEER VARIABLE CONTRACTS TRUST
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SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
Floating S&P/Moody's
Rate (c) Ratings
Shares (unaudited) (unaudited) Value
Transportation - 0.1%
Airlines - 0.1%
3,201 Delta Air Lines Inc.* $ 36,683
-----------
Total Transportation $ 36,683
-----------
TOTAL COMMON STOCK
(Cost $153,643) $ 46,019
-----------
Principal
Amount ($)
TEMPORARY CASH INVESTMENTS - 2.4%
Securities Lending Collateral - 2.4% (d)
Certificates of Deposit:
33,885 Abbey National Plc, 3.15%, 8/13/09 $ 33,885
33,880 Bank of Nova Scotia, 3.21%, 5/5/09 33,880
54,151 Bank of Scotland NY, 2.92%, 6/5/09 54,151
60,993 Barclays Bank, 1.5%, 5/27/09 60,993
10,773 Calyon NY, 4.62%, 1/16/09 10,773
67,770 CBA, 4.87%, 7/16/09 67,770
60,993 DNB NOR Bank ASA NY, 3.04%, 6/5/09 60,993
62,077 Intesa SanPaolo S.p.A., 1.44%, 5/22/09 62,077
3,925 NORDEA NY, 4.13%, 4/9/09 3,925
50,827 Royal Bank of Canada NY, 2.7%, 8/7/09 50,827
33,885 Royal Bank of Scotland, 3.06%, 3/5/09 33,885
6,774 Skandinavian Enskilda Bank NY, 3.06%, 2/13/09 6,774
67,770 Societe Generale, 3.29%, 9/4/09 67,770
60,993 Svenska Bank NY, 4.61%, 7/8/09 60,993
67,770 U.S. Bank NA, 2.25%, 8/24/09 67,770
-----------
$ 676,466
-----------
Commercial Paper:
6,458 BBVA U.S., 2.83%, 3/12/09 $ 6,458
67,770 Monumental Global Funding, Ltd., 2.5%, 8/17/09 67,770
33,885 CME Group, Inc., 2.9%, 8/6/09 33,885
33,881 General Electric Capital Corp., 2.86%, 3/16/09 33,881
66,550 American Honda Finance Corp., 4.95%, 7/14/09 66,550
67,770 HSBC Bank, Inc., 2.5%, 8/14/09 67,770
33,885 IBM, 2.39%, 9/25/09 33,885
60,993 Met Life Global Funding, 3.19%, 6/12/09 60,993
60,993 New York Life Global, 2.13%, 9/4/09 60,993
57,604 Westpac Banking Corp., 2.34%, 6/1/09 57,604
-----------
$ 489,788
-----------
Tri-party Repurchase Agreements:
149,094 Deutsche Bank, 0.25%, 1/2/09 $ 149,094
11,513 Barclays Capital Markets, 0.5%, 1/2/09 11,513
-----------
$ 160,606
-----------
Time Deposit:
67,770 BNP Paribas, 0.01%, 1/2/09 $ 67,770
-----------
22 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
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Principal Floating S&P/Moody's
Amount ($) Rate (c) Ratings
(unaudited) (unaudited) Value
Money Market Mutual Funds:
16,942 Columbia Government Reserves Fund $ 16,942
50,827 JP Morgan, U.S. Government Money Market Fund 50,827
-----------
$ 67,770
-----------
Total Securities Lending Collateral $ 1,462,400
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $1,462,400) $ 1,462,400
-----------
TOTAL INVESTMENT IN SECURITIES - 99.0%
(Cost $75,852,273)(a) $61,187,711
-----------
OTHER ASSETS AND LIABILITIES - 1.0% $ 622,455
-----------
TOTAL NET ASSETS - 100.0% $61,810,166
===========
* Non-income producing security.
+ Investment deemed to be an affiliate of the Fund.
NR Not rated by either S&P or Moody's.
(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, 2008, the value of these securities amounted to $9,631,850
or 15.6% of total net assets.
** Senior floating rate loan interests in which the Portfolio invests
generally pay interest at rates that are periodically redetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate
offered by one or more major United States banks, (iii) the certificate
of deposit or (iv) other base lending rates used by commercial lenders.
The rate shown is the coupon rate at period end.
(a) At December 31, 2008, the net unrealized loss on investments based on
cost for federal income tax purposes of $75,858,933 was as follows:
Aggregate gross unrealized gain for all investments
in which there is an excess of value over tax cost $ 1,407,443
Aggregate gross unrealized loss for all investments
in which there is an excess of tax cost over value (16,078,665)
------------
Net unrealized loss $(14,671,222)
============
(b) At December 31, 2008, the following securities were out on loan:
Principal
Amount ($) Description Value
150,000 Allison Transmission, 11.0%, 11/1/15 (144A) $ 73,500
128,000 Central Garden, 9.125%, 2/1/13 75,520
400,000 Graham Packaging Co., 8.5%, 10/15/12 285,000
270,000 Kinder Morgan Energy, 5.95%, 2/15/18 230,436
260,000 MBIA, Inc., Floating Rate Note, 1/15/33 (144A) 132,600
133,000 Sally Holdings, 9.25%, 11/15/14 (144A) 114,380
273,000 Sibacademfinance Plc, 9.0%, 5/12/09 (144A) 274,567
38,000 Tenneco Automotive, Inc., 8.625%, 11/15/14 14,440
100,000 Turanalem Finance BV, 8.5%, 2/10/15 (144A) 43,000
120,000 Verasun Energy Corp., 9.875%, 12/15/12 72,000
190,000 Yankee Acquisition Corp., 9.75%, 2/15/17 79,800
----------
Total $1,395,243
==========
(c) Debt obligation with a variable interest rate. Rate shown is rate at
period end.
(d) Security lending collateral is managed by Credit Suisse, New York Branch.
(e) Security is in default and is non-income producing.
The accompanying notes are an integral part of these financial statements. 23
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
NOTE: Principal amounts are denominated in U.S. Dollars unless otherwise
denoted:
AUD Australian Dollar
DKK Danish Kroner
EURO Euro
ITL Italian Lira
JPY Japanese Yen
NOK Norwegian Krone
SEK Swedish Krone
Purchases and sales of securities (excluding temporary cash investments) for
the year ended December 31, 2008 were as follows:
Purchases Sales
Long-term U.S. Government $14,412,187 $40,286,374
Other Long-Term Securities $34,020,691 $ 8,118,303
Various inputs are used in determining the value of the Portfolio's
investments. These inputs are summarized in the three broad levels listed
below.
Highest priority is given to Level 1 inputs and lowest priority is given to
Level 3.
Level 1 - quoted prices in active markets for identical securities
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining fair value of investments)
The following is a summary of the inputs used as of December 31, 2008, in
valuing the Portfolio's assets:
Investments in Other Financial
Valuation Inputs Securities Instruments
- -------------------------------------------------------------------------------------
Level 1 - Quoted Prices $ 367,769 $ -
Level 2 - Other Significant Observable Inputs 60,819,942 18,367
Level 3 - Significant Unobservable Inputs - -
----------- -------
Total $61,187,711 $18,367
=========== =======
24 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 10.83 $ 10.80 $ 10.76 $ 11.26 $ 11.01
---------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income $ 0.68 $ 0.58 $ 0.55 $ 0.61 $ 0.60
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (1.86) 0.09 0.12 (0.31) 0.47
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment
operations $ (1.18) $ 0.67 $ 0.67 $ 0.30 $ 1.07
Distributions to shareowners:
Net investment income (0.72) (0.58) (0.58) (0.64) (0.66)
Net realized gain (0.02) (0.06) (0.05) (0.16) (0.16)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ (1.92) $ 0.03 $ 0.04 $ (0.50) $ 0.25
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.91 $ 10.83 $ 10.80 $ 10.76 $ 11.26
========== ========== ========== ========== ==========
Total return* (11.57)% 6.43% 6.48% 2.74% 10.25%
Ratio of net expenses to average net assets+ 0.89% 0.84% 0.83% 0.89% 1.03%
Ratio of net investment income to average
net assets+ 6.49% 5.26% 5.13% 5.57% 5.52%
Portfolio turnover rate 66% 64% 44% 46% 53%
Net assets, end of period (in thousands) $ 12,822 $ 17,665 $ 18,989 $ 20,662 $ 20,814
Ratios with no waiver of management fees and
assumption of expenses by PIM and no
reduction for fees paid indirectly:
Net expenses 0.89% 0.84% 0.83% 0.89% 1.03%
Net investment income 6.49% 5.26% 5.13% 5.57% 5.52%
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, and sales charges.
The accompanying notes are an integral part of these financial statements. 25
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class II 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
Net asset value, beginning of period $ 10.83 $ 10.80 $ 10.76 $ 11.26 $ 11.01
---------- ---------- ---------- ---------- ----------
Increase from investment operations:
Net investment income $ 0.64 $ 0.53 $ 0.51 $ 0.55 $ 0.55
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (1.84) 0.12 0.14 (0.28) 0.49
---------- ---------- ---------- ---------- ----------
Net increase from investment operations $ (1.20) $ 0.65 $ 0.65 $ 0.27 $ 1.04
Distributions to shareowners:
Net investment income (0.69) (0.56) (0.56) (0.61) (0.63)
Net realized gain (0.02) (0.06) (0.05) (0.16) (0.16)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ (1.91) $ 0.03 $ 0.04 $ (0.50) $ 0.25
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.92 $ 10.83 $ 10.80 $ 10.76 $ 11.26
========== ========== ========== ========== ==========
Total return* (11.69)% 6.17% 6.24% 2.49% 9.95%
Ratio of net expenses to average net assets+ 1.14% 1.08% 1.07% 1.14% 1.29%
Ratio of net investment income to average
net assets+ 6.27% 5.03% 4.88% 5.30% 5.49%
Portfolio turnover rate 66% 64% 44% 46% 53%
Net assets, end of period (in thousands) $ 48,988 $ 59,543 $ 48,052 $ 40,045 $ 25,027
Ratios with no waiver of management fees and
assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 1.14% 1.08% 1.07% 1.14% 1.29%
Net investment income 6.27% 5.03% 4.88% 5.30% 5.49%
* 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.
+ Ratios with no reduction for fees paid indirectly.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, and sales charges.
26 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/08
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities of unaffiliated issuers, at value (including securities loaned of
$1,395,243) (cost $75,693,618) $ 61,078,140
Investment in securities of affiliated issuers, at value
(cost $158,655) 109,571
Total Investments in securities, at value
(cost $75,852,273) $ 61,187,711
Cash 724,530
Foreign currencies, at value (cost $46,784) 42,553
Receivables --
Investment securities sold 51
Portfolio shares sold 268,577
Dividends and interest 1,104,049
Forward foreign currency portfolio hedge contracts, open-net 18,367
-------------
Total assets $ 63,345,838
-------------
LIABILITIES:
Payables --
Portfolio shares repurchased $ 14,276
Dividends 132
Upon return of securities loaned 1,462,400
Due to affiliates 1,540
Unrealized depreciation on unfunded corporate loans 857
Accrued expenses 56,467
-------------
Total liabilities $ 1,535,672
-------------
NET ASSETS:
Paid-in capital $ 74,004,856
Undistributed net investment income 1,162,333
Accumulated net realized gain on investments and foreign currency transactions 1,304,833
Net unrealized loss on investments (14,665,419)
Net unrealized gain on forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies 3,563
-------------
Total net assets $ 61,810,166
-------------
NET ASSET VALUE PER SHARE:
(No par value, unlimited number of shares authorized)
Class 1 (based on $12,821,836/1,438,519 shares) $ 8.91
-------------
Class 2 (based on $48,988,330/5,492,928 shares) $ 8.92
-------------
The accompanying notes are an integral part of these financial statements. 27
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended 12/31/08
INVESTMENT INCOME:
Dividends $ 13,322
Interest (net of foreign taxes withheld of $2,727)
(including income from affiliates of $14,800) 5,500,518
Income from securities loaned, net 19,138
-------------
Total investment income $ 5,532,978
-------------
EXPENSES:
Management fees $ 486,372
Transfer agent fees
Class I 1,188
Class II 1,188
Distribution fees (Class II) 146,059
Administrative fees 22,440
Custodian fees 38,809
Professional fees 49,081
Printing expense 19,720
Fees and expenses of nonaffiliated trustees 6,186
Miscellaneous 40,138
-------------
Total expenses $ 811,181
-------------
Net investment income $ 4,721,797
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Investments $ 1,298,712
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies 683,058 $ 1,981,770
------------- -------------
Change in net unrealized gain (loss) on:
Investments $ (15,530,006)
Unfunded corporate loans (384)
Forward foreign currency contracts and other assets and liabilities denominated in
foreign currencies (205,011) $ (15,735,401)
------------- -------------
Net loss on investments and foreign currency transactions $ (13,753,631)
-------------
Net decrease in net assets resulting from operations $ (9,031,834)
-------------
28 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Years Ended 12/31/08 and 12/31/07, respectively
Year Ended Year Ended
12/31/08 12/31/07
FROM OPERATIONS:
Net investment income $ 4,721,797 $ 3,664,717
Net realized gain on investments and foreign currency transactions 1,981,770 515,048
Change in net unrealized gain (loss) on investments and foreign currency transactions (15,735,401) 219,121
------------- -------------
Net increase (decrease) in net assets resulting from operations $ (9,031,834) $ 4,398,886
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income:
Class I ($0.72 and $0.58 per share, respectively) $ (1,143,226) $ (964,681)
Class II ($0.69 and $0.56 per share, respectively) (3,939,576) (2,801,756)
Net realized gain:
Class I ($0.02 and $0.06 per share, respectively) (25,046) (97,901)
Class II ($0.02 and $0.06 per share, respectively) (88,896) (289,780)
------------- -------------
Total distributions to shareowners $ (5,196,744) $ (4,154,118)
------------- -------------
FROM PORTFOLIO SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 23,423,302 $ 25,658,519
Reinvestment of distributions 5,196,736 4,146,944
Cost of shares repurchased (29,789,099) (19,883,006)
------------- -------------
Net increase (decrease) in net assets resulting from
Portfolio share transactions $ (1,169,061) $ 9,922,457
------------- -------------
Net increase (decrease) in net assets $ (15,397,639) $ 10,167,225
NET ASSETS:
Beginning of year 77,207,805 67,040,580
------------- -------------
End of year $ 61,810,166 $ 77,207,805
============= =============
Undistributed net investment income, end of period $ 1,162,333 $ 894,454
============= =============
'08 Shares '08 Amount '07 Shares '07 Amount
CLASS I
Shares sold 203,690 $ 2,070,181 218,594 $ 2,353,237
Reinvestment of distributions 114,641 1,168,264 97,928 1,055,408
Less shares repurchased (510,910) (5,037,442) (442,830) (4,775,644)
---------- ------------- ---------- -------------
Net decrease (192,579) $ (1,798,997) (126,308) $ (1,366,999)
========== ============= ========== =============
CLASS II
Shares sold 2,036,958 $ 21,353,121 2,161,498 $ 23,305,282
Reinvestment of distributions 396,075 4,028,472 286,906 3,091,536
Less shares repurchased (2,438,095) (24,751,657) (1,397,871) (15,107,362)
---------- ------------- ---------- -------------
Net increase (decrease) (5,062) $ 629,936 1,050,533 $ 11,289,456
========== ============= ========== =============
The accompanying notes are an integral part of these financial statements. 29
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Strategic Income VCT Portfolio (the Portfolio) is one of 19
portfolios comprising Pioneer Variable Contracts Trust (the Trust) a Delaware
statutory trust registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The investment objective
of the Portfolio is to produce a high level of current income.
The Portfolio offers two classes of shares designated as Class I and Class II
shares. Each class of shares represents an interest in the same portfolio of
investments of the Portfolio and has identical rights (based on relative net
asset values) to assets and liquidation proceeds. Share classes can bear
different class-specific fees and expenses such as transfer agent and
distribution fees. Differences in class-specific fees and expenses will result
in differences in net investment income and, therefore, the payment of
different dividends by each class. The Amended and Restated Declaration of
Trust of the Portfolio gives the Board the flexibility to specify either per
share voting or dollar-weighted voting when submitting matters for shareholder
approval. Under per share voting, each share of a class of the Portfolio is
entitled to one vote. Under dollar-weighted voting, a shareholder's voting
power is determined not by the number of shares owned, but by the dollar value
of the shares on the record date. Share classes have exclusive voting rights
with respect to matters affecting only that class, including with respect to
the distribution plan for that class. There is no distribution plan for Class I
shares.
Portfolio shares may be purchased only by either insurance companies for the
purpose of funding variable annuity and variable life insurance contracts, or
by qualified pension and retirement plans.
The Portfolio's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Portfolio 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 income, expenses, gains and losses during the reporting
year. Actual results could differ from those estimates.
When interest rates rise, the prices of fixed income securities in the
Portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Portfolio will generally rise. Investments in
the Portfolio are subject to possible loss due to the financial failure of
underlying securities and their inability to meet their debt obligations.
Prepayment risk is the chance that mortgage-backed bonds will be paid off early
if falling interest rates prompt homeowners to refinance their mortgages. The
Portfolio's prospectuses contain unaudited information regarding the
Portfolio's principal risks. Please refer to those documents when considering
the Portfolio's risks.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements, which
are consistent with those generally accepted in the investment company
industry:
A. Security Valuation
Security transactions are recorded as of trade date. The net asset value of
the Portfolio is computed once daily, on each day the New York Stock
Exchange (NYSE) is open, as of the close of regular trading on the NYSE. In
computing the net asset value, securities are valued at the last sale price
on the principal exchange where they are traded. Fixed income securities
are valued at prices supplied by independent pricing services, which
consider such factors as Treasury spreads, yields, maturities and ratings.
Valuations may be supplemented by dealers and other sources, as required.
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 prices
and/or quotations are not readily available are valued using fair value
methods pursuant to procedures adopted by the Board of Trustees. Trading in
foreign equity securities is substantially completed each day at various
times prior to the close of the NYSE. The value of such securities used in
computing the net asset value of the Portfolio's shares is based on the
last sale price on the principal exchange where they traded. The Portfolio
may also use fair value methods to value a security, including a non-U.S.
security, when the closing market price on the primary exchange where the
security is traded no longer accurately reflects the value of the security.
At December 31, 2008 there were no securities that were valued using fair
value methods (other than securities valued using prices supplied by
independent pricing services). Temporary cash investments are valued at
cost which approximates market value.
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 becomes aware 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. Discounts and premiums on fixed income securities are
accreted and amortized, respectively, on a yield-to-maturity basis and are
included in interest income. Dividend and interest income from foreign
30
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
securities are reported net of unrecoverable foreign taxes withheld at the
applicable country rates.
Gains and losses from sales on investments are calculated on the identified
cost method for both financial reporting and federal income tax purposes,
and, if applicable, are reported net of foreign taxes on capital gains at
the applicable country rates.
B. 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, if any,
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. dollars actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the Statement of Operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
C. Forward Foreign Currency Contracts
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
Portfolio's 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.
(See Note 5)
D. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required. Tax years for the prior three fiscal years remain subject to
examination by tax authorities.
In addition to the requirements of the Internal Revenue Code, the Portfolio
may also be required to pay local taxes on the recognition of capital gains
and/or the repatriation of foreign currencies in certain countries. During
the year ended December 31, 2008, no such taxes were paid.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with federal
income tax rules. Therefore, the source of the Portfolio's distributions
may be shown in the accompanying financial statements as from or in excess
of net investment income or as from net realized gain on investment
transactions, or as from paid-in capital, depending on the type of book/tax
differences that may exist.
At December 31, 2008, the Portfolio has reclassified $628,884 to increase
undistributed net investment income and $628,884 to decrease accumulated
net realized gain on investments and foreign currency transactions to
reflect permanent book/tax differences. The reclassification has no impact
on the net asset value of the Portfolio and is designed to present the
Portfolio's capital accounts on a tax basis.
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 and the components of distributable
earnings (accumulated losses) on a federal income tax basis at December 31,
2008, was as follows:
31
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2008 2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 5,196,744 $3,866,467
Long-term capital gain - 287,651
----------- ----------
Total distributions $ 5,196,744 $4,154,118
=========== ==========
Distributable Earnings:
Undistributed ordinary income $ 2,012,134
Undistributed long-term gain 480,059
Unrealized depreciation (14,686,883)
-----------
Total (12,194,690)
===========
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax basis adjustments on defaulted bonds and the tax
treatment of mark-to-market of foreign currency contracts.
E. Portfolio Shares
The Portfolio records sales and repurchases of its 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 UniCredit S.p.A. (UniCredit), $633,101 in commissions on the sale of
Trust shares for the year ended December 31, 2008. Distribution fees for
Class II shares are calculated based on the average daily net asset values
attributable to Class II shares of the Portfolio.
Shareowners of each class share all expenses and fees paid to the transfer
agent, Pioneer Investment Management Shareholder Services, Inc. (PIMSS),
for its services, which are allocated based on the number of accounts in
each class and the ratable allocation of related out-of-pocket expenses
(see Note 3). Income, common expenses (excluding transfer agent and
distribution fees) and realized and unrealized gains and losses are
calculated at the Portfolio level and allocated daily to each class of
shares based on the respective percentage of the adjusted net assets at the
beginning of the day. The Portfolio declares as daily dividends
substantially all of its respective net investment income. All dividends
are paid on a monthly basis. Short-term capital gain distributions, if any,
may be declared with the daily dividends. Distributions paid by the
Portfolio with respect to each class of shares are calculated in the same
manner, at the same time, and in the same amount, except that Class I and
Class II shares can bear different transfer agent and distribution fees.
Dividends and distributions to shareowners are recorded on the ex-dividend
date.
F. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors. When entering into a securities loan
transaction, the Portfolio typically receives cash collateral from the
borrower equal to at least the value of the securities loaned, which is
invested in temporary cash investments. Credit Suisse, New York Branch, as
the Portfolio's security lending agent, manages the Portfolio's securities
lending collateral. The income earned on the investment of collateral is
shared with the borrower and the lending agent in payment of any rebate due
to the borrower with respect to the securities loan, and in compensation
for the lending agent's services to the Portfolio. The Portfolio also
continues to receive payments in lieu of dividends and interest on the
securities loaned. Gain or loss on the value of the loaned securities that
may occur during the term of the loan will be for the account of the
Portfolio. The amount of the collateral is required to be adjusted daily to
reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right, under the lending agreement, to terminate the loan
and recover the securities from the borrower with prior notice. The
Portfolio will be required to return the cash collateral to the borrower
and could suffer a loss if the value of the collateral, as invested, has
declined.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest, is required to be at least equal to or in excess of the value of
the repurchase agreement. 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.
32
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredit manages the Portfolio.
Management fees are calculated daily at the annual rate of 0.65% of the
Portfolio's average daily net assets.
In addition, under the management and administration agreement, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. Included in "Due to affiliates" reflected
on the Statement of Assets and Liabilities is $1,124 in management fees,
administrative costs and certain other fees payable to PIM at December 31,
2008.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredit provides substantially
all transfer agent and shareowner services to the Trust at negotiated rates.
Included in "Due to affiliates" reflected on the Statement of Assets and
Liabilities is $90 in transfer agent fees payable to PIMSS at December 31,
2008.
4. Distribution Plan
The Portfolio has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 with respect to Class II Shares. Pursuant to the
Plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares to compensate PFD for (1)
distribution services and (2) personal and account maintenance services
performed and expenses incurred by PFD in connection with the Portfolio's Class
II shares. Included in "Due to affiliates" reflected on the Statement of Assets
and Liabilities is $326 in distribution fees payable to PFD at December 31,
2008.
5. Forward Foreign Currency Contracts
During the year ended December 31, 2008, the Portfolio had entered into various
contracts that obligate the Portfolio to deliver currencies at specified future
dates. At the maturity of a contract, the Portfolio must make delivery of the
foreign currency. Alternatively, prior to the settlement date of a portfolio
hedge, the Portfolio may close out such contracts by entering into an
offsetting hedge contract.
As of December 31, 2008, outstanding forward Portfolio hedge contracts were as
follows:
- ---------------------------------------------------------------------------------------------------
Net
Contracts to In Exchange Settlement Unrealized
Currency Deliver For Date Value Gain (Loss)
- ---------------------------------------------------------------------------------------------------
AUD (Australian Dollar) (670,000) $ 446,676 1/12/09 $ (474,859) (28,183)
EURO (European Dollar) (1,665,000) 2,362,618 1/30/09 (2,320,702) 41,916
JPY (Japanese Yen) (54,310,000) 602,333 2/5/09 (597,356) 4,977
NOK (Norwegian Krone (255,000) 36,249 1/30/09 (36,592) (343)
- ---------------------------------------------------------------------------------------------------
6. Unfunded Loan Commitments
As of December 31, 2008, the Portfolio had unfunded loan commitments of
approximately $3,957 (excluding unrealized depreciation on those commitments of
$857 as of December 31, 2008) which could be extended at the option of the
borrower, pursuant to the following loan agreements:
- --------------------------------------------------------------------------------
Borrower Unfunded Commitment
- --------------------------------------------------------------------------------
CHS/Community Health $ 3,957
- --------------------------------------------------------------------------------
7. Affiliated Companies
The Portfolio's investments in securities managed by PIM are deemed affiliates
of the Fund for financial reporting purposes. The following summarizes
transactions with affiliates of the Portfolio for the year ended December 31,
2008:
- --------------------------------------------------------------------------------------------------------------
Principal Purchases Sales Principal Net
Amount (principal (principal Amount Interest Realized
Affiliates 12/31/07 amount) amount) 12/31/08 Income (Loss) Gain Value
- --------------------------------------------------------------------------------------------------------------
ATF Bank JSC, 9.25%,
4/12/12 (144A) $160,000 $- $- $160,000 $14,800 $- $109,571
- --------------------------------------------------------------------------------------------------------------
33
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/08 (continued)
- --------------------------------------------------------------------------------
8. New Pronouncement
In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161), was issued and
is effective for fiscal years beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about an entity's derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Portfolio's financial statement disclosures.
34
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the Shareowners
of Pioneer Strategic Income VCT Portfolio:
We have audited the accompanying statement of assets and liabilities of Pioneer
Strategic Income VCT Portfolio, one of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), including the schedule of investments,
as of December 31, 2008, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Trust's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Trust's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2008, by correspondence
with the custodian, brokers and agent banks. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pioneer Strategic Income VCT Portfolio at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/S/ Ernst & Young
Boston, Massachusetts
February 6, 2009
35
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (unaudited)
The percentage of the Portfolio's ordinary income distributions that are exempt
from nonresident alien (NRA) tax withholding resulting from qualified interest
income was 65.76%.
36
- --------------------------------------------------------------------------------
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Investment Adviser
Pioneer Investment Management, Inc.
Custodian
Brown Brothers Harriman & Co.
Independent Registered Public Accounting Firm
Ernst & Young LLP
Principal Underwriter
Pioneer Funds Distributor, Inc.
Legal Counsel
Bingham McCutchen LLP
Shareowner Services and Transfer Agent
Pioneer Investment Management Shareholder Services, Inc.
Trustees and Officers
The Board of Trustees provides broad supervision over the Portfolio's affairs.
The officers of the Trust are responsible for the Trustss operations. The
Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Trust within the meaning of the 1940 Act are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are referred to
as Independent Trustees. Each of the Trustees serves as a trustee of each of the
76 U.S. registered investment portfolios for which Pioneer serves as investment
adviser (the "Pioneer Funds"). The address for all Trustees and all officers of
the Trust is 60 State Street, Boston, Massachusetts 02109.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (82)* Chairman of the Trustee since 1994. Serves Deputy Chairman and a Director None
Board, Trustee until a successor trustee is of Pioneer Global Asset
and President elected or earlier Management S.p.A. ("PGAM");
retirement or removal. Non-Executive Chairman and a
Director of Pioneer Investment
Management USA Inc. ("PIM-USA");
Chairman and a Director of
Pioneer; Chairman and Director
of Pioneer Institutional Asset
Management, Inc. (since 2006);
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
Director of PIOGLOBAL Real
Estate Investment Fund (Russia)
(until June 2006); Director of
Nano-C, Inc. (since 2003);
Director of Cole Management Inc.
(since 2004); Director of
Fiduciary Counseling, Inc.;
President and Director of
Pioneer Funds Distributor, Inc.
("PFD") (until May 2006);
President of all of the Pioneer
Funds; and Of Counsel, Wilmer
Cutler Pickering Hale and Dorr
LLP
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel K. Kingsbury Trustee and Trustee since 2008. Serves Director, CEO and President of None
(50)* Executive Vice until a successor trustee is Pioneer Investment Management
President elected or earlier USA Inc. (since February 2007);
retirement or removal. Director and President of
Pioneer Investment Management,
Inc. and Pioneer Institutional
Asset Management, Inc. (since
February 2007); Executive Vice
President of all of the Pioneer
Funds (since March 2007);
Director of Pioneer Global Asset
Management S.p.A. (since April
2007); Head of New Markets
Division, Pioneer Global Asset
Management S.p.A. (2000 - 2007)
- ------------------------------------------------------------------------------------------------------------------------------------
* Mr. Cogan and Mr. Kingsbury are Interested Trustees because they are
officers or directors of the Portfolio's investment adviser and certain of
its affiliates.
37
- --------------------------------------------------------------------------------
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock (65) Trustee Trustee since 2005. Serves Executive Vice President and Director of
until a successor trustee is Chief Financial Officer, I-trax, Enterprise Community
elected or earlier Inc. (publicly traded health Investment, Inc.
retirement or removal. care services company) (2004 - (privately-held
2007); Partner, Federal City affordable housing
Capital Advisors (boutique finance company);
merchant bank) (1997 to 2004 and and Director of New
2008 - present); and Executive York Mortgage Trust
Vice President and Chief (publicly traded
Financial Officer, Pedestal Inc. mortgage REIT)
(internet-based mortgage trading
company) (2000 - 2002)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (60) Trustee Trustee since 2000. Serves President, Bush International, Director of Marriott
until a successor trustee is LLC (international financial International, Inc.,
elected or earlier Advisory firm) Director of Discover
retirement or removal. Financial Services
(credit card issuer
and electronic
payment services);
Director of Briggs &
Stratton Co. (engine
manufacturer);
Director of UAL
Corporation (airline
holding company);
Director of Mantech
International
Corporation
(national security,
defense, and
intelligence
technology firm);
and Member, Board of
Governors,
Investment Company
Institute
- ------------------------------------------------------------------------------------------------------------------------------------
Benjamin M. Friedman Trustee Trustee since 2008. Serves Professor, Harvard University Trustee, Mellon
(64) until a successor trustee is Institutional Funds
elected or earlier Investment Trust and
retirement or removal Mellon Institutional
Funds Master
Portfolio (oversees
17 portfolios in
fund complex)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee Trustee since 2000. Serves Founding Director, Vice None
(61) until a successor trustee is President and Corporate
elected or earlier Secretary, The Winthrop Group,
retirement or removal. Inc. (consulting firm); and
Desautels Faculty of Management,
McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Perna (58) Trustee Trustee since 2006. Serves Chief Executive Officer, None
until a successor trustee is Quadriserv, Inc. (technology
elected or earlier products for securities lending
retirement or removal. industry) (2008 - present);
Private investor (2004 - 2008);
and Senior Executive Vice
President, The Bank of New York
(financial and securities
services) (1986 - 2004)
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (60) Trustee Trustee since 1995. Serves President and Chief Executive Director of New
until a successor trustee is Officer, Newbury, Piret & America High Income
elected or earlier Company, Inc. (investment Fund, Inc.
retirement or removal. banking firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (80) Trustee Trustee since 2008. Serves Senior Counsel, Sullivan & Director, The Swiss
until a successor trustee is Cromwell LLP (law firm) Helvetia Fund, Inc.
elected or earlier (closed-end
retirement or removal. investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
38
- --------------------------------------------------------------------------------
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITION HELD LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST AND TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (60) Secretary Since 2000. Serves at the Secretary of PIM-USA; Senior None
discretion of the Board Vice President - Legal of
Pioneer; Secretary/ Clerk of
most of PIM-USA's subsidiaries;
and Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September 2003)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (44) Assistant Since 2003. Serves at the Associate General Counsel of None
Secretary discretion of the Board Pioneer since January 2008 and
Assistant Secretary of all of
the Pioneer Funds since
September 2003; Vice President
and Senior Counsel of Pioneer
from July 2002 to December 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (49) Treasurer Since 2008. Serves at the Vice President - Fund None
discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Treasurer of all of
the Pioneer Funds since March
2008; Deputy Treasurer of
Pioneer from March 2004 to
February 2008; Assistant
Treasurer of all of the Pioneer
Funds from March 2004 to
February 2008; and Treasurer and
Senior Vice President, CDC IXIS
Asset Management Services from
2002 to 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (43) Assistant Since 2000. Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (50) Assistant Since 2002. Serves at the Fund Accounting Manager - Fund
Treasurer discretion of the Board Accounting, Administration and
Controllership Services of
Pioneer; and Assistant Treasurer
of all of the Pioneer Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Katherine Kim Sullivan Assistant Since 2003. Serves at the Fund Administration Manager - None
(35) Treasurer discretion of the Board Fund Accounting, Administration
and Controllership Services
since June 2003 and Assistant
Treasurer of all of the Pioneer
Funds since September 2003;
Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Teri W. Anderholm (49) Chief Since 2007. Serves at the Chief Compliance Officer of None
Compliance discretion of the Board Pioneer since December 2006 and
Officer of all the Pioneer Funds since
January 2007; Vice President and
Compliance Officer, MFS
Investment Management (August
2005 to December 2006);
Consultant, Fidelity Investments
(February 2005 to July 2005);
Independent Consultant (July
1997 to February 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
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45
[LOGO]PIONEER
Investments(R)
Proxy Voting Policies and Procedures of the Portfolio are available without
charge, upon request, by calling our toll free number (1-800-225-6292).
Information regarding how the Portfolio voted proxies relating to Portfolio
securities during the most recent 12-month period ended June 30 is publicly
available to shareowners at www.pioneerinvestments.com. This information is
also available on the Securities and Exchange Commission's web site at
http://www.sec.gov.
20364-02-0209
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party. If
the registrant has not adopted such a code of ethics, explain why it has not
done so.
The registrant has adopted, as of the end of the period covered by this report,
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer and controller.
(b) For purposes of this Item, the term "code of ethics" means written standards
that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in
reports and documents that a registrant files with, or submits to, the
Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and
regulations;
(4) The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) The registrant must briefly describe the nature of any amendment, during the
period covered by the report, to a provision of its code of ethics that applies
to the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code of
ethics definition enumerated in paragraph (b) of this Item. The registrant must
file a copy of any such amendment as an exhibit pursuant to Item 10(a), unless
the registrant has elected to satisfy paragraph (f) of this Item by posting its
code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by
undertaking to provide its code of ethics to any person without charge, upon
request, pursuant to paragraph (f)(3) of this Item.
The registrant has made no amendments to the code of ethics during the period
covered by this report.
(d) If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of ethics to
the registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set forth
in paragraph (b) of this Item, the registrant must briefly describe the nature
of the waiver, the name of the person to whom the waiver was granted, and the
date of the waiver.
Not applicable.
(e) If the registrant intends to satisfy the disclosure requirement under
paragraph (c) or (d) of this Item regarding an amendment to, or a waiver from,
a provision of its code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of this
Item by posting such information on its Internet website, disclose the
registrant's Internet address and such intention.
Not applicable.
(f) The registrant must:
(1) File with the Commission, pursuant to Item 10(a), a copy of its code
of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, as an exhibit to its annual
report on this Form N-CSR;
(2) Post the text of such code of ethics on its Internet website and
disclose, in its most recent report on this Form N-CSR, its Internet
address and the fact that it has posted such code of ethics on its
Internet website; or
(3) Undertake in its most recent report on this Form N-CSR to provide to
any person without charge, upon request, a copy of such code of ethics
and explain the manner in which such request may be made.
See Item 10(2)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of trustees has determined that
the registrant either:
(i) Has at least one audit committee financial expert serving on its audit
committee; or
(ii) Does not have an audit committee financial expert serving on its audit
committee.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit committee
financial expert and whether that person is "independent." In order to be
considered "independent" for purposes of this Item, a member of an audit
committee may not, other than in his or her capacity as a member of the audit
committee, the board of trustees, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined in
Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
Ms. Marguerite A. Piret, an independent trustee, is such an audit committee
financial expert.
(3) If the registrant provides the disclosure required by paragraph (a)(1)
(ii) of this Item, it must explain why it does not have an audit committee
financial expert.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each
of the last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
Audit Fees
Fees for audit services provided to the Trust's 19 portfolios,
including fees associated with routine and non routine filings
of its Form N-1A, totaled approximately $617,700 in 2008
and $567,425 in 2007.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
Audit-Related and Other Fees
There were no audit-related and other services provided to
the Trust during the fiscal years ended December 31, 2008
and 2007.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
Tax Fees
Fees for tax compliance services, primarily for tax return
totaled $157,510 in 2008 and $148,580 in 2007.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
N/A
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
PIONEER FUNDS
APPROVAL OF AUDIT, AUDIT-RELATED, TAX AND OTHER SERVICES
PROVIDED BY THE INDEPENDENT AUDITOR
SECTION I - POLICY PURPOSE AND APPLICABILITY
The Pioneer Funds recognize the importance of maintaining the independence of
their outside auditors. Maintaining independence is a shared responsibility
involving Pioneer Investment Management, Inc ("PIM"), the audit committee and
the independent auditors.
The Funds recognize that a Fund's independent auditors: 1) possess knowledge of
the Funds, 2) are able to incorporate certain services into the scope of the
audit, thereby avoiding redundant work, cost and disruption of Fund personnel
and processes, and 3) have expertise that has value to the Funds. As a result,
there are situations where it is desirable to use the Fund's independent
auditors for services in addition to the annual audit and where the potential
for conflicts of interests are minimal. Consequently, this policy, which is
intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and
procedures to be followed by the Funds when retaining the independent audit firm
to perform audit, audit-related tax and other services under those
circumstances, while also maintaining independence.
Approval of a service in accordance with this policy for a Fund shall also
constitute approval for any other Fund whose pre-approval is required pursuant
to Rule 210.2-01(c)(7)(ii).
In addition to the procedures set forth in this policy, any non-audit services
that may be provided consistently with Rule 210.2-01 may be approved by the
Audit Committee itself and any pre-approval that may be waived in accordance
with Rule 210.2-01(c)(7)(i)(C) is hereby waived.
Selection of a Fund's independent auditors and their compensation shall be
determined by the Audit Committee and shall not be subject to this policy.
SECTION II - POLICY
- ---------------- -------------------------------- -------------------------------------------------
SERVICE SERVICE CATEGORY DESCRIPTION SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
CATEGORY
- ---------------- -------------------------------- -------------------------------------------------
I. AUDIT Services that are directly o Accounting research assistance
SERVICES related to performing the o SEC consultation, registration
independent audit of the Funds statements, and reporting
o Tax accrual related matters
o Implementation of new accounting
standards
o Compliance letters (e.g. rating agency
letters)
o Regulatory reviews and assistance
regarding financial matters
o Semi-annual reviews (if requested)
o Comfort letters for closed end
offerings
- ---------------- -------------------------------- -------------------------------------------------
II. Services which are not o AICPA attest and agreed-upon procedures
AUDIT-RELATED prohibited under Rule o Technology control assessments
SERVICES 210.2-01(C)(4) (the "Rule") o Financial reporting control assessments
and are related extensions of o Enterprise security architecture
the audit services support the assessment
audit, or use the
knowledge/expertise gained
from the audit procedures as a
foundation to complete the
project. In most cases, if
the Audit-Related Services are
not performed by the Audit
firm, the scope of the Audit
Services would likely
increase. The Services are
typically well-defined and
governed by accounting
professional standards (AICPA,
SEC, etc.)
- ---------------- -------------------------------- -------------------------------------------------
------------------------------------- ------------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the audit period for all services and related fees
pre-approved specific service reported at each regularly
subcategories. Approval of the scheduled Audit Committee
independent auditors as meeting.
auditors for a Fund shall
constitute pre approval for
these services.
------------------------------------- ------------------------------------
o "One-time" pre-approval o A summary of all such
for the fund fiscal year within services and related fees
a specified dollar limit (including comparison to
for all pre-approved specified dollar limits)
specific service subcategories reported quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limit for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for Audit-Related
Services not denoted as
"pre-approved", or
to add a specific service
subcategory as "pre-approved"
------------------------------------- ------------------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
III. TAX SERVICES Services which are not o Tax planning and support
prohibited by the Rule, o Tax controversy assistance
if an officer of the Fund o Tax compliance, tax returns, excise
determines that using the tax returns and support
Fund's auditor to provide o Tax opinions
these services creates
significant synergy in
the form of efficiency,
minimized disruption, or
the ability to maintain a
desired level of
confidentiality.
- ----------------------- --------------------------- -----------------------------------------------
- ------------------------------------- -------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- -------------------------
- ------------------------------------- -------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year all such services and
within a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for tax services not
denoted as pre-approved, or to add a specific
service subcategory as
"pre-approved"
- ------------------------------------- -------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- --------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PRE-APPROVED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- --------------------------- -----------------------------------------------
IV. OTHER SERVICES Services which are not o Business Risk Management support
prohibited by the Rule, o Other control and regulatory
A. SYNERGISTIC, if an officer of the Fund compliance projects
UNIQUE QUALIFICATIONS determines that using the
Fund's auditor to provide
these services creates
significant synergy in
the form of efficiency,
minimized disruption,
the ability to maintain a
desired level of
confidentiality, or where
the Fund's auditors
posses unique or superior
qualifications to provide
these services, resulting
in superior value and
results for the Fund.
- ----------------------- --------------------------- -----------------------------------------------
- --------------------------------------- ------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------- --------------------------
o "One-time" pre-approval o A summary of
for the fund fiscal year within all such services and
a specified dollar limit related fees
(including comparison
to specified dollar
limits) reported
quarterly.
o Specific approval is
needed to exceed the
pre-approved dollar limits for
these services (see general
Audit Committee approval policy
below for details on obtaining
specific approvals)
o Specific approval is
needed to use the Fund's
auditors for "Synergistic" or
"Unique Qualifications" Other
Services not denoted as
pre-approved to the left, or to
add a specific service
subcategory as "pre-approved"
- ------------------------------------- --------------------------
SECTION III - POLICY DETAIL, CONTINUED
- ----------------------- ------------------------- -----------------------------------------------
SERVICE CATEGORY SERVICE CATEGORY SPECIFIC PROHIBITED SERVICE SUBCATEGORIES
DESCRIPTION
- ----------------------- ------------------------- -----------------------------------------------
PROHIBITED SERVICES Services which result 1. Bookkeeping or other services
in the auditors losing related to the accounting records or
independence status financial statements of the audit
under the Rule. client*
2. Financial information systems design
and implementation*
3. Appraisal or valuation services,
fairness* opinions, or
contribution-in-kind reports
4. Actuarial services (i.e., setting
actuarial reserves versus actuarial
audit work)*
5. Internal audit outsourcing services*
6. Management functions or human
resources
7. Broker or dealer, investment
advisor, or investment banking services
8. Legal services and expert services
unrelated to the audit
9. Any other service that the Public
Company Accounting Oversight Board
determines, by regulation, is
impermissible
- ----------------------- ------------------------- -----------------------------------------------
- ------------------------------------------- ------------------------------
AUDIT COMMITTEE APPROVAL POLICY AUDIT COMMITTEE
REPORTING POLICY
- ------------------------------------------- ------------------------------
o These services are not to be o A summary of all
performed with the exception of the(*) services and related
services that may be permitted fees reported at each
if they would not be subject to audit regularly scheduled
procedures at the audit client (as Audit Committee meeting
defined in rule 2-01(f)(4)) level will serve as continual
the firm providing the service. confirmation that has
not provided any
restricted services.
- ------------------------------------------- ------------------------------
- --------------------------------------------------------------------------------
GENERAL AUDIT COMMITTEE APPROVAL POLICY:
o For all projects, the officers of the Funds and the Fund's auditors will each
make an assessment to determine that any proposed projects will not impair
independence.
o Potential services will be classified into the four non-restricted service
categories and the "Approval of Audit, Audit-Related, Tax and Other
Services" Policy above will be applied. Any services outside the specific
pre-approved service subcategories set forth above must be specifically
approved by the Audit Committee.
o At least quarterly, the Audit Committee shall review a report summarizing the
services by service category, including fees, provided by the Audit firm as
set forth in the above policy.
- --------------------------------------------------------------------------------
(2) Disclose the percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Non-Audit Services
Beginning with non-audit service contracts entered into on
or after May 6, 2003, the effective date of the new SEC pre-
approval rules, the Trust's audit committee is required to
pre-approve services to affiliates defined by SEC rules to the
extent that the services are determined to have a direct
impact on the operations or financial reporting of the Trust.
For the years ended December 31, 2008 and 2007, there
were no services provided to an affiliate that required the
Trust's audit committee pre-approval.
(f) If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees.
N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant for each of
the last two fiscal years of the registrant.
The aggregate non-audit fees for the Trust and affiliates, as
previously defined, totaled $157,510 in 2008 and $148,580
in 2007.
(h) Disclose whether the registrant's audit committee of the board of trustees
has considered whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
The Fund's audit committee of the Board of Trustees has
considered whether the provision of non-audit services that
were rendered to the Affiliates (as defined) that were not pre-
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence.
Item 5. Audit Committee of Listed Registrants
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17 CFR 240.10A-3), state whether
or not the registrant has a separately-designated standing
audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)).
If the registrant has such a committee, however designated,
identify each committee member. If the entire board of directors
is acting as the registrants audit committee as specified in
Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)),
so state.
N/A
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17 CFR 240.10A-3(d)) regarding an exemption
from the listing standards for audit committees.
N/A
Item 6. Schedule of Investments.
File Schedule I Investments in securities of unaffiliated issuers
as of the close of the reporting period as set forth in 210.12-
12 of Regulation S-X [17 CFR 210.12-12], unless the schedule is
included as part of the report to shareholders filed under Item
1 of this Form.
Included in Item 1
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report on
this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a) If the registrant is a closed-end management investment company that
is filing an annual report on this Form N-CSR,provide the following
information:
(1) State the name, title, and length of service of the person or persons
employed by or associated with the registrant or an investment adviser
of the registrant who are primarily responsible for the day-to-day management
of the registrants portfolio (Portfolio Manager). Also state each Portfolio
Managers business experience during the past 5 years.
Not applicable to open-end management investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
(a) If the registrant is a closed-end management investment company,
in the following tabular format, provide the information specified in
paragraph (b) of this Item with respect to any purchase made by or on
behalf of the registrant or any affiliated purchaser, as defined in
Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of
shares or other units of any class of the registrants equity securities
that is registered by the registrant pursuant to Section 12 of the
Exchange Act (15 U.S.C. 781). Instruction to paragraph (a). Disclose
all purchases covered by this Item, including purchases that do not
satisfy the conditions of the safe harbor of Rule 10b-18 under the
Exchange Act (17 CFR 240.10b-18), made in the period covered by the
report. Provide disclosures covering repurchases made on a monthly basis.
For example, if the reporting period began on January 16 and ended on
July 15, the chart would show repurchases for the months from January 16
through February 15, February 16 through March 15, March 16 through
April 15, April 16 through May 15, May 16 through June 15, and June 16
through July 15.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrants board of directors, where
those changes were implemented after the registrant last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G)
of Schedule 14A (17 CFR 240.14a-101), or this Item.
There have been no material changes to the procedures by which the
shareholders may recommend nominees to the registrants board of
directors since the registrant last provided disclosure in response
to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14(A) in
its definitive proxy statement, or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, about the effectiveness of the registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR
270.30a-2(c))) based on their evaluation of these controls and procedures as of
a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph.
The registrant's principal executive officer
and principal financial officer have
concluded that the registrant's disclosure
controls and procedures are effective based
on their evaluation of these controls and
procedures as of a date within 90 days of the
filing date of this report.
(b) Disclose whether or not there were significant changes in the registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
There were no significant changes in the
registrant's internal control over financial
reporting that occurred during the second
fiscal quarter of the period covered by this
report that have materially affected, or are
reasonably likely to materially affect, the
registrant's internal control over financial
reporting.
The registrant's principal executive officer and principal financial
officer, however, voluntarily are reporting the following information:
In August of 2006 the registrant's investment adviser
enhanced its internal procedures for reporting performance
information required to be included in prospectuses.
Those enhancements involved additional internal controls
over the appropriateness of performance data
generated for this purpose. Such enhancements were made
following an internal review which identified
prospectuses relating to certain classes of shares of
a limited number of registrants where, inadvertently,
performance information not reflecting the deduction of
applicable sales charges was included. Those prospectuses
were revised, and the revised prospectuses were distributed to
shareholders.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2).
Filed herewith.
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Pioneer Variable Contracts Trust
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr, President
Date February 27, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ John F. Cogan, Jr.
John F. Cogan, Jr., President
Date February 27, 2009
By (Signature and Title)* /s/ Mark Bradley
Mark Bradley, Treasurer
Date February 27, 2009
* Print the name and title of each signing officer under his or her signature.