OMB APPROVAL
OMB Number: 3235-0570
Expires: December 31, 2005
Estimated average burden
hours per response..... 5.0
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, 2004 through December 31, 2004
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 Papp Small and Mid Cap Growth VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap Growth 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 12
Report of Independent Registered Public Accounting Firm 15
Trustees, Officers and Service Providers 16
Please consider a Portfolio's investment objectives, risks, charges and
expenses carefully before investing. The prospectus contains this and other
information about a Portfolio and should be read carefully before you invest or
send money. To obtain a prospectus and for other information on any Pioneer
Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at
www.pioneerfunds.com.
The Trust files a complete statement 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 Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A PIECHART IN THE PRINTED MATERIAL]
Portfolio Diversification
(As a percentage of total investment portfolio)
Depository Receipts for International Stocks 2.9%
U.S. Common Stocks 97.1%
Sector Distribution
(As a percentage of equity holdings)
Materials 2.1%
Consumer Staples 5.5%
Financials 11.5%
Industrials 12.3%
Consumer Discretionary 15.8%
Health Care 24.2%
Information Technology 28.6%
Five Largest Holdings
(As a percentage of equity holdings)
1. C.R. Bard, Inc. 3.15%
2. UCBH Holdings, Inc. 3.07
3. Federated Investors, Inc. 3.00
4. Alberto-Culver Co. 2.97
5. Investors Financial
Services Corp. 2.56
The Portfolio is actively managed and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 3/15/04
Net Asset Value per Share $ 10.87 $ 10.00
Distributions per Share Short-Term Long-Term
(3/15/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ - $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Papp Small and Mid Cap Growth VCT Portfolio at net asset value, compared to
that of the Russell 2500 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 MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
Russell 2500 Growth Index
4-Mar 10000 10000
4-Dec 10861 10752
The Russell 2500 Growth Index measures the performance of U.S. small- and
mid-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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 8.70%
(3/15/04)
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 fund 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 VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth 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 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 Papp Small and Mid Cap Growth
VCT Portfolio
Based on actual returns from July 1, 2004 through December 31, 2004
Share Class II
- ---------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,000.92
Expenses Paid During Period* $ 7.03
- ---------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.40% 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 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). 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 Papp Small and Mid Cap Growth
VCT Portfolio
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
Share Class II
- ---------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.11
Expenses Paid During Period* $ 7.10
- ---------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.40% 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 Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
Equity markets rose in 2004, led by strong relative performance by small- and
mid-cap stocks, especially the securities of companies showing the greatest
earnings growth in a cyclical rebound. In the following interview, members of
the management team of L. Roy Papp & Associates, which is responsible for the
Portfolio's management, discuss the factors that influenced the performance of
Pioneer Papp Small and Mid Cap Growth VCT Portfolio from the Portfolio's
inception on March 15, 2004, through December 31, 2004.
Q: How did the Portfolio perform?
A: Pioneer Papp Small and Mid Cap Growth VCT Portfolio produced positive
results, although its emphasis on stable growth companies caused it to
trail small- and mid-cap averages. For the period from Portfolio inception
on March 15, 2004 through December 31, 2004, Class II shares of the
Portfolio returned 8.70% at net asset value. In comparison, the Russell
2500 Growth Index returned 12.94% over the same period.
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.
Q: What factors affected Portfolio performance?
A: We emphasize higher quality growth companies with healthy balance sheets,
consistent long-term earnings, strong profit growth and relatively little
debt. In 2004, the performance of our Portfolio trailed that of our
benchmark index. One reason is that we placed a strong emphasis on
technology companies, which tended to trail market averages until the final
two months of the year. In fact, after a slow start in the period, the
Portfolio's performance improved considerably during the final three months
of the year. Within technology, we also held the stocks of many
semiconductor companies because of our confidence in their long-term
earnings prospects. Our semiconductor holdings also were diversified, by
their customers, across many different industries. However, when Intel, the
largest semiconductor company, reported decelerating earnings growth for a
quarter, all semiconductor stocks tended to fall in the market's reaction.
We tended to de-emphasize small- and mid-cap software companies because
they include relatively few corporations that have the potential to
dominate their industries. Our concerns about valuations also caused us to
avoid some high-flying Internet stocks, most notably Yahoo and Google.
Our focus has been predominately in mid-cap companies that meet our quality
criteria. They are companies with long-term operating histories, usually
more than 15 to 20 years, and we try to invest in them for long periods of
time. Because we focus on companies with consistent earnings, we also
de-emphasize cyclical companies whose earnings tend to fluctuate
dramatically depending on the business cycle.
Q: What were some of the investments that helped performance?
A: Among the investments that supported performance, was UCBH Holdings, which
was a standout. This West Coast bank specializes in offering services to
the fast-growing Asian-American community and recently opened a new branch
in Hong Kong. Another financial services company that appreciated
substantially was T. Rowe Price, the asset management and mutual fund
company. We believe it is in a strong position to benefit from proposals to
privatize retirement and health care accounts.
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 a portfolio
holding more securities. Investing in small and mid-sized companies may offer
the potential for higher returns, but these companies are also subject to
greater short-term price fluctuations than larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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 Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
Other investments that helped performance included: Apollo Group, which
provides adult vocational educational programs both on campuses and on the
Internet; O'Reilly Automotive, a supplier of aftermarket auto parts;
Polaris, a manufacturer of all-terrain vehicles and personal watercraft;
and Plantronics, a leader in developing telephone headsets. Several health
care related stocks also performed well, including: Resmed, which is
developing products for patients with sleep disorders; Dentsply
International, which provides dental supplies; and Waters, which provides
specialized equipment to the biotechnology industry. C.R. Bard, a medical
products company, was a recent addition to the portfolio that has supported
performance.
Q: What were some of the investments that proved disappointing?
A: We emphasize companies with records of consistent earnings. As a result, we
were underweighted in oil supply companies, whose stock prices registered
strong gains as the price of oil soared during the year. Semiconductor
industry holdings that detracted from results during the year included
Novellus, Semtech and Microchip. Despite their disappointing performance
during 2004, we remain confident about their longer-term prospects and
continue to hold them.
Q: What is your outlook?
A: We feel confident about the future earnings prospects of the investments in
our portfolio. We have just gone through a period in which many highly
speculative companies, including some with inconsistent earnings records,
have performed well. We believe that environment will not last forever.
We think Pioneer Papp Small and Mid Cap Growth VCT Portfolio is well
positioned for an environment that places a higher value on companies that
strive to deliver consistent earnings growth over longer periods of time.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 98.3%
Materials - 2.1%
Specialty Chemicals - 2.1%
900 Sigma-Aldrich Corp. $ 54,414
----------
Total Materials $ 54,414
----------
Commercial Services & Supplies - 10.7%
Data Processing Services - 1.2%
1,700 Forrester Research, Inc.* $ 30,498
----------
Diversified Commerce Services - 9.5%
600 Apollo Group, Inc.* $ 48,426
1,550 ChoicePoint, Inc.* 71,285
1,598 Cintas Corp. 70,088
3,200 DeVry, Inc.* 55,552
----------
$ 245,351
----------
Total Commercial Services &
Supplies $ 275,849
----------
Transportation - 2.5%
Air Freight & Couriers - 2.5%
1,170 Expeditors International of
Washington, Inc. $ 65,380
----------
Total Transportation $ 65,380
----------
Consumer Durables & Apparel - 2.5%
Leisure Products - 2.5%
950 Polaris Industries, Inc. $ 64,619
----------
Total Consumer Durables & Apparel $ 64,619
----------
Hotels, Restaurants & Leisure - 2.2%
Restaurants - 2.2%
1,600 Brinker International, Inc.* $ 56,112
----------
Total Hotels, Restaurants & Leisure $ 56,112
----------
Media - 6.9%
Advertising - 5.7%
2,800 Harte-Hanks, Inc. $ 72,744
1,350 WPP Group Plc (A.D.R.) 73,778
----------
$ 146,522
----------
Broadcasting & Cable Television - 1.2%
1,800 Saga Communications, Inc.* $ 30,330
----------
Total Media $ 176,852
----------
Retailing - 4.0%
General Merchandise Stores - 1.4%
1,100 Family Dollar Stores, Inc. $ 34,353
----------
Specialty Stores - 2.6%
1,500 O'Reilly Automotive, Inc.* $ 67,575
----------
Total Retailing $ 101,928
----------
Shares Value
Household & Personal Products - 5.4%
Household Products - 2.5%
1,100 Clorox Co. $ 64,823
----------
Personal Products - 2.9%
1,550 Alberto-Culver Co. (Class B) $ 75,284
----------
Total Household & Personal
Products $ 140,107
----------
Health Care Equipment & Services - 23.8%
Health Care Distributors - 2.7%
1,600 Patterson Co.* $ 69,424
----------
Health Care Equipment - 15.6%
1,250 C. R. Bard, Inc. $ 79,975
1,300 Dentsply International, Inc. 73,060
2,400 Molecular Devices Corp.* 48,240
1,200 ResMed, Inc.* 61,320
1,384 Stryker Corp. 66,778
1,900 Techne Corp.* 73,910
----------
$ 403,283
----------
Health Care Services - 5.5%
500 Express Scripts, Inc.* $ 38,220
2,490 IMS Health, Inc. 57,793
1,100 Medco Health Solutions, Inc.* 45,760
----------
$ 141,773
----------
Total Health Care Equipment &
Services $ 614,480
----------
Banks - 3.0%
Regional Banks - 3.0%
1,700 UCBH Holdings, Inc. $ 77,894
----------
Total Banks $ 77,894
----------
Diversified Financials - 8.3%
Asset Management & Custody Banks - 8.3%
2,500 Federated Investors, Inc. $ 76,000
1,500 Investors Financial Services Corp. 74,970
1,000 T. Rowe Price Associates, Inc. 62,200
----------
$ 213,170
----------
Total Diversified Financials $ 213,170
----------
Software & Services - 7.9%
Data Processing & Outsourced Services - 7.9%
1,300 DST Systems, Inc.* $ 67,756
1,700 Fiserv, Inc.* 68,323
2,400 SunGard Data Systems, Inc.* 67,992
----------
$ 204,071
----------
Total Software & Services $ 204,071
----------
Technology Hardware & Equipment - 7.1%
Communications Equipment - 1.6%
1,000 Plantronics, Inc. $ 41,470
----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Electronic Equipment &
Instruments - 1.6%
900 Waters Corp.* $ 42,111
----------
Electronic Manufacturer Services - 3.9%
2,600 Molex, Inc. $ 69,290
1,100 National Instruments Corp. 29,975
----------
$ 99,265
----------
Total Technology Hardware &
Equipment $ 182,846
----------
Semiconductors - 9.4%
Semiconductor Equipment - 2.6%
1,100 KLA-Tencor Corp.* $ 51,238
600 Novellus Systems, Inc.* 16,733
----------
$ 67,971
----------
Semiconductors - 6.8%
1,600 Linear Technology Corp. $ 62,015
2,600 Microchip Technology 69,316
2,000 Semtech Corp.* 43,740
----------
$ 175,071
----------
Total Semiconductors $ 243,042
----------
Shares Value
Capital Goods - 2.5%
Manufacturing (Specialized) - 2.5%
1,250 Mettler-Toledo International, Inc.* $ 64,138
----------
Total Capital Goods $ 64,138
----------
TOTAL COMMON STOCKS
(Cost $2,389,780) $2,534,902
----------
TOTAL INVESTMENTS IN
SECURITIES - 98.3%
(Cost $2,389,780) $2,534,902
----------
OTHER ASSETS AND
LIABILITIES - 1.7% $ 43,622
----------
TOTAL NET ASSETS - 100.0% $2,578,524
==========
(A.D.R.) American Depositary Receipt
* Non-Income producing security
The accompanying notes are an integral part of these financial statements.
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
3/15/04
to
Class II 12/31/04
Net asset value, beginning of period $ 10.00
-------
Increase from investment operations:
Net investment loss $ (0.02)
Net realized and unrealized gain on investments 0.89
--------
Net increase from investment operations $ 0.87
--------
Net increase in net asset value $ 0.87
--------
Net asset value, end of period $ 10.87
=======
Total return* 8.70%
Ratio of net expenses to average net assets+ 1.00%**
Ratio of net investment loss to average net assets+ (0.51)%**
Portfolio turnover rate 44%
Net assets, end of period (in thousands) $2,579
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 7.50%**
Net investment loss (7.01)%**
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.00%**
Net investment loss (0.51)%**
* 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. Total return rate is
not annualized.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (cost $2,389,780) $2,534,902
Cash 189,652
Receivables -
Investment securities sold 71,375
Dividends, interest and foreign taxes withheld 720
Due from Pioneer Investment Management, Inc. 6,245
Other 624
----------
Total assets $2,803,518
----------
LIABILITIES:
Payables -
Investment securities purchased $ 181,195
Fund shares repurchased 1,003
Due to affiliates 2,185
Accrued expenses 40,611
----------
Total liabilities $ 224,994
----------
NET ASSETS:
Paid-in capital $2,486,138
Accumulated undistributed net realized gain (loss) (52,736)
Net unrealized gain (loss) on:
Investments 145,122
----------
Total net assets $2,578,524
----------
NET ASSET VALUE PER SHARE:
Class II:
(No par value, unlimited number of shares authorized)
Net assets $2,578,524
Shares outstanding 237,257
----------
Net asset value per share $ 10.87
----------
The accompanying notes are an integral part of these financial statements.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period
from 3/15/04
(Commencement
of Operations)
to 12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $21) $ 4,402
Interest 758
---------
Total investment income $ 5,160
---------
EXPENSES:
Management fees $ 7,899
Transfer agent fees 1,260
Distribution fees 2,633
Administrative fees 13,875
Custodian fees 10,806
Professional fees 31,101
Printing 11,535
Fees and expenses of nonaffiliated trustees 99
Miscellaneous 260
---------
Total expenses $ 79,468
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (68,936)
---------
Net expenses $ 10,532
---------
Net investment income (loss) $ (5,372)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments $ (52,736)
---------
$ (52,736)
---------
Change in net unrealized gain or loss from:
Investments $ 145,122
---------
$ 145,122
---------
Net gain (loss) on investments $ 92,386
=========
Net increase (decrease) in net assets resulting
from operations $ 87,014
=========
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period
from 3/15/04
(Commencement
of Operations)
to 12/31/04
FROM OPERATIONS:
Net investment income $ (5,372)
Net realized gain (loss) on investments (52,736)
Change in net unrealized gain or loss on
investments, futures contracts and
foreign currency transactions 145,122
----------
Net increase (decrease) in net assets
resulting from operations $ 87,014
----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $3,211,433
Cost of shares repurchased (719,923)
----------
Net increase in net assets
resulting from Fund share transactions $2,491,510
----------
Net increase in net assets $2,578,524
NET ASSETS:
End of period $2,578,524
==========
The accompanying notes are an integral part of these financial statements.
11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Papp Small and Mid Cap Growth VCT Portfolio (the Portfolio) a
Portfolio of Pioneer Variable Contracts Trust (the Trust) which is a Delaware
statutory trust registered under the Investment Company Act of 1940 as an
open-end management investment company. The Trust consists of twenty-two
separate diversified portfolios, fourteen of which issue both Class I and Class
II shares (collectively, the Portfolios, individually the Portfolio) as
follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
The Papp Small and Mid Cap Growth VCT Portfolio commenced operations on March
15, 2004.
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The investment objective of Papp Small and Mid Cap Growth Portfolio is long
term capital growth.
The financial statements and financial highlights of all other portfolios are
presented in separate books.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. The Portfolio also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
12
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
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. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
The amounts and characterizations of distributions to shareowners for
financial reporting purposes are determined in accordance with income tax
rules. Therefore, the source of each Portfolio's distributions may be shown
in the accompanying financial statements as either from, or in excess of,
net investment income or net realized gain on investment transactions, or
from paid-in capital, depending on the type of book/tax differences that
may exist.
The Portfolio has elected to defer $8,778 in capital losses recognized
between November 1, 2004 and December 31, 2004 to its fiscal year ending
December 31, 2005.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Papp Small and Mid Cap Growth VCT Portfolio
had a capital loss carryforward of $25,641, which will expire in 2012 if
not utilized.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
- --------------------------------------------------------------------------------
Undistributed Net Accumulated
Investment Realized Paid-In
Portfolio Income (Loss) Gain (Loss) Capital
- ----------------------------------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap Growth VCT Portfolio $5,372 $ (0) $(5,372)
====== ===== =========
- ----------------------------------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, on a tax basis. There were no
distributions paid during the fiscal year ended December 31, 2004.
- --------------------------------------------------------------------------------
2004
- --------------------------------------------------------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ --
Undistributed long-term gain/
(capital loss carryforward) (25,641)
Post-October loss deferred (8,778)
Unrealized appreciation (depreciation) 126,805
-------
Total $92,356
=======
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
C. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. Distribution fees are calculated based on the average
daily net asset values attributable to Class I and Class II shares of the
Portfolio, respectively.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $135 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$508 payable to PFD at December 31, 2004.
5. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
- -------------------------------------------------------------------------------------------------------------
Net
Gross Gross Appreciation/
Tax Cost Appreciation Depreciation (Depreciation)
------------- -------------- -------------- ---------------
Papp Small and Mid Cap Growth Portfolio $2,408,097 $160,346 $ (33,541) $126,805
========== ============= ============= =============
- ---------------------------------------------------------------------------------------------------------------
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the period ended
December 31, 2004, were $3,023,924 and $581,408, respectively.
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- --------------------------------------------------------------------------------
Papp Small & Mid Cap Growth Portfolio '04 Shares '04 Amount
- ------------------------------------------------------------------
CLASS II:
Shares sold 308,301 $3,211,433
Reinvestment of distributions -- --
Shares repurchased (71,044) (719,923)
------- ----------
Net increase 237,257 $2,491,510
======= ==========
- ------------------------------------------------------------------
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and the Class II
Shareowners of Pioneer Papp Small and Mid Cap Growth VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Papp Small and Mid Cap Growth VCT
Portfolio, one of the portfolios constituting the Pioneer Variable Contracts
Trust (the "Trust"), as of December 31, 2004, and the related statements of
operations and changes in net assets, and the financial highlights, for the
period from March 15, 2004 (commencement of operations) to December 31, 2004.
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 audit.
We conducted our audit 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. An audit includes 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, 2004, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. We believe that our
audit provides 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 Papp Small and Mid Cap Growth VCT Portfolio of the Pioneer Variable
Contracts Trust at December 31, 2004, the results of its operations, changes in
its net assets, and the financial highlights, for the period from March 15,
2004 (commencement of operations) to December 31, 2004 in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 11, 2005
15
- --------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
Custodian with their rincipal occupations during the past five years. Trustees who
Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as
Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S.
registered investment portfolios for which Pioneer Investment Management,
Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address
Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State
Street, Boston, Massachusetts 02109.
Legal Counsel The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available
upon request, without charge, by calling 1-800-225-6292.
Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number
Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd.
Jr. (78)* Board, Trustee successor trustee until retirement or removal;
and President is elected or Deputy Chairman and a
earlier retirement Director of Pioneer Global
or removal 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;
Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative
Investment Management
(Bermuda) Limited and
affiliated funds; President
and Director of Pioneer
Funds Distributor, Inc.
("PFD"); President of all of
the Pioneer Funds; and Of
Counsel (since 2000, partner
prior to 2000), Wilmer
Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA
and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief None
(52)** Executive Vice successor trustee is Executive Officer, PIM-USA
President elected or earlier since May 2003 (Director
retirement or removal since January 2001);
President and Director of
Pioneer since May 2003;
Chairman and Director of
Pioneer Investment
Management Shareholder
Services, Inc. ("PIMSS")
since May 2003; Executive
Vice President of all of th
Pioneer Funds since June
2003; Executive Vice
President and Chief
Operating Officer of
PIM-USA, November 2000 to
May 2003; Executive Vice
President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999 t
November 2000; Senior Vice
President and Chief
Financial Officer, John
Hancock Advisers, L.L.C.,
April 1997 to November 1999
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
16
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment
Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing
3050 K. elected or earlier I-trax, Inc. (publicly traded finance company); Director of New York
Street NW, retirement or health care services Mortgage Trust (publicly traded mortgage
Washington, removal. company) (2001-present); REIT)
DC 20007 Managing Partner, Federal
City Capital Advisors
(boutique merchant
bank)(1995-2000; 2002 to
2004); Executive Vice
President and Chief
Financial Officer, Pedestal
Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial
(56) 3509 2000. successor trustee is (international financial identification and specialty coated material
Woodbine elected or earlier advisory firm) products manufacturer), Millennium
Street, retirement or removal Chemicals, Inc. (commodity chemicals),
Chevy Chase, Mortgage Guaranty Insurance Corporation,
MD 20815 and R.J. Reynolds Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Trustee since Serves until Founding Director, The None
B.W. Graham 2000. successor trustee is Winthrop Group, Inc.
(57) 1001 elected or earlier (consulting firm); Professor
Sherbrooke retirement or of Management, Faculty of
Street West, removal Management, McGill
Montreal, University
Quebec,
Canada H3A
1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite Trustee since Serves until President, and Chief Executive Director of New American High Income Fund,
A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company)
(56) One trustee is Company, Inc. (investment
Boston elected or banking firm)
Place, 28th earlier
Floor, retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetia Fund, Inc.
West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP
125 Broad is elected or earlier PLC (investment managers)
Street, New retirement or removal
York, NY
10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Trustee since Serves until President, John Winthrop & Co., None
Winthrop September, successor trustee Inc.(private investment firm)
(68) One 2000. is elected or earlier
North Adgers retirement or removal
Wharf,
Charleston,
SC 29401
- ------------------------------------------------------------------------------------------------------------------------------------
17
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from
April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the discretion Assistant Vice President and None
Kelley (40) Secretary of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the discretion Partner, Wilmer Cutler None
Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Treasurer Serves at the discretion Vice President-Fund None
Nave (59) of the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of all
of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Bradley (45) Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of
all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the discretion Assistant Vice President - None
Presutti (39) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None
(46) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None
Sullivan (31) Treasurer of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration
and Custody Services (Fund
Accounting Manager from
August 1999 to May 2002, Fund
Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None
(37) Compliance of the Board Pioneer (Director of
Officer Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
20
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This page for your notes.
21
[LOGO]
PIONEER
Investments(R)
[LOGO]
PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 17
Trustees, Officers and Service Providers 18
Please consider a Portfolio's investment objectives, risks, charges and
expenses carefully before investing. The prospectus contains this and other
information about a Portfolio and should be read carefully before you invest or
send money. To obtain a prospectus and for other information on any Pioneer
Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at
www.pioneerfunds.com.
The Trust files a complete statement 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 Europe VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Sector Distribution
(As a percentage of total investment portfolio holdings)
International Preferred Stocks 0.9%
International Common Stocks 99.1%
Geographical Distribution
(As a percentage of equity holdings)
Finland 0.8%
Belgium 1.6%
Sweden 1.6%
Ireland 3.2%
Italy 5.1%
Netherlands 6.0%
Spain 6.7%
Germany 9.3%
Switzerland 12.6%
France 26.5%
United Kingdom 26.6%
Five Largest Holdings
(As a percentage of equity holdings)
1. Vodafone Group Plc 4.70%
2. UBS AG 3.18
3. Total SA 2.92
4. Societe Generale 2.84
5. CS Group 2.78
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 10.44 $ 8.89
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.0583 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Europe VCT Portfolio at net asset value, compared to that of the Morgan Stanley
Capital International (MSCI) Europe 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 Europe VCT Portfolio
MSCI Europe Index
Oct-98 10000 10000
10596 10992
13571 12741
Dec-00 11030 11671
8445 9349
Dec-02 6835 7629
9085 10570
Dec-04 10739 12777
The Morgan Stanley Capital International (MSCI) Europe Index measures the
performance of stocks in European developed 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 the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 1.16%
(10/30/98)
5 Years -4.57
1 Year 18.20
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.pioneerfunds.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. Please refer to the variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 Europe 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 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 Europe VCT Portfolio
Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,169.25 $ 1,167.75
Expenses Paid During Period* $ 8.12 $ 9.40
- --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% and
1.73% 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). 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 Europe VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,017.60 $ 1,016.34
Expenses Paid During Period* $ 7.55 $ 8.74
- --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% and
1.73% 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 Europe VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
The 12 months ended December 31, 2004, was a favorable period for European
stocks. In spite of high energy prices, attractive stock price levels, high
dividend yields and receding fears of inflation contributed to strong returns
for the Europe VCT Portfolio, as portfolio manager Stan Pearson discusses in
the following interview.
Q: How did the Portfolio perform?
A: For the 12 months ended December 31, 2004, Class II shares generated a
return of 18.20% at net asset value. The performance lagged the Morgan
Stanley Capital International (MSCI) Europe Index's return of 20.88%. We
think that two stocks account for the underperformance. AstraZeneca
(Switzerland) was impacted by general weakness in the pharmaceutical
sector and stock-specific events, including the failure to get FDA
approval for one of its drugs. Food service provider Compass Group (United
Kingdom) suffered after releasing a surprise profit warning in September.
In our view, company cash flows have been impacted by once-off items, and
we expect cash flow generation to improve going forward.
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.
Q: Which stocks contributed to performance?
A: While many pharmaceutical stocks suffered as a result of questions
surrounding safety concerns about blockbuster Cox-2 inhibitor drugs, not
all the news was bad for health care stocks. Celesio (Germany), a
wholesale pharmaceutical company, rallied as a result of its business
restructuring and continued earnings growth.
In the telecommunication services industry, we've focused on operators
with a high level of exposure to the European market, which continues to
generate attractive growth. We purchased Belgacom (Belgium) during its
initial public offering in March because it was well valued and offered an
attractive dividend yield. The stock has done well as a result of the
company's financial strength and sound management.
The Portfolio enjoyed strong performance from its emphasis on energy
stocks, which are benefiting from high oil prices. ENI (Italy) represented
one of the Portfolio's best performers for the year. In the utility
sector, E.on is benefiting from the rise in electricity prices. The
company has also made progress in restructuring, selling non-core assets
and reducing its workforce.
Similarly, strong stock selection and an overweight position in the
capital goods sector generated strong returns. CRH (Ireland) is profiting
from the cyclical upturn and increased capital expenditures in the
building materials arena. The company has a successful strategy of
acquiring small companies that are easily integrated into CRH.
Underlying fundamentals in the financial sector improved on the back of
the strong equity markets, and rising investor demand helped push stock
prices higher. Barclays (United Kingdom) led the Portfolio's financial
holdings and contributed nicely to the Portfolio's performance. During
2004, the stock benefited from speculation that it was a potential
take-over target for U.S. banks. Finally, our decision not to invest in
the semiconductor industry helped performance because the industry
struggled throughout the fiscal year as growth forecasts proved to be
overly optimistic.
Q: What is your outlook?
A: European companies have the capacity to expand margins and profits, but
earnings growth is likely to be modest. In a climate where equity
appreciation is driven by modest earnings growth, we consider high
dividend yields and strong cash flow to be important sources of stock
price support. Therefore, we are placing a premium on stocks with the
stability and predictability of robust dividend yields.
At present levels, European equities are appropriately discounting an
environment characterized by gently accelerating macroeconomic growth, low
inflation and low volatility. We believe such a global equity environment
is likely to result in moderate expectations for equity returns across
Europe for the foreseeable future.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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 Europe VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCKS - 0.9%
Automobiles & Components - 0.9%
Automobile Manufacturers - 0.9%
250 Porsche AG $ 159,264
-----------
TOTAL PREFERRED STOCKS
(Cost $83,104) $ 159,264
-----------
COMMON STOCKS - 97.9%
Energy - 9.4%
Integrated Oil & Gas - 4.1%
32,474 BP Amoco Plc $ 316,497
16,533 Eni S.p.A. 414,540
-----------
$ 731,037
-----------
Oil & Gas Refining Marketing &
Transportation - 5.3%
16,148 Repsol SA $ 419,786
2,339 Total SA 511,991
-----------
$ 931,777
-----------
Total Energy $ 1,662,814
-----------
Materials - 9.3%
Commodity Chemicals - 1.4%
3,516 BASF India, Ltd. $ 252,819
-----------
Construction Materials - 6.4%
11,436 CRH Plc $ 306,459
2,196 Holcim, Ltd. 132,566
8,961 Italcementi S.p.A. 144,084
3,729 Lafarge Br 359,324
1,391 VINCI SA 186,499
-----------
$ 1,128,932
-----------
Diversified Metals & Mining - 1.5%
9,326 Rio Tinto Plc $ 274,043
-----------
Total Materials $ 1,655,794
-----------
Capital Goods - 7.1%
Construction & Engineering - 4.3%
12,320 ACS, Actividades de Construccion y
Servicios, S.A. $ 281,233
5,731 Compagnie de Saint Gobain 344,235
797 Technip 147,072
-----------
$ 772,540
-----------
Electrical Components & Equipment - 1.2%
3,012 Schneider Electric SA $ 209,209
-----------
Industrial Machinery - 1.6%
1,976 Atlas Copco AB $ 89,168
4,221 AB SKF 187,945
-----------
$ 277,113
-----------
Total Capital Goods $ 1,258,862
-----------
Shares Value
Commercial Services & Supplies - 1.4%
Diversified Commercial Services - 1.4%
9,329 TNT Post Group N.V. $ 253,356
-----------
Total Commercial Services &
Supplies $ 253,356
-----------
Automobiles & Components - 0.9%
Auto Parts & Equipment - 0.9%
2,394 Compagnie Generale des
Etablissements Michelin $ 153,268
-----------
Total Automobiles & Components $ 153,268
-----------
Consumer Durables & Apparel - 1.0%
Apparel, Accessories & Luxury Goods - 1.0%
1,131 Adidas-Salomon AG $ 182,109
-----------
Total Consumer Durables & Apparel $ 182,109
-----------
Hotels, Restaurants & Leisure - 2.0%
Restaurants - 2.0%
42,574 Compass Group Plc $ 200,909
8,416 GUS plc 151,709
-----------
$ 352,618
-----------
Total Hotels, Restaurants & Leisure $ 352,618
-----------
Media - 2.1%
Advertising - 0.5%
2,942 Publicis SA $ 95,154
-----------
Publishing - 1.6%
7,545 Elsevier NV $ 102,854
5,457 Vivendi Universal* 174,811
-----------
$ 277,665
-----------
Total Media $ 372,819
-----------
Retailing - 1.7%
Distributors - 0.8%
14,303 Buhrmann NV* $ 139,026
-----------
Specialty Stores - 0.9%
34,285 HMV Group Plc $ 170,270
-----------
Total Retailing $ 309,296
-----------
Food & Drug Retailing - 4.2%
Drug Retail - 0.8%
11,116 Boots Co. Plc $ 139,667
-----------
Food Retail - 3.4%
1,429 Nestle SA (Registered Shares) $ 373,904
37,557 Tesco Plc 232,179
-----------
$ 606,083
-----------
Total Food & Drug Retailing $ 745,750
-----------
The accompanying notes are an integral part of these financial statements.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Food, Beverage & Tobacco - 1.8%
Tobacco - 1.8%
18,370 British American Tobacco Plc $ 316,318
-----------
Total Food, Beverage & Tobacco $ 316,318
-----------
Pharmaceuticals & Biotechnology - 8.2%
Pharmaceuticals - 8.2%
512 Actelion, Ltd.* $ 52,454
11,377 AstraZeneca Plc 413,428
12,095 GlaxoSmithKline Plc 284,538
2,452 Roche Holdings AG 280,042
3,535 Sanofi-Aventis 282,546
1,796 Schering AG 133,874
-----------
$ 1,446,882
-----------
Total Pharmaceuticals &
Biotechnology $ 1,446,882
-----------
Banks - 15.1%
Diversified Banks - 15.1%
8,687 Allied Irish Banks Plc $ 179,311
32,459 Barclays Plc 364,657
13,477 Banco Bilbao Vizcaya Argentaria, SA 238,517
5,468 BNP Paribas SA 395,665
6,739 Credit Agricole SA 202,895
11,564 CS Group* 487,180
4,600 Depfa Bank Plc 77,234
14,386 HSBC Holding Plc 242,491
14,378 Royal Bank of Scotland Group Plc 482,632
-----------
$ 2,670,582
-----------
Total Banks $ 2,670,582
-----------
Diversified Financials - 10.7%
Asset Management & Custody Banks - 0.4%
2,630 Man Group Plc $ 73,463
-----------
Diversified Financial
Services - 9.1%
6,429 Fortis NV $ 178,055
6,390 ING Groep NV 193,219
2,730 Lagardere S.C.A. 196,640
4,931 Societe Generale 498,393
6,686 UBS AG 557,151
-----------
$ 1,623,458
-----------
Specialized Finance - 1.2%
3,406 Deutsche Boerse AG $ 204,654
-----------
Total Diversified Financials $ 1,901,575
-----------
Shares Value
Insurance - 4.6%
Life & Health Insurance - 0.5%
2,574 Assicurazioni Generali $ 87,197
-----------
Multi-Line Insurance - 3.4%
11,889 AXA $ 294,430
1,923 Zurich Financial Services* 319,639
-----------
$ 614,069
-----------
Reinsurance - 0.7%
3,097 Hannover Rueckversicheru $ 121,034
-----------
Total Insurance $ 822,300
-----------
Software & Services - 1.0%
IT Consulting & Other Services - 1.0%
2,571 Atos Origin* $ 174,397
-----------
Total Software & Services $ 174,397
-----------
Technology Hardware & Equipment - 3.6%
Semiconductors - 1.0%
6,783 Philips Electronics NV $ 179,433
-----------
Communications Equipment - 0.9%
10,079 Nokia Oyj $ 158,148
-----------
Computer Hardware - 0.5%
34,273 Dixons Group Plc $ 100,038
-----------
Electronic Equipment & Instruments - 1.2%
2,450 Siemens $ 207,334
-----------
Total Technology Hardware &
Equipment $ 644,953
-----------
Telecommunication Services - 11.2%
Alternate Carriers - 2.4%
12,630 France Telecom $ 417,197
-----------
Integrated Telecommunication Services - 4.2%
6,351 Belgacom SA* $ 274,098
12,569 Telefonica SA 236,223
59,202 Telecom Italia S.p.A. 241,711
-----------
$ 752,032
-----------
Wireless Telecommunication Services - 4.6%
304,416 Vodafone Group Plc $ 824,041
-----------
Total Telecommunication Services $ 1,993,270
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Utilities - 2.6%
Electric Utilities - 2.6%
4,077 E.On AG $ 371,038
8,667 National Grid Transco Plc 82,528
-----------
$ 453,566
-----------
Total Utilities $ 453,566
-----------
TOTAL COMMON STOCKS
(Cost $13,033,884) $17,370,529
-----------
TOTAL INVESTMENTS IN SECURITIES - 98.8%
(Cost $13,116,988) (a) $17,529,793
-----------
OTHER ASSETS AND
LIABILITIES - 1.2% $ 195,845
-----------
TOTAL NET ASSETS - 100.0% $17,725,638
===========
* Non-income producing security
(a) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
United Kingdom 26.6%
France 26.5
Switzerland 12.6
Germany 9.3
Spain 6.7
Netherlands 6.0
Italy 5.1
Ireland 3.2
Sweden 1.6
Belgium 1.6
Finland 0.8
-----
100.0%
=====
The accompanying notes are an integral part of these financial statements.
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended 1/2/01 to
Class II (a) 12/31/04 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 8.89 $ 6.71 $ 8.29 $ 11.07
------- ------ -------- --------
Increase from investment operations:
Net investment income $ 0.04 $ 0.03 $ 0.01 $ 0.08
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.57 2.17 ( 1.59) ( 2.71)
------- ------ -------- --------
Net increase (decrease) from investment operations $ 1.61 $ 2.20 $ (1.58) $ (2.63)
Distributions to shareowners:
Net investment income ( 0.06) (0.02) -- ( 0.15)
Net realized gain -- -- -- --
------- ------- -------- --------
Net increase (decrease) in net asset value $ 1.55 $ 2.18 $ (1.58) $ (2.78)
------- ------- -------- --------
Net asset value, end of period $ 10.44 $ 8.89 $ 6.71 $ 8.29
======= ======= ======== ========
Total return* 18.20% 32.92% (19.06)% (23.44)%
Ratio of net expenses to average net assets+ 1.75% 1.79% 1.86% 3.22%
Ratio of net investment income to average net assets+ 0.61% 0.56% 0.25% ( 2.56)%
Portfolio turnover rate 55% 52% 95% 73%
Net assets, end of period (in thousands) $ 8,252 $ 5,005 $ 1,829 $ 398
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 2.20% 2.75% 2.66% 4.57%
Net investment income (loss) 0.17% (0.40)% ( 0.54)% ( 3.90)%
(a) Class II shares were first publicly offered on January 2, 2001.
* 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.
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $13,116,988) $ 17,529,793
Cash 247,120
Receivables --
Fund shares sold 4,231
Dividends, interest and foreign taxes withheld 32,798
Other 1,489
------------
Total assets $ 17,815,431
------------
LIABILITIES:
Payables --
Fund shares repurchased $ 17,293
Due to affiliates 21,663
Accrued expenses 50,837
------------
Total liabilities $ 89,793
------------
NET ASSETS:
Paid-in capital $ 21,052,463
Undistributed net investment income (loss) 103,181
Accumulated undistributed net realized gain (loss) (7,845,397)
Net unrealized gain (loss) on:
Investments 4,412,805
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 2,586
------------
Total net assets $ 17,725,638
------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 9,477,976
Shares outstanding 891,363
------------
Net asset value per share $ 10.64
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 8,247,662
Shares outstanding 790,400
------------
Net asset value per share $ 10.44
The accompanying notes are an integral part of these financial statements.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $51,698) $ 355,527
Interest 3,353
----------
Total investment income $ 358,880
----------
EXPENSES:
Management fees $ 149,784
Transfer agent fees and expenses 3,049
Distribution fees (Class II) 15,403
Administrative reimbursements 18,500
Custodian fees 66,885
Professional fees 33,376
Printing expense 5,807
Miscellaneous 13,769
----------
Total expenses $ 306,573
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (66,223)
----------
Net expenses $ 240,350
----------
Net investment income (loss) $ 118,530
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $1,174,390
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (19,831)
----------
$1,154,559
----------
Change in net unrealized gain or (loss) from:
Investments (the change in reserve for repatriation taxes of $86,981) $1,407,564
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (4,757)
----------
$1,402,807
----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $2,557,366
==========
Net increase (decrease) in net assets resulting
from operations $2,675,896
==========
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended Year Ended
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 118,530 $ 110,674
Net realized gain (loss) on investments 1,154,559 (108,393)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 1,402,807 3,419,238
------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 2,675,896 $ 3,421,519
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (65,951) $ (36,322)
Class II (38,910) (9,367)
------------ ------------
Total distributions to shareowners $ (104,861) $ (45,689)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 3,890,105 $ 6,502,123
Reinvestment of distributions 104,862 45,689
Cost of shares repurchased (3,175,336) (6,113,517)
------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 819,631 $ 434,295
------------ ------------
Net increase (decrease) in net assets $ 3,390,666 $ 3,810,125
NET ASSETS:
Beginning of year 14,334,972 10,524,848
------------ ------------
End of year $ 17,725,638 $ 14,334,973
============ ============
Undistributed net investment income (loss),
end of year $ 103,181 $ 109,343
============ ============
The accompanying notes are an integral part of these financial statements.
11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Europe Portfolio (the Portfolio) is a Portfolio of the Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objective of Europe VCT Portfolio is to seek long-term capital
growth.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years.
Actual results could differ from those estimates. 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
generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Net asset values for
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded.
Securities that have not traded on the date of valuation, or securities
for which sale prices are not generally reported, are valued at the mean
between the last bid and asked prices. 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.
12
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At December 31, 2004, there were no fair valued securities except as
follows. 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 Europe
Portfolio are fair valued using vendor-supplied pricing updates for each
security to the time of the close of the NYSE. Temporary cash investments
and securities held by the Portfolio are valued at amortized cost.
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, 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 represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount
of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are
not segregated in the statement of operations from the effects of changes
in market price of those securities but are included with the net realized
and unrealized gain or loss on investments.
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 8).
D. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required.
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 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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2003, Europe VCT Portfolio had a capital loss
carryforward of $6,975,894 of which the following amounts will expire
between 2009 and 2011 if not utilized: $4,296,563 in 2009, $1,896,288 in
20010 and $783,043 in 2011.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of
the portfolio and are designed to present the portfolio's capital accounts
on a tax basis.
Undistributed Net
Investment Income Accumulated Realized
Portfolio (Loss) Net Gain (Loss) Paid-In Capital
- ------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio $ (19,831) $19,831 $ --
========== ======= =====
- ------------------------------------------------------------------------------------------
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
- --------------------------------------------------------------------------------
2004 2003
- ------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 104,861 $45,689
Long-Term capital gain -- --
----------- -------
$ 104,861 $45,689
----------- -------
Return of Capital -- --
Total distributions $ 104,861 $45,689
============ =======
Distributable Earnings (Accumulated Losses):
Undistributed ordinary income $ 103,181
Undistributed long-term gain/(capital loss carryforward) (6,975,894)
Unrealized appreciation (depreciation) 3,545,888
-----------
Total $(3,326,825)
============
- ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales.
E. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 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, 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.
F. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain
or loss in the fair value of the securities loaned that may occur during
the term of the loan, will be for account of the Trust. The loans are
secured by collateral of at least 102%, at all times, of the fair value of
the securities loaned. The fair value of the collateral will be adjusted
daily to reflect any price fluctuation in the value of the loaned
securities. The Trust has the right under the lending agreement to recover
the securities on loan from the borrower on demand. The Trust invests cash
collateral in the Securities Lending Investment Fund which is managed by
Brown Brothers Harriman & Co., the Trust's custodian.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest received from counterparties, is required to be at least equal to
or in excess of the value of the repurchase agreement at the time of
purchase. The collateral for all repurchase agreements is held in
safekeeping in the customer-only account of the Portfolio's custodian, or
subcustodian. The Trust's investment adviser, Pioneer Investment
Management, Inc. (PIM), is responsible for determining that the value of
the collateral remains at least equal to the repurchase price.
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolio. Management fees are calculated daily at the following annual rate of
1.00% 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. At December 31, 2004, $19,630 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$1,762 payable to PFD at December 31, 2004.
5. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
- --------------------------------------------------------------------------------
Net
Gross Gross Appreciation/
Portfolio Tax Cost Appreciation Depreciation (Depreciation)
- ------------------------------------------------------------------------------------------
Europe Portfolio $13,986,491 $3,915,690 $ (372,388) $3,543,302
=========== ========== =========== ==========
- ------------------------------------------------------------------------------------------
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $8,930,700 and $8,096,127, respectively.
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- --------------------------------------------------------------------------------
Europe Portfolio '04 Shares '04 Amount '03 Shares '03 Amount
- ------------------------------------------------------------------------------------------
CLASS I:
Shares sold 43,531 $ 395,370 59,876 $ 462,031
Reinvestment of distributions 7,232 65,952 4,817 36,322
Shares repurchased (190,688) (1,758,638) (308,777) (2,225,749)
-------------------------------------------------------
Net increase (decrease) (139,925) $ (1,297,316) (244,084) $ (1,727,396)
=======================================================
CLASS II:
Shares sold 374,441 $ 3,494,736 836,602 $ 6,040,092
Reinvestment of distributions 4,343 38,910 1,262 9,367
Shares repurchased (151,264) (1,416,699) (547,441) (3,887,768)
-------------------------------------------------------
Net increase (decrease) 227,520 $ 2,116,947 290,423 $ 2,161,691
=======================================================
- ------------------------------------------------------------------------------------------
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts
During the year ended December 31, 2004, certain Portfolios had entered into
various contracts that obligate the Portfolios to deliver currencies at
specified future dates. At the maturity of a contract, the Portfolios must make
delivery of the foreign currency. Alternatively, prior to the settlement date
of a portfolio hedge, the Portfolio may close out such contracts by entering
into an offsetting hedge contract. As of December 31, 2004, the Portfolio had
no outstanding portfolio or settlement hedges.
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and
the Class II Shareowners of Pioneer Europe VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Europe VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for the period ended December 31, 2001 were
audited by other auditors who have ceased operations and whose report, dated
February 8, 2002, expressed an unqualified opinion on those financial
highlights.
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. An audit includes 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, 2004, by
correspondence with the custodian. 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 Europe VCT Portfolio of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
17
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
Custodian with their rincipal occupations during the past five years. Trustees who
Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as
Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S.
registered investment portfolios for which Pioneer Investment Management,
Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address
Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State
Street, Boston, Massachusetts 02109.
Legal Counsel The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available
upon request, without charge, by calling 1-800-225-6292.
Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number
Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc.
online at pioneerfunds.com. online at pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd.
Jr. (78)* Board, Trustee successor trustee until retirement or removal;
and President is elected or Deputy Chairman and a
earlier retirement Director of Pioneer Global
or removal 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;
Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative
Investment Management
(Bermuda) Limited and
affiliated funds; President
and Director of Pioneer
Funds Distributor, Inc.
("PFD"); President of all of
the Pioneer Funds; and Of
Counsel (since 2000, partner
prior to 2000), Wilmer
Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA
and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive None
(52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003
President elected or earlier (Director since January 2001);
retirement or removal President and Director of Pioneer
since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment
Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing
3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York
Street NW, retirement or health care services Mortgage Trust (publicly traded mortgage
Washington, removal. company) (2001-present); REIT)
DC 20007 Managing Partner, Federal
City Capital Advisors
(boutique merchant
bank)(1995-2000; 2002 to
2004); Executive Vice
President and Chief
Financial Officer, Pedestal
Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial
(56) 3509 2000. successor trustee is (international inancial identification and specialty coated material
Woodbine elected or earlier advisory firm) products manufacturer), Millennium
Street, retirement or removal Chemicals, Inc. (commodity chemicals),
Chevy Chase, Mortgage Guaranty Insurance Corporation,
MD 20815 and R.J. Reynolds Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Trustee since Serves until Founding Director, The None
B.W. Graham 2000. successor trustee is Winthrop Group, Inc.
(57) 1001 elected or earlier (consulting firm); Professor
Sherbrooke retirement or removal of Management, Faculty of
Street West, Management, McGill
Montreal, University
Quebec,
Canada H3A
1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund,
A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company)
(56) One trustee is Company, Inc. (investment
Boston elected or banking firm)
Place, 28th earlier
Floor, retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetia Fund, Inc.
West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP
125 Broad is elected or earlier PLC (investment managers)
Street, New retirement or removal
York, NY
10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Trustee since Serves until President, John Winthrop & CO., None
Winthrop September, successor trustee Inc.(private investment firm)
(68) One 2000. is elected or earlier
North Adgers retirement or removal
Wharf,
Charleston,
SC 29401
- ------------------------------------------------------------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Complianc of PIM-USA from
April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the discretion Assistant Vice President and None
Kelley (40) Secretary of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the discretion Partner, Wilmer Cutler None
Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Treasurer Serves at the discretion Vice President-Fund None
Nave (59) of the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of all
of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Bradley (45) Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of
all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the discretion Assistant Vice President - None
Presutti (39) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None
(46) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
20
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Europe VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None
Sullivan (31) Treasurer of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration
and Custody Services (Fund
Accounting Manager from
August 1999 to May 2002, Fund
Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None
(37) Compliance of the Board Pioneer (Director of
Officer Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
21
[LOGO]
PIONEER
Investments(R)
[GRAPHICS OMITTED]
PIONEER
VARIABLE
CONTRACTS
TRUST
Pioneer Variable Contracts Trust -- Class I Shares
Pioneer Emerging Markets VCT Portfolio
Pioneer Europe VCT Portfolio
Pioneer International Value VCT Portfolio
Pioneer Small Cap Value VCT Portfolio
Pioneer Small Company VCT Portfolio
Pioneer Mid Cap Value VCT Portfolio
Pioneer Growth Shares VCT Portfolio
Pioneer Real Estate Shares VCT Portfolio
Pioneer Fund VCT Portfolio
Pioneer Equity Income VCT Portfolio
ANNUAL REPORT
December 31, 2004
Pioneer Balanced VCT Portfolio
Pioneer High Yield VCT Portfolio
Pioneer Strategic Income VCT Portfolio
Pioneer America Income VCT Portfolio
Pioneer Money Market VCT Portfolio
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table of Contents
Letter to Shareowners 1
Comparing Ongoing Portfolio Expenses 2
Pioneer Emerging Markets VCT Portfolio
Portfolio and Performance Update 4
Portfolio Management Discussion 5
Pioneer Europe VCT Portfolio
Portfolio and Performance Update 6
Portfolio Management Discussion 7
Pioneer International Value VCT Portfolio
Portfolio and Performance Update 8
Portfolio Management Discussion 9
Pioneer Small Cap Value VCT Portfolio
Portfolio and Performance Update 10
Portfolio Management Discussion 11
Pioneer Small Company VCT Portfolio
Portfolio and Performance Update 12
Portfolio Management Discussion 13
Pioneer Mid Cap Value VCT Portfolio
Portfolio and Performance Update 14
Portfolio Management Discussion 15
Pioneer Growth Shares VCT Portfolio
Portfolio and Performance Update 16
Portfolio Management Discussion 17
Pioneer Real Estate Shares VCT Portfolio
Portfolio and Performance Update 18
Portfolio Management Discussion 19
Pioneer Fund VCT Portfolio
Portfolio and Performance Update 20
Portfolio Management Discussion 21
Pioneer Equity Income VCT Portfolio
Portfolio and Performance Update 22
Portfolio Management Discussion 23
Pioneer Balanced VCT Portfolio
Portfolio and Performance Update 24
Portfolio Management Discussion 25
Pioneer High Yield VCT Portfolio
Portfolio and Performance Update 26
Portfolio Management Discussion 27
Pioneer Strategic Income VCT Portfolio
Portfolio and Performance Update 28
Portfolio Management Discussion 29
Pioneer America Income VCT Portfolio
Portfolio and Performance Update 30
Portfolio Management Discussion 31
Pioneer Money Market VCT Portfolio
Portfolio and Performance Update 32
Schedules of Investments
Pioneer Emerging Markets VCT Portfolio 33
Pioneer Europe VCT Portfolio 38
Pioneer International Value VCT Portfolio 41
Pioneer Small Cap Value VCT Portfolio 45
Pioneer Small Company VCT Portfolio 49
Pioneer Mid Cap Value VCT Portfolio 53
Pioneer Growth Shares VCT Portfolio 57
Pioneer Real Estate Shares VCT Portfolio 60
Pioneer Fund VCT Portfolio 61
Pioneer Equity Income VCT Portfolio 65
Pioneer Balanced VCT Portfolio 68
Pioneer High Yield VCT Portfolio 75
Pioneer Strategic Income VCT Portfolio 81
Pioneer America Income VCT Portfolio 91
Pioneer Money Market VCT Portfolio 96
Financial Statements 108
Notes to Financial Statements 122
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
LETTER TO SHAREOWNERS 12/31/04
- --------------------------------------------------------------------------------
Dear Shareowner,
After three calendar quarters of listless performance, U.S. equity markets
improved strongly late in the year. Anxiety over energy prices, international
tensions and the falling American dollar had held the markets back, but
uneasiness about the presidential election was the principal source of investor
hesitation. The election went smoothly, the result was decisive, and the
ensuing rally pushed major indices into the black for the second year running.
However, returns trailed 2003's levels. Small-capitalization companies
outperformed large-cap issues for the sixth consecutive year. Markets overseas
were generally buoyant: commodity-rich nations saw surging demand for copper,
iron ore, lumber and other materials, with much of their output destined to
feed China's vast economic appetite.
Bond investors focused on longer-term issues. Reflecting the risk preference
that favored small-cap stocks, high-yield bonds were the strongest performers,
while higher quality issues, including U.S. Treasury issues, scored more modest
gains. Municipal bond returns were generally favorable as well; economic growth
spurred rising tax revenues, putting many issuers into surplus for the first
time in years.
A measured pace of growth seems in store for the U.S. economy, which generated
2.2 million jobs after years of employment declines. By the end of September,
the economy had tallied 12 positive quarters, and the nation's annualized
growth rate stood at a respectable four percent. We believe this rate of
expansion is enough to sustain growth without provoking the Federal Reserve
Board into aggressive interest rate hikes aimed at calming inflation.
As always, we encourage you to talk to your investment adviser about market
changes and any implications for how your personal investment portfolio is
balanced. Thank you for your continued confidence in Pioneer.
Respectfully,
/s/Osbert M. Hood
Osbert M. Hood
President
Pioneer Investment Management, Inc.
Any information in this shareholder 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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
1
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
COMPARING ONGOING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
As a shareowner of the Portfolio, you incur two types of costs: (1)
transactions costs, including sales charges (loads) on purchase payment and
redemption fees, and (2) ongoing costs including management fees and other
Portfolio Expenses.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (January 1, 2004 - December 31,
2004). This example is intended to help you understand your ongoing costs (in
dollars), of investing in the Portfolio and to compare these costs of investing
in other mutual funds.
Actual Expenses
The first line of the table below for each Portfolio provides information about
the actual account values and actual expenses. You may use the information in
the line, together with amount you invested, to estimate the expenses that you
paid over the period. Simply divide you account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiple the result by
the number in the first line for a Portfolio under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during the period.
Hypothetical Example for Comparison Purposes
The second line of the table below for each Portfolio 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. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other portfolios.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs only and will not
help you determine the relative total costs of owning different mutual funds.
In addition, if these transaction costs were included, your costs would have
been higher.
Class I Shares
----------------------------------------------------
Beginning Ending
Account Acount Expenses Paid
Value Value During Period
7/1/04 12/31/04 (7/1/04-12/31/04)
- ----------------------------------------------------------------------------------------------------
Pioneer Emerging Markets VCT Portfolio
Actual $ 1,000.00 $ 1,251.10 $ 9.82
Hypothetical (a) $ 1,000.00 $ 1,016.34 $ 8.79
Pioneer Europe VCT Portfolio
Actual $ 1,000.00 $ 1,169.25 $ 8.12
Hypothetical (a) $ 1,000.00 $ 1,017.60 $ 7.55
Pioneer International Value VCT Portfolio
Actual $ 1,000.00 $ 1,146.73 $ 9.74
Hypothetical (a) $ 1,000.00 $ 1,016.34 $ 9.14
Pioneer Small Cap Value VCT Portfolio
Actual $ 1,000.00 $ 1,112.59 $ 6.60
Hypothetical (a) $ 1,000.00 $ 1,018.85 $ 6.30
Pioneer Small Company VCT Portfolio
Actual $ 1,000.00 $ 1,067.51 $ 6.46
Hypothetical (a) $ 1,000.00 $ 1,018.85 $ 6.30
Pioneer Mid Cap Value VCT Portfolio
Actual $ 1,000.00 $ 1,121.91 $ 3.88
Hypothetical (a) $ 1,000.00 $ 1,021.52 $ 3.70
Pioneer Growth Shares VCT Portfolio
Actual $ 1,000.00 $ 1,077.66 $ 5.30
Hypothetical (a) $ 1,000.00 $ 1,020.31 $ 5.15
2
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class I Shares
----------------------------------------------------
Beginning Ending
Account Acount Expenses Paid
Value Value During Period
7/1/04 12/31/04 (7/1/04-12/31/04)
- ----------------------------------------------------------------------------------------------------
Pioneer Real Estate Shares VCT Portfolio
Actual $ 1,000.00 $ 1,263.87 $ 5.77
Hypothetical (a) $ 1,000.00 $ 1,020.21 $ 5.15
Pioneer Fund VCT Portfolio
Actual $ 1,000.00 $ 1,090.36 $ 3.72
Hypothetical (a) $ 1,000.00 $ 1,021.57 $ 3.60
Pioneer Equity Income VCT Portfolio
Actual $ 1,000.00 $ 1,119.78 $ 3.82
Hypothetical (a) $ 1,000.00 $ 1,021.52 $ 3.65
Pioneer Balanced VCT Portfolio
Actual $ 1,000.00 $ 1,028.06 $ 4.67
Hypothetical (a) $ 1,000.00 $ 1,020.61 $ 4.65
Pioneer High Yield VCT Portfolio
Actual $ 1,000.00 $ 1,077.61 $ 4.11
Hypothetical (a) $ 1,000.00 $ 1,021.22 $ 4.00
Pioneer Strategic Income VCT Portfolio
Actual $ 1,000.00 $ 1,098.98 $ 5.15
Hypothetical (a) $ 1,000.00 $ 1,019.96 $ 4.95
Pioneer America Income VCT Portfolio
Actual $ 1,000.00 $ 1,032.65 $ 4.07
Hypothetical (a) $ 1,000.00 $ 1,021.17 $ 4.05
Pioneer Money Market VCT Portfolio
Actual $ 1,000.00 $ 1,003.99 $ 4.01
Hypothetical (a) $ 1,000.00 $ 1,021.42 $ 4.05
(a)5% return per year before expenses
Expenses are equal to the annualized expense ratio of a Portfolio's Class I
shares (as indicated in the table below), multiplied by 184/366 (to reflect the
one half year period.)
Annualized
Expense Ratio
--------------
Pioneer Emerging Markets VCT Portfolio 1.73%
Pioneer Europe VCT Portfolio 1.49%
Pioneer International Value VCT Portfolio 1.80%
Pioneer Small Cap Value VCT Portfolio 1.24%
Pioneer Small Company VCT Portfolio 1.24%
Pioneer Mid Cap Value VCT Portfolio 0.73%
Pioneer Growth Shares VCT Portfolio 1.01%
Pioneer Real Estate Shares VCT Portfolio 1.01%
Pioneer Fund VCT Portfolio 0.71%
Pioneer Equity Income VCT Portfolio 0.72%
Pioneer Balanced VCT Portfolio 0.92%
Pioneer High Yield VCT Portfolio 0.79%
Pioneer Strategic Income VCT Portfolio 0.98%
Pioneer America Income VCT Portfolio 0.80%
Pioneer Money Market VCT Portfolio 0.80%
3
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
International Common Stocks 55.8%
International Preferred Stocks 1.7%
U.S. Common Stocks 5.5%
Temporary Cash Investment 7.7%
Depositary Receipts for International Stocks 29.3%
Geographical Distribution
(As a percentage of equity holdings)
Other(individually less then 1%) 2.0%
Hungary 1.1%
Czech Rebublic 1.1%
Philippines 1.3%
Singapore 1.3%
Peru 1.4%
People's Republic of China 2.0%
Poland 2.2%
Thailand 2.3%
Chile 2.8%
Indonesia 2.8%
Malaysia 5.2%
India 5.5%
Turkey 6.0%
Mexico 6.2%
Russia 6.8%
South Africa 7.1%
Taiwan 7.5%
Brazil 14.5%
South Korea 20.9%
Five Largest Holdings
(As a percentage of equity holdings)
1. Samsung Electronics Co. 3.67%
2. Petrobras Brasileiro SA
(A.D.R.) 3.43%
3. Companhia Vale do Rio
Doce (A.D.R.) 2.47%
4. Telefonos de Mexico SA 1.76%
5. Lukoil Holding (A.D.R.) 1.74%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $20.48 $17.37
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.1496 $ - $ -
- --------------------------------------------------------------------------------
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 Free 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 Emerging Markets VCT Portfolio
MSCI Emerging Markets Free Index
10/98 10000 10000
10490 10675
18750 17766
12/00 12337 12330
11450 12037
12/02 11312 11315
17903 17682
12/04 21292 22267
The Morgan Stanley Capital International (MSCI) Emerging Markets Free 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, 2004)
Net Asset Value
Life-of-Class 13.03%
(10/30/98)
5 Years 2.58%
1 Year 18.93%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
For the 12 months ended December 31, 2004, Pioneer Emerging Markets VCT
Portfolio Class I shares delivered a total return of 18.93. Over the same time
period, the MSCI Emerging Markets Free Index had a total return of 25.95%.
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.
In the following discussion, Christopher Smart and Sam Polyak, portfolio
managers of the Portfolio, review the last 12 months and look ahead to next
year.
After an extraordinary performance in 2003, how did Emerging Markets fare this
year?
With still strong economic growth in the United States and China, supported by
an accommodative monetary policy in most countries, Emerging Markets turned in
yet another outstanding year. In the 12 months ending December 31, 2004, the
MSCI Emerging Markets Index outperformed the MSCI World Index by approximately
11 percentage points and the S&P 500 Index by approximately 14 percentage
points. While global rates began to rise, the moderate strength of the recovery
made for a more gradual adjustment. Moreover, a weakening U.S. dollar
throughout the year had two distinct effects on the Emerging world. On the one
hand, it helped reduce the sovereign debt burdens of many developing countries,
as a significant portion of their debt is in U.S. dollars, while it helped cool
inflationary expectations as their currencies gained in relative value. While
the Chinese economy slowed somewhat from the excessive pace of its expansion
early in the year, it was still on track to grow near 10%, which provided good
support for global commodity prices like coal, iron ore, steel and soybeans.
How did the Portfolio fare in this environment?
The Portfolio's exposure to these favorable trends generally boosted
performance during the period. Our exposure to Turkey and India were especially
helpful as these markets benefited from strong acceleration in domestic demand.
We also benefited from the inclusion of stocks like Yanzhou Coal Mining, which
rose 41.2% as the rapid rise of Chinese coal prices boosted its profits. In
Brazil, Companhia Vale do Rio Doce, one of the world's largest producers of
iron ore, rose nearly 41.9% as the firm posted record profits on the strength
of global commodity prices. Finally, our decision to limit our exposure to
technology firms was also helpful, as major stocks in that sector in Taiwan,
Israel, and Korea underperformed the benchmark dramatically.
Performance was hurt over the last year from our positive view of Russia and
our negative view of South Africa. The high oil price, which produced
significant inflows of money into the Russian economy and growth near 7% was
not enough to overcome investor concerns about political developments that
appeared to threaten the course for further economic and political reform. In
South Africa, meanwhile, a surge in easy credit and domestic spending provided
an unexpected boon to many banks, retailers and industrial companies, even as
the strong currency undercut the profits of the mining industry.
How do you choose what stocks to buy?
Our process moves along two tracks. We look at our markets from the top down,
to find countries where the economies are growing, where interest rates are
falling and where there is a stable or improving political climate. At the same
time, from the bottom up, we screen stocks in our universe for attractive
valuations and growth prospects. We examine the economic sector in which a
company operates and attempt to assess the management's ability to take
advantage of growth opportunities. Together with our investment colleagues in
Singapore and Dublin, we model the company's future revenue and profit streams
to find stocks where the market may be underestimating its ability to create
value. If it meets these criteria within a favorable environment of economic
growth, it becomes a good candidate for the Portfolio. We believe the Portfolio
contains some of the world's best growth prospects at some of the world's best
valuations. Individually, the stocks may be riskier than most, but the
Portfolio construction helps to mitigate at least some of that risk.
What do you expect in 2005?
Emerging Markets have essentially outperformed developed markets significantly
in the last few years, which imposes a certain amount of humility on any
outlook for the year ahead. Still, we continue to believe that valuations are
attractive and growth prospects remain good, especially when compared to the
alternatives in developed markets. Performance in 2005 will remain vulnerable
to a rapid adjustment in global currencies or a sharp decline in global demand.
Still, weak job growth in the United States, Europe and Japan will discourage
monetary authorities from moving too quickly on rate increases, which should
continue to provide ample liquidity for key Emerging Markets. Barring an
unforeseen adjustment, this combination should make for another year of good
performance in relative and absolute terms.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Sector Distribution
(As a percentage of total investment portfolio)
International Common Stock 99.1%
International Preferred Stocks 0.9%
Geographical Distribution
(As a percentage of equity holdings)
Finland 0.8%
Belgium 1.6%
Sweden 1.6%
Ireland 3.2%
Italy 5.1%
Netherlands 6.0%
Spain 6.7%
Germany 9.3%
Switzerland 12.6%
France 26.5%
United Kingdom 26.6%
Five Largest Holdings
(As a percentage of equity holdings)
1. Vodafone Group Plc 4.70%
2. UBS AG 3.18%
3. Total SA 2.92%
4. Societe Generale 2.84%
5. CS Group 2.78%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $10.64 $9.05
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.0709 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Europe VCT Portfolio at net asset value, compared to that of the Morgan Stanley
Capital International (MSCI) Europe 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 Europe VCT Portfolio
MSCI Europe Index
10/98 10000 10000
10600 10992
13618 12741
12/00 11104 11671
8587 9349
12/02 6955 7629
9269 10570
12/04 10982 12777
The Morgan Stanley Capital International (MSCI) Europe Index measures the
performance of stocks in European developed 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 the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 1.53%
(10/30/98)
5 Years -4.21%
1 Year 18.48%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
6
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
The 12 months ended December 31, 2004, was a favorable period for European
stocks. In spite of high energy prices, attractive stock price levels, high
dividend yields and receding fears of inflation contributed to strong returns
for the Europe Portfolio, as Portfolio Manager Stan Pearson discusses in the
following interview.
Q: How did the Portfolio perform?
A: For the 12 months ended December 31, 2004, Class I shares rose 18.48% at net
asset value. The performance lagged the Morgan Stanley Capital
International (MSCI) Europe Index's return of 20.88%. We think that two
stocks account for the underperformance. AstraZeneca (Switzerland) was
impacted by general weakness in the pharmaceutical sector and stock
specific events, including the failure to get FDA approval for one of its
drugs. Food service provider Compass Group (United Kingdom) suffered after
releasing a surprise profit warning in September. In our view, company cash
flows have been impacted by once-off items, and we expect cash flow
generation to improve going forward.
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.
Q: Which stocks contributed to performance?
A: While many pharmaceutical stocks suffered as a result of questions
surrounding safety concerns about blockbuster cox-2 inhibitor drugs, not
all the news was bad for health care stocks. Celesio (Germany), a wholesale
pharmaceutical company, rallied as a result of its business restructuring
and continued earnings growth.
In the telecommunication services industry, we've focused on operators with
a high level of exposure to the European market, which continues to generate
attractive growth. We purchased Belgacom (Belgium) during its initial public
offering in March because it was well valued and offered an attractive
dividend yield. The stock has done well as a result of the company's
financial strength and sound management.
The Portfolio enjoyed strong performance from its emphasis on energy stocks,
which are benefiting from high oil prices. ENI (Italy) represented one of
the Portfolio's best performers for the year. In the utility sector, E.on is
benefiting from the rise in electricity prices. The company has also made
progress in restructuring, selling non-core assets and reducing its
workforce.
Similarly, strong stock selection and an overweight position in the capital
goods sector generated strong returns. CRH (Ireland) is profiting from the
cyclical upturn and increased capital expenditures in the building materials
arena. The company has a successful strategy of acquiring small companies
that are easily integrated into CRH.
Underlying fundamentals in the financial sector improved on the back of the
strong equity markets, and rising investor demand helped push stock prices
higher. Barclays (United Kingdom) led the portfolio's financial holdings and
contributed nicely to the Portfolio's performance. During 2004, the stock
benefited from speculation that it was a potential take-over target for U.S.
banks. Finally, our decision not to invest in the semiconductor industry
helped performance because the industry struggled throughout the fiscal year
as growth forecasts proved to be overly optimistic.
Q: What is your outlook?
A: European companies have the capacity to expand margins and profits, but
earnings growth is likely to be modest. In a climate where equity
appreciation is driven by modest earnings growth, we consider high dividend
yields and strong cash flow to be important sources of stock price support.
Therefore, we are placing a premium on stocks with the stability and
predictability of robust dividend yields.
At present levels, European equities are appropriately discounting an
environment characterized by gently accelerating macroeconomic growth, low
inflation and low volatility. We believe such a global equity environment is
likely to result in moderate expectations for equity returns across Europe
for the foreseeable future.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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.
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Sector Distribution
(As a percentage of total investment portfolio)
U.S. Common Stocks 1.5%
Temporary Cash Investment 3.4%
Depositary Receipts for International Stocks 3.9%
International Common Stocks 91.2%
Geographical Distribution
(As a percentage of equity holdings)
Other (individually less then 1%) 3.8%
Australia 1.0%
Belgium 1.0%
Brazil 1.1%
Turkey 1.3%
Ireland 1.5%
South Korea 1.5%
Netherlands 3.6%
Italy 4.2%
Spain 4.9%
Germany 5.4%
Switzerland 7.9%
United Kingdom 15.9%
France 16.3%
Japan 30.6%
Five Largest Holdings
(As a percentage of equity holdings)
1. Vodafone Group Plc 2.46%
2. Total SA 2.42%
3. Toyota Motor Co. 2.33%
4. Japan Tobacco, Inc. 2.13%
5. UBS AG 1.97%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $11.88 $10.06
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.0542 $ - $ -
- --------------------------------------------------------------------------------
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) All Country World Free (ACWF) ex.
U.S. 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 International Value VCT Portfolio
MSCI AC WId Fr USA Index
2/95 10000 10000
11053 10960
12/96 11998 11691
12581 11929
12/98 12163 13655
17561 17877
12/00 13609 15177
10378 12218
12/02 8996 10425
11701 14740
12/04 13891 17891
Index comparison begins on 2/28/95. The Morgan Stanley Capital International
(MSCI) All Country World Free 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 the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 3.39%
(3/1/95)
5 Years -4.58%
1 Year 18.71%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
8
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
International stocks appreciated strongly during 2004, despite higher interest
rates and rising oil prices. As Portfolio Manager Christopher Smart explains,
investments in economically sensitive industries across Japan, Europe and
emerging markets were strong contributors to performance.
Q: How did the Portfolio perform?
A: For the 12 months ended December 31, 2004, Class I shares rose 18.71% at net
asset value. However, with the disappointing performance of a few stocks,
it lagged the Morgan Stanley Capital International (MSCI) All Country World
Free Index, which rose 21.36% for the same period.
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.
We've been underweighting technology stocks for some time out of concern for
their valuations and weak demand in developed countries. Nevertheless, their
limited presence in the Portfolio still detracted from performance. Nokia
(Finland) and Ericsson (Sweden) suffered from inadequate product lines in an
increasingly competitive market for mobile telephones. We saw opportunity in
Hitachi Chemical (Japan), which we viewed as a promising, yet undervalued,
manufacturer of electronic component materials. Unfortunately, concerns
about the semiconductor cycle and weak personal computer sales drove the
stock price down during the second half of the fiscal year.
Outside the technology sector, two holdings domiciled in Switzerland were
disappointing. Nestle S.A., the Swiss food giant, declined as the company's
sales growth and profitability came in below expectations. We continue to
believe that the stock will recover, as Nestle delivers on its promises to
cut operating costs and improve its overall margins. Astra Zeneca's failure
to secure approval for its anti-clotting medicine Exanta hurt expectations
for future results, but we remain optimistic that its pipeline retains
value.
Q: What investments contributed to performance?
A: Japanese stocks, helped by a recovery in the property market, proved very
advantageous despite a retreat in the final months of the fiscal year.
Investments in prefabricated housing and construction materials
manufacturer Sekisui Chemical Company and Daiwa House rose considerably
during the reporting period. Also, quality retail chains like Ryohin
Keikaku Co. and clothing chain Fast Retailing enjoyed strong growth in
operating profits.
Investments in European cyclical stocks, which had lagged the market earlier
this year, also posted gains. Electric utility E.on AG (Germany) appreciated
sharply, as investors gained confidence in management's ability to sell
non-core assets in real estate and the chemicals industry and boost its
dividend pay-out ratio. The construction and engineering firm ACS benefited
from strong growth in revenues from road, infrastructure and building
contracts mainly in Spain, where economic expansion and European Union
financing have supported a construction boom. Belgacom, which posted
lackluster performance following its initial listing in March, recovered
handsomely in the fall. High global oil prices have given management at
Total SA (France) and ENI S.p.A (Italy) the opportunity to broaden its
ambitions for new exploration and expansion of downstream businesses.
Q: What can you tell us about the Portfolio's investments in emerging markets?
A: Some limited but key investments in emerging markets helped performance
considerably. Last spring, emerging markets were negatively affected by
fears of global inflation and the Federal Reserve Board's (the Fed) tighter
monetary policy. We thought that the Fed's interest rate increases would be
gradual and that the ensuing fall in stock prices in these markets was
overblown.
Three new holdings exemplify our strategy in emerging markets. For the first
time in more than a decade, real wages in Brazil are rising after weathering
the effects of currency devaluation and inflation. Brazil's third largest
bank, Unibanco, is a new holding that should profit from a continued
acceleration of consumer spending and its growth in its credit card business
and consumer lending. In Turkey, Koc Holdings rose nearly 30% during the
recent quarter, as Turkey's accession into the European union took one small
step closer to reality. Mobile operator Turkcell has increased its customer
base by more than 22% over the last year, and minutes of usage by
subscribers continues to climb.
Q: What is your outlook?
A: Barring any unforeseen events that could severely hamper the European
recovery, the valuations of most stocks remain extremely attractive
compared to the United States, and the earnings growth potential is good.
We are also optimistic about prospects for a Japanese recovery, as land
prices appreciate and consumers begin to spend again. In key emerging
markets, like Turkey and Brazil, we think we'll continue to find investment
opportunities, where falling inflation and interest rates have released
powerful forces of domestic demand.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Diversification
(As a percentage of total investment portfolio)
Exchange Traded Fund 0.8%
International Common Stocks 1.8%
Depositary Receipts for International Stocks 3.4%
Temporary Cash Investment 4.1%
U.S. Common Stocks 89.9%
Sector Distribution Portfolio
(As a percentage of equity holdings)
Telecommunication Services 0.9%
Consumer Staples 4.2%
Utilities 4.6%
Energy 7.5%
Materials 8.0%
Information Technology 8.6%
Health Care 9.0%
Consumer Discretionary 10.2%
Industrials 18.6%
Financials 28.4%
Five Largest Holdings
(As a percentage of equity holdings)
1. Insight Enterprises, Inc. 2.26%
2. Southwestern Energy Co. 2.05%
3. PacifiCare Health Systems 1.83%
4. Pediatrix Medical Group, Inc. 1.79%
5. Wabtec Corp. 1.75%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $15.02 $12.50
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ - $ - $ -
- --------------------------------------------------------------------------------
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. 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 Small Value VCT Portfolio
Russell 2000 Value Index
11/01 10000 10000
12/02 8979 9400
12/04 14611 16781
The Russell 2000 Value Index measures the performance of U.S. small-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 the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 13.79%
(11/8/01)
1 Year 20.16%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
10
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
Successful stock selection among energy, transportation and health care
companies helped Pioneer Small Cap Value VCT Portfolio perform well over the
past 12 months. In the following discussion, portfolio manager David Adams and
assistant portfolio manager Jack McPherson review the economic background and
detail some of the steps they took to bolster Portfolio performance.
Q. How did the Portfolio perform over this period?
A. For the twelve-month period ended December 31, 2004, Pioneer Small Cap Value
VCT Portfolio returned 20.16% at net asset value. In comparison, the
Russell 2000 Value Index, the Fund's benchmark, returned 22.25%.
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.
Q. What was the investment background for small-cap value stocks over this
period?
A. Value issues - those stocks that are selling at a significant discount to
our estimation of their intrinsic value - were leaders within the small-cap
universe for the full 12-month period, despite periods of outperformance by
growth stocks. Strong job creation in the spring raised fears of rising
interest rates, driving down financial and other traditional value sectors
seen as vulnerable to rising rates. Value issues rebounded sharply over the
summer as investors positioned their portfolios more defensively during the
runup to the presidential election. With the election decided, growth
sectors and a smattering of lower quality issues moved higher in November.
But the gains recorded between June and August were enough to position
value stocks significantly ahead for the period.
Q. Which areas of the Portfolio had the greatest impact on results?
A. As energy prices rose, we maintained a heavily overweighted position among
energy issues compared to the benchmark. That, plus sharp gains by a number
of our selections, made the energy sector the biggest contributor to strong
returns. Southwestern Energy, an Arkansas-based exploration and production
company, capitalized on high prices by expanding production at existing
operating fields and advancing development of more recently discovered
reserves. Massey Energy, an Appalachian coal company, saw prices for the
metallurgical coal used in steel manufacturing increase sharply for the
first time in decades, driven by unprecedented demand from China and
elsewhere.
Illustrating how our patient, value-focused style is designed to work, we
were rewarded this year for our purchase of Swift Energy, a longer-term
holding. Swift has stabilized its troubled New Zealand operations and
increased oil and gas production from its key Lake Washington reserves. We
took some profits in Swift, as continued good news pushed its price higher.
Increasing global oil consumption aided results at Stelmar Shipping, which
saw strong demand for its fleet of modern, doublehulled tankers. Stelmar has
also been approached by potential acquirers. Genesee and Wyoming, which
acquires short-line trackage from larger railroads, chiefly in the U.S. and
Australia, benefited from expanded shipping volumes of coal and grains.
Forward Air, a broker of shipping services for corporations, increased its
market share as economic expansion heightened demand for cost-efficient
transportation management.
Our large exposure to health care services was another positive. Pacificare
benefited from federal incentives aimed at steering Medicare patients to
managed care plans. Pacificare, the market leader, is also recovering from
operational problems, another reason its stock has moved higher. The
migration of patients to managed care programs also aided Amerigroup, a
large provider of health care programs for beneficiaries of Medicare and
other public assistance programs. Shares of Chemed rose when it acquired
full ownership of Vitas, a hospice company. Vitas is expected to gain from
regulations favoring home care for terminally ill Medicare patients, instead
of costly hospital stays. Our underweight position in real estate investment
trusts and other interest rate-sensitive financial sectors, also helped
returns.
Q. What areas held back performance?
A. Technology stocks suffered from spotty business conditions. Orders shrank
for Remec's telecommunication equipment, but we have retained our
commitment because the potential sale of Remec's defense business may
enhance the value of the telecom division. Advanced Energy and Applied
Films, manufacturers of semiconductor capital equipment, were hurt by
uncertain demand for new manufacturers' facilities. Insight Enterprises, a
direct distributor of information technology products and services, was an
exception. Improving fundamentals and a modest upturn in personal and
corporate IT spending boosted Insight's stock. Graftech International
slumped following disappointing third quarter earnings. Graftech may not
have been aggressive enough in negotiating 2005 contracts for its graphite
electrodes, used in steel making. We added to holdings when shares fell,
because we think investor reaction has been overblown. Rewards Network,
which markets restaurant and other discount programs to consumers,
continued to disappoint as skepticism grew over its hotel initiatives and
its ability to sign up more restaurants.
Q. What is your outlook for the economy and the markets?
A. Overall, we think the economic outlook is favorable, with slow, steady
growth and rising interest rates a likely scenario. But the stock market
may already have taken that outlook into account; the markets enjoyed a
strong run over the summer and moved higher once again in November. The
rise in small-cap value stocks has been exceptional, implying that returns
could be more modest over the next several months. This increases the
challenge for investors like us to find good long-term values in the
marketplace. However, our value methodology helps us to find reasonably
priced stocks throughout the market cycle.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
A Word About Risk:
Investing in small companies may offer the potential for higher returns, but
these companies are also subject to greater short-term price fluctuations than
larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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.
11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
International Common Stocks 0.4%
Depositary Receipts for International Stocks 0.7%
Temporary Cash Investment 4.1%
U.S. Common Stocks 94.8%
Sector Distribution
(As a percentage of equity holdings)
Utilities 1.9%
Telecommunication Services 1.9%
Consumer Staples 3.4%
Energy 3.5%
Materials 7.9%
Consumer Discretionary 13.7%
Health Care 13.9%
Information Technology 15.0%
Industrials 15.5%
Financials 23.3%
Five Largest Holdings
(As a percentage of equity holdings)
1. Swift Transportation Co., Inc. 1.43%
2. Ruby Tuesday, Inc. 1.11%
3. Provident Senior Living 0.96%
4. Wind River Systems 0.90%
5. People's Energy Corp. 0.88%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 12.97 $ 11.44
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ - $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Small Company VCT Portfolio at net asset value, compared to that of 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 MOUTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Small Company VCT Portfolio
Russell 2000 Index
1/01 10000 10000
10498 9741
12/02 8739 7747
10951 11407
12/04 12415 13497
Index comparison begins 1/31/01. The Russell 2000 Index measures U.S. small-cap
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, 2004)
Net Asset Value
Life-of-Class 6.81%
(1/19/01)
1 Year 13.37%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
12
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
In the following discussion, co-managers Diego Franzin and Michael Rega review
the performance of Pioneer Small Company VCT Portfolio over the year ended
December 31, 2004. Diego and Michael assumed day-to-day investment
responsibility for the Portfolio on November 1, 2004.
Q. How did Pioneer Small Company VCT Portfolio perform over this period?
A. For the twelve months ended December 31, 2004, the Portfolio returned 13.38%
at net asset value. The result trailed the Portfolio's benchmark, the
Russell 2000 Index, which returned 18.33% over the same period.
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.
Q. Please describe the background for small-company stocks over this period.
A. Stocks, including small-caps, treaded water for several months in 2004, held
back by concern over the economy, election uncertainty and international
tensions. With renewed evidence of continued economic growth, and with the
election firmly decided, investors returned to equities in the latter
months of the year.
Driven by profit growth, small-capitalization stocks outperformed large caps
for the sixth consecutive year in 2004, marking the longest stretch of
small-cap outperformance since the Russell 2000 Index was launched in 1979.
Smaller companies increased operating efficiencies and expanded margins,
allowing more of each revenue dollar to reach the bottom line. For four of
the last five years, value-oriented smaller stocks were dominant, but growth
stocks began catching up late in the year.
Q. Which stocks or sectors influenced performance favorably?
A. One-time coalmine operator Brink's rose as it continued to work down
long-standing pension obligations owed to former employees and their
families. Canada-based Alliance Atlantis, whose management team is highly
regarded in the industry, enjoyed good results from its various Crime Scene
Investigation (CSI) television series. Sales targets in China for Nu Skin's
health and beauty products fell behind by a few months; after a brief
decline, shares rebounded and added to results for the year. We took
profits in Chattem, manufacturers of Gold Bond products, in favor of other
opportunities. We also took advantage of higher prices to cut real estate
investment trust holdings, adding commercial banks, including Irwin
Financial and City National, that appear better positioned to profit as a
flattening yield curve squeezes profit margins. Corn Products
International, a leading producer of corn syrup, benefited from increased
operating efficiencies and the probability of greater access to the large
Mexican market.
Q. Which holdings had a negative impact over the period?
A. Unsuccessful stock selection nullified an overweight position in the strong
energy sector. Being underweight in technology was beneficial, but choices
among industrial, materials and technology issues hurt results. Together,
those factors account for much of the Portfolio's underperformance compared
with its benchmark. Unifi, a maker of synthetic yarns for apparel and home
goods, missed earnings targets due to weak pricing and saw some of its
customers move production overseas. Rewards Network, which continues to
retool its hotel and restaurant discount programs, fell sharply. Cuts in
state and federal educational programs combined with a revamping of the SAT
test undercut shares of Princeton Review, a test preparation company. And
shares of Plato Learning, which offers computer-based job training,
declined after ratcheting back revenue expectations.
Q. What is your current outlook, and how are you positioning the Portfolio?
A. We believe the economic expansion will carry over into 2005 even if interest
rates rise further. In addition, energy prices may moderate in the face of
adequate supplies.
In late 2004, growth stocks appeared exceptionally cheap by some traditional
measures, and we believe that growth prospects will eventually be reflected
in stock prices. In addition, the best performing growth issues had no
earnings at all, a sign that investors were attracted to the notion of
growth, independent of other factors. With that scenario in mind, we are
tightening the Portfolio's growth focus, broadening sector diversification
and increasing the Portfolio's roster of stocks. Attractive sectors include
health care, as well as deepwater drilling, where drilling rig utilization
rates have moved higher. In technology, software companies may benefit as
companies look for productivity-enhancing ways to invest sizeable cash
holdings accumulated over recent years.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
A Word About Risk:
Investing in small companies may offer the potential for higher returns, but
these companies are also subject to greater short-term price fluctuations than
larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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.
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
Depositary Receipts for International Stocks 1.0%
Temporary Cash Investment 8.2%
U.S. Common Stocks 90.8%
Sector Distribution Portfolio
(As a percentage of total investment portfolio)
Telecommunication Services 0.1%
Utilities 5.5%
Energy 6.0%
Consumer Staples 7.7%
Health Care 8.5%
Materials 8.7%
Industrials 11.1%
Information Technology 12.6%
Consumer Discretionary 19.7%
Financials 20.1%
Five Largest Holdings
(As a percentage of equity holdings)
1. Foot Locker Inc. 2.55%
2. Mattel, Inc. 2.19%
3. Safeway, Inc. 1.81%
4. Triad Hospitals, Inc. 1.76%
5. CIGNA Corp. 1.76%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $24.67 $20.47
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.080 $ - $ 0.2095
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Mid Cap Value VCT Portfolio at net asset value, compared to that of the Russell
Midcap Value Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Mid Cap Value VCT Portfolio
Russell Midcap Value Index
3/95 10000 10000
12263 11819
12/96 14748 13596
19812 16952
12/98 20820 16271
20799 18407
12/00 24789 21721
25369 23130
12/02 22920 20537
31643 28234
12/04 39142 34478
Index comparison begins 3/31/95. 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, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Class 13.30%
(3/1/95)
5 Years 13.37%
1 Year 22.12%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
Domestic equity markets moved in fits and starts, both up and down, through the
first nine months of 2004 before finally staging a strong rally following the
November elections. In the final two months of the year, stock indices moved
upward, with small- and mid-cap companies outperforming large-cap corporations,
and value stocks outpacing growth stocks. In the following interview, Rod
Wright discusses the market environment and factors that affected performance
during 2004. Mr. Wright is responsible for the day-to-day management of Pioneer
Mid Cap Value VCT Portfolio.
Q: How did the Portfolio perform?
A: The Portfolio delivered strong results, despite trailing its benchmark
index. For the 12 months ended December 31, 2004, the Portfolio had a total
return of 22.12% at net asset value, while the Russell Midcap Value Index
returned 23.71%.
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.
Q: What were the principal factors that affected performance?
A: The Portfolio participated in the final end-of-year rally that raised stock
averages. For much of the year, a variety of factors and potential problems
affected investors, who worried about the effects of rising interest rates,
increasing energy prices, instability in Iraq and the political uncertainty
resulting from a fiercely contested Presidential election.
During the year, our selections in the health care, telecommunications,
energy, financials and utilities sectors helped performance, while
investments in materials, technology, industrials and consumer staples
sectors detracted from results.
Q: What were some of the individual investments that had the greatest impact on
Portfolio results?
A: Although technology investments tended to be a drag on performance, one
technology company - NCR - had the single greatest positive impact on the
Portfolio's return. NCR, which already had established itself as a leader
in producing ATM and automatic retail scanning and check-out equipment, saw
greatly improved results from its technology that helps companies store and
manage large quantities of data. NCR's stock had been selling at a deep
discount, but the effects of a corporate reorganization and the policies of
a new management team helped lead to greatly improved earnings.
Reliant Energy, which is involved in both electric power generation and in
power distribution, was the Portfolio's second-largest contributor, as its
stock appreciated after a reorganization of company debt.
Other stocks that helped performance substantially included: Transocean,
which operates oil drilling rigs and benefited from rising oil prices; W.W.
Grainger, a national distributor of industrial parts and machinery, which
enjoyed improved earnings as a result of a restructuring; and Ball, a
packaging company which manufactures cans and bottles for beverage
companies. Two health care sector investments that helped were: Becton
Dickinson, a medical supply company; and Cigna, an HMO.
Also adding to results were three companies involved in acquisitions at
premiums to their stock valuations: Charter Bank, which was taken over by
Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a
producer of research equipment for medical laboratories, which was acquired
by Fisher Scientific; and Veritas Software, a developer of data management
software, which announced it was being acquired by Symantec.
Holdings that detracted from results included UTStarcom, a manufacturer of
inexpensive hand-held telephones, which was hurt by intense competition in
China. While we sold our position in UTStarcom, we retained three other
stocks that were a drag on performance: Safeway, toy company Mattel and
mortgage insurer PMI, all of which gained, but still lagged the mid-cap
value market.
Portfolio results were held back by not owning three companies that were
performance leaders during 2004: TXU, a Texas utility; Apple Computer, the
developer of the popular iPod product; and Monsanto, which produces
genetically modified seeds for the agriculture industry.
Q: What is your investment outlook?
A: We are reasonably optimistic about the economy and investment opportunities
in the stock market. After a year in which corporate earnings rose faster
than stock prices, stock valuations - as measured by price/earnings ratios
- are more reasonable than they were a year ago. At the same time, interest
rates remain low by historical standards, even though the Federal Reserve
has raised short-term rates several times, while the economy continues to
expand and support rising corporate earnings.
Although we expect to continue to de-emphasize stocks of companies that may
be vulnerable to rapid increases in interest rates, we are moderately
bullish about the overall market.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
A Word About Risk:
Investing in mid-sized companies may offer the potential for higher returns,
but these companies are also subject to greater short-term price fluctuations
than larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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.
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
Temporary Cash Investment 1.0%
Depositary Receipts for International Stocks 11.1%
U.S. Common Stocks 87.9%
Sector Distribution Portfolio
(As a percentage of equity holdings)
Energy 1.5%
Telecommunication Services 4.1%
Materials 4.5%
Consumer Discretionary 10.7%
Industrials 10.8%
Financials 10.9%
Consumer Staples 13.4%
Health Care 21.2%
Information Technology 22.9%
Five Largest Holdings
(As a percentage of equity holdings)
1. Microsoft Corp. 4.97%
2. Pfizer, Inc. 4.05%
3. American International
Group, Inc. 3.57%
4. Sandisk Corp. 3.47%
5. Amgen, Inc. 2.99%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $13.04 $12.22
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ - $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Growth Shares 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 PIE CHART IN THE PRINTED MATERIAL]
Pioneer Growth Shares VCT Portfolio
Russell 1000 Index
10/97 10000 10000
10646 10227
12/98 13522 13561
16351 14637
12/00 15079 13484
13202 10962
12/02 10343 7157
13436 8971
12/04 14966 9573
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, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Class -0.61%
(10/31/97)
5 Years -8.14%
1 Year 6.71%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
Helped by a late-year rally, equities produced returns consistent with
long-term historical averages during 2004, but large-cap growth stocks tended
to underperform large-cap value stocks, as well as small- and mid-cap issues.
In the following interview, Christopher Galizio discusses the factors that
affected the performance of Pioneer Growth Shares VCT Portfolio during 2004.
Mr. Galizio is responsible for day-to-day investment management of the
Portfolio.
Q: How did the Portfolio perform during 2004?
A: For the 12-month period ended December 31, 2004, the Portfolio's Class I
shares had a total return of 6.71%. During the same 12-month period, the
Russell 1000 Growth Index, a common benchmark for large-company growth
stocks, returned 6.30%.
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.
Q: What was the investment environment like during the year?
A: While the stock market produced good returns, large-cap growth stocks tended
to underperform the market as well as other types of stocks, especially
value stocks. The reason was predominately because the best-performing
sectors tended to have more value stocks. The low-interest-rate
environment, for example, helped the performance of financial service
companies, while fast-rising commodity prices helped lift the valuations of
companies in the energy and materials sectors. Similarly, the economic
expansion aided the industrial sector, which enjoyed increasing sales and
improved profitability. All these sectors tend to have greater
concentrations of value companies than growth companies. At the same time,
we saw underperformance by two sectors with high concentrations of growth
companies - health care and information technology. In health care, the
large pharmaceutical companies in particular underperformed both because
some successful products were losing patent protection and because other
products became embroiled in questions about possible harmful side effects.
The most notable products affected by these side-effect questions were
Pfizer's two Cox-2 pain inhibitors, Celebrex and Bextra, both of which
suffered declines in sales, and Merck's Cox-2 inhibitor Vioxx, which was
withdrawn from the market. In the case of information technology, slowing
demand and a build-up of inventories undermined the earnings growth of
several companies, especially in the semiconductor industry.
Q: What were your principal strategies and how did they affect performance?
A: We had repositioned the Portfolio shortly before the mid-point of the year,
reducing holdings in both health care and information technology. The
adjusted portfolio performed strongly during the final six months of 2004.
We liquidated our position in Pfizer before the questions arose about
Celebrex, and our lack of exposure to that controversy was a big help to
Portfolio performance. At the same time, we retained a holding in Merck and
even added to it after its stock price fell to a very attractive level. We
also reduced investments in information technology, substantially lowering
our holdings of semiconductor companies, and we de-emphasized consumer
staples, which we believed had risen to high valuations.
As we did so, we added to our investments in basic materials, financial
services and telecommunications services. In basic materials, we increased
our investments in copper companies, notably Freeport-McMoRan and Phelps
Dodge, both of which faced very favorable demand-supply outlooks for the
foreseeable future. In financial services, we added to investments in major
companies such as Citigroup, Bank of America, credit-card issuer MBNA, and
the government-sponsored mortgage organization, Freddie Mac. We reduced our
exposure to the insurance industry, eliminating AIG before its stock
plummeted amid questions about financial arrangements with brokers. After
AIG's stock price collapsed, we reinvested in the company to take advantage
of its attractive valuation.
Q: What were some of the investments that most influenced performance?
A: The two decisions that most helped performance were the liquidation of the
position in Pfizer and the overweighting of Phelps Dodge.
Macrovision, a software company that we overweighted in the second half of
the year, rose by 30% after we purchased it. Macrovision is a leader in
producing an anti-piracy technology designed to protect material on both
DVDs and CDs from unauthorized copying. National retailer Target was another
excellent performer, as its same-store sales improved faster than rival
Wal-Mart. We sold our position in Target after its stock had risen to a high
valuation. Altria, the former Philip Morris, also supported performance when
it rallied following a favorable court ruling in a tobacco liability case.
U.K.-based wireless phone company Vodafone was another stock that
appreciated in anticipation of the success of its investments in the next
generation of wireless technology. Nextel, which later received an
aquisition offer, and France Telecom were two other wireless investments
that performed very well In health care, a leading performer was medical
equipment company Guidant, which received a favorable takeover proposal from
Johnson & Johnson. Other technology holdings that detracted from results
included UTStarcomm, which we have sold, and Samsung Electronics, which we
have retained because we like the company's long-term prospects. Relative to
the market, performance was held back because we did not own any shares of
several companies that performed very well, including Johnson & Johnson, GE,
United Health Group, eBay and Qualcomm.
Q: What is your investment outlook?
A: We base our investment decisions on our analysis of the fundamental
strengths and prospects of individual companies in relation to their stock
prices, rather than on any top-down sector decisions based on macroeconomic
analysis.
At the start of the new year, we continued to have a favorable opinion about
many materials companies and believed the long-term outlook for copper
companies was particularly favorable. We also had overweight positions in
industrials, financial services and telecommunications services sector.
Within those sectors, the companies with the largest weightings were metals,
insurance and wireless communications providers.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Call 800-688-9915 or visit www.pioneerfunds.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.
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
U.S. Common Stocks 92.1%
Temporary Cash Investment 7.9%
Sector Distribution Portfolio
(As a percentage of equity holdings)
Health Care 0.4%
Manufactured Homes 0.4%
Self Storage 4.0%
Diversified 7.7%
Hotel 10.1%
Shopping Center 12.0%
Industrials 13.1%
Regional Mall 13.4%
Apartment 18.6%
Office 20.3%
Five Largest Holdings
(As a percentage of equity holdings)
1. Simon DeBartolo Group, Inc. 6.58%
2. Boston Properties, Inc. 5.08%
3. AvalonBay Communities, Inc. 4.82%
4. Equity Residential Property
Trust 4.37%
5. Catellus Development Corp. 4.19%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $24.30 $18.57
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.4466 $ 0.2129 $ 0.1166
- --------------------------------------------------------------------------------
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
Wilshire Real Estate Securities Index. Portfolio returns are based on net asset
value and do not reflect applicable insurance fees and surrender charges.
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Real Estate Shares VCT Portfolio
Wilshire Real Estate Securities Index
3/95 10000 10000
11322 11696
12/96 15497 15875
18565 19235
12/98 15330 15629
14841 14977
12/00 19403 19397
21431 20911
12/02 21983 21440
30133 28890
12/04 40622 39215
Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index
is a market-capitalization weighted measure of the performance of real estate
investment trusts (equity and hybrid) and real estate operating companies.
Index returns are calculated monthly, assume reinvestment of dividends and,
unlike Portfolio returns, do not reflect any fees, expenses or sales charges.
You cannot invest directly in the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 14.90%
(3/1/95)
5 Years 21.23%
1 Year 35.74%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
For the fifth year in a row, real estate stocks achieved positive returns and
outperformed the broader market indices. As Matthew Troxell of AEW Capital
Management, L.P. explains in the following interview, it will fall to astute
stock selection to identify the real estate investments most likely to continue
this momentum into the New Year after such a rewarding multi-year rally.
Q: How did the Portfolio perform during fiscal 2004?
A: Performance by property type was universally strong. For the 12 months ended
December 31, 2004, Class I shares rose 35.74% at net asset value. This
performance slightly outperformed the 34.81% return for the Wilshire Real
Estate Securities Index for the same period.
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.
Q: What investments contributed to performance?
A: Strong operating fundamentals at the property level and solid consumer
spending patterns boosted returns of regional mall real estate investment
trusts (REITs). One of the Portfolio's largest holdings, Simon Property
Group, performed strongly in the last quarter of the fiscal year. This REIT
announced the acquisition of Chelsea Property Group (also held by the
Portfolio) during the first half of the fiscal year. Initially, investors
reacted negatively. But we viewed the proposed merger very positively,
because Chelsea Property Group, which owns factory outlet shopping centers
in Japan as well as in the United States, would add international diversity
and a new retail avenue of growth to Simon's current portfolio. Each
company's board of directors and Chelsea's shareholders unanimously
approved the definitive merger agreement, and the company's stock rallied
nicely.
While the outlook for the office sector is improving as a result of positive
job growth, it takes longer for the improvements to manifest themselves at
the property owner level. (Tenants must first use their existing empty space
before seeking new office space.) Boston Properties, Inc., which holds a
portfolio of high-quality buildings in markets with high barriers to entry,
exemplifies the kind of resilient, well-managed company that has weathered
the office downturn better than many of its counterparts. This office REIT
returned 42.5% for 2004.
A sector of the real estate market that recovered well in 2004 was
apartments. AvalonBay Communities, Inc. was one of the Portfolio's best
performing stocks for the reporting period. Like the office sector,
multi-family housing is benefiting from positive job growth, which helps
increase demand for apartments. In addition, we're seeing tremendous demand
for the conversion of apartments to condominiums in a number of markets,
including southeast Florida and southern California, where the price of
owning a home is prohibitive for many people. This increased demand is
improving fundamentals while condo conversion demand provides support for
asset prices - a scenario that creates a natural price support.
In the lodging sector, our selection of hotels did well, but it was the
presence of Starwood Hotels and Resorts that dramatically impacted
performance with its 64.7% return for 2004. This hotel, like many in its
universe, saw great improvement in occupancy rates - resulting in a greater
number of rooms being rented in 2004 than 2003. Much of the improvement was
due to the ability of management to increase room rates, which is a more
powerful driver of profitability than occupancy rates.
Q: Any stocks prove to be disappointing?
A: Despite the positive performance of industrial stocks, the sector detracted
from performance relatively speaking, since the group underperformed the
index. The Portfolio's investments in Liberty Property Trust, an office and
industrial REIT, lagged the market due to investor concerns about
management's decision to delay construction of a new office building in
downtown Philadelphia until an anchor tenant was found. When Comcast signed
on as a tenant, the stock recovered. We remain confident that management at
Liberty has a good understanding of their business and holds strong assets.
Q: What is your outlook?
A: With the underlying fundamentals improving, real estate stocks appear poised
to continue strengthening. However, after such impressive performance
during the past five years, we would not be surprised to see a moderating
of performance returns in 2005. As the proverbial tide lifts all boats, we
expect to take a more cautious approach, knowing that astute stock picking
will be challenging but all the more important in the upcoming months.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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, poor property
management, environmental liabilities, uninsured damage, increased competition,
or changes in real estate tax laws.
Call 800-688-9915 or visit www.pioneerfunds.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.
19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
U.S. Common Stocks 94.6%
International Common Stocks 1.1%
Temporary Cash Investments 1.8%
Depositary Receipts for International Stocks 1.0%
Sector Distribution
(As a percentage of equity holidings)
Utilities 1.7%
Telecommunication Services 3.1%
Materials 6.5%
Energy 7.9%
Consumer Staples 10.1%
Health Care 12.3%
Industrials 13.2%
Consumer Discretionary 14.0%
Information Technology 15.5%
Financials 15.7%
Five Largest Holdings
(As a percentage of equity holdings)
1. Exxon Mobil Corp. 2.58%
2. ChevronTexaco Corp. 2.18%
3. Target Corp. 2.04%
4. United Technologies Corp. 1.98%
5. Microsoft Corp. 1.97%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $20.57 $18.70
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.2186 $ - $ -
- --------------------------------------------------------------------------------
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 PIE CHART IN THE PRINTED MATERIAL]
Pioneer Fund VCT Portfolio
S&P 500 Index
10/97 10000 10000
10643 10543
12/98 13686 13296
16565 15411
12/00 15060 15600
13275 13908
12/02 10342 11261
13306 13936
12/04 14747 15504
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, 2004)
Net Asset Value
Life-of-Class 6.31%
(10/31/97)
5 Years 0.12%
1 Year 11.26%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
20
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT
Portfolio, reviews the past year and gives an overview of the Portfolio's
performance over that period.
Q: How did the Portfolio perform versus its benchmark? To what do you attribute
the performance?
A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. The
Portfolio rose 11.25% at net asset value for the calendar year. Most of the
gain came in the fourth quarter, which saw the Portfolio rise 9.26%. By
comparison, the Standard & Poor's 500 Index increased by 11.04% for the
year and 9.23% in the fourth quarter.
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.
For Pioneer Fund VCT Portfolio, the better-than-average performance was
derived both from our solid weightings in many of the old-economy stocks,
especially in energy, industrials, and materials, and from our good stock
selection in the four sectors that underperformed the S&P 500 average,
consumer staples, financials, health care, and information technology. Among
our best-performing stocks were Norfolk Southern and PACCAR in industrials
and T. Rowe Price in financials, but we also benefited from having only
modest relative exposure to Pfizer and Cisco Systems (which we sold during
the year) and no holdings of Coca-Cola, all stocks that did poorly. We did
suffer from having above-market weightings in two of the dismal
semi-conductor names, Applied Materials and Texas Instruments, but on the
whole we managed to avoid most of the "disaster" stocks. We were
particularly pleased that consumer discretionary, the sector we had
highlighted in our annual report for 2003 as the "major culprit" in our
relative underperformance versus the S&P during that year, was a positive
contributor to performance in 2004. Three of our largest gains were from
stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons.
Q: What changes did you make to the Portfolio during the second half?
A: The list of 32 additions to and 10 deletions from the portfolio in the
second half of 2004 makes it look as though the period was a singularly
busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally
busy time, but due to the merger of an acquired fund, the Safeco Core
Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up
with some new, transferred positions. Most of the Safeco fund, overlapped
with positions already owned, but we inherited the others as well. Rather
than "throwing them all out with the wash," we thought that we would take
our time to study them in the expectation that some might prove to be
worthwhile longer-term holdings. The merger itself marked an exciting
increase to the asset base of Pioneer Fund VCT Portfolio, and also to our
shareholder family. To our new, formerly Safeco shareholders, a hearty
welcome!
The total effect of the portfolio activity on sector weights was modest,
with no sector weighting going up or down by as much as 2%. Materials,
industrials, consumer discretionary, information technology, and
telecommunications services all increased as a percentage of the Fund
portfolio, and energy, consumer staples, health care, financials, and
utilities all decreased. As examples, in materials we added: BHP Billiton, a
major Australian-based mining and minerals company; Inco, the Canadian
nickel producer; and Newmont Mining, a leading gold miner. Two new materials
names came from the Safeco fund, Praxair, supplier of industrial gases, and
Ball, a packaging company. Among industrials, Northrup Grumman and
Ingersoll-Rand were both Safeco holdings, and in the case of consumer
discretionary, five of the eight new stocks came from the Safeco fund. The
two largest additions, however, were our own purchases, Nordstrom and Gap,
both of them retailing companies showing signs of meaningful operational
improvement over the past couple of years.
Information technology rose somewhat with: our purchase of Veritas Software,
which has received a merger proposal from another portfolio company,
Symantec; the receipt of shares of Freescale Semiconductor from our holding
Motorola; and the inclusion of EMC, an information storage specialist, from
the Safeco fund. Telecommunications saw one purchase by us, Nextel
Communications, and two additions attributable to the Safeco fund,
CenturyTel and Verizon. Subsequent to our purchase of Nextel, the company
entered into merger discussions with Sprint.
In regard to the sectors where the weightings decreased, the reasons in some
cases had to do with weaker relative share-price performance and in other
cases with sales from the portfolio. In energy, we realized a gain on a
large position in Smith International and replaced it with a smaller holding
of Schlumberger. With consumer staples, despite the addition of two small
positions from the Safeco portfolio, Kellogg and Kimberly Clark, the sector
declined as a percent of the Portfolio due to underperformance versus the
market averages. In the case of health care, it was a combination of selling
in excess of purchasing and woeful stock performance from some of the
pharmaceuticals, especially Mylan Labs, which announced an acquisition that
many investors thought ill conceived. During the six months, we realized
significant percentage gains on our sales of Biomet and Wellpoint Health
Networks, while adding two names in the health-care equipment and supplies
industry, Stryker and Medtronic, and one name in biotechnology, Amgen.
Medtronic and Amgen were both from the Safeco fund.
Financials saw SouthTrust stock exchanged for shares of Wachovia in a merger
and our shares of Charter One Financial acquired for cash by the Royal Bank
of Scotland. We sold our position in St. Paul Travelers after discouragement
over the company's need to set up additional reserves following the merger
creating the company. Finally, in utilities, we sold a position in Vectren
and received a smaller position in Exelon from the Safeco fund.
Q: What is your outlook for 2005?
A: The economic outlook appears favorable over the coming year. Interest rates
are expected to continue rising, but not so fast that they should present
impediments to further economic growth. Earnings growth will moderate
somewhat, which is normal as a business cycle lengthens, but should still
be adequate to fuel additional share-price advances. Federal tax law, with
the maximum 15% tax rate on qualified dividends and long-term capital
gains, is likewise favorable to the stock market. Of course there are
concerns, including energy and other commodity prices and the high trade
and Federal budget deficits. At some point, too, investors will begin
looking ahead to the next downturn in the economy and thinking about ways
to position themselves more defensively. A lot rides on the length of the
current business cycle. Making the forecasting even more difficult is the
unusual circumstance that this is a wartime cycle, with some economic
activity not conforming to more predictable business patterns.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Call 800-688-9915 or visit www.pioneerfunds.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.
21
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
Convertible Corporate Bonds 0.1%
Convertible Preferred Stocks 1.2%
Temporary Cash Investment 4.5%
U.S. Common Stocks 94.2%
Sector Distribution
(As a percentage of equity holdings)
Information Technology 3.1%
Health Care 6.2%
Consumer Staples 6.4%
Telecommunication Services 6.5%
Materials 7.2%
Energy 9.8%
Industrials 10.0%
Consumer Discretionary 12.1%
Utlities 16.8%
Financials 21.9%
Five Largest Holdings
(As a percentage of equity holdings)
1. PACCAR, Inc. 4.48%
2. Exxon Mobil Corp. 3.35%
3. ChevronTexaco Corp. 3.31%
4. Washington Mutual, Inc. 3.07%
5. T. Rowe Price Associates, Inc. 2.61%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $20.58 $18.09
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.4372 $ - $ -
- --------------------------------------------------------------------------------
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 AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer Equity Income VCT Portfolio
Russell 1000 Value Index
3/95 10000 10000
12632 12025
12/96 15366 13852
20773 18732
12/98 24021 22816
25787 23092
12/00 27597 26522
26054 24673
12/2 22010 20770
28620 25466
12/04 33339 29638
Index comparison begins 2/28/95. 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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 11.99%
(3/1/95)
5 Years 5.12%
1 Year 16.39%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
22
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
In the following discussion, John Carey, portfolio manager of Pioneer Equity
Income VCT Portfolio, reviews the past year and gives an overview of the
Portfolio's performance over that period.
Q: How did the Portfolio perform versus its benchmark? To what do you attribute
the performance?
A: Pioneer Equity Income VCT Portfolio showed a good gain in 2004, rising by
16.38% at net asset value. That was in line with the Russell 1000 Value
Index, which rose by 16.49%. We are pleased to report such positive results
to you.
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.
As a whole, it was, as the numbers suggest, a good year for stocks, though
most of the performance came in the second half and particularly in the
fourth quarter. During the earlier part of the year, the market largely
backed and filled as investors worried about rising interest rates, the war
in Iraq, the weak dollar, rising oil prices, terrorist threats, and the
upcoming Presidential election. Around the middle of October, however, the
market as measured by most major indexes began to move higher, and it
continued the upward move following the election and right through to the
end of the year.
The sectors in the Russell 1000 Value Index performing above average for the
year were energy, utilities, industrials, consumer staples, and materials,
and those performing below average were telecommunications services,
financials, consumer discretionary, information technology, and health care.
Pioneer Equity Income VCT Portfolio was overweight in four of the five top
performing sectors, and underweight in three of the five underperforming
sectors. Oddly enough, though, the principal contributor to relative
positive performance for the portfolio was our stock selection in one of the
underperforming sectors, financials, our biggest underweight relative to the
index! The performance was attributable to premium take-over offers received
by two of our banks, Charter One Financial and SouthTrust, and significant
price increases for T. Rowe Price, a money-management company, and Simon
Property Group, a real-estate investment trust. We also did not own any
shares of Citigroup, an important index name that underperformed. At the
same time, while we were appropriately underweight in information
technology, we happened to own a very poor performer in the sector,
convertible preferred shares of Electronic Data Systems, which we did sell
during the year.
Industrials and materials were bright spots for both the index and the
Portfolio. In addition to being overweight in both sectors, we enjoyed
superior performance from our holdings relative to the sector averages.
Positive stand-outs for us in those sectors were PACCAR, builder of heavy
trucks, and Roanoke Electric Steel, a small steel mill. Offsetting
negative-return contributions came from holdings in the troubled health-care
sector, where we were overweight and also suffered from below-average
results from Eli Lilly and Merck.
Q: What changes did you make to the portfolio during the year?
A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the
favorable fundamentals in energy, materials, and industrials, we looked for
additional investments in those sectors. Occidental Petroleum (oil and
natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge
(copper mining), ServiceMaster (commercial and residential maintenance
services), and Vulcan Materials (construction materials) were situations we
found attractive. With our "value" orientation, we also looked in some of
the underperforming sectors for names we thought unaccountably "cheap." In
financials, we added Comerica, U.S. Bancorp, and State Street, and we also
received shares of Wachovia in exchange for SouthTrust, which Wachovia
acquired. In consumer discretionary, we bought Tupperware and common shares
of Ford Motor in addition to our previous position in Ford convertible
preferred shares; in information technology, we added Motorola; and in
health care, we purchased Bristol-Myers Squibb and a small position in a
new issue of convertible securities from Schering-Plough. Rounding out our
additions were Clorox in consumer staples and Atmos Energy, Equitable
Resources, and Ameren in utilities.
Securities liquidated included stocks such as Biomet and Illinois Tool Works
on which we had taken significant profits and whose prices we thought
adequately reflected values, and stocks such as Pfizer and Coca-Cola about
which we became concerned in a longer-term fundamental way. Other names sold
during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck, Bank
of America, Merrill Lynch, St. Paul Travelers, Equity Office Properties,
Electonic Data Systems convertible preferred, and Hewlett-Packard.
The most meaningful effects of our trading on sector weights were in
materials and utilities, where our weightings increased versus the portfolio
weightings in the sectors at yearend 2003, and in health care, where our
weighting decreased versus a year ago, though part of the decrease was due
just to weak share-price moves for our health-care stocks relative to large
price increases in some other sectors.
Q: What is your outlook for 2005?
A: The economic outlook appears favorable over the coming year. Interest rates
are expected to continue rising, but not so fast that they should present
impediments to further economic growth. Earnings growth should continue,
albeit potentially at a slower pace than in 2003 and 2004. Federal tax law,
with the maximum 15% tax rate on qualified dividends and 15% rate on
long-term capital gains, is likewise favorable to the stock market. Of
course there are concerns, including energy and other commodity prices and
the high trade and Federal budget deficits. We aim to mitigate the risk
from those factors by investing on the one hand in companies benefiting
from rising materials prices and, on the other hand, avoiding companies
with poor cost controls. Otherwise we are always interested in companies
that not only can do better but that also have a plan in place and a
management committed to achieve the better results. A good economy creates
more opportunities for companies to execute such turn-arounds.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Call 800-688-9915 or visit www.pioneerfunds.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.
23
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
U.S. Common Stocks 62.7%
Collateralized Mortgage Obligations 0.3%
Asset Backed Securites 0.4%
U.S Government Agency Obligations 0.4%
Depositary Receipts for International Stocks 2.0%
U.S. Corporate Bonds 11.7%
U.S. Government Securities 22.5%
U.S. Common Stocks 62.7%
Sector Distribution
(As a percentage of long-term holdings)
Utilities 0.4%
Telecommunication Services 2.4%
Materials 3.4%
Energy 6.5%
Industrials 7.1%
Health Care 9.1%
Consumer Discretionary 10.3%
Information Technology 11.9%
Financials 11.9%
Consumer Staples 15.1%
Government Obligations 22.9%
Five Largest Holdings
(As a percentage of long-term holdings)
1. Berkshire Hathaway, Inc.
(Class B) 3.37%
2. First Data Corp. 3.10%
3. Microsoft Corp. 3.08%
4. Northrop Grumman Corp. 3.03%
5. Wm. Wrigley Jr. Co. 2.82%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $14.40 $14.04
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.3057 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Balanced VCT Portfolio at net asset value, compared to that of the Standard &
Poor's (S&P) 500 Index and the Lehman Brothers 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 WAS REPRESENTED AS A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Pioneer Balanced VCT Portfolio
S&P 500
Lehman Aggregate Bond Index
3/95 10000 10000 10000
11279 12533 11847
12/96 11686 15406 13536
12817 20543 15920
12/98 13929 26417 16341
13812 31974 16754
12/00 15418 29068 17668
16720 25623 17268
12/02 18435 19961 15496
19192 25684 18085
12/04 20025 28476 18952
Index comparison begins 3/31/95. The Standard & Poor's 500 Stock Index (the S&P
500) is a commonly used measure of the broad U.S. stock market. The Lehman
Brothers Aggregate Bond Index is a measure of the U.S. bond 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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 6.93%
(3/1/95)
5 Years 2.50%
1 Year 4.79%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
24
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
In the following interview, Timothy Mulrenan, who is responsible for the equity
portfolio of Pioneer Balanced VCT Portfolio, and Richard Schlanger, who is
responsible for the Portfolio's fixed-income portfolio, discuss the markets and
the factors that affected performance during 2004.
Throughout the year, the Portfolio kept its allocations to equities and bonds
relatively stable, with about 64% of assets in stocks and about 36% in fixed
income investments.
Q: How did the Portfolio perform during 2004?
A: Pioneer Balanced VCT Portfolio had a total return of 4.79% at net asset
value during the 12 months ended December 31, 2004.
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.
Q: What was the investment environment like during the period?
A: The economy was healthy, growing at a moderate rate throughout 2004.
Evidence of a sustained economic recovery was clear enough that, beginning
on June 30, the Federal Reserve Board began raising the overnight interbank
lending rate, the Fed Funds Rate, in an effort to avoid any increase in
inflationary pressures. By the end of the year, the Fed Funds Rate had
risen from 1.00% to 2.25%, with the Fed indicating it intended to continue
to raise the rate at a "measured" pace.
During a year in which the value of the U.S. dollar on international
currency exchanges fell dramatically and energy prices rose significantly,
longer-term interest rates remained surprisingly stable for much of the
year. In fact, the yield of the 10-year Treasury ended 2004 at 4.22%, very
close to its level at the start of the year. As the improving economy helped
lift corporate profits, corporate bonds significantly outperformed
government bonds. Mortgage-backed securities also did better than Treasuries
in a year in which securities that paid a higher coupon tended to deliver
higher returns.
In the equity markets, stock prices did not move greatly during the first 10
months of the year. However, after the November elections and the end of
political uncertainty about control of the federal government, stocks staged
a strong rally. Small- and mid-cap stocks and value stocks outperformed
large-cap stocks and growth stocks.
Q: What were your strategies in managing fixed-income assets of the Portfolio
during the year?
A: We emphasized the "spread sectors" - corporates and mortgages - and kept the
portfolio's duration, or sensitivity to interest-rate changes, close to
that of the benchmark Lehman Brothers Aggregate Bond Index. For much of the
year, we kept our investments in high-yielding, lower-rated corporate bonds
at about 8.5% of fixed income assets, close to our limit of 10%. However,
we did lower that to about 7.6% of fixed income assets by the end of the
year, increasing our investments in mortgage-backed securities to almost
half the portfolio. This was because, after strong performance by corporate
bonds, we found that mortgage securities offered very attractive relative
value, as they provided almost as much income as corporate securities, but
with higher credit quality.
At the end of 2004, average credit quality was AA-, up from the A+ average
rating of a year earlier. Both because we were cautious in taking
interest-rate risk and because we increased our investments in mortgages,
the Portfolio's duration was 3.93 years, down from 4.26 years at the end of
2003.
Both our sector selection and our decision to keep the Portfolio's
sensitivity to interest rate changes close to that of the benchmark aided
performance during the year.
Q: What were the principal factors affecting the performance of the equity
investments during 2004?
A: During a year in which high-quality, large-company growth stocks were not in
favor, the best performance tended to come from our investments in the
energy and consumer staples sectors. Several of our holdings in the
information technology sector also supported performance, while many of the
most notable detractors were in health care and consumer discretionary
investments.
The price of oil rose substantially in 2004, helping lift the performance of
the entire energy sector. Our best-performing energy investments included
Encana, a Canadian exploration and production company, and Varco
International, which provides oil field equipment and services to energy
companies. Varco eventually received an attractive acquisition offer from
National Oil Well. Chewing gum leader Wrigleys appreciated on good earnings
growth, its improving outlook with the acquisition of the Altoids and
Lifesavers brands, and inroads into the markets in China and India. Gillette
gained on successful new product introductions and excellent cost
management.
In information technology, Symantec's stock price appreciated with strong
sales of its anti-virus software. Newmont Mining, the world's largest gold
mining company, was another holding that did well. In health care, our
investments in large pharmaceutical companies detracted from results during
a difficult year for the industry. The largest disappointment was Pfizer, a
major position in the portfolio. Pfizer's stock price plummeted late in the
year amid controversies about possible side effects of its Cox-2 pain
inhibitor, Celebrex. The news came after Merck, a smaller holding in the
portfolio, withdrew its Cox-2 pain inhibitor from the market entirely. Among
consumer discretionary holdings, the most notable drag on performance was
our investment in Viacom, which declined 17% during the year, primarily
because of disappointing advertising sales in its radio station division.
As the year progressed, we sold some of our more successful investments,
notably Symantec and Newmont Mining because of concerns about the high
valuations that they had attained. As we did so, we invested in Vodaphone,
the wireless communications company based in the U.K.; Guidant, a leading
medical device company which later received an acquisition offer from
Johnson & Johnson; and Avaya, a telecommunications equipment company that is
a leader in providing Voice Over Internet Protocol technology to
corporations.
Q: What is your investment outlook?
A: We believe the economy will continue to expand and the Federal Reserve will
maintain its policy of raising short-term interest rates. Longer-term rates
may rise more slowly. As this happens, the "yield curve" will flatten as
the difference between short-term rates and longer-term rates narrows. If
this scenario unfolds, we may take a more "bar-belled" approach to the
fixed income portfolio, investing in both short-maturity (less than two
years) and longer-maturity securities (more than 10 years) but
de-emphasizing intermediate-term issues which may be the most vulnerable to
the risk of price loss from rising rates. We may also take some profits in
mortgage investments if their prices begin to look less appealing and look
for more attractive opportunities in corporate securities.
In the equity market, we believe corporate profits will continue to improve,
but at a decelerating rate. We think stock prices will track earnings
growth, which in turn should track nominal Gross Domestic Product growth. We
intend to continue to emphasize high quality, stable-growth companies.
Historically, these companies have done relatively well as corporate profit
growth begins decelerating as the economy enters a new, slower-growth stage
in the business cycle. The consumer staples and health care sectors
typically perform well in such an environment.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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.
25
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment in securities)
Convertible Preferred Stocks 2.4%
Temporary Cash Investment 2.7%
Convertible Corporate Bonds 30.3%
U.S Corprotate Bonds 64.6%
Maturity Distribution
(As a percentage of total investment in securities)
8+ years 8.5%
6-8 years 11.2%
4-6 years 48.8%
3-4 years 15.0%
1-3 years 16.5%
Five Largest Holdings
(As a percentage of long-term holdings)
1. Mueller Industries, Inc.
6.0%, 11/1/14 3.97%
2. Corning, Inc., 5.9%, 3/15/14 3.42%
3. CMS Energy Corp. 7.75%,
8/1/10 3.03%
4. Bowater, Inc., 6.5%,
6/15/13 3.02%
5. SCI Systems, Inc., 3.0%,
3/15/07 2.68%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 11.67 $ 11.45
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.6177 $ - $ 0.047
- --------------------------------------------------------------------------------
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 AS A PIE CHART IN THE PRINTED MATERIAL]
Pioneer High Yield VCT Portfolio
ML Convertible Bonds Speculative Quality Index
ML High Yield Master II Index
5/00 10000 10000 10000
8424 9770 10623
7882 10207 12387
12/02 7744 10013 12211
10529 12830 16215
12/04 11861 14227 17517
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, 2004)
Net Asset Value
Life-of-Class 12.27%
(5/1/00)
1 Year 8.03%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
26
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
The high-yield market generated solid returns during the 12 months ended
December 31, 2004. In the following interview, Portfolio Manager Margaret Patel
describes the market backdrop and why the Portfolio underperformed its
benchmark index.
Q: How did the Portfolio perform?
A: During the six months ended December 31, 2004, the Portfolio's Class I
shares had a total return based on net asset value of 8.03%. By comparison,
the Merrill Lynch High Yield Master II Index returned 10.87%.
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.
Q: What was the environment like for the high-yield market during 2004?
A: All sectors of the high-yield market generally rallied, reflecting a pick-up
in the economy. Defaults continued to decline steadily from their peak in
2002. Although short-term interest rates were on the rise - as the Federal
Reserve Board began to implement a tightening policy - high-yield bonds
continued to offer a substantial yield advantage over comparable-maturity
Treasuries and cash equivalents. Furthermore, the supply of newly issued
high-yield corporate bonds was not sufficient to meet the demand for
higher-yielding securities. As a result, high-yield bond prices continued
to rise.
Q. Why did the Portfolio's performance lag that of the Merrill Lynch High Yield
Master II Index?
A. Because of its investments in convertible bonds. Convertibles underperformed
conventional high-yield bonds because they tend to be more sensitive to the
changes in short-term interest rates that we experienced than high-yield
issues. In addition, the period was characterized by underlying
equity-market volatility that was lower than historical averages, a factor
that also typically leads to the underperformance of convertible
securities. Overall, the lower credit tiers of the market performed best,
at a time when we were moving the Portfolio's average credit quality
higher. The Portfolio had minimal exposure to the distressed and lower-tier
credits that led the market during the past 12 months, particularly in such
sectors as telecommunications and media.
Q: Which investments proved to be some of the top performers during the fiscal
year? Which disappointed?
A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand
conditions. Millennium Chemicals, benefited from its acquisition by
Lyondell, as well as from a brighter outlook for basic chemicals. Several
biotechnology holdings also fared well, including Cubist Pharmaceuticals,
which offers a drug for soft-tissue infections; CV Therapeutics, which
sells products to treat angina; and Human Genome, which advanced due to
clinical successes and management's focus on reducing research and
development expenditures. Disappointments included Intermet, an auto-parts
manufacturer that defaulted on its debt due to raw materials pricing
pressure. Two technology holdings also lagged, Maxtor, a data storage
manufacturer, and Adaptec, which makes computer-networking products. Those
securities fell in concert with the technology sector, which struggled
through most of the year because of weaker-than-expected corporate
technology spending.
Q: What is your outlook?
A: We remain optimistic that the economy should continue to grow near its
long-term historical average during the coming year. While the Fed is
likely to continue to raise short-term rates, we expect any increases to be
gradual. In addition, we anticipate that defaults should remain below
long-term averages, providing solid support for high-yield bonds. Because
the high-yield market has experienced such a run-up in the recent past, we
believe that returns in 2005 will be driven more by interest income than by
capital appreciation. We have been able to find the best value in the
higher-quality tiers of the market. They should be better insulated if
financial market volatility increases. Although convertible securities
detracted from Portfolio performance, we believe that, over time, they
offer an opportunity to participate in the future growth of the underlying
stocks, making the asset class attractive to long-term-oriented investors.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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. When concentrating on one issuer, the Portfolio is sensitive to
changes in the value of these securities. 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.
Call 800-688-9915 or visit www.pioneerfunds.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.
27
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A PIE CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
Convertible Corporate Bonds 0.7%
Collateralized Mortgage Obligations 1.0%
Municipal Bonds 1.9%
Asset Backed Securities 2.4%
Temporary Cash Investment 2.6%
Foreign Government Bonds 12.6%
U.S. Government Securities 24.5%
U.S. Corporate Bonds 54.3%
Maturity Distribution
(As a percentage of total investment portfolio)
8+ years 7.3%
6-8 years 14.3%
4-6 years 28.5%
3-4 years 11.9%
1-3 years 31.5%
0-1 years 6.5%
Five Largest Holdings
(As a percentage of long-term holdings)
1. Federal Home Loan Mortgage
Corp., 6.0%, 8/1/34 2.22%
2. Government National
Mortgage Association,
6.0%, 8/15/16 1.69%
3. Federal National Mortgage
Association, 6.375%,
8/15/07 1.44%
4. Norwegian Government,
6.75%, 1/15/07 1.38%
5. Canadian Government,
4.25%, 9/1/09 1.27%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $11.26 $11.01
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.6551 $ - $ 0.1616
- --------------------------------------------------------------------------------
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
Lehman Brothers 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 PIE CHART IN THE PRINTED MATERIAL]
Pioneer Strategic Income VCT Portfolio
Lehman U.S. Universal Index
7/99 10000 10000
10136 10070
12/00 11234 10525
12144 11251
12/02 13338 12458
14117 15104
12/04 14640 16651
Index comparison begins July 31, 1999. The Lehman Brothers 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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Class 9.84%
(7/29/99)
5 Years 10.58%
1 Year 10.25%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
28
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
As economies throughout the world grew steadily during 2004, the values of both
corporate bonds and emerging market debt tended to rise. At the same time, many
non-U.S. currencies gained in value relative to the dollar. In the following
discussion, Kenneth J. Taubes discusses the factors that influenced the
performance of Strategic Income VCT Portfolio during 2004. Mr. Taubes, Director
of Pioneer's Fixed Income Group, oversees the team responsible for daily
management of the Portfolio.
Q: How did the Portfolio perform during 2004?
A: Strategic Income Portfolio performed very well, outpacing its benchmark by a
wide margin. For the 12 months ended December 31, 2004, the Portfolio's
Class I shares had a total return of 10.25%, while the Lehman U.S.
Universal Bond Index returned 4.97%. On December 31, 2004, the Standardized
30-day SEC Yield for Class I shares was 5.64%.
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.
Q: What factors affected Portfolio performance?
A: With strong economic growth throughout the globe during 2004, corporate cash
flows and profits rose, improving overall credit quality in the United
States and abroad. The best-performing sectors in the fixed-income markets
tended to be those areas that normally carry the highest credit risk -
high-yield, corporate bonds and emerging market debt - as strengthening
economies improved overall credit quality. The year 2004 also was a period
in which the U.S. dollar continued to lose value against major foreign
currencies.
Taking advantage of the Portfolio's ability to diversify across several
different fixed-income sectors, we overweighted the two best-performing
sectors - domestic high-yield bonds and emerging market bonds. This strategy
substantially contributed to performance, as did our allocations to
investment-grade foreign debt that appreciated in value as the dollar fell.
Outside the United States, we invested in countries such as Australia and
Canada, whose economies benefited from rising commodity prices and tighter
monetary policies. In Europe, we invested in Sweden and Norway, both of
which also benefited from these factors. Within the emerging markets, we
emphasized Brazil and Russia, where economic growth was strong, while adding
to commodity-linked bonds in China and India.
At the end of the year, U.S. high yield bonds constituted 29.3l% of the
Portfolio's assets, while emerging market and international high-yield
investments accounted for another 20% of assets. We also emphasized other
sectors that offered yield advantages over Treasuries. International
investment-grade debt accounted for 17.2% of Portfolio assets, while U.S.
mortgage-backed securities constituted 23.5% of Portfolio assets and
domestic investment-grade corporate debt accounted for 8.4%.
Q: What were some of the individual holdings that most influenced Portfolio
performance?
A: Within the emerging markets, the bonds of several Brazilian companies were
standout performers, including: brewer AMBEV; steel company CSN; and
Telemar, a telecommunications service company.
Russian investments that supported performance included bonds of Gazprom,
the government-controlled energy company, and Mobil Telesystems, a mobile
phone service provider. In India, Vedanta, a mining company with operations
in zinc and other materials, performed well. Among European high-yield bonds
that performed well were cable companies NTL of the United Kingdom and Kabel
of Germany.
Domestically, top performers included materials companies Celanese, European
and ICI Huntsman, as well as chemical companies Lyondell and Methanex.
Detracting from results were: insurance company Unum Provident, whose bond
prices slipped amid controversy over the New York attorney general's
investigation of industry practices; and Toys "R" Us, which announced
restructuring plans.
Q: What is your investment outlook?
A: We anticipate continued global economic growth and expect to maintain an
emphasis on corporate securities. However, we believe high-yield corporate
bonds do not offer as compelling relative values as they did a year ago. We
have reduced our high-yield positions somewhat, while increasing our
commitment to mortgage-backed securities.
In the United States, we anticipate that the Federal Reserve will continue
to raise the Fed funds rate at a measured pace during 2005. We believe the
market rates for longer-term securities already are close to being fairly
valued. As a result, we anticipate that the yield curve - which measures the
relationship between short-term and longer-term interest rates - likely will
flatten during the year as short-term rates move up.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
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. The securities issued by U.S. Government sponsored
entities (i.e., FNMA, Freddie Mac) is neither guaranteed nor issued by the U.S.
Government.
Call 800-688-9915 or visit www.pioneerfunds.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.
29
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
[THE FOLLOWING DATA IS REPRESENTED BY A MOUNTAIN CHART IN THE ORIGINAL DOCUMENT]
Portfolio Diversification
(As a percentage of total investment portfolio)
U.S. Corporate Bonds 0.5%
Temporary Cash Investment 3.3%
U.S. Government Agency Obligatons 3.9%
U.S. Govenment Securites 92.3%
Maturity Distribution
(As a percentage of total investment portfolio)
8+ years 8.4%
6-8 years 0.9%
4-6 years 16.2%
3-4 years 4.9%
1-3 years 66.6%
0-1 years 3.0%
Five Largest Holdings
(As a percentage of long-term holdings)
1. U.S. Treasury Notes,
6.5%, 2/15/10 11.92%
2. U.S. Treasury Notes,
6.25%, 8/15/23 4.85%
3. Federal Home Loan Mortgage
Corp., 6.0%, 3/1/33 2.72%
4. U.S. Treasury Notes,
6.375%, 8/15/27 2.49%
5. Federal Home Loan Mortgage
Corp., 6.0%, 5/1/34 2.08%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 10.11 $ 10.35
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.58203 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
America Income VCT Portfolio at net asset value, compared to that of the Lehman
Brothers Fixed-Rate Mortgage-Backed Securities Index and of Lehman Brothers
Government Bond 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 MOUTAIN CHART IN THE PRINTED MATERIAL]
Pioneer American Income VCT Portfolio
Lehman Government Bond Index
Lehman Fixed Rate Mortgage Index
3/95 10000 10000 10000
11098 11302 10574
12/96 11693 11615 10712
12802 12727 11616
12/98 13694 13981 12563
13947 13667 12247
12/00 15505 15477 13687
16779 16598 14574
12/02 18246 18506 16077
18802 18943 16369
12/04 19687 19604 16928
Index comparisons begin 2/28/95. The Lehman Brothers Government Bond Index
measures the performance of the U.S. government bond market. The Lehman
Brothers Fixed Rate Mortgage Index measures the performance of the government
and mortgage securities 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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Class 5.49%
(3/1/95)
5 Years 6.69%
1 Year 3.42%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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.
30
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
As the U.S. economy expanded, the Federal Reserve began raising interest rates
at a slow but steady pace. The yield curve flattened, and short-term interest
rates rose more than long-term rates, which remained virtually unchanged for
the year. Against this backdrop, investors in U.S. Government and agency
securities were rewarded with a relatively attractive level of income during
the 12-month period ended December 31, 2004. Richard Schlanger, a member of the
Pioneer fixed-income team, discusses the factors that affected the fixed-income
market and the Portfolio over the past 12 months.
Q: How did the Portfolio perform during the period?
A. For the 12-month period ended December 31, 2004, Class I shares of Pioneer
America Income VCT Portfolio produced a total return of 3.42%. The
Portfolio performed in line with its benchmark, the Lehman Brothers
Government Bond Index which returned 3.48% for the same period, but
underperformed the 4.70% return of the Lehman Brothers Fixed-Rate
Mortgage-Backed Index. At the end of the period, the 30-day SEC yield for
Class I shares was 3.59%.
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.
Q. What was the investment environment like during the period?
A. With the economy on a firmer footing, the Federal Reserve boosted short-term
interest rates in June and continued raising them through the end of the
year. Initially, the Fed's actions caused Treasury yields to move higher;
but when it appeared that inflation was under control, the yield curve
flattened. The yield curve shows the relationship between bond yields and
maturity lengths. With a flatter yield curve, short-term yields moved
higher and prices declined; and longer-term yields fell or remained stable,
boosting prices. An enormous amount of Treasury buying by overseas
investors was also instrumental in keeping Treasury yields low.
Q: How did you manage the Portfolio in this environment?
A: The Portfolio's assets were invested in mortgage-backed securities, which
accounted for 68.3% of net assets and Treasury securities, 28.8% of net
assets. There was also a 2.9% cash position.
All of the mortgages were issued by Government Sponsored Enterprises (GSEs),
with about 37.5% of the mortgage position invested in securities issued by
the Government National Mortgage Association (Ginnie Mae). (Ginnie Mae
securities are backed by the full faith and credit of the U.S. government;
however, a full faith and credit backing applies to underlying Portfolio
securities and not to Portfolio shares.) About 18.8% of the mortgages were
from the Federal National Mortgage Association (Fannie Mae,) and 11.6% from
the Federal Home Loan Mortgage Corporation (Freddie Mac).
In the Treasury portion of the Portfolio, we emphasized securities with
short to intermediate durations. We expected yields to move higher and
wanted to minimize the price volatility that would naturally occur as yields
rose. Therefore, we kept duration shorter than the benchmark. Measured in
years, duration measures a bond's price sensitivity to interest-rate
changes. A shorter duration can protect a portfolio from price declines as
yields rise. We were premature, however, in our expectation of higher
yields. As a result, our short-duration strategy worked against the
Portfolio. Long-term Treasuries outperformed, because of the huge demand
from overseas investors and the flattening of the yield curve. For example,
the 30-year Treasury bond returned 8.89%; the five-year Treasury returned
2.39%.
Q: What contributed most to performance?
A: The significant overweight in mortgage-backed securities made the largest
positive impact, as mortgages outperformed other fixed-income assets.
Minimizing prepayment risk by selecting specific mortgage pools also helped
drive performance. The flatter yield curve, which boosted the prices of
longer-term Treasury securities, also benefited results.
Q: What detracted from performance?
A: The Portfolio's underweight in long-term Treasuries. We continue to believe,
however, that yields on such Treasuries are artificially low, given the
weak U.S. dollar, the growing trade imbalance and a Fed that is likely to
continue raising interest rates.
Q: What is your outlook for the next six months?
A: In the short-term, we expect the investment environment to remain unchanged
and are unlikely to alter the Portfolio significantly during the first
quarter of 2005. We plan to remain overweight in mortgage securities. In
February, Federal Reserve Chairman Alan Greenspan will make his semi-annual
Humphrey-Hawkins testimony before Congressional committees. At that time,
we will learn what next several months, we will be closely monitoring data
to determine the appropriate action to take should the economic backdrop
change.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
A Word About Risk:
Government guarantees apply to the underlying securities only and not to the
prices and yields of the Portfolio. 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. 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 the Portfolio are subject to possible loss due to
the financial failure of underlying securities and their inability to meet
their debt obligations.
Call 800-688-9915 or visit www.pioneerfunds.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.
31
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO AND PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Although the U.S. Federal Reserve started to raise short-term interest rates
from the lowest levels reached in more than four decades, 2004 remained a year
in which money market investments offered extremely low yields by historical
measures. Despite five increases in interest rates between June 30 and December
31, the key Fed Funds Rate ended the year at just 2.25%. Throughout the 12
months ended December 31, 2004, Pioneer Money Market VCT Portfolio maintained a
$1 share price and provided modest income consistent with the yields available
in the money market. The Portfolio invests exclusively in high-quality money
market instruments issued by the U.S. government and domestic corporations and
banks. All issues have the highest ratings from the two nationally recognized
ratings organizations: A1 by Standard & Poor's Investors Services and P1 by
Moody's Investor Services. (Ratings apply to underlying securities, not
Portfolio shares.)
In the following discussion, Andrew D. Feltus reviews the investment
environment and the strategies that affected Pioneer Money Market VCT Portfolio
over the 12 months ended December 31, 2004. Mr. Feltus is a member of Pioneer's
Fixed Income Group, which is responsible for the daily management of the
Portfolio.
Q: How did the Portfolio perform during 2004?
A: For the 12 months ended December 31, 2004, Pioneer Money Market VCT
Portfolio had a total return of 0.65% at net asset value. On December 31,
2004, the Portfolio's seven-day effective yield for Class A shares was
1.38%.
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.
Q: What was the investment environment like during the year?
A: For virtually the entire first half of 2004, the influential Fed Funds Rate
remained at a 46-year low of 1.00%. The situation began to change when the
Federal Reserve raised the rate on June 30 by one-quarter of one percentage
point and signaled that it intended to initiate further increases on a
gradual basis. The central bank raised the rate four more times, and the
Fed Funds Rate stood at 2.25% at the end of the year.
The rate increases occurred against a backdrop of continued economic growth
and hints of an increase in inflationary pressure. Economic growth, as
measured by growth in Gross Domestic Product (GDP), rose by an average
annualized rate of 4.6% during the first nine months of 2004. Affected by
the higher costs of energy, the Consumer Price Index rose to about 3.5% by
the end of November. While periodic concerns about low new-job creation did
arise, in general the Federal Reserve Board believed that the economy was
gathering enough strength that monetary policy could be tightened to avert
the possibility of increasing inflationary threats.
At the end of the year, the Federal Reserve was widely expected to continue
to raise short-term rates in 2005.
Q: What were your principal strategies in this low-interest rate environment?
A: We held to our commitment to high-quality money market instruments. We
started gradually to lower the Portfolio's effective duration so that we
could take advantage of higher yields available as the Federal Reserve
Board proceeded with its rate increases. At the end of the year, the
effective duration of the Fund was 45 days, down from 67 days just six
months earlier.
Q: What is your investment outlook?
A: We anticipate that the economy will show sustained growth in 2005 and that
the Federal Reserve Board will maintain its policy of raising short-term
grates gradually. At the same time, because of budget pressures and concern
about the federal deficit, the government is likely to put new brakes on
spending. The combination of the tighter monetary policy and restrained
fiscal policy may act as a drag on the pace of economic growth and
ultimately cause a possible change in monetary policy.
If economic growth does begin to slow, the Federal Reserve may revise its
current bias toward raising short-term rates. However, until that appears
imminent, we intend to continue to keep the Portfolio's effective duration
relatively short to enable us to invest in newer, higher-yielding securities
that have the potential to raise the level of income to be distributed to
shareholders.
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 1.00 $ 1.00
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.0065 $ - $ -
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.
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.
Call 800-688-9915 or visit www.pioneerfunds.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, 2004)
Net Asset Value
Life-of-Class 3.45%
(3/1/95)
5 Years 2.28%
1 Year 0.65%
All total returns shown assume reinvestment of distributions at net asset
value.
* Portfolio performance does not reflect any variable contract fees, expenses
or sales charges. If they had been included, performance would have been
lower.
Please refer to the variable product's annual report wrapper for performance
that reflects the deduction of the variable product's fees and charges. The
performance table does not reflect the deduction of taxes that a shareowner
would pay on distributions or the redemption of shares.
Any information in this 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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
32
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCKS - 2.8%
Materials - 0.6%
Diversified Metals & Mining - 0.6%
274,000 Caemi Mineracao E Metalurgia SA* $ 235,211
-----------
Total Materials $ 235,211
-----------
Capital Goods - 0.1%
Industrial Conglomerates - 0.1%
3,445 LG Corp. $ 37,249
-----------
Total Capital Goods $ 37,249
-----------
Banks - 1.1%
Diversified Banks - 1.1%
2,893 Banco Itau Holding Financeira $ 434,604
-----------
Total Banks $ 434,604
-----------
Telecommunication Services - 1.0%
Integrated Telecommunication Services - 0.5%
12,301 Tele Norte Leste Participacoes (A.D.R.) $ 207,518
-----------
Wireless Telecommunication Services - 0.5%
6,900 Telemig Celular Participacoes (A.D.R.) $ 194,787
-----------
Total Telecommunication Services $ 402,305
-----------
TOTAL PREFERRED STOCKS
(Cost $626,782) $ 1,109,369
-----------
COMMON STOCKS - 93.1%
Energy - 9.7%
Integrated Oil & Gas - 6.9%
225,000 CNOOC, Ltd. $ 121,671
5,480 Lukoil Holding (A.D.R.) 649,939
35,300 Petrobras Brasileiro (A.D.R.) 1,278,213
13,500 Surgutneftegaz (A.D.R.) (a) 504,900
46,000 Yukos 135,125
-----------
$ 2,689,848
-----------
Oil & Gas Equipment and Services - 0.5%
3,000 Samchully Co., Ltd. $ 188,049
-----------
Oil & Gas Exploration & Production - 1.5%
431,600 China Petroleum & Chemicals $ 177,043
179,000 Panva Gas Holdings, Ltd.* 79,998
2,700 Mol Magyar Olaj 189,702
34,200 PTT Public Co., Ltd. 152,199
-----------
$ 598,942
-----------
Oil & Gas Refining Marketing &
Transportation - 0.8%
220,000 China Aviation Oil Singapore $ 0
1,598,800 Petron Corp. 92,507
8,000 Polski Koncern Nafto (G.D.R.) 201,520
-----------
$ 294,027
-----------
Total Energy $ 3,770,866
-----------
Shares Value
Materials - 15.3%
Commodity Chemicals - 1.9%
3,869 Daelim Industrial Co. $ 200,997
4,900 LG Petrochemical Co., Ltd. 122,997
7,000 Reliance Industries, Ltd. (144A) 179,340
12,010,000 Ultrapar Participacoes SA 230,614
-----------
$ 733,948
-----------
Construction Materials - 1.3%
5,150 Asia Cement Co., Ltd. $ 169,070
35,006,000 Akcansa Cimento AS* 123,565
543,800 Lafarge Malayan Cement Bhd 104,451
14,400 Siam City Cement Co., Ltd. 90,384
-----------
$ 487,470
-----------
Diversified Chemical - 0.4%
270,234 Sinopac Holdings Co. $ 158,850
-----------
Diversified Metals & Mining - 5.1%
5,500 Anglo American Platinum Corp., Ltd.* $ 201,487
37,700 Companhia Vale do Rio Doce (A.D.R.) 919,126
4,900 Freeport-McMoRan Copper & Gold, Inc.
(Class B) 187,327
17,200 KGHM Polska Miedz SA 178,622
6,300 Norilsk Nickel 344,138
127,000 Yanzhou Coal Mining 181,077
-----------
$ 2,011,777
-----------
Fertilizers & Agricultural Chemicals - 0.5%
38,600 Makhteshim-Agan Industries, Ltd. $ 207,372
-----------
Gold - 0.7%
30,100 IAMGOLD Corp. $ 198,961
172,000 Zijin Mining Group Co., Ltd. 77,965
-----------
$ 276,926
-----------
Paper Products - 0.5%
5,270 Aracruz Cellulose SA (A.D.R.) $ 198,679
-----------
Precious Metals & Minerals - 3.3%
1,750 Anglogold Ashanti, Ltd. $ 63,338
16,400 Anglogold Ashanti, Ltd. (A.D.R.) (a) 596,140
23,200 Compania de Minas Buenaventura SA 531,280
507,100 PT Aneka Tambang TBK 94,184
-----------
$ 1,284,942
-----------
Specialty Chemicals - 0.4%
85,501 Formosa Plastic Corp. $ 146,510
-----------
Steel - 1.2%
4,400 Pohang Iron & Steel Co., Ltd. (A.D.R.) (a) $ 195,932
16,800 Remgro, Ltd. 280,885
-----------
$ 476,817
-----------
Total Materials $ 5,983,291
-----------
The accompanying notes are an integral part of these financial statements.
33
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Capital Goods - 5.7%
Building Products - 0.8%
12,500 Daewoo Heavy Industries & Machinery, Ltd. $ 185,824
2,530 Hanil Cement Co., Ltd. 146,478
-----------
$ 332,302
-----------
Construction & Engineering - 1.7%
379,435 CTCI Corp. $ 240,994
9,600 LG Construction, Ltd. 264,226
10,740 Kyeryong Construction Industrial Co., Ltd. 166,135
-----------
$ 671,355
-----------
Electrical Components &
Equipment - 0.7%
14,900 Bharat Heavy Electricals (Demat Shares) $ 265,190
-----------
Industrial Conglomerates - 1.8%
23,200 Copec-Compania Petroleos $ 185,767
6,825 LG Corp. 111,148
59,798,000 KOC Holding AS* 390,489
-----------
$ 687,404
-----------
Industrial Machinery - 0.7%
19,400 Daewood Heavy Industries & Machinery, Ltd. $ 150,353
187,000 Yungtay Engineering Co., Ltd. 112,884
-----------
$ 263,237
-----------
Total Capital Goods $ 2,219,488
-----------
Commercial Services & Supplies - 0.8%
Diversified Commercial Services - 0.8%
20,956 Bidvest Group, Ltd. $ 297,387
-----------
Total Commercial Services &
Supplies $ 297,387
-----------
Transportation - 1.7%
Air Freight & Couriers - 0.2%
153,400 Singapore Post, Ltd. $ 83,604
-----------
Marine - 1.1%
68,000 Samsung Heavy Industries Co., Ltd. $ 424,004
-----------
Railroads - 0.4%
34,300 Malaysia International Shipping Bhd. $ 138,033
-----------
Total Transportation $ 645,641
-----------
Automobiles & Components - 3.0%
Automobile Manufacturers - 3.0%
3,500 Hyundai Motor Co., Ltd. $ 187,440
10,530 Hyundai Heavy Industries 350,212
143,653 PT Astra International 148,538
178,200 Sime Darby Bhd. 281,310
17,499 Tata Motors 204,293
-----------
$ 1,171,793
-----------
Total Automobiles & Components $ 1,171,793
-----------
Shares Value
Consumer Durables & Apparel - 1.2%
Homebuilding - 0.8%
563,500 Ayala Land, Inc. $ 73,325
110,200 Corporacion GEO, S.A. de CV* 220,538
-----------
$ 293,863
-----------
Leisure Products - 0.4%
6,000 Bajaj Auto, Ltd. (Demat Shares) $ 156,909
-----------
Total Consumer Durables & Apparel $ 450,772
-----------
Hotels, Restaurants & Leisure - 0.4%
Hotels, Resorts & Cruise Lines - 0.3%
9,200 Indian Hotels Co., Ltd. $ 116,755
-----------
Restaurants - 0.1%
105,000 Jollibee Foods Corp. $ 53,329
-----------
Total Hotels, Restaurants & Leisure $ 170,084
-----------
Media - 3.0%
Advertising - 0.3%
6,200 G2R, Inc. $ 106,368
-----------
Broadcasting & Cable Television - 1.3%
306,200 ABS-CBN Broadcasting Corp. $ 101,221
3,100 Grupo Televisa SA (A.D.R.) 187,550
518,000 Media Prima Bhd* 233,097
-----------
$ 521,868
-----------
Movies & Entertainment - 1.0%
322,800 Grammy Entertainment Plc $ 142,825
57,700 Zee Telefilms, Ltd. 228,241
-----------
$ 371,066
-----------
Publishing - 0.4%
69,716,000 Hurriyet Gazetecilik ve Matbaacilik AS* $ 164,400
-----------
Total Media $ 1,163,702
-----------
Retailing - 0.1%
Distributors - 0.1%
6,955 The Spar Group, Ltd.* $ 26,468
-----------
Total Retailing $ 26,468
-----------
Food & Drug Retailing - 2.7%
Food Distributors - 0.6%
7,300 Compania Cervecerias Unidas SA (a) $ 184,179
12,000 Kimberly-Clark de Mexico, S.A. de C.V. 41,461
-----------
$ 225,640
-----------
Food Retail - 2.1%
12,000 Brasil Distr Pao Acu (A.D.R.) $ 307,200
3,780 CJ Corp. 258,377
94,000 President Chain Store Corp. 150,760
6,955 Tiger Brands, Ltd. 119,373
-----------
$ 835,710
-----------
Total Food & Drug Retailing $ 1,061,350
-----------
34 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Food, Beverage & Tobacco - 7.2%
Brewers - 0.3%
3,950 Efes Breweries International (G.D.R.)
(144A)* $ 118,500
-----------
Distillers & Vintners - 1.9%
9,966,000 Andalou efes Biracilik VE $ 201,470
12,500 Companhia de Bebidas PR (A.D.R.) 354,125
68,500 Grupo Modelo SA de CV 188,478
-----------
$ 744,073
-----------
Packaged Foods & Meats - 0.4%
1,390 Pulmuone Co., Ltd. $ 69,770
71,017 Rainbow Chicken, Ltd. 94,261
-----------
$ 164,031
-----------
Soft Drinks - 2.3%
9,100 Coca-Cola FEMSA, S.A. de C.V. (A.D.R.) $ 216,216
14,200 Embotelladora Andina SA (A.D.R.) 186,659
7,900 Fomento Economico Mexicano SA de C.V. 415,619
140,600 Sermsuk Public Co., Ltd. 78,840
-----------
$ 897,334
-----------
Tobacco - 2.3%
17,000 British American Tabacco (Malaysia) Bhd $ 204,631
6,200 Korea Tobacco 185,442
300 Philip Morris CR AS 226,620
97,200 PT Gudang Garam Public Co., Ltd. 141,995
186,500 PT Hanjaya Mandala Sampoerna Tbk 133,739
-----------
$ 892,427
-----------
Total Food, Beverage & Tobacco $ 2,816,365
-----------
Household & Personal Products - 1.4%
Household Products - 0.7%
44,940,000 Arcelik AS* $ 275,188
-----------
Personal Products - 0.7%
8,750 Natura Cosmeticos SA $ 255,318
-----------
Total Household & Personal
Products $ 530,506
-----------
Pharmaceuticals & Biotechnology - 0.6%
Pharmaceuticals - 0.6%
21,500 Aurobindo Pharma, Ltd. $ 160,964
110,200 PT Tempo Scan Pacific 90,209
-----------
$ 251,173
-----------
Total Pharmaceuticals &
Biotechnology $ 251,173
-----------
Shares Value
Banks - 9.7%
Diversified Banks - 9.2%
9,666 Banco Bradesco SA $ 242,230
33,800 Bangkok Bank, Ltd. 99,045
230,950 Chinatrust Financial Holding Co., Ltd. 275,222
149,000 Commerce Asset Holdings Bhd 184,232
10,300 Hana Bank 256,452
131,000 Hong Leong Bank Bhd 189,532
91,000 Kasikornbank (Class F) 131,380
12,000 Kookmin Bank (A.D.R.)* (a) 468,960
1,900 Kookmin Bank* 74,078
58,700 Malayan Banking Bhd 182,208
162,700 Metropolitan Bank & Trust Co. 76,831
407,500 PT Bank Central Asia Tbk 130,758
2,136,076 PT Lippo Bank 161,097
79,800 Siam Commercial Bank Plc (Foreign) 100,073
22,549 Standard Bank Group, LTD. 262,607
13,600 State Bank of India 205,117
35,354,000 Turkiye Is Bankasi (Isbank)* 195,369
11,400 Uniao de Bancos Brasileiros S.A.
(Unibanco) (G.D.R.) (144A) 361,608
-----------
$ 3,596,799
-----------
Regional Banks - 0.5%
218,000 First Financial Holdings $ 186,317
-----------
Total Banks $ 3,783,116
-----------
Diversified Financials - 5.1%
Diversified Financial Services - 5.1%
732,700 Bank Mandiri $ 151,926
485,344 China Development Financial* 233,397
70,000 Citic Pacific, Ltd. 198,911
143,900 FirstRand, Ltd. 340,126
137,000 Fubon Group 139,979
102,656,000 Haci Omer Sabanci Holding AS* 399,700
109,000 MCL Ladn, Ltd. 100,790
250,900 RHB Capital Berhad 154,431
76,900 Sanlam, Ltd. 176,233
632,700 SM Prime Holdings 86,753
-----------
$ 1,982,246
-----------
Total Diversified Financials $ 1,982,246
-----------
Insurance - 1.6%
Life & Health Insurance - 0.4%
7,900 Cathay Financial Holding Co., Ltd. (144A) $ 158,790
-----------
Multi-Line Insurance - 1.2%
47,567,000 Aksigorta AS* $ 190,550
3,600 Samsung Fire & Marine Insurance 284,036
-----------
$ 474,586
-----------
Total Insurance $ 633,376
-----------
The accompanying notes are an integral part of these financial statements.
35
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Real Estate - 0.4%
Real Estate Management &
Development - 0.4%
98,200 Wheelock Properties (Singapore), Ltd. $ 147,092
-----------
Total Real Estate $ 147,092
-----------
Software & Services - 0.5%
Application Software - 0.5%
4,032 Infosys Technologies, Ltd. $ 194,681
-----------
Total Software & Services $ 194,681
-----------
Technology Hardware & Equipment - 2.3%
Semiconductors - 1.2%
44,269 Hon Hai Precision Industry $ 204,496
171,005 Taiwan Semiconductor Manufacturing Co. 271,274
-----------
$ 475,770
-----------
Communications Equipment - 0.5%
8,600 Matav Rt (A.D.R.) $ 209,926
-----------
Electronic Equipment &
Instruments - 0.6%
24,000 Elec & Eltek International Co., Ltd. $ 68,147
2,350 LG Electronics, Inc. 145,098
-----------
$ 213,245
-----------
Total Technology Hardware &
Equipment $ 898,941
-----------
Semiconductors - 4.1%
3,130 Samsung Electronics $ 1,365,942
390,870 United Microelectronics Corp., Ltd. 251,691
-----------
$ 1,617,633
-----------
Total Semiconductors $ 1,617,633
-----------
Telecommunication Services - 13.0%
Integrated Telecommunication
Services - 6.8%
4,900 Brasil Telecom Participacoes SA $ 186,935
24,800 Compania de Telephonos de Chile SA
(A.D.R.) 278,752
18,900 KT Corp. (a) 412,209
29,587 Mahanagar Telephone Nigam, Ltd. 236,
29,900 Mahanagar Telephone (Demat) 107,028
3,100 Maroc Telecom* 35,394
11,900 SPT Telecom AS 197,306
40,000 Telekom Malaysia 122,064
17,100 Telefonos de Mexico SA (a) 655,272
68,800 Telekomunikacja Polska SA 451,545
-----------
$ 2,682,609
-----------
Shares Value
Wireless Telecommunication Services - 6.2%
27,200 Advanced Service Co., Ltd. $ 74,868
7,700 Alumax, Inc. 403,095
9,900 Korea Telecom Freetel Co. 236,755
1,100 Mobile Telesystems (A.D.R.) (a) 152,361
21,637 SK Telecom Co., Ltd. (a) 481,423
142,500 StarHub, Ltd.* 96,026
146,000 Taiwan Cellular Corp. 163,007
16,447 Turkcell Iletism Hizmet (A.D.R.) 297,691
42,700 Venfin, Ltd. 189,718
8,700 Vimpel-Communications (A.D.R.)* 314,418
-----------
$ 2,409,362
-----------
Total Telecommunication Services $ 5,091,971
-----------
Utilities - 3.6%
Electric Utilities - 2.3%
1,200 Cemig SA (A.D.R.) $ 29,448
1,206,235 Enersis SA* 205,109
14,600 Korea Electric Power Corp. 378,682
10,060 Unified Energy System (G.D.R.) 276,101
-----------
$ 889,340
-----------
Gas Utilities - 0.9%
5,100 Gazprom (A.D.R.)* (a) $ 180,908
5,900 Korea Gas Corp. 182,884
-----------
$ 363,792
-----------
Multi-Utilities & Unregulated Power - 0.4%
283,600 YTL Power International Bhd $ 134,320
-----------
Total Utilities $ 1,387,452
-----------
TOTAL COMMON STOCKS
(Cost $26,091,813) $36,295,394
-----------
RIGHTS/WARRANTS - 0.0%
Commercial Services & Supplies - 0.0%
Diversified Commercial Services - 0.0%
1,580 Bidvest Group, Ltd., Exp. 12/8/06* $ 6,714
-----------
Total Commercial Services &
Supplies $ 6,714
-----------
TOTAL RIGHTS/WARRANTS
(Cost $0) $ 6,714
-----------
36 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
TEMPORARY CASH INVESTMENT - 8.3%
Security Lending Collateral - 8.3%
3,125,761 Securities Lending
Investment Fund, 2.18% $ 3,125,761
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $3,125,761) $ 3,125,761
------------
TOTAL INVESTMENTS IN
SECURITIES - 104.2%
(Cost $29,844,356) (b) $ 40,537,238
------------
OTHER ASSETS AND
LIABILITIES - (4.2)% $ (1,557,033)
------------
TOTAL NET ASSETS - 100.0% $ 38,980,205
============
(A.D.R.) American Depositary Receipt
(G.D.R.) Global Depositary Receipt
* Non-income producing 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, 2004, the value of these securities amounted to $818,238
or 2.1% of net assets.
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
15,575 Anglogold Ashanti, Ltd. (A.D.R.) $ 566,151
590 Compania Cervecerias Unidas SA 14,886
155 Gazprom (A.D.R.)* 5,343
11,365 Kookmin Bank* (A.D.R.) 444,144
15,905 KT Corp. 346,888
976 Mobile Telesystems (A.D.R.) 135,186
4,105 Pohang Iron & Steel Co., Ltd. (A.D.R.) 182,796
13,090 SK Telecom Co., Ltd. 291,253
12,620 Surgutneftegaz (A.D.R.) 471,988
15,565 Telefonos de Mexico SA 596,451
----------
Total $3,055,085
==========
(b) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
South Korea 20.9%
Brazil 14.5
Taiwan 7.5
South Africa 7.1
Russia 6.8
Mexico 6.2
Turkey 6.0
India 5.5
Malaysia 5.2
Indonesia 2.8
Chile 2.8
Thailand 2.3
Poland 2.2
People's Republic of China 2.0
Peru 1.4
Singapore 1.3
Philippines 1.3
Czech Republic 1.1
Hungary 1.1
Other (individually less than 1%) 2.0
-----
100.0%
=====
The accompanying notes are an integral part of these financial statements.
37
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCKS - 0.9%
Automobiles & Components - 0.9%
Automobile Manufacturers - 0.9%
250 Porsche AG $ 159,264
-----------
TOTAL PREFERRED STOCKS
(Cost $83,104) $ 159,264
-----------
COMMON STOCKS - 97.9%
Energy - 9.4%
Integrated Oil & Gas - 4.1%
32,474 BP Amoco Plc $ 316,497
16,533 Eni S.p.A. 414,540
-----------
$ 731,037
-----------
Oil & Gas Refining Marketing &
Transportation - 5.3%
16,148 Repsol SA $ 419,786
2,339 Total SA 511,991
-----------
$ 931,777
-----------
Total Energy $ 1,662,814
-----------
Materials - 9.3%
Commodity Chemicals - 1.4%
3,516 BASF India, Ltd. $ 252,819
-----------
Construction Materials - 6.4%
11,436 CRH Plc $ 306,459
2,196 Holcim, Ltd. 132,566
8,961 Italcementi S.p.A. 144,084
3,729 Lafarge Br 359,324
1,391 VINCI SA 186,499
-----------
$ 1,128,932
-----------
Diversified Metals & Mining - 1.5%
9,326 Rio Tinto Plc $ 274,043
-----------
Total Materials $ 1,655,794
-----------
Capital Goods - 7.1%
Construction & Engineering - 4.3%
12,320 ACS, Actividades de Construccion y
Servicios, S.A. $ 281,233
5,731 Compagnie de Saint Gobain 344,235
797 Technip 147,072
-----------
$ 772,540
-----------
Electrical Components & Equipment - 1.2%
3,012 Schneider Electric SA $ 209,209
-----------
Industrial Machinery - 1.6%
1,976 Atlas Copco AB $ 89,168
4,221 AB SKF 187,945
-----------
$ 277,113
-----------
Total Capital Goods $ 1,258,862
-----------
Shares Value
Commercial Services & Supplies - 1.4%
Diversified Commercial Services - 1.4%
9,329 TNT Post Group N.V. $ 253,356
-----------
Total Commercial Services &
Supplies $ 253,356
-----------
Automobiles & Components - 0.9%
Auto Parts & Equipment - 0.9%
2,394 Compagnie Generale des
Etablissements Michelin $ 153,268
-----------
Total Automobiles & Components $ 153,268
-----------
Consumer Durables & Apparel - 1.0%
Apparel, Accessories & Luxury Goods - 1.0%
1,131 Adidas-Salomon AG $ 182,109
-----------
Total Consumer Durables & Apparel $ 182,109
-----------
Hotels, Restaurants & Leisure - 2.0%
Restaurants - 2.0%
42,574 Compass Group Plc $ 200,909
8,416 GUS plc 151,709
-----------
$ 352,618
-----------
Total Hotels, Restaurants & Leisure $ 352,618
-----------
Media - 2.1%
Advertising - 0.5%
2,942 Publicis SA $ 95,154
-----------
Publishing - 1.6%
7,545 Elsevier NV $ 102,854
5,457 Vivendi Universal* 174,811
-----------
$ 277,665
-----------
Total Media $ 372,819
-----------
Retailing - 1.7%
Distributors - 0.8%
14,303 Buhrmann NV* $ 139,026
-----------
Specialty Stores - 0.9%
34,285 HMV Group Plc $ 170,270
-----------
Total Retailing $ 309,296
-----------
Food & Drug Retailing - 4.2%
Drug Retail - 0.8%
11,116 Boots Co. Plc $ 139,667
-----------
Food Retail - 3.4%
1,429 Nestle SA (Registered Shares) $ 373,904
37,557 Tesco Plc 232,179
-----------
$ 606,083
-----------
Total Food & Drug Retailing $ 745,750
-----------
38 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Food, Beverage & Tobacco - 1.8%
Tobacco - 1.8%
18,370 British American Tobacco Plc $ 316,318
-----------
Total Food, Beverage & Tobacco $ 316,318
-----------
Pharmaceuticals & Biotechnology - 8.2%
Pharmaceuticals - 8.2%
512 Actelion, Ltd.* $ 52,454
11,377 AstraZeneca Plc 413,428
12,095 GlaxoSmithKline Plc 284,538
2,452 Roche Holdings AG 280,042
3,535 Sanofi-Aventis 282,546
1,796 Schering AG 133,874
-----------
$ 1,446,882
-----------
Total Pharmaceuticals &
Biotechnology $ 1,446,882
-----------
Banks - 15.1%
Diversified Banks - 15.1%
8,687 Allied Irish Banks Plc $ 179,311
32,459 Barclays Plc 364,657
13,477 Banco Bilbao Vizcaya Argentaria, SA 238,517
5,468 BNP Paribas SA 395,665
6,739 Credit Agricole SA 202,895
11,564 CS Group* 487,180
4,600 Depfa Bank Plc 77,234
14,386 HSBC Holding Plc 242,491
14,378 Royal Bank of Scotland Group Plc 482,632
-----------
$ 2,670,582
-----------
Total Banks $ 2,670,582
-----------
Diversified Financials - 10.7%
Asset Management & Custody Banks - 0.4%
2,630 Man Group Plc $ 73,463
-----------
Diversified Financial Services - 9.1%
6,429 Fortis NV $ 178,055
6,390 ING Groep NV 193,219
2,730 Lagardere S.C.A. 196,640
4,931 Societe Generale 498,393
6,686 UBS AG 557,151
-----------
$ 1,623,458
-----------
Specialized Finance - 1.2%
3,406 Deutsche Boerse AG $ 204,654
-----------
Total Diversified Financials $ 1,901,575
-----------
Shares Value
Insurance - 4.6%
Life & Health Insurance - 0.5%
2,574 Assicurazioni Generali $ 87,197
-----------
Multi-Line Insurance - 3.4%
11,889 AXA $ 294,430
1,923 Zurich Financial Services* 319,639
-----------
$ 614,069
-----------
Reinsurance - 0.7%
3,097 Hannover Rueckversicheru $ 121,034
-----------
Total Insurance $ 822,300
-----------
Software & Services - 1.0%
IT Consulting & Other Services - 1.0%
2,571 Atos Origin* $ 174,397
-----------
Total Software & Services $ 174,397
-----------
Technology Hardware & Equipment - 3.6%
Semiconductors - 1.0%
6,783 Philips Electronics NV $ 179,433
-----------
Communications Equipment - 0.9%
10,079 Nokia Oyj $ 158,148
-----------
Computer Hardware - 0.5%
34,273 Dixons Group Plc $ 100,038
-----------
Electronic Equipment & Instruments - 1.2%
2,450 Siemens $ 207,334
-----------
Total Technology Hardware &
Equipment $ 644,953
-----------
Telecommunication Services - 11.2%
Alternate Carriers - 2.4%
12,630 France Telecom $ 417,197
-----------
Integrated Telecommunication Services - 4.2%
6,351 Belgacom SA* $ 274,098
12,569 Telefonica SA 236,223
59,202 Telecom Italia S.p.A. 241,711
-----------
$ 752,032
-----------
Wireless Telecommunication Services - 4.6%
304,416 Vodafone Group Plc $ 824,041
-----------
Total Telecommunication Services $ 1,993,270
-----------
The accompanying notes are an integral part of these financial statements.
39
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Utilities - 2.6%
Electric Utilities - 2.6%
4,077 E.On AG $ 371,038
8,667 National Grid Transco Plc 82,528
-----------
$ 453,566
-----------
Total Utilities $ 453,566
-----------
TOTAL COMMON STOCKS
(Cost $13,033,884) $17,370,529
-----------
TOTAL INVESTMENTS IN
SECURITIES - 98.8%
(Cost $13,116,988) (a) $17,529,793
-----------
OTHER ASSETS AND
LIABILITIES - 1.2% $ 195,845
-----------
TOTAL NET ASSETS - 100.0% $17,725,638
===========
* Non-income producing security
(a) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
United Kingdom 26.6%
France 26.5
Switzerland 12.6
Germany 9.3
Spain 6.7
Netherlands 6.0
Italy 5.1
Ireland 3.2
Sweden 1.6
Belgium 1.6
Finland 0.8
-----
100.0%
=====
40 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCK - 0.5%
Telecommunication Services - 0.5%
Integrated Telecommunication
Services - 0.5%
8,400 Tele Norte Leste Participacoes (A.D.R.) $ 141,708
-----------
TOTAL PREFERRED STOCK
(Cost $101,323) $ 141,708
-----------
COMMON STOCKS - 98.7%
Energy - 6.3%
Integrated Oil & Gas - 2.7%
30,110 BP Amoco Plc $ 293,457
17,400 Eni S.p.A. 436,278
-----------
$ 729,735
-----------
Oil & Gas Refining Marketing &
Transportation - 3.6%
12,600 Repsol SA $ 327,551
2,960 Total SA 647,924
-----------
$ 975,475
-----------
Total Energy $ 1,705,210
-----------
Materials - 8.1%
Commodity Chemicals - 1.3%
4,700 BASF India, Ltd. $ 337,955
-----------
Construction Materials - 2.9%
9,600 CRH Plc $ 256,586
6,200 Italcementi S.p.A. 99,690
1,600 Lafarge Br 154,175
1,980 Vinci SA (a) 265,469
-----------
$ 775,920
-----------
Diversified Metals & Mining - 1.6%
3,850 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 147,186
2,100 Norilsk Nickel 114,713
5,390 Rio Tinto Plc 158,384
-----------
$ 420,283
-----------
Industrial Gases - 1.3%
62,000 Taiyo Nippon Sanso Corp. $ 364,928
-----------
Steel - 1.0%
23,102 Broken Hill Proprietary Co., Ltd. $ 277,355
-----------
Total Materials $ 2,176,441
-----------
Capital Goods - 9.1%
Aerospace & Defense - 0.3%
2,700 European Aeronautic Defence $ 78,322
-----------
Shares Value
Construction & Engineering - 4.4%
11,649 ACS, Actividades de Construccion y
Servicios, SA $ 265,916
4,000 Compagnie de Saint Gobain 240,262
119,200 Kajima Corp. 514,067
940 Technip 173,459
-----------
$ 1,193,704
-----------
Electrical Components & Equipment - 1.6%
55,800 Mitsubishi Electric Corp. $ 274,245
2,400 Schneider Electric SA 166,700
-----------
$ 440,945
-----------
Industrial Conglomerates - 0.5%
20,892,000 KOC Holding AS* $ 136,428
-----------
Industrial Machinery - 2.3%
3,800 Atlas Copco AB $ 171,478
36,600 OSG Corp. (a) 443,151
-----------
$ 614,629
-----------
Total Capital Goods $ 2,464,028
-----------
Commercial Services & Supplies - 0.8%
Diversified Commercial Services - 0.8%
8,100 TNT Post Group NV $ 219,979
-----------
Total Commercial Services &
Supplies $ 219,979
-----------
Transportation - 1.8%
Railroads - 1.8%
88 East Japan Railway Co. $ 490,631
-----------
Total Transportation $ 490,631
-----------
Automobiles & Components - 3.1%
Auto Parts & Equipment - 0.4%
1,500 Compagnie Generale des Etablissements
Michelin $ 96,033
-----------
Automobile Manufacturers - 2.7%
2,500 Bayerische Motoren Werke AG $ 112,628
15,300 Toyota Motor Co. 625,414
-----------
$ 738,042
-----------
Total Automobiles & Components $ 834,075
-----------
Consumer Durables & Apparel - 0.6%
Apparel, Accessories & Luxury Goods - 0.6%
1,000 Adidas-Salomon AG $ 161,016
-----------
Total Consumer Durables & Apparel $ 161,016
-----------
Hotels, Restaurants & Leisure - 3.1%
Casinos & Gaming - 1.7%
8,200 Sega Sammy Holdings, Inc.* $ 450,679
-----------
The accompanying notes are an integral part of these financial statements.
41
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Restaurants - 1.4%
37,200 Compass Group Plc $ 175,549
12,000 GUS plc 216,315
-----------
$ 391,864
-----------
Total Hotels, Restaurants & Leisure $ 842,543
-----------
Media - 1.7%
Advertising - 0.3%
3,000 Publicis SA $ 97,030
-----------
Publishing - 1.4%
11,200 Reed Elsevier Plc $ 102,875
8,400 Vivendi Universal* 269,088
-----------
$ 371,963
-----------
Total Media $ 468,993
-----------
Retailing - 4.2%
Distributors - 1.6%
34,000 Mitsubishi Corp. $ 439,416
-----------
General Merchandise Stores - 2.6%
6,900 Ito Yokado, Ltd. $ 290,671
7,900 Ryohin Keikaku Co., Ltd. 397,075
-----------
$ 687,746
-----------
Total Retailing $ 1,127,162
-----------
Food & Drug Retailing - 3.8%
Drug Retail - 0.6%
13,500 Boots Co., Plc $ 169,621
-----------
Food Retail - 3.2%
7,266 Koninklijke Ahold NV (144A)* $ 56,227
1,700 Nestle SA (Registered Shares) 444,812
55,700 Tesco Plc 344,340
-----------
$ 845,379
-----------
Total Food & Drug Retailing $ 1,015,000
-----------
Food, Beverage & Tobacco - 3.1%
Tobacco - 3.1%
16,020 British American Tobacco Plc $ 275,853
50 Japan Tobacco, Inc. 570,938
-----------
$ 846,791
-----------
Total Food, Beverage & Tobacco $ 846,791
-----------
Household & Personal Products - 1.5%
Household Products - 1.5%
28,300 Shiseido Co., Ltd. $ 410,008
-----------
Total Household & Personal
Products $ 410,008
-----------
Shares Value
Health Care Equipment & Services - 0.5%
Health Care Supplies - 0.5%
800 Nobel Biocare Holding AG $ 144,687
-----------
Total Health Care Equipment &
Services $ 144,687
-----------
Pharmaceuticals & Biotechnology - 5.7%
Pharmaceuticals - 5.7%
9,332 AstraZeneca Plc $ 339,115
8,590 GlaxoSmithKline Plc 202,082
3,200 Novartis 160,026
3,138 Roche Holdings AG 358,390
4,280 Sanofi-Aventis 342,093
1,670 Schering AG 124,482
-----------
$ 1,526,188
-----------
Total Pharmaceuticals &
Biotechnology $ 1,526,188
-----------
Banks - 11.5%
Diversified Banks - 11.5%
7,400 Allied Irish Banks Plc $ 152,745
16,225 Barclays Plc 182,278
18,200 Banco Bilbao Vizcaya Argentaria SA 322,105
50,800 Banca Intesa S.p.A. 243,983
5,000 BNP Paribas SA 361,801
9,645 Credit Agricole SA 290,387
7,930 CS Group* 334,083
18,000 Development Bank of Singapore, Ltd. 177,261
17,200 HSBC Holding Plc 289,924
4,100 Kookmin Bank (A.D.R.)* (a) 160,228
12,520 Royal Bank of Scotland Group Plc 420,264
5,100 Uniao de Bancos Brasileiros S.A.
(Unibanco) (G.D.R.) (144A) 161,772
-----------
$ 3,096,831
-----------
Total Banks $ 3,096,831
-----------
Diversified Financials - 9.3%
Consumer Finance - 1.8%
13,600 Credit Saison Co., Ltd. $ 497,009
-----------
Diversified Financial Services - 6.7%
12,400 ING Groep NV $ 374,947
2,800 Lagardere S.C.A. 201,682
3,319 Societe Generale 335,463
50,000 Sumitomo Trust Bank 361,633
6,350 UBS AG 529,152
-----------
$ 1,802,877
-----------
Specialized Finance - 0.8%
3,400 Deutsche Boerse AG $ 204,294
-----------
Total Diversified Financials $ 2,504,180
-----------
42 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Insurance - 2.4%
Life & Health Insurance - 0.7%
5,300 Assicurazioni Generali $ 179,543
-----------
Multi-Line Insurance - 1.7%
11,600 AXA $ 287,272
1,080 Zurich Financial Services* 179,517
-----------
$ 466,789
-----------
Total Insurance $ 646,332
-----------
Real Estate - 1.5%
Real Estate Management & Development - 1.5%
34,000 Mitsui Fudosan Co. $ 414,847
-----------
Total Real Estate $ 414,847
-----------
Software & Services - 0.5%
IT Consulting & Other Services - 0.5%
2,100 Atos Origin* $ 142,448
-----------
Total Software & Services $ 142,448
-----------
Technology Hardware & Equipment - 5.5%
Semiconductors - 0.9%
9,500 Philips Electronics NV $ 251,307
-----------
Computer Hardware - 0.4%
35,300 Dixons Group Plc $ 103,036
-----------
Electronic Equipment & Instruments - 2.6%
3,900 Nidec Corp. $ 476,798
2,490 Siemens 210,719
-----------
$ 687,517
-----------
Office Electronics - 1.6%
32,500 Konica Minolta Holdings, Inc.* $ 432,715
-----------
Total Technology Hardware &
Equipment $ 1,474,575
-----------
Semiconductors - 2.5%
Semiconductor Equipment - 1.6%
7,100 Tokyo Electron, Ltd. $ 439,022
-----------
Semiconductors - 0.9%
250 Samsung Electronics $ 109,101
15,900 Taiwan Semiconductor Manufacturing Co.
(A.D.R.) 134,991
-----------
$ 244,092
-----------
Total Semiconductors $ 683,114
-----------
Telecommunication Services - 9.8%
Alternate Carriers - 1.3%
11,000 France Telecom $ 363,354
-----------
Shares Value
Integrated Telecommunication Services - 4.2%
6,500 Belgacom SA* $ 280,528
16,200 British Sky Broadcasting Plc 174,818
17,500 Mahanagar Telephone Nigam, Ltd. 139,650
18,730 Telefonica SA 352,014
46,486 Telecom Italia S.p.A. 189,794
-----------
$ 1,136,804
-----------
Wireless Telecommunciation Services - 4.3%
1,000 Mobile Telesystems (A.D.R.) (a) $ 138,510
6,500 SK Telecom Co., Ltd. (a) 144,625
12,091 Turk ell Iletism Hizmet (A.D.R.) 218,847
243,611 Vodafone Group Plc 659,444
-----------
$ 1,161,426
-----------
Total Telecommunication Services $ 2,661,584
-----------
Utilities - 2.3%
Electric Utilities - 2.3%
3,533 E.On AG $ 321,530
2,700 Iberdrola SA* 68,502
23,300 National Grid Transco Plc 221,864
-----------
$ 611,896
-----------
Total Utilities $ 611,896
-----------
TOTAL COMMON STOCKS
(Cost $20,557,882) $26,668,559
-----------
TEMPORARY CASH INVESTMENT - 3.5%
Security Lending Collateral - 3.5%
946,907 Securities Lending
Investment Fund, 2.18% $ 946,907
-----------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $946,907) $ 946,907
-----------
TOTAL INVESTMENTS IN
SECURITIES - 102.7%
(Cost $21,606,112) (b) $27,757,174
-----------
OTHER ASSETS
AND LIABILITIES - (2.7)% $ (764,841)
-----------
TOTAL NET ASSETS - 100.0% $26,992,333
===========
The accompanying notes are an integral part of these financial statements.
43
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
(A.D.R.) American Depositary Receipt
(G.D.R.) Global Depository 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, 2004, the value of these securities amounted to $217,999
or 0.8% of net assets.
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
3,895 Kookmin Bank (A.D.R.) * $ 152,217
950 Mobile Telesystems (A.D.R.) 131,585
30,700 OSG Corp. 371,776
570 SK Telecom Co., Ltd. 12,683
1,800 Vinci SA 241,344
---------
Total $ 909,605
=========
(b) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
Japan 30.6%
France 16.3
United Kingdom 15.9
Switzerland 7.9
Germany 5.4
Spain 4.9
Italy 4.2
Netherlands 3.6
South Korea 1.5
Ireland 1.5
Turkey 1.3
Brazil 1.1
Belgium 1.0
Austrialia 1.0
Other (individually less than 1%) 3.8
-----
100.0%
=====
44 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 90.2%
Energy - 6.9%
Oil & Gas Drilling - 2.3%
1,525 Atwood Oceanics, Inc.* $ 79,453
26,736 Key Energy Services, Inc.* 315,485
14,500 Todco* 267,090
-----------
$ 662,028
-----------
Oil & Gas Equipment & Services - 2.2%
14,200 Gulfmarkt Offshore, Inc.* $ 316,234
10,240 Maverick Tube Corp.* 310,272
-----------
$ 626,506
-----------
Oil & Gas Exploration & Production - 2.4%
5,900 Penn Virginia Corp. $ 239,363
5,395 Swift Energy Co.* 156,131
7,769 Unit Corp.* 296,853
-----------
$ 692,347
-----------
Total Energy $ 1,980,881
-----------
Materials - 7.2%
Diversified Metals & Mining - 1.2%
9,914 Massey Energy Co. $ 346,494
-----------
Gold - 1.0%
7,350 Glamis Gold, Ltd.* $ 126,126
24,300 IAMGOLD Corp. 160,623
-----------
$ 286,749
-----------
Metal & Glass Containers - 0.8%
5,137 Jarden Corp.* $ 223,151
-----------
Paper Products - 1.8%
16,193 Domtar, Inc. $ 195,450
11,400 Flowserve Corp.* 313,956
-----------
$ 509,406
-----------
Precious Metals & Minerals - 0.2%
28,125 Cambior, Inc.* $ 75,094
-----------
Specialty Chemicals - 0.4%
3,875 Great Lakes Chemical Corp. $ 110,399
-----------
Steel - 1.9%
3,575 Carpenter Technology $ 208,995
34,893 Graftech International, Ltd.* 330,088
-----------
$ 539,083
-----------
Total Materials $ 2,090,376
-----------
Capital Goods - 8.1%
Aerospace & Defense - 0.2%
4,875 Intrado, Inc.* $ 58,988
-----------
Shares Value
Construction, Farm Machinery &
Heavy Trucks - 1.6%
21,575 Wabtec Corp. $ 459,979
-----------
Construction & Engineering - 1.1%
5,070 Granite Construction, Inc. $ 134,862
7,825 Insituform Technologies, Inc.* 177,393
-----------
$ 312,255
-----------
Electrical Components & Equipment - 0.7%
23,479 Power-One, Inc.* $ 209,433
-----------
Industrial Conglomerates - 1.5%
20,760 Cornell Co., Inc.* $ 315,137
7,796 NN, Inc. 102,985
-----------
$ 418,122
-----------
Industrial Machinery - 1.9%
5,687 Joy Global, Inc. $ 246,986
3,125 Kaydon Corp. 103,188
1,894 Nacco Industries, Inc. 199,628
-----------
$ 549,802
-----------
Trading Companies & Distributors - 1.1%
11,830 Applied Industrial Technologies, Inc. $ 324,128
-----------
Total Capital Goods $ 2,332,707
-----------
Commercial Services & Supplies - 5.6%
Data Processing Services - 0.4%
10,000 Gartner Group, Inc.* $ 124,600
-----------
Diversified Commercial Services - 4.1%
5,878 Chemed Corp. $ 394,473
18,400 Central Parking Corp. 278,760
14,335 Profit Recovery Group International* 72,105
27,255 Rent-Way, Inc.* (a) 218,313
8,100 Watson Wyatt & Co. Holdings 218,295
-----------
$ 1,181,946
-----------
Employment Services - 1.1%
36,400 On Assignment, Inc.* $ 188,916
5,670 Korn/Ferry International* 117,653
-----------
$ 306,569
-----------
Total Commercial Services &
Supplies $ 1,613,115
-----------
Transportation - 3.3%
Marine - 0.8%
2,400 Arlington Tankers, Ltd.* $ 55,080
3,677 Stelmar Shipping, Ltd. 175,430
-----------
$ 230,510
-----------
Railroads - 1.3%
13,043 Genesee & Wyoming, Inc.* $ 365,334
-----------
The accompanying notes are an integral part of these financial statements.
45
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Trucking - 1.2%
16,775 Central Freight Lines, Inc.* $ 105,683
3,968 Dollar Thrifty Automotive Group* 119,834
2,800 Forward Air Corp.* 125,160
-----------
$ 350,677
-----------
Total Transportation $ 946,521
-----------
Automobiles & Components - 0.6%
Auto Parts & Equipment - 0.6%
10,395 Federal Signal Corp. $ 183,576
-----------
Total Automobiles & Components $ 183,576
-----------
Consumer Durables & Apparel - 1.1%
Apparel, Accessories & Luxury Goods - 1.1%
18,968 Charming Shoppes, Inc.* $ 177,730
4,250 Kellwood Co. 146,625
-----------
$ 324,355
-----------
Total Consumer Durables & Apparel $ 324,355
-----------
Hotels, Restaurants & Leisure - 0.7%
Hotels, Resorts & Cruise Lines - 0.1%
11,500 Jameson Inns, Inc.* $ 22,655
-----------
Restaurants - 0.6%
9,619 O'Charley's, Inc.* $ 188,051
-----------
Total Hotels, Restaurants & Leisure $ 210,706
-----------
Media - 0.5%
Advertising - 0.2%
6,566 EMAK Worldwide, Inc.* $ 65,660
-----------
Publishing - 0.3%
7,340 Advanced Marketing Services, Inc. $ 73,840
-----------
Total Media $ 139,500
-----------
Retailing - 6.4%
Apparel Retail - 0.8%
5,295 Stage Stores, Inc.* $ 219,848
-----------
Catalog Retail - 2.1%
28,975 Insight Enterprises, Inc.* $ 594,567
-----------
Computer & Electronics Retail - 0.4%
16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738
-----------
Specialty Stores - 3.1%
7,075 Claire's Stores, Inc. $ 150,344
5,052 Guitar Center, Inc.* 266,190
23,407 Hancock Fabrics, Inc. 242,731
6,348 School Specialty, Inc.* 244,779
-----------
$ 904,044
-----------
Total Retailing $ 1,833,197
-----------
Shares Value
Food & Drug Retailing - 1.9%
Food Distributors - 0.6%
12,050 B & G Foods, Inc. $ 180,509
-----------
Food Retail - 1.3%
8,808 Fresh Del Monte Produce, Inc. $ 260,805
11,625 Wild Oats Markets, Inc.* 102,416
-----------
$ 363,221
-----------
Total Food & Drug Retailing $ 543,730
-----------
Food, Beverage & Tobacco - 0.2%
Packaged Foods & Meats - 0.2%
1,925 American Italian Pasta Co. (a) $ 44,756
-----------
Total Food, Beverage & Tobacco $ 44,756
-----------
Household & Personal Products - 1.7%
Household Products - 1.3%
15,279 Nu Skin Enterprises, Inc. $ 387,781
-----------
Personal Products - 0.4%
4,825 NBTY, Inc.* $ 115,848
-----------
Total Household & Personal
Products $ 503,629
-----------
Health Care Equipment & Services - 7.6%
Health Care Distributors - 2.3%
4,585 Amerigroup Corp. $ 346,901
12,125 Cross Country Healthcare, Inc.* (a) 219,220
3,475 Chattem, Inc.* 115,023
-----------
$ 681,144
-----------
Health Care Equipment - 0.5%
3,000 Analogic Corp. $ 134,370
-----------
Health Care Facilities - 0.9%
3,350 Sunrise Senior Living, Inc.* (a) $ 155,306
2,783 Triad Hospitals, Inc.* 103,555
-----------
$ 258,861
-----------
Health Care Services - 2.2%
7,327 Pediatrix Medical Group, Inc.* $ 469,294
8,275 Providence Service Corp.* 173,527
-----------
$ 642,821
-----------
Managed Health Care - 1.7%
8,530 PacifiCare Health Systems* $ 482,116
-----------
Total Health Care Equipment &
Services $ 2,199,312
-----------
Pharmaceuticals & Biotechnology - 0.5%
Biotechnology - 0.5%
17,655 Kendle International, Inc.* $ 155,364
-----------
Total Pharmaceuticals &
Biotechnology $ 155,364
-----------
46 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Banks - 8.7%
Diversified Banks - 3.9%
4,131 Banner Corp. $ 128,846
15,230 BankAtlantic Bancorp, Inc. 303,077
1,100 Community Bancorp* 33,660
11,050 Provident Financial Services, Inc. 214,039
20,325 Texas Capital Bancshares, Inc.* 439,427
-----------
$ 1,119,049
-----------
Regional Banks - 4.0%
7,000 Alliance Bankshares Corp.* $ 108,850
27,425 Cardinal Financial Corp.* 305,789
3,875 City National Corp. 273,769
1,775 Irwin Financial Corp. 50,392
23,150 Sterling Bancshares, Inc. 330,351
1,705 Whitney Holding Corp. 76,708
-----------
$ 1,145,859
-----------
Thrifts & Mortgage Finance - 0.8%
3,475 BankUnited Financial Corp.* $ 111,026
9,475 First Niagara Financial Group, Inc. 132,176
-----------
$ 243,202
-----------
Total Banks $ 2,508,110
-----------
Diversified Financials - 6.7%
Consumer Finance - 0.9%
25,856 Medallion Financial Corp. $ 250,803
-----------
Consumer Finance - 1.4%
7,025 Advanta Corp. $ 158,906
7,478 Advanta Corp. (Class B) 181,491
11,000 Rewards Network, Inc.* (a) 77,000
-----------
$ 417,397
-----------
Investment Banking & Brokerage - 2.9%
7,000 A.G. Edwards, Inc. $ 302,470
23,689 Apollo Investment Corp. 357,704
4,050 Piper Jaffray Co.* 194,198
-----------
$ 854,372
-----------
Specialized Finance - 1.5%
10,225 Assured Guaranty, Ltd. $ 201,126
5,843 Financial Federal Corp.* 229,046
-----------
$ 430,172
-----------
Total Diversified Financials $ 1,952,744
-----------
Insurance - 3.7%
Insurance Brokers - 0.2%
1,800 Platinum Underwriter Holdings, Ltd. $ 55,980
-----------
Shares Value
Property & Casualty Insurance - 2.9%
3,825 American Safety Insurance Group, Ltd.* $ 62,501
6,826 IPC Holdings, Ltd. 296,999
27,525 Quanta Capital Holdings (144A)* 253,781
2,925 RLI Corp. 121,592
2,525 Selective Insurance Group, Inc. (a) 111,706
-----------
$ 846,579
-----------
Reinsurance - 0.6%
6,950 Odyssey Re Holdings, Corp. (a) $ 175,210
-----------
Total Insurance $ 1,077,769
-----------
Real Estate - 5.7%
Real Estate Management & Development - 0.8%
3,875 Corrections Corp. of America* $ 156,744
2,626 Levitt Corp. 80,277
-----------
$ 237,021
-----------
Real Estate Investment Trusts - 4.9%
9,913 BioMed Property Trust, Inc. $ 220,168
10,650 Capital Trust, Inc. 327,062
1,928 Entertainment Properties Trust 85,892
18,425 Feldman Mall Properties, Inc.* (a) 239,709
15,915 Provident Senior Living* 254,640
6,350 Saxon Capital, Inc. 152,337
4,271 Universal Health Realty, Inc. 137,227
-----------
$ 1,417,035
-----------
Total Real Estate $ 1,654,056
-----------
Software & Services - 4.2%
Application Software - 0.8%
13,779 SPSS, Inc.* $ 215,504
-----------
Data Processing & Outsourced Services - 0.7%
16,142 Pegusus Systems, Inc.* $ 203,389
-----------
Internet Software & Services - 1.2%
7,625 Internet Security Systems, Inc.* $ 177,281
12,275 PEC Solutions, Inc.* 173,937
-----------
$ 351,218
-----------
Systems Software - 1.5%
24,550 Borland Software Corp.* $ 286,744
7,025 Sybase, Inc.* 140,149
-----------
$ 426,893
-----------
Total Software & Services $ 1,197,004
-----------
Technology Hardware & Equipment - 3.1%
Communications Equipment - 1.9%
4,575 Black Box Corp. $ 219,692
47,375 Remec, Inc.* 341,574
-----------
$ 561,266
-----------
The accompanying notes are an integral part of these financial statements.
47
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Computer Storage & Peripherals - 0.3%
4,425 Electronics For Imaging, Inc.* $ 77,039
-----------
Electronic Equipment & Instruments - 0.4%
11,425 Planar Systems, Inc.* $ 128,303
-----------
Technology Distributors - 0.5%
3,075 Tech Data Corp.* $ 139,605
-----------
Total Technology Hardware &
Equipment $ 906,213
-----------
Semiconductors - 0.6%
Semiconductor Equipment - 0.3%
3,593 Advanced Energy Industries, Inc.* $ 32,804
2,837 Brooks Automations, Inc.* 48,853
-----------
$ 81,657
-----------
Semiconductors - 0.3%
9,370 HI/FN, Inc.* $ 86,391
-----------
Total Semiconductors $ 168,048
-----------
Telecommunication Services - 0.8%
Wireless Telecom Services - 0.8%
26,003 Boston Communications Group, Inc.* $ 240,268
-----------
Total Telecommunication Services $ 240,268
-----------
Utilities - 4.2%
Gas Utilities - 3.5%
5,600 AGL Resources, Inc. $ 186,144
6,505 People's Energy Corp. 285,895
10,649 Southwestern Energy Co.* 539,787
-----------
$ 1,011,826
-----------
Multi-Utilities & Unregulated Power - 0.5%
2,350 Energen Corp. $ 138,533
-----------
Utilities - 0.2%
1,625 UGI Corp. $ 66,479
-----------
Total Utilities $ 1,216,838
-----------
TOTAL COMMON STOCKS
(Cost $20,981,073) $26,022,775
-----------
EXCHANGE TRADED FUND - 0.8%
1,150 iShares Russell 2000 Value ETF (a) $ 221,904
-----------
TOTAL EXCHANGE TRADED FUND
(Cost $162,579) $ 221,904
-----------
Shares Value
TEMPORARY CASH INVESTMENT - 3.9%
Security Lending Collateral - 3.9%
1,134,938 Securities Lending Investment Fund,
2.18% $ 1,134,938
-----------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $1,134,938) $ 1,134,938
-----------
TOTAL INVESTMENTS IN
SECURITIES - 94.9%
(Cost $22,278,590) $27,379,617
-----------
OTHER ASSETS AND
LIABILITIES - 5.1% $ 1,458,402
-----------
TOTAL NET ASSETS - 100.0% $28,838,019
==========
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
1,700 American Italian Pasta Co. $ 39,525
3,735 Cross Country Healthcare, Inc.* 67,529
16,500 Feldman Mall Properties, Inc.* 214,500
1,045 iShares Russell 2000 Value (ETF) 201,643
5,320 Odyssey Re Holdings, Corp. 134,117
24,685 Rent-Way, Inc.* 197,727
4,964 Rewards Network, Inc.* 34,748
1,425 Selective Insurance Group, Inc. 63,042
3,110 Sunrise Senior Living, Inc.* 144,180
----------
Total $1,097,011
==========
48 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 98.4%
Energy - 3.4%
Oil & Gas Drilling - 0.7%
2,100 Stone Energy Corp.* $ 94,689
-----------
Oil & Gas Equipment & Services - 0.7%
3,100 Maverick Tube Corp.* $ 93,930
-----------
Oil & Gas Exploration & Production - 2.0%
2,925 Forest Oil Corp.* (a) $ 92,781
1,600 Houston Exploration Co.* 90,096
2,703 Spinnaker Exploration Co.* 94,794
-----------
$ 277,671
-----------
Total Energy $ 466,290
-----------
Materials - 7.7%
Aluminum - 0.7%
3,900 Century Aluminum Co.* $ 102,414
-----------
Gold - 0.5%
11,125 IAMGOLD Corp. $ 73,536
-----------
Materials - 0.4%
625 Mega Blocks* $ 9,928
2,950 Mega Blocks, Inc. (144A)* 46,861
-----------
$ 56,789
-----------
Metal & Glass Containers - 0.6%
1,775 Kennametal, Inc. $ 88,342
-----------
Paper Products - 1.4%
3,600 Flowserve Corp.* $ 99,144
5,250 Wausau-Mosinee Paper Corp. 93,765
-----------
$ 192,909
-----------
Precious Metals & Minerals - 0.7%
8,500 Stillwater Mining Co.* $ 95,710
-----------
Specialty Chemicals - 2.7%
3,700 Cambrex Corp. $ 100,270
3,300 H.B. Fuller Co. 94,083
9,700 PolyOne Corp.* 87,882
8,775 Wellman, Inc. 93,805
-----------
$ 376,040
-----------
Steel - 0.7%
3,200 NS Group, Inc.* $ 88,960
-----------
Total Materials $ 1,074,700
-----------
Capital Goods - 6.5%
Aerospace & Defense - 1.2%
5,600 Hexcel Corp.* $ 81,200
7,300 Orbital Sciences Corp.* (a) 86,359
-----------
$ 167,559
-----------
Building Products - 0.7%
5,000 Lennox International, Inc. $ 101,750
-----------
Shares Value
Construction, Farm Machinery &
Heavy Trucks - 0.7%
1,200 The Toro Co. $ 97,620
-----------
Construction & Engineering - 0.7%
5,500 Perini Corp.* $ 91,795
-----------
Electrical Components & Equipment - 1.2%
2,900 Acuity Brands, Inc. $ 92,220
2,500 Thomas & Betts Corp.* 76,875
-----------
$ 169,095
-----------
Industrial Conglomerates - 1.3%
4,900 Brush Engineered Materials, Inc.* $ 90,650
4,700 Tredegar Corp. 94,987
-----------
$ 185,637
-----------
Industrial Machinery - 0.7%
2,600 Albany International Corp. $ 91,416
-----------
Total Capital Goods $ 904,872
-----------
Commercial Services & Supplies - 5.3%
Data Processing Services - 0.7%
7,450 Gartner Group, Inc.* $ 92,827
-----------
Commercial Printing - 0.4%
1,675 John H. Harland Co. $ 60,468
-----------
Diversified Commercial Services - 3.1%
2,301 The Brinks Co. $ 90,936
3,650 Central Parking Corp. 55,298
4,394 FTI Consulting, Inc.* 92,582
2,000 Regis Corp. 92,300
5,900 Tetra Tech, Inc* 98,766
-----------
$ 429,882
-----------
Employment Services - 0.6%
14,700 The Princeton Review, Inc.* $ 90,405
-----------
Environmental Services - 0.5%
12,275 Newpark Resources, Inc.* $ 63,216
-----------
Total Commercial Services &
Supplies $ 736,798
-----------
Transportation - 3.5%
Airlines - 1.4%
2,800 Alaska Air Group, Inc.* $ 93,772
7,600 ExpressJet Holdings, Inc.* 97,888
-----------
$ 191,660
-----------
Trucking - 2.1%
2,600 Overnite Corp. $ 96,824
9,100 Swift Transportation Co., Inc.* 195,468
-----------
$ 292,292
-----------
Total Transportation $ 483,952
-----------
The accompanying notes are an integral part of these financial statements.
49
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Automobiles & Components - 1.3%
Auto Parts & Equipment - 0.6%
5,400 Aftermarket Technology Corp.* $ 86,940
-----------
Automobile Manufacturers - 0.7%
2,300 Winnebago Industries, Inc.* $ 89,838
-----------
Total Automobiles & Components $ 176,778
-----------
Consumer Durables & Apparel - 2.7%
Apparel, Accessories & Luxury Goods - 0.7%
10,100 Charming Shoppes, Inc.* $ 94,637
-----------
Footwear - 0.7%
3,100 Wolverine World Wide, Inc. $ 97,402
-----------
Housewares & Specialties - 0.7%
2,775 Yankee Candle Co. $ 92,075
-----------
Leisure Products - 0.6%
3,900 JAKKS Pacific, Inc.* $ 86,229
-----------
Total Consumer Durables & Apparel $ 370,343
-----------
Hotels, Restaurants & Leisure - 2.4%
Leisure Facilities - 0.6%
4,000 Vail Resorts, Inc.* $ 89,680
-----------
Restaurants - 1.8%
5,800 Ruby Tuesday, Inc. $ 151,264
4,900 The Steak n Shake Co.* 98,392
-----------
$ 249,656
-----------
Total Hotels, Restaurants & Leisure $ 339,336
-----------
Media - 2.7%
Advertising - 0.7%
1,600 R.H. Donnelley Corp.* $ 94,480
-----------
Broadcasting & Cable Television - 0.6%
6,000 Gray Television, Inc. $ 93,000
-----------
Movies & Entertainment - 0.7%
3,550 Alliance Atlantis Communications, Inc.* $ 97,554
-----------
Publishing - 0.7%
4,875 Journal Register Co.* $ 94,234
-----------
Total Media $ 379,268
-----------
Retailing - 5.1%
Apparel Retail - 1.9%
3,100 Aeropostale, Inc.* $ 91,233
7,500 Guess?, Inc.* 94,125
6,500 Skechers U.S.A.* 84,240
-----------
$ 269,598
-----------
Distributors - 1.2%
3,200 Beacon Roofing Supply, Inc.* $ 63,552
3,500 Wesco International, Inc.* 103,740
-----------
$ 167,292
-----------
Shares Value
General Merchandise Stores - 0.6%
3,000 American Greetings Corp. $ 76,050
-----------
Internet Retail - 0.7%
8,000 Netflix, Inc.* $ 98,640
-----------
Specialty Stores - 0.7%
7,400 Payless ShoeSource, Inc.* $ 91,020
-----------
Total Retailing $ 702,600
-----------
Food & Drug Retailing - 1.4%
Food Distributors - 0.7%
1,939 The J.M. Smucker Co. $ 91,269
-----------
Food Retail - 0.7%
2,300 Sanderson Farms, Inc. $ 99,544
-----------
Total Food & Drug Retailing $ 190,813
-----------
Food, Beverage & Tobacco - 0.6%
Agricultural Products - 0.6%
1,670 Corn Products International, Inc. $ 89,445
-----------
Total Food, Beverage & Tobacco $ 89,445
-----------
Household & Personal Products - 0.7%
Household Products - 0.7%
3,850 Nu Skin Enterprises, Inc. $ 97,713
-----------
Total Household & Personal
Products $ 97,713
-----------
Health Care Equipment & Services - 9.3%
Health Care Distributors - 0.8%
2,300 United Therapeutics Corp.* $ 103,845
-----------
Health Care Equipment - 2.0%
2,475 Haemonetics Corp.* $ 89,620
2,575 PolyMedica Corp. 96,022
3,900 Steris Corp.* 92,508
-----------
$ 278,150
-----------
Health Care Facilities - 1.9%
2,600 Lifepoint Hospitals, Inc.* $ 90,532
2,002 Sunrise Senior Living, Inc.* (a) 92,813
1,900 Universal Health Services, Inc. (Class B) 84,550
-----------
$ 267,895
-----------
Health Care Services - 3.3%
1,700 Cerner Corp.* (a) $ 90,389
3,300 Lifeline Systems, Inc.* 85,008
1,425 Pediatrix Medical Group, Inc.* 91,271
5,025 Providence Service Corp.* 105,374
4,496 Parexel International Corp.* 91,269
-----------
$ 463,311
-----------
Health Care Supplies - 0.6%
5,800 Merit Medical Systems, Inc.* $ 88,624
-----------
50 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Managed Health Care - 0.7%
5,050 First Health Group Corp.* $ 94,486
-----------
Total Health Care Equipment &
Services $ 1,296,311
-----------
Pharmaceuticals & Biotechnology - 4.4%
Biotechnology - 3.0%
4,925 Cubist Pharmaceuticals, Inc.* $ 58,263
4,200 Connetics Corp.* 102,018
12,500 Indevus Pharmaceuticals, Inc.* (a) 74,500
7,300 InterMune, Inc.* 96,798
8,600 Regeneron Pharmaceuticals, Inc.* 79,206
-----------
$ 410,785
-----------
Pharmaceuticals - 1.4%
4,100 Able Laboratories, Inc.* $ 93,275
3,600 Bone Care International, Inc.* 100,260
-----------
$ 193,535
-----------
Total Pharmaceuticals &
Biotechnology $ 604,320
-----------
Banks - 10.6%
Diversified Banks - 1.4%
4,800 Provident Financial Services, Inc. $ 92,976
3,100 Trustmark Corp. 96,317
-----------
$ 189,293
-----------
Regional Banks - 7.3%
3,700 BancorpSouth, Inc. $ 90,169
3,300 Community Bank System, Inc. 93,225
2,200 Chemical Financial Corp. 94,424
2,600 Central Pacific Financial Corp.* 94,042
1,325 City National Corp. 93,611
2,200 First Community Bancorp 93,940
5,300 First Financial Bancorp 92,750
2,900 Greater Bay Bancorp 80,852
3,500 Irwin Financial Corp. 99,365
3,300 Oriental Financial Group, Inc. 93,423
3,600 Susquehanna Bancshares, Inc. 89,820
-----------
$ 1,015,621
-----------
Thrifts & Mortgage Finance - 1.9%
2,300 BankUnited Financial Corp.* $ 73,485
3,025 Commercial Federal Corp. 89,873
2,125 Webster Financial Corp. 107,610
-----------
$ 270,968
-----------
Total Banks $ 1,475,882
-----------
Diversified Financials - 2.8%
Consumer Finance - 0.7%
3,800 Charter Municipal Mortgage
Acceptance Co. $ 92,872
-----------
Shares Value
Consumer Finance - 1.4%
4,078 Advanta Corp. (Class B) $ 98,973
13,997 Rewards Network, Inc.* (a) 97,979
-----------
$ 196,952
-----------
Investment Banking & Brokerage - 0.7%
6,078 Apollo Investment Corp. $ 91,778
-----------
Total Diversified Financials $ 381,602
-----------
Insurance - 2.6%
Life & Health Insurance - 0.7%
2,100 AmerUs Group Co. $ 95,130
-----------
Property & Casualty Insurance - 1.9%
4,600 Bristol West Holdings, Inc. $ 92,000
2,500 Infinity Property & Casualty Corp. 88,000
2,020 Selective Insurance Group, Inc. 89,365
-----------
$ 269,365
-----------
Total Insurance $ 364,495
-----------
Real Estate - 6.9%
Real Estate Investment Trusts - 6.9%
8,500 Anworth Mortgage Asset Corp. $ 91,035
3,100 Brandywine Realty Trust 91,109
4,577 BioMed Property Trust, Inc. 101,655
2,850 Capital Trust, Inc. 87,524
2,900 Cousins Properties, Inc. 87,783
2,800 Heritage Property Investment Trust 89,852
10,000 MFA Mortgage Investments, Inc. 88,200
2,800 Newcastle Investment Corp. 88,984
8,195 Provident Senior Living* 131,120
1,600 Redwood Trust, Inc. 99,344
-----------
$ 956,606
-----------
Total Real Estate $ 956,606
-----------
Software & Services - 6.1%
Application Software - 3.4%
3,700 Advent Software, Inc.* $ 75,776
3,500 Macrovision Corp.* 90,020
14,500 Parametric Technology Co.* 85,405
7,100 Valueclick, Inc.* 94,643
9,100 Wind River Systems* 345,844
-----------
$ 691,688
-----------
Data Processing & Outsourced Services - 0.7%
5,700 The BISYS Group, Inc.* $ 93,765
-----------
Home Entertainment Software - 0.7%
12,375 Plato Learning, Inc.* $ 92,194
-----------
Internet Software & Services - 0.6%
7,000 Earthlink, Inc.* $ 80,640
-----------
The accompanying notes are an integral part of these financial statements.
51
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Systems Software - 0.7%
8,875 Borland Software Corp.* $ 103,660
-----------
Total Software & Services $ 1,061,947
-----------
Technology, Hardware & Equipment - 5.9%
Networking Equipment - 0.6%
13,900 Extreme Networks, Inc.* $ 91,045
-----------
Communications Equipment - 2.7%
15,100 Arris Group, Inc.* $ 106,304
4,800 CommScope, Inc.* 90,720
5,200 SeaChange International, Inc.* (a) 90,688
8,500 Symmetricom, Inc.* 82,535
-----------
$ 370,247
-----------
Computer Storage & Peripherals - 1.2%
3,500 Intergraph Corp.* $ 94,255
4,000 Novatel Wireless, Inc.* (a) 77,520
-----------
$ 171,775
-----------
Electronic Equipment & Instruments - 0.7%
12,400 Identix, Inc.* $ 91,512
-----------
Electronic Manufacturing Services - 0.7%
7,800 TTM Technologies, Inc.* $ 92,040
-----------
Total Technology, Hardware &
Equipment $ 816,619
-----------
Semiconductors - 2.8%
Semiconductor Equipment - 1.4%
11,900 Axcelis Technologies, Inc.* $ 96,747
5,246 Photronics, Inc.* 86,559
500 PortalPlayer, Inc.* 12,340
-----------
$ 195,646
-----------
Semiconductors - 1.4%
10,100 MIPS Technologies, Inc.* $ 99,485
20,800 SGC Holding Corp.* 94,432
-----------
$ 193,917
-----------
Total Semiconductors $ 389,563
-----------
Telecommunication Services - 1.9%
Integrated Telecommunication Services - 1.3%
7,575 Aeroflex, Inc.* $ 91,809
6,959 CT Communications, Inc. 85,596
-----------
$ 177,405
-----------
Wireless Telecom Services - 0.6%
9,375 Boston Communications Group, Inc.* $ 86,625
-----------
Total Telecommunication Services $ 264,030
-----------
Shares Value
Utilities - 1.8%
Electric Utilities - 0.5%
1,400 CH Energy Group, Inc. $ 67,270
-----------
Gas Utilities - 1.3%
2,500 Atmos Energy Corp. $ 68,375
2,750 People's Energy Corp. 120,857
-----------
$ 189,232
-----------
Total Utilities $ 256,502
-----------
TOTAL COMMON STOCKS
(Cost $12,760,997) $13,658,246
===========
WARRANTS - 0.0%
Energy - 0.0%
Oil & Gas Exploration & Production - 0.0%
1,850 Arena Resources Warrants EXP 8/9/08* $ 5,411
-----------
TOTAL WARRANTS
(Cost $1,885) $ 5,411
-----------
TEMPORARY CASH INVESTMENT - 4.2%
Security Lending Collateral - 4.2%
579,352 Securities Lending Investment Fund,
2.18% $ 579,352
-----------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $579,352) $ 579,352
-----------
TOTAL INVESTMENTS IN
SECURITIES - 102.6%
(Cost $13,342,234) $14,243,009
-----------
OTHER ASSETS
AND LIABILITIES - (2.6)% $ (372,893)
-----------
TOTAL NET ASSETS - 100.0% $13,870,116
===========
* Non-income producing 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, 2004, the value of these securities amounted to $46,861 or
0.3% of net assets.
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
1,615 Cerner Corp.* $ 85,870
2,779 Forest Oil Corp.* 88,150
11,875 Indevus Pharmaceuticals, Inc.* 70,775
3,800 Novatel Wireless, Inc.* 73,644
6,935 Orbital Sciences Corp.* 82,041
791 Rewards Network, Inc.* 5,537
3,990 SeaChange International, Inc.* 69,586
1,759 Sunrise Senior Living, Inc.* 81,546
--------
Total $557,149
========
52 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.8%
Energy - 5.9%
Integrated Oil & Gas - 0.9%
7,700 BP Amoco Plc (A.D.R.) $ 449,680
129,540 Occidental Petroleum Corp. 7,559,954
------------
$ 8,009,634
------------
Oil & Gas Drilling - 2.8%
175,915 ENSCO International, Inc. $ 5,583,542
111,530 Nabors Industries, Inc.* 5,720,374
30,000 Pride International, Inc* 616,200
141,630 Transocean Offshore, Inc.* 6,003,696
102,035 Weatherford International, Inc.* 5,234,396
------------
$ 23,158,208
------------
Oil & Gas Exploration & Production - 2.0%
14,200 Apache Corp. $ 718,094
11,700 Anadarko Petroleum Corp. 758,277
185,022 Devon Energy Corp. 7,201,056
203,585 Pioneer Natural Resources Co. 7,145,834
19,300 XTO Energy, Inc. 682,834
------------
$ 16,506,095
------------
Oil & Gas Refining Marketing &
Transportation - 0.3%
27,385 Sun Co., Inc. $ 2,237,628
------------
Total Energy $ 49,911,565
------------
Materials - 8.6%
Commodity Chemicals - 1.2%
171,545 Air Products & Chemicals, Inc. $ 9,944,464
------------
Diversified Chemical - 1.6%
7,200 Olin Corp. $ 158,544
197,420 PPG Industries, Inc. 13,456,147
------------
$ 13,614,691
------------
Diversified Metals & Mining - 1.8%
141,700 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 5,417,191
100,785 Phelps Dodge Corp. 9,969,652
------------
$ 15,386,843
------------
Metal & Glass Containers - 1.6%
305,720 Ball Corp. $ 13,445,566
------------
Paper Products - 2.3%
278,467 Flowserve Corp.* $ 7,668,981
351,900 Meadwestvaco Corp. 11,925,891
------------
$ 19,594,872
------------
Specialty Chemicals - 0.1%
16,500 Ecolab, Inc. $ 579,645
------------
Total Materials $ 72,566,081
------------
Shares Value
Capital Goods - 5.2%
Aerospace & Defense - 1.0%
11,800 Northrop Grumman Corp. $ 641,448
166,500 United Defense Industries, Inc.* 7,867,125
------------
$ 8,508,573
------------
Construction, Farm Machinery &
Heavy Trucks - 0.1%
13,100 Terex Corp.* $ 624,215
------------
Electrical Component & Equipment - 1.3%
627,890 Symbol Technologies, Inc. $ 10,862,497
------------
Industrial Conglomerates - 2.8%
259,780 American Standard Co., Inc.* $ 10,734,110
148,520 ITT Industries, Inc. 12,542,514
------------
$ 23,276,624
------------
Total Capital Goods $ 43,271,909
------------
Commercial Services & Supplies - 4.3%
Commercial Printing - 1.4%
344,740 R.R. Donnelly & Sons Co. $ 12,165,875
------------
Diversified Commercial Services - 1.3%
26,700 FTI Consulting, Inc.* $ 562,569
209,010 H & R Block, Inc. 10,241,490
------------
$ 10,804,059
------------
Environmental Services - 1.6%
396,435 Republic Services, Inc. $ 13,296,430
------------
Total Commercial Services &
Supplies $ 36,266,364
------------
Transportation - 1.7%
Air Freight & Couriers - 0.1%
9,600 Expeditors International of
Washington, Inc. $ 536,448
------------
Airlines - 0.6%
294,810 Southwest Airlines Co. $ 4,799,507
------------
Railroads - 1.0%
139,920 Canadian National Railway Co. $ 8,570,100
------------
Total Transportation $ 13,906,055
------------
Automobiles & Components - 0.1%
Automobile Manufacturers - 0.1%
19,300 Monaco Coach Corp. $ 397,001
8,800 PACCAR, Inc. 708,224
------------
$ 1,105,225
------------
Total Automobiles & Components $ 1,105,225
------------
The accompanying notes are an integral part of these financial statements.
53
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Consumer Durables & Apparel - 4.5%
Apparel, Accessories & Luxury Goods - 0.3%
99,391 The Limited Brands, Inc. $ 2,287,981
------------
Housewares & Specialties - 0.8%
31,700 Leggett & Platt, Inc. $ 901,231
174,600 Yankee Candle Co.* 5,793,228
------------
$ 6,694,459
------------
Leisure Products - 2.2%
940,930 Mattel, Inc. $ 18,338,726
------------
Photographic Products - 1.2%
316,300 Eastman Kodak Co. (a) $ 10,200,675
------------
Total Consumer Durables & Apparel $ 37,521,841
------------
Hotels, Restaurants & Leisure - 1.7%
Hotels, Resorts & Cruise Lines - 0.1%
27,600 Ambassadors Group, Inc. $ 982,836
------------
Restaurants - 1.6%
333,400 Ruby Tuesday, Inc. $ 8,695,072
91,905 Tricon Global Restaurants, Inc. 4,336,078
------------
$ 13,031,150
------------
Total Hotels, Restaurants & Leisure $ 14,013,986
------------
Media - 3.7%
Advertising - 1.7%
1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760
------------
Broadcasting & Cable TV - 1.2%
275,200 Entercom Communications Corp.* $ 9,876,928
------------
Movies & Entertainment - 0.8%
315,360 Regal Entertainment Group (a) $ 6,543,720
16,900 Viacom, Inc. (Class B) 614,991
------------
$ 7,158,711
------------
Total Media $ 31,325,399
------------
Retailing - 9.6%
Apparel Retail - 1.1%
221,900 Liz Claiborne, Inc. $ 9,366,399
------------
Department Stores - 0.7%
150,300 J.C. Penney Co., Inc. $ 6,222,420
------------
General Merchandise Stores - 0.8%
265,100 American Greetings Corp. (a) $ 6,720,285
------------
Internet Retail - 1.4%
418,500 InterActive Corp.* $ 11,558,970
------------
Shares Value
Specialty Stores - 5.6%
984,000 Blockbuster, Inc. (a) $ 9,387,360
793,230 Foot Locker, Inc. 21,361,684
210,700 Tiffany & Co. 6,736,079
471,700 Toys "R" Us, Inc.* 9,655,699
------------
$ 47,140,822
------------
Total Retailing $ 81,008,896
------------
Food & Drug Retailing - 7.6%
Drug Retail - 1.3%
233,170 CVS Corp. $ 10,508,972
------------
Food Distributors - 1.3%
9,800 Amerisourcebergen Corp. $ 575,064
322,700 McKesson HBOC, Inc. 10,152,142
21,900 Performance Food Group Co.* 589,329
------------
$ 11,316,535
------------
Food Retail - 3.4%
284,790 ConAgra, Inc. $ 8,387,066
111,818 Dean Foods Co.* 3,684,403
62,000 Kroger Co.* 1,087,480
770,100 Safeway, Inc. 15,201,774
------------
$ 28,360,723
------------
Hypermarkets & Supercenters - 1.6%
447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453
13,000 Costco Wholesale Corp. 629,330
------------
$ 13,675,783
------------
Total Food & Drug Retailing $ 63,862,013
------------
Food, Beverage & Tobacco - 0.1%
Soft Drinks - 0.1%
13,600 PepsiCo, Inc. $ 709,920
------------
Total Food, Beverage & Tobacco $ 709,920
------------
Health Care Equipment & Services - 6.5%
Health Care Distributors - 0.8%
147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826
21,200 Wyeth 902,908
------------
$ 7,014,734
------------
Health Care Facilities - 3.0%
971,100 Tenet Healthcare Corp.* $ 10,662,678
397,360 Triad Hospitals, Inc.* 14,785,766
------------
$ 25,448,444
------------
Health Care Services - 0.8%
17,200 Accredo Health, Inc.* $ 476,784
111,330 Laboratory Corp. of America Holdings* 5,546,461
23,200 Ims Health, Inc. 538,472
------------
$ 6,561,717
------------
54 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Health Care Supplies - 0.1%
11,200 Cooper Co., Inc. $ 790,608
------------
Managed Health Care - 1.8%
180,400 CIGNA Corp. $ 14,715,228
------------
Total Health Care Equipment &
Services $ 54,530,731
------------
Pharmaceuticals & Biotechnology - 2.0%
Pharmaceuticals - 2.0%
648,200 IVAX Corp.* (a) $ 10,254,524
356,100 Mylan Laboratories, Inc. (a) 6,295,848
23,900 Pfizer, Inc. 642,671
------------
$ 17,193,043
------------
Total Pharmaceuticals &
Biotechnology $ 17,193,043
------------
Banks - 7.1%
Diversified Banks - 0.0%
10,200 U.S. Bancorp $ 319,464
------------
Regional Banks - 4.7%
120,600 City National Corp. $ 8,520,390
175,830 KeyCorp 5,960,637
184,865 Marshall & Ilsley Corp. 8,171,033
264,456 North Fork Bancorporation, Inc. 7,629,556
28,852 Washington Banking Co. 523,664
36,000 West Coast Bancorp Oregon 914,760
120,200 Zions Bancorporation 8,177,206
------------
$ 39,897,246
------------
Thrifts & Mortgage Finance - 2.4%
145,098 Countrywide Financial Corp. $ 5,370,077
323,160 The PMI Group, Inc. 13,491,930
21,500 Washington Mutual, Inc. 909,020
------------
$ 19,771,027
------------
Total Banks $ 59,987,737
------------
Diversified Financials - 6.6%
Consumer Finance - 1.4%
18,414 White Mountains Insurance Group, Ltd. $ 11,895,444
------------
Asset Management & Custody Banks - 1.2%
314,990 Federated Investors, Inc. $ 9,575,696
23,600 Waddell & Reed Financial, Inc. 563,804
------------
$ 10,139,500
------------
Consumer Finance - 1.7%
29,000 MBNA Corp. $ 817,510
832,100 Providian Financial Corp.* 13,704,687
------------
$ 14,522,197
------------
Shares Value
Investment Banking & Brokerage - 2.3%
322,000 A.G. Edwards, Inc. $ 13,913,620
248,150 Investment Technology Group, Inc.* 4,963,000
------------
$ 18,876,620
------------
Total Diversified Financials $ 55,433,761
------------
Insurance - 6.4%
Insurance Brokers - 2.3%
278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551
259,540 Willis Group Holdings, Ltd. (a) 10,685,262
------------
$ 19,343,813
------------
Life & Health Insurance - 2.0%
111,030 Jefferson - Pilot Corp. $ 5,769,119
6,900 Stancorp Financial Group, Inc. 569,250
554,700 UNUM Corp. (a) 9,951,318
------------
$ 16,289,687
------------
Property & Casualty Insurance - 2.1%
64,905 Ambac Financial Group, Inc. $ 5,330,648
238,000 Safeco Corp. 12,433,120
------------
$ 17,763,768
------------
Total Insurance $ 53,397,268
------------
Software & Services - 4.4%
Application Software - 1.6%
71,100 Captaris, Inc.* $ 366,876
14,600 Intuit, Inc.* 642,546
18,200 Microsoft Corp. 486,122
407,100 Veritas Software Corp.* 11,622,705
------------
$ 13,118,249
------------
Data Processing & Outsourced Services - 2.7%
584,730 The BISYS Group, Inc.* $ 9,618,809
14,800 Fiserv, Inc.* 594,812
437,829 SunGard Data Systems, Inc.* 12,403,696
------------
$ 22,617,317
------------
Systems Software - 0.1%
19,020 Netiq Corp.* $ 232,234
36,000 WatchGuard Technologies, Inc.* 159,480
------------
$ 391,714
------------
Total Software & Services $ 36,127,280
------------
Technology, Hardware & Equipment - 8.0%
Communications Equipment - 2.0%
356,600 Century Telephone Enterprises, Inc. $ 12,648,602
480,221 Tellabs, Inc.* 4,125,098
------------
$ 16,773,700
------------
The accompanying notes are an integral part of these financial statements.
55
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Computer Hardware - 0.6%
76,360 NCR Corp.* $ 5,286,403
------------
Computer Storage & Peripherals - 3.1%
275,600 Imation Corp. $ 8,772,348
277,500 Sandisk Corp.* 6,929,174
333,900 Storage Technology Corp.* 10,554,579
------------
$ 26,256,101
------------
Electronic Equipment & Instruments - 1.1%
123,980 W.W. Grainger, Inc. $ 8,259,548
28,000 Ingram Micro, Inc.* 582,400
------------
$ 8,841,948
------------
Technology Distributors - 1.2%
150,320 Fisher Scientific International, Inc.* $ 9,376,962
19,600 Tektronix, Inc. 592,115
------------
$ 9,969,077
------------
Total Technology, Hardware &
Equipment $ 67,127,229
------------
Semiconductors - 0.2%
Semiconductor Equipment - 0.0%
24,500 FEI Co.* $ 514,500
------------
Semiconductors - 0.2%
36,300 Intel Corp. $ 849,057
36,700 Micron Technology, Inc.* 453,245
50,400 Triquint Semiconductor, Inc.* 224,280
------------
$ 1,526,582
------------
Total Semiconductors $ 2,041,082
------------
Telecommunication Services - 0.1%
Integrated Telecommunication Services - 0.1%
20,600 SBC Communications, Inc. $ 530,862
14,700 Verizon Communications, Inc. 595,498
------------
$ 1,126,360
------------
Total Telecommunication Services $ 1,126,360
------------
Utilities - 5.5%
Electric Utilities - 4.1%
45,800 Avista Corp. $ 809,286
168,475 Constellation Energy Group 7,364,041
131,915 Entergy Corp. 8,916,137
122,500 NSTAR 6,649,300
322,500 PG&E Corp.* 10,732,800
------------
$ 34,471,564
------------
Multi-Utilities & Unregulated Power - 1.4%
836,100 Reliant Energy* (a) $ 11,412,762
------------
Total Utilities $ 45,884,323
------------
TOTAL COMMON STOCKS
(Cost $694,162,506) $838,318,071
------------
Principal
Amount Value
TEMPORARY CASH INVESTMENTS - 8.9%
Repurchase Agreement - 0.9%
$7,500,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,500,000 plus accrued interest on
1/3/05 collateralized by $7,133,000
U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000
------------
Shares
Security Lending Collateral - 8.0%
67,222,325 Securities Lending
Investment Fund, 2.18% $ 67,222,325
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $74,722,325) $ 74,722,325
------------
TOTAL INVESTMENTS IN
SECURITIES - 108.7%
(Cost $768,884,831) $913,040,396
------------
OTHER ASSETS
AND LIABILITIES - (8.7%) $(73,064,457)
------------
TOTAL NET ASSETS - 100.0% $839,975,936
=============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
261,495 American Greetings Corp. $ 6,628,898
386,336 BJ'S Wholesale Club, Inc.* 11,253,968
775,700 Blockbuster, Inc. 7,400,178
100,000 Eastman Kodak Co. 3,225,000
122,760 IVAX Corp.* 1,942,063
338,295 Mylan Laboratories, Inc. 5,981,056
294,557 Regal Entertainment Group 6,112,058
214,400 Reliant Energy* 2,926,560
521,740 UNUM Corp. 9,360,016
245,613 Willis Group Holdings, Ltd. 10,111,886
-----------
Total $64,941,683
===========
56 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 99.5%
Energy - 1.5%
Integrated Oil & Gas - 0.9%
6,100 Occidental Petroleum Corp. $ 355,996
-----------
Oil & Gas Refining Marketing &
Transportation - 0.6%
9,700 Repsol SA (A.D.R.) $ 253,170
-----------
Total Energy $ 609,166
-----------
Materials - 4.4%
Diversified Metals & Mining - 4.4%
27,100 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 1,036,033
7,300 Phelps Dodge Corp. 722,116
-----------
$ 1,758,149
-----------
Total Materials $ 1,758,149
-----------
Capital Goods - 9.0%
Industrial Conglomerates - 6.6%
12,200 American Standard Co., Inc.* $ 504,104
5,700 Illinois Tool Works, Inc. 528,276
6,400 Johnson Controls, Inc. 406,016
20,200 Tyco International, Ltd. 721,948
4,700 United Technologies Corp. 485,745
-----------
$ 2,646,089
-----------
Industrial Machinery - 2.4%
12,800 Deere & Co. $ 952,320
-----------
Total Capital Goods $ 3,598,409
-----------
Commercial Services & Supplies - 1.8%
Diversified Commercial Services - 0.8%
1,300 Apollo Group, Inc.* $ 104,923
3,300 The Dun & Bradstreet Corp.* 196,845
-----------
$ 301,768
-----------
Office Services & Supplies - 1.0%
7,700 Canon, Inc. (A.D.R.) $ 417,802
-----------
Total Commercial Services &
Supplies $ 719,570
-----------
Consumer Durables & Apparel - 1.4%
Apparel, Accessories & Luxury Goods - 1.4%
22,500 TJX Companies, Inc. $ 565,425
-----------
Total Consumer Durables & Apparel $ 565,425
-----------
Shares Value
Hotels, Restaurants & Leisure - 1.9%
Restaurants - 1.9%
9,400 Ruby Tuesday, Inc. $ 245,152
10,600 Tricon Global Restaurants, Inc. 500,108
-----------
$ 745,260
-----------
Total Hotels, Restaurants & Leisure $ 745,260
-----------
Media - 3.7%
Broadcasting & Cable Television - 1.8%
65,800 Liberty Media Corp.* $ 722,484
-----------
Movies & Entertainment - 1.9%
27,000 The Walt Disney Co. $ 750,600
-----------
Total Media $ 1,473,084
-----------
Retailing - 3.8%
Apparel Retail - 0.7%
6,800 Liz Claiborne, Inc. $ 287,028
-----------
Computer & Electronics Retail - 1.1%
7,500 Best Buy Co., Inc. $ 445,650
-----------
Home Improvement Retail - 2.0%
13,500 Lowe's Co., Inc. $ 777,465
-----------
Total Retailing $ 1,510,143
-----------
Food & Drug Retailing - 2.4%
Food Distributors - 2.4%
16,300 Cardinal Health, Inc. $ 947,845
-----------
Total Food & Drug Retailing $ 947,845
-----------
Food, Beverage & Tobacco - 6.7%
Soft Drinks - 4.2%
9,500 Fomento Economico Mexicano SA de C.V. $ 499,795
22,800 PepsiCo, Inc. 1,190,160
-----------
$ 1,689,955
-----------
Tobacco - 2.5%
16,200 Altria Group, Inc. $ 989,820
-----------
Total Food, Beverage & Tobacco $ 2,679,775
-----------
Household & Personal Products - 4.3%
Household Products - 2.5%
18,300 Procter & Gamble Co. $ 1,007,964
-----------
Personal Products - 1.8%
18,000 Avon Products, Inc. $ 696,600
-----------
Total Household & Personal
Products $ 1,704,564
-----------
The accompanying notes are an integral part of these financial statements.
57
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Health Care Equipment & Services - 6.8%
Health Care Distributors - 1.9%
29,800 Bristol-Myers Squibb Co. $ 763,476
-----------
Health Care Equipment - 3.1%
11,800 AstraZeneca Plc (A.D.R.) $ 429,402
11,600 Guidant Corp. 836,360
-----------
$ 1,265,762
-----------
Health Care Facilities - 0.8%
7,900 HCA, Inc. $ 315,684
-----------
Health Care Supplies - 1.0%
7,500 Smith & Nephew Plc (A.D.R.) $ 388,200
-----------
Total Health Care Equipment &
Services $ 2,733,122
-----------
Pharmaceuticals & Biotechnology - 14.1%
Biotechnology - 5.0%
18,558 Amgen, Inc.* $ 1,190,496
14,000 Gilead Sciences, Inc.* 489,860
6,800 ImClone Systems, Inc.* 313,344
-----------
$ 1,993,700
-----------
Pharmaceuticals - 9.1%
17,900 IVAX Corp.* $ 283,178
32,200 Merck & Co., Inc. 1,034,908
59,900 Pfizer, Inc. 1,610,711
35,100 Schering-Plough Corp. 732,888
-----------
$ 3,661,685
-----------
Total Pharmaceuticals &
Biotechnology $ 5,655,385
-----------
Banks - 1.3%
Diversified Banks - 1.3%
5,100 Bank of America Corp. $ 239,649
5,100 Wachovia Corp. 268,260
-----------
$ 507,909
-----------
Total Banks $ 507,909
-----------
Diversified Financials - 3.7%
Consumer Finance - 1.2%
16,700 MBNA Corp. $ 470,773
-----------
Other Diversified Finance Services - 2.5%
21,100 Citigroup, Inc. $ 1,016,598
-----------
Total Diversified Financials $ 1,487,371
-----------
Insurance - 5.9%
Life & Health Insurance - 1.5%
14,800 Aflac, Inc. $ 589,632
-----------
Shares Value
Multi-Line Insurance - 3.5%
21,600 American International Group, Inc. $ 1,418,472
-----------
Property & Casualty Insurance - 0.9%
7,900 ACE, Ltd. $ 337,725
-----------
Total Insurance $ 2,345,829
-----------
Software & Services - 9.1%
Application Software - 5.9%
74,000 Microsoft Corp. $ 1,976,540
15,500 Macrovision Corp.* 398,660
-----------
$ 2,375,200
-----------
Home Entertainment Software - 1.2%
13,400 Take-Two Interactive Software, Inc.* (a) $ 466,186
-----------
IT Consulting & Other Services - 2.0%
29,900 Accenture, Ltd.* $ 807,300
-----------
Total Software & Services $ 3,648,686
-----------
Technology Hardware & Equipment - 12.1%
Communications Equipment - 1.6%
37,400 Avaya, Inc.* $ 643,280
-----------
Computer Hardware - 4.1%
5,700 Diebold, Inc. $ 317,661
9,300 Dell, Inc.* 391,902
45,200 Hewlett-Packard Co. 947,844
-----------
$ 1,657,407
-----------
Computer Storage & Peripherals - 3.5%
55,300 Sandisk Corp.* $ 1,380,841
-----------
Electronic Equipment & Instruments - 2.9%
5,300 Samsung Electronics $ 1,160,700
-----------
Total Technology Hardware &
Equipment $ 4,842,228
-----------
Semiconductors - 3.1%
42,900 Taiwan Semiconductor
Manufacturing Co. (A.D.R.) $ 364,221
36,000 Texas Instruments, Inc. 886,320
-----------
$ 1,250,541
-----------
Total Semiconductors $ 1,250,541
-----------
Telecommunication Services - 2.5%
Wireless Telecommunication Services - 2.5%
36,400 Vodafone Group Plc (A.D.R.) $ 996,632
-----------
Total Telecommunication Services $ 996,632
-----------
TOTAL COMMON STOCKS
(Cost $36,802,330) $39,779,093
-----------
58 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
TEMPORARY CASH INVESTMENT - 1.0%
Security Lending Collateral - 1.0%
413,820 Securities Lending Investment Fund,
2.18% $ 413,820
-----------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $413,820) $ 413,820
-----------
TOTAL INVESTMENTS IN
SECURITIES - 100.4%
(Cost $37,216,150) $40,192,913
-----------
OTHER ASSETS
AND LIABILITIES - (0.4)% $ (143,560)
-----------
TOTAL NET ASSETS - 100.0% $40,049,353
===========
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
11,495 Take-Two Interactive Software,
Inc.* $ 399,911
---------
Total $ 399,911
=========
The accompanying notes are an integral part of these financial statements.
59
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 97.7%
Hotels, Restaurants & Leisure - 5.4%
Hotels, Resorts & Cruise Lines - 5.4%
93,500 Hilton Hotels Corp. $ 2,126,190
54,000 Starwood Hotels & Resorts 3,153,600
------------
$ 5,279,790
------------
Total Hotels, Restaurants & Leisure $ 5,279,790
------------
Diversified Financials - 3.3%
Diversified Financial Services - 3.3%
86,000 Brookfield Properties Corp. (a) $ 3,216,400
------------
Total Diversified Financials $ 3,216,400
------------
Real Estate - 89.1%
Real Estate Management & Development - 4.5%
131,500 Catellus Development Corp. $ 4,023,900
27,500 Kite Realty Group Trust 420,200
------------
$ 4,444,100
------------
Real Estate Investment Trusts - 84.6%
38,000 Apartment Investment & Management Co. $ 1,464,520
46,200 AMB Property Corp. 1,866,018
40,000 Arden Realty Group, Inc. 1,508,800
102,000 Archstone Communities Trust 3,906,600
61,500 AvalonBay Communities, Inc. 4,630,950
20,500 BioMed Property Trust, Inc. 455,305
75,500 Boston Properties, Inc. 4,882,585
6,200 Capital Automotive 220,255
44,600 Camden Property Trust 2,274,600
21,000 Corporate Office Properties 616,350
19,000 Carramerica Realty Corp. 627,000
74,000 Developers Diversifies Realty Corp. 3,283,380
53,000 Duke Realty Investments, Inc. 1,809,420
11,300 Equity Lifestyle Properties, Inc. 403,975
86,000 Equity Office Properties Trust 2,504,320
116,000 Equity Residential Property Trust (a) 4,196,880
12,100 First Potomac Realty Trust 275,880
38,000 Federal Realty Investment Trust 1,962,700
74,500 General Growth Properties, Inc. 2,693,920
51,000 Highwoods Properties, Inc. 1,412,700
196,800 Host Marriott Corp. 3,404,640
14,500 Hospitality Properties Trust 667,000
9,000 Healthcare Realty Trust, Inc. 366,300
24,500 iStar Financial, Inc. 1,108,870
16,500 Kimco Realty Corp. 956,835
Shares Value
12,000 Kilroy Realty Corp. $ 513,000
82,000 Liberty Property Trust 3,542,400
30,900 The Macerich Co. 1,940,520
90,900 ProLogis Trust 3,938,697
30,800 Pan Pacific Retail Properties, Inc. 1,931,160
41,000 Prentiss Properties Trust 1,566,200
44,000 Public Storage, Inc. 2,453,000
25,000 PS Business Parks, Inc. 1,127,500
53,600 Regency Centers Corp. 2,969,440
10,800 Spirit Finance Corp.* (a) 136,620
30,500 Shurgard Storage Centers, Inc. 1,342,305
24,700 Strategic Hotel Capital, Inc. 407,550
97,800 Simon DeBartolo Group, Inc. 6,324,726
63,400 Taubman Centers, Inc. 1,898,830
70,400 Trizec Properties Inc. 1,331,968
57,000 United Dominion Realty Trust 1,413,600
36,500 Vornado Realty Trust (a) 2,778,745
------------
$83,116,064
------------
Total Real Estate $87,560,164
------------
TOTAL COMMON STOCKS
(Cost $63,722,198) $96,056,354
------------
TEMPORARY CASH INVESTMENT - 8.4%
Security Lending Collateral - 8.4%
8,225,580 Securities Lending
Investment Fund, 2.18% $ 8,225,580
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $8,225,580) $ 8,225,580
------------
TOTAL INVESTMENTS IN
SECURITIES - 106.1%
(Cost $71,947,778) $104,281,934
------------
OTHER ASSETS
AND LIABILITIES - (6.1)% $(6,035,766)
------------
TOTAL NET ASSETS - 100.0% $98,246,168
===========
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
81,700 Brookfield Properties Corp. $3,055,580
58,700 Equity Residential Property Trust 2,123,766
10,260 Spirit Finance Corp.* 129,789
34,675 Vornado Realty Trust 2,639,808
----------
Total $7,948,943
==========
60 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 98.9%
Energy - 7.8%
Integrated Oil & Gas - 5.8%
20,126 BP Amoco Plc (A.D.R.) $ 1,175,358
31,052 ConocoPhillips 2,696,245
241,264 ChevronTexaco Corp. 12,668,773
292,714 Exxon Mobil Corp. 15,004,520
44,680 Occidental Petroleum Corp. 2,607,525
------------
$ 34,152,421
------------
Oil & Gas Drilling - 0.7%
60,277 Schlumberger, Ltd. $ 4,035,545
------------
Oil & Gas Exploration & Production - 1.3%
99,995 Apache Corp. $ 5,056,747
70,551 Pioneer Natural Resources Co. 2,476,340
------------
$ 7,533,087
------------
Total Energy $ 45,721,053
------------
Materials - 6.5%
Aluminum - 0.6%
117,716 Alcoa, Inc. $ 3,698,637
------------
Commodity Chemicals - 1.3%
27,138 Air Products & Chemicals, Inc. $ 1,573,190
46,466 E.I. du Pont de Nemours and Co. 2,279,157
88,000 Praxair, Inc. 3,885,200
------------
$ 7,737,547
------------
Diversified Chemical - 0.3%
21,688 PPG Industries, Inc. $ 1,478,254
------------
Diversified Metals & Mining - 2.7%
112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778
81,386 Inco, Ltd.* 2,993,377
39,803 Phelps Dodge Corp. 3,937,313
200,118 Rio Tinto Plc 5,886,829
------------
$ 15,520,297
------------
Metal & Glass Containers - 0.8%
104,000 Ball Corp. $ 4,573,920
------------
Paper Products - 0.3%
53,073 Meadwestvaco Corp. $ 1,798,644
------------
Precious Metals & Minerals - 0.3%
40,047 Newmont Mining Corp. $ 1,778,487
------------
Specialty Chemicals - 0.2%
39,222 Ecolab, Inc. $ 1,377,869
------------
Total Materials $ 37,963,655
------------
Shares Value
Capital Goods - 10.3%
Aerospace & Defense - 1.4%
48,104 General Dynamics Corp. $ 5,031,678
54,000 Northrop Grumman Corp. 2,935,440
------------
$ 7,967,118
------------
Electrical Components & Equipment - 2.1%
65,964 Emerson Electric Co. $ 4,624,076
206,300 General Electric Co. 7,529,950
------------
$ 12,154,026
------------
Industrial Conglomerates - 4.5%
79,790 Illinois Tool Works, Inc. $ 7,394,937
120,984 Johnson Controls, Inc. 7,675,225
111,551 United Technologies Corp. 11,528,796
------------
$ 26,598,958
------------
Industrial Machinery - 2.3%
40,569 Caterpillar, Inc. $ 3,955,883
86,222 Deere & Co. 6,414,917
40,000 Ingersoll-Rand Co. 3,212,000
------------
$ 13,582,800
------------
Total Capital Goods $ 60,302,902
------------
Commercial Services & Supplies - 0.5%
Office Services & Supplies - 0.5%
58,698 Canon, Inc. (A.D.R.) $ 3,184,953
------------
Total Commercial Services &
Supplies $ 3,184,953
------------
Transportation - 2.3%
Airlines - 0.5%
170,807 Southwest Airlines Co. $ 2,780,738
------------
Railroads - 1.5%
50,040 Burlington Northern, Inc. $ 2,367,392
180,893 Norfolk Southern Corp. 6,546,518
------------
$ 8,913,910
------------
Trucking - 0.3%
21,253 United Parcel Service (a) $ 1,816,281
------------
Total Transportation $ 13,510,929
------------
Automobiles & Components - 2.1%
Automobile Manufacturers - 2.1%
253,315 Ford Motor Corp. $ 3,708,532
108,616 PACCAR, Inc. 8,741,416
------------
$ 12,449,948
------------
Total Automobiles & Components $ 12,449,948
------------
The accompanying notes are an integral part of these financial statements.
61
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Consumer Durables & Apparel - 0.6%
Apparel, Accessories & Luxury Goods - 0.2%
65,267 Gap, Inc. $ 1,378,439
------------
Housewares & Specialties - 0.4%
84,000 Leggett & Platt, Inc. $ 2,388,120
------------
Total Consumer Durables & Apparel $ 3,766,559
------------
Media - 4.5%
Advertising - 0.6%
43,791 Omnicom Group $ 3,692,457
------------
Movies & Entertainment - 0.2%
51,957 The Walt Disney Co. $ 1,444,405
------------
Publishing - 3.7%
48,893 Elsevier NV $ 665,764
90,111 Gannett Co. 7,362,069
149,146 John Wiley & Sons, Inc. 5,196,247
78,179 McGraw-Hill Co., Inc. 7,156,506
28,800 Tribune Co. 1,213,632
------------
$ 21,594,218
------------
Total Media $ 26,731,080
------------
Retailing - 6.5%
Apparel Retail - 0.2%
24,633 Liz Claiborne, Inc. $ 1,039,759
------------
Computer & Electronics Retail - 0.6%
60,000 Best Buy Co., Inc. $ 3,565,200
11,064 Game Stop Corp. (Class B)* 247,944
------------
$ 3,813,144
------------
Department Stores - 2.0%
80,000 Kohl's Corp.* $ 3,933,600
88,332 May Department Stores Co. 2,596,961
118,523 Nordstrom, Inc. 5,538,580
------------
$ 12,069,141
------------
General Merchandise Stores - 2.2%
34,432 Family Dollar Stores, Inc. $ 1,075,311
228,656 Target Corp. 11,874,106
------------
$ 12,949,417
------------
Home Improvement Retail - 1.3%
110,000 Home Depot, Inc. $ 4,701,400
48,716 Lowe's Co., Inc. 2,805,554
------------
$ 7,506,954
------------
Specialty Stores - 0.2%
30,603 Barnes & Noble, Inc.* $ 987,559
------------
Total Retailing $ 38,365,974
------------
Shares Value
Food & Drug Retailing - 2.5%
Drug Retail - 0.9%
139,003 Walgreen Co. $ 5,333,545
------------
Food Distributors - 1.4%
83,493 Cardinal Health, Inc. $ 4,855,118
84,201 Sysco Corp. 3,213,952
------------
$ 8,069,070
------------
Food Retail - 0.2%
28,200 Kellogg Co. $ 1,259,412
------------
Total Food & Drug Retailing $ 14,662,027
------------
Food, Beverage & Tobacco - 3.7%
Packaged Foods & Meats - 2.1%
86,457 Campbell Soup Co. $ 2,584,200
44,844 General Mills, Inc. 2,229,195
73,219 H.J. Heinz Co., Inc. 2,854,809
54,767 Hershey Foods Corp. 3,041,759
76,005 Sara Lee Corp. 1,834,761
------------
$ 12,544,724
------------
Soft Drinks - 1.6%
178,941 PepsiCo, Inc. $ 9,340,720
------------
Total Food, Beverage & Tobacco $ 21,885,444
------------
Household & Personal Products - 3.8%
Household Products - 3.2%
90,211 Colgate-Palmolive Co. $ 4,615,195
15,015 Clorox Co. 884,834
80,030 Estee Lauder Co. 3,662,973
171,470 Procter & Gamble Co. 9,444,568
------------
$ 18,607,570
------------
Personal Products - 0.6%
58,000 Kimberly-Clark Corp. $ 3,816,980
------------
Total Household & Personal
Products $ 22,424,550
------------
Health Care Equipment & Services - 6.6%
Health Care Distributors - 3.4%
204,554 Abbott Laboratories $ 9,542,444
163,188 Johnson & Johnson 10,349,383
------------
$ 19,891,827
------------
Health Care Equipment - 2.8%
73,222 Becton, Dickinson & Co. $ 4,159,010
32,057 Guidant Corp. 2,311,310
85,000 Medtronic, Inc. 4,221,950
123,159 Stryker Corp. 5,942,422
------------
$ 16,634,692
------------
62 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Managed Health Care - 0.4%
23,937 United Healthcare Group, Inc. $ 2,107,174
------------
Total Health Care Equipment &
Services $ 38,633,693
------------
Pharmaceuticals & Biotechnology - 5.6%
Biotechnology - 0.8%
68,200 Amgen, Inc.* $ 4,375,030
------------
Pharmaceuticals - 4.8%
55,362 Barr Laboratorie, Inc. $ 2,521,185
95,302 Eli Lilly & Co. 5,408,389
236,082 Merck & Co., Inc. 7,587,675
104,212 Mylan Laboratories, Inc. (a) 1,842,468
56,907 Novartis AG 2,876,080
78,800 Pfizer, Inc. 2,118,932
18,810 Roche Holdings AG (A.D.R) 2,184,311
180,617 Schering-Plough Corp. 3,771,283
------------
$ 28,310,323
------------
Total Pharmaceuticals &
Biotechnology $ 32,685,353
------------
Banks - 8.1%
Diversified Banks - 3.7%
288,277 U.S. Bancorp $ 9,028,836
41,456 Wachovia Corp. 2,180,586
174,435 Wells Fargo & Co. 10,841,135
------------
$ 22,050,557
------------
Regional Banks - 3.1%
98,868 First Horizon National Corp. $ 4,262,199
59,000 Fifth Third Bancorp 2,789,520
140,351 National City Corp. 5,270,180
57,444 SunTrust Banks, Inc. 4,243,963
23,185 Zions Bancorporation 1,577,276
------------
$ 18,143,138
------------
Thrifts & Mortgage Finance - 1.3%
177,481 Washington Mutual, Inc. $ 7,503,897
------------
Total Banks $ 47,697,592
------------
Diversified Financials - 5.4%
Asset Management & Custody Banks - 2.6%
114,875 The Bank of New York Co., Inc. $ 3,839,123
45,290 Federated Investors, Inc. 1,376,816
77,103 State Street Corp. 3,787,299
101,277 T. Rowe Price Associates, Inc. 6,299,429
------------
$ 15,302,667
------------
Consumer Finance - 2.2%
138,272 American Express Co. $ 7,794,393
172,000 MBNA Corp. 4,848,680
------------
$ 12,643,073
------------
Shares Value
Investment Banking & Brokerage - 0.6%
60,698 Merrill Lynch & Co., Inc. $ 3,627,919
------------
Diversified Financial Services - 0.0%
1 Citigroup, Inc. $ 48
------------
Total Diversified Financials $ 31,573,707
------------
Insurance - 1.9%
Multi-Line Insurance - 0.9%
78,394 American International Group, Inc. $ 5,148,134
------------
Property & Casualty Insurance - 1.0%
56,844 Chubb Corp. $ 4,371,304
33,919 Safeco Corp. 1,771,929
------------
$ 6,143,233
------------
Total Insurance $ 11,291,367
------------
Software & Services - 5.5%
Application Software - 3.1%
44,591 Adobe Systems, Inc. $ 2,797,639
429,081 Microsoft Corp. 11,460,754
62,259 Symantec Corp.* 1,603,792
82,800 Veritas Software Corp.* 2,363,940
------------
$ 18,226,125
------------
Data Processing & Outsourced Services - 2.4%
107,497 Automatic Data Processing, Inc. $ 4,767,492
38,501 Computer Sciences Corp.* 2,170,301
26,882 DST Systems, Inc.* 1,401,090
29,998 Fiserv, Inc.* 1,205,620
158,920 SunGard Data Systems, Inc.* 4,502,204
------------
$ 14,046,707
------------
Total Software & Services $ 32,272,832
------------
Technology Hardware & Equipment - 6.2%
Communications Equipment - 2.1%
95,000 Century Telephone Enterprises, Inc. $ 3,369,650
221,762 Motorola, Inc. 3,814,306
326,377 Nokia Corp. (A.D.R) 5,114,328
------------
$ 12,298,284
------------
Computer Hardware - 3.7%
27,643 Diebold, Inc. $ 1,540,544
203,265 Dell, Inc.* 8,565,587
76,270 Hewlett-Packard Co. 1,599,382
81,063 IBM Corp. 7,991,191
403,137 Sun Microsystems, Inc.* 2,168,877
------------
$ 21,865,581
------------
Computer Storage & Peripherals - 0.4%
160,000 EMC Corp.* $ 2,379,200
------------
Total Technology Hardware &
Equipment $ 36,543,065
------------
The accompanying notes are an integral part of these financial statements.
63
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Semiconductors - 3.6%
Semiconductor Equipment - 0.9%
308,306 Applied Materials, Inc.* $ 5,272,033
------------
Semiconductors - 2.7%
24,815 Freescale Semiconductors, Inc.* $ 455,602
349,426 Intel Corp. 8,173,074
294,793 Texas Instruments, Inc. 7,257,804
------------
$ 15,886,480
------------
Total Semiconductors $ 21,158,513
------------
Telecommunication Services - 3.1%
Integrated Telecommunication Services - 3.0%
23,765 Alltel Corp. $ 1,396,431
146,005 BellSouth Corp. 4,057,479
218,671 SBC Communications, Inc. 5,635,151
164,000 Verizon Communications, Inc. 6,643,640
------------
$ 17,732,701
------------
Wireless Telecommunication Services - 0.1%
17,897 Nextel Communications, Inc.* $ 536,910
------------
Total Telecommunication Services $ 18,269,611
------------
Utilities - 1.7%
Electric Utilities - 1.4%
32,838 American Electric Power Co., Inc. $ 1,127,655
36,216 Consolidated Edison, Inc. 1,584,450
90,000 Exelon Corp. 3,966,300
57,799 Southern Co. 1,937,422
------------
$ 8,615,827
------------
Gas Utilities - 0.2%
27,431 KeySpan Energy Corp. $ 1,082,153
------------
Water Utilities - 0.1%
18,826 Aqua America, Inc. $ 462,931
------------
Total Utilities $ 10,160,911
------------
TOTAL COMMON STOCKS
(Cost $459,723,725) $581,255,718
============
Principal
Amount Value
TEMPORARY CASH INVESTMENTS - 1.8%
Repurchase Agreement - 1.2%
$ 7,300,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,300,000 plus accrued interest on
1/3/05 collateralized by $6,902,000
U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000
------------
Shares
Security Lending Collateral - 0.6%
3,264,285 Securities Lending
Investment Fund, 2.18% $ 3,264,286
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $10,564,285) $ 10,564,286
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.7%
(Cost $470,288,010) $591,820,004
------------
OTHER ASSETS
AND LIABILITIES - (0.7)% $ (4,056,175)
------------
TOTAL NET ASSETS - 100.0% $587,763,829
============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
99,001 Mylan Laboratories, Inc. $ 1,750,338
16,979 United Parcel Service 1,451,025
-----------
Total $ 3,201,363
===========
64 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
CONVERTIBLE PREFERRED STOCKS - 1.2%
Automobiles & Components - 1.1%
Automobile Manufacturers - 1.1%
2,600 General Motors, 5.25%, 3/6/32 $ 59,800
57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718
------------
$ 3,085,518
------------
Total Automobiles & Components $ 3,085,518
------------
Pharmaceuticals & Biotechnology - 0.1%
Pharmaceuticals - 0.0%
4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322
------------
Total Pharmaceuticals &
Biotechnology $ 247,322
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,000,714) $ 3,332,840
------------
Principal
Amount
USD ($)
CONVERTIBLE CORPORATE BOND - 0.1%
Retailing - 0.1%
Apparel Retail - 0.1%
200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250
------------
Total Retailing $ 265,250
------------
TOTAL CONVERTIBLE CORPORATE BOND
(Cost $200,000) $ 265,250
------------
Shares
COMMON STOCKS - 94.2%
Energy - 9.3%
Integrated Oil & Gas - 9.3%
71,813 ConocoPhillips $ 6,235,523
169,714 ChevronTexaco Corp. 8,911,682
176,110 Exxon Mobil Corp. 9,027,399
36,142 Occidental Petroleum Corp. 2,109,247
------------
$ 26,283,851
------------
Total Energy $ 26,283,851
------------
Materials - 6.9%
Commodity Chemicals - 1.6%
51,941 Air Products & Chemicals, Inc. $ 3,011,020
28,233 E.I. du Pont de Nemours and Co. 1,384,829
------------
$ 4,395,849
------------
Construction Materials - 0.7%
36,142 Vulcan Materials Co. $ 1,973,715
------------
Diversified Chemical - 0.9%
37,925 PPG Industries, Inc. $ 2,584,968
------------
Diversified Metals & Mining - 1.0%
29,700 Phelps Dodge Corp. $ 2,937,924
------------
Paper Products - 0.8%
64,436 Meadwestvaco Corp. $ 2,183,736
------------
Shares Value
Specialty Chemicals - 0.8%
42,784 Valspar Corp. $ 2,139,628
------------
Steel - 1.1%
51,012 Nucor Corp. $ 2,669,968
20,704 Roanoke Electric Steel Corp. 427,972
------------
$ 3,097,940
------------
Total Materials $ 19,313,760
------------
Capital Goods - 8.1%
Aerospace & Defense - 2.7%
53,284 Boeing Co. $ 2,758,513
46,899 General Dynamics Corp. 4,905,635
------------
$ 7,664,148
------------
Electrical Components & Equipment - 1.5%
60,925 Emerson Electric Co. $ 4,270,843
------------
Industrial Conglomerates - 2.8%
66,280 Johnson Controls, Inc. $ 4,204,803
33,767 United Technologies Corp. 3,489,819
------------
$ 7,694,622
------------
Industrial Machinery - 1.1%
28,397 Gorman-Rupp Co. $ 653,131
95,208 The Timken Co. 2,477,312
------------
$ 3,130,443
------------
Total Capital Goods $ 22,760,056
------------
Commercial Services & Supplies - 0.6%
Employment Services - 0.6%
128,355 Servicemaster Co. $ 1,770,015
------------
Total Commercial Services &
Supplies $ 1,770,015
------------
Transportation - 0.9%
Railroads - 0.9%
52,265 Burlington Northern, Inc. $ 2,472,657
------------
Total Transportation $ 2,472,657
------------
Automobiles & Components - 5.7%
Automobile Manufacturers - 5.7%
154,894 Ford Motor Corp. $ 2,267,648
46,700 General Motors Corp. 1,870,802
149,912 PACCAR, Inc. 12,064,918
------------
$ 16,203,368
------------
Total Automobiles & Components $ 16,203,368
------------
Consumer Durables & Apparel - 0.4%
Housewares & Specialties - 0.4%
47,700 Tupperware Corp. $ 988,344
------------
Total Consumer Durables &
Apparel $ 988,344
------------
The accompanying notes are an integral part of these financial statements.
65
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Media - 3.1%
Movies & Entertainment - 1.7%
149,253 Cedar Fair, L.P. $ 4,910,424
------------
Publishing - 1.4%
41,821 McGraw-Hill Co., Inc. $ 3,828,294
------------
Total Media $ 8,738,718
------------
Retailing - 1.2%
Department Stores - 1.2%
111,354 May Department Stores Co. $ 3,273,808
------------
Total Retailing $ 3,273,808
------------
Food, Beverage & Tobacco - 4.7%
Packaged Foods & Meats - 4.2%
152,313 Campbell Soup Co. $ 4,552,636
62,343 General Mills, Inc. 3,099,071
76,105 H.J. Heinz Co., Inc. 2,967,334
48,430 Sara Lee Corp. 1,169,100
------------
$ 11,788,141
------------
Soft Drinks - 0.5%
29,533 PepsiCo, Inc. $ 1,541,623
------------
Total Food, Beverage & Tobacco $ 13,329,764
------------
Household & Personal Products - 1.4%
Household Products - 1.4%
40,479 Colgate-Palmolive Co. $ 2,070,906
30,353 Clorox Co. 1,788,702
------------
$ 3,859,608
------------
Total Household & Personal
Products $ 3,859,608
------------
Health Care Equipment & Services - 4.0%
Health Care Distributors - 3.2%
99,784 Abbott Laboratories $ 4,654,924
28,800 Bristol-Myers Squibb Co. 737,856
59,163 Johnson & Johnson 3,752,117
------------
$ 9,144,897
------------
Health Care Equipment - 0.8%
39,446 Becton, Dickinson & Co. $ 2,240,533
------------
Total Health Care Equipment &
Services $ 11,385,430
------------
Pharmaceuticals & Biotechnology - 1.8%
Pharmaceuticals - 1.8%
59,789 Eli Lilly & Co. $ 3,393,026
53,124 Merck & Co., Inc. 1,707,405
------------
$ 5,100,431
------------
Total Pharmaceuticals &
Biotechnology $ 5,100,431
------------
Shares Value
Banks - 11.7%
Diversified Banks - 4.4%
25,400 Comerica, Inc. $ 1,549,908
88,909 U.S. Bancorp 2,784,630
83,196 Wachovia Corp. 4,376,110
60,514 Wells Fargo & Co. 3,760,945
------------
$ 12,471,593
------------
Regional Banks - 4.3%
64,229 First Horizon National Corp. $ 2,768,912
100,062 National City Corp. 3,757,328
76,456 SunTrust Banks, Inc. 5,648,569
------------
$ 12,174,809
------------
Thrifts & Mortgage Finance - 3.0%
195,686 Washington Mutual, Inc. $ 8,273,604
------------
Total Banks $ 32,920,006
------------
Diversified Financials - 4.8%
Asset Management & Custody Banks - 4.1%
61,735 Eaton Vance Corp. $ 3,219,480
27,800 State Street Corp. 1,365,536
113,009 T. Rowe Price Associates, Inc. 7,029,160
------------
$ 11,614,176
------------
Investment Banking & Brokerage - 0.7%
44,506 A.G. Edwards, Inc. $ 1,923,104
------------
Total Diversified Financials $ 13,537,280
------------
Insurance - 3.2%
Property & Casualty Insurance - 3.2%
57,533 Chubb Corp. $ 4,424,288
89,632 Safeco Corp. 4,682,376
------------
$ 9,106,664
------------
Total Insurance $ 9,106,664
------------
Real Estate - 1.2%
Real Estate Investment Trusts - 1.2%
53,284 Simon DeBartolo Group, Inc. $ 3,445,876
------------
Total Real Estate $ 3,445,876
------------
Software & Services - 0.9%
Application Software - 0.3%
32,011 Microsoft Corp. $ 855,014
------------
Data Processing & Outsourced Services - 0.6%
40,616 Automatic Data Processing, Inc. $ 1,801,320
------------
Total Software & Services $ 2,656,334
------------
Technology Hardware & Equipment - 2.0%
Communications Equipment - 0.6%
91,600 Motorola, Inc. $ 1,575,520
------------
66 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Computer Hardware - 1.4%
62,145 Diebold, Inc. $ 3,463,341
6,402 IBM Corp. 631,109
------------
$ 4,094,450
------------
Total Technology Hardware &
Equipment $ 5,669,970
------------
Telecommunication Services - 6.2%
Integrated Telecommunication Services - 6.2%
53,541 Alltel Corp. $ 3,146,069
140,143 BellSouth Corp. 3,894,574
175,340 SBC Communications, Inc. 4,518,512
64,047 AT&T Corp. 1,220,736
113,589 Verizon Communications, Inc. 4,601,490
------------
$ 17,381,381
------------
Total Telecommunication Services $ 17,381,381
------------
Utilities - 16.1%
Electric Utilities - 10.2%
79,358 Ameren Corp. $ 3,979,010
66,696 American Electric Power Co., Inc. 2,290,341
121,608 Constellation Energy Group 5,315,486
76,537 Consolidated Edison, Inc. 3,348,494
34,077 FPL Group, Inc. 2,547,256
108,460 Great Plains Energy, Inc. 3,284,169
66,088 NSTAR 3,587,257
127,476 Southern Co. 4,272,996
------------
$ 28,625,009
------------
Gas Utilities - 4.2%
15,400 Atmos Energy Corp. $ 421,190
128,160 KeySpan Energy Corp. 5,055,912
124,991 Questar Corp. 6,369,541
------------
$ 11,846,643
------------
Multi-Utilities & Unregulated Power - 1.1%
50,083 Equitable Resources, Inc. $ 3,038,035
------------
Water Utilities - 0.6%
73,317 Aqua America, Inc. $ 1,802,861
------------
Total Utilities $ 45,312,548
------------
TOTAL COMMON STOCKS
(Cost $200,659,301) $265,509,869
------------
Principal
Amount Value
TEMPORARY CASH INVESTMENT - 4.5%
Repurchase Agreement - 4.5%
$12,700,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$12,700,000 plus accrued interest on
1/3/05 collateralized by $12,654,000
U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $12,700,000) $ 12,700,000
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $216,560,015) $281,807,959
------------
OTHER ASSETS
AND LIABILITIES - 0.0% $ 117,819
------------
TOTAL NET ASSETS - 100.0% $281,925,778
============
The accompanying notes are an integral part of these financial statements.
67
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 63.5%
Energy - 5.5%
Integrated Oil & Gas - 0.4%
3,900 Exxon Mobil Corp. $ 199,914
-----------
Oil & Gas Drilling - 4.8%
8,700 Encana Corp. $ 496,422
33,400 ENSCO International, Inc. 1,060,116
22,000 Varco International, Inc.* 641,300
-----------
$ 2,197,838
-----------
Oil & Gas Exploration & Production - 0.3%
3,900 Pioneer Natural Resources Co. $ 136,890
-----------
Total Energy $ 2,534,642
-----------
Materials - 2.0%
Precious Metals & Minerals - 2.0%
21,800 Newmont Mining Corp. $ 968,138
-----------
Total Materials $ 968,138
-----------
Capital Goods - 2.9%
Aerospace & Defense - 3.0%
25,000 Northrop Grumman Corp. $ 1,359,000
-----------
Total Capital Goods $ 1,359,000
-----------
Commercial Services & Supplies - 0.7%
Diversified Commercial Services - 0.7%
7,400 Cintas Corp. $ 324,564
-----------
Total Commercial Services &
Supplies $ 324,564
-----------
Transportation - 2.5%
Trucking - 2.5%
13,400 United Parcel Service $ 1,145,164
-----------
Total Transportation $ 1,145,164
-----------
Media - 3.7%
Broadcasting & Cable Television - 1.4%
8,800 Clear Channel Communications, Inc. $ 294,712
10,200 Comcast Corp.* 334,968
-----------
$ 629,680
-----------
Movies & Entertainment - 2.3%
29,319 Viacom, Inc. (Class B) $ 1,066,918
-----------
Total Media $ 1,696,598
-----------
Retailing - 3.9%
Apparel Retail - 1.5%
16,400 Liz Claiborne, Inc. $ 692,244
-----------
General Merchandise Stores - 2.2%
32,000 Family Dollar Stores, Inc. $ 999,360
-----------
Shares Value
Specialty Stores - 0.2%
6,491 Blockbuster, Inc. $ 61,924
6,491 Blockbuster, Inc. (Class B) 57,186
-----------
$ 119,110
-----------
Total Retailing $ 1,810,714
-----------
Food & Drug Retailing - 5.5%
Drug Retail - 1.0%
9,900 CVS Corp. $ 446,193
-----------
Food Distributors - 0.8%
6,400 Cardinal Health, Inc. $ 372,160
-----------
Food Retail - 2.8%
18,300 Wm. Wrigley Jr. Co. $ 1,266,177
-----------
Hypermarkets & Supercenters - 0.9%
7,800 Wal-Mart Stores, Inc. $ 411,996
-----------
Total Food & Drug Retailing $ 2,496,526
-----------
Food, Beverage & Tobacco - 5.3%
Distillers & Vintners - 2.1%
19,200 Anheuser-Busch Co., Inc. $ 974,016
-----------
Soft Drinks - 3.2%
7,900 The Coca-Cola Co. $ 328,877
21,800 PepsiCo, Inc. 1,137,960
-----------
$ 1,466,837
-----------
Total Food, Beverage & Tobacco $ 2,440,853
-----------
Household & Personal Products - 3.7%
Household Products - 0.9%
9,300 Estee Lauder Co. $ 425,661
-----------
Personal Products - 2.8%
28,100 Gillette Co. $ 1,258,318
-----------
Total Household & Personal
Products $ 1,683,979
-----------
Health Care Equipment & Services - 4.5%
Health Care Distributors - 1.7%
17,800 Wyeth $ 758,102
-----------
Health Care Equipment - 2.8%
17,300 Biomet, Inc. $ 750,647
7,700 Guidant Corp. 555,170
-----------
$ 1,305,817
-----------
Total Health Care Equipment &
Services $ 2,063,919
-----------
Pharmaceuticals & Biotechnology - 3.7%
Biotechnology - 0.9%
6,516 Amgen, Inc.* $ 418,001
-----------
68 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Pharmaceuticals - 2.8%
4,000 Eli Lilly & Co. $ 227,000
39,288 Pfizer, Inc. 1,056,454
-----------
$ 1,283,454
-----------
Total Pharmaceuticals &
Biotechnology $ 1,701,455
-----------
Diversified Financials - 3.0%
Asset Management & Custody Banks - 1.1%
15,700 The Bank of New York Co., Inc. $ 524,694
-----------
Consumer Finance - 1.5%
12,300 American Express Co. $ 693,351
-----------
Investment Banking & Brokerage - 0.4%
2,900 Merrill Lynch & Co., Inc. $ 173,333
-----------
Total Diversified Financials $ 1,391,378
-----------
Insurance - 4.6%
Property & Casualty Insurance - 4.6%
515 Berkshire Hathaway, Inc. (Class B)* $ 1,512,040
6,900 Progressive Corp. 585,396
-----------
$ 2,097,436
-----------
Total Insurance $ 2,097,436
-----------
Software & Services - 6.9%
Application Software - 3.9%
51,800 Microsoft Corp. $ 1,383,578
15,400 Symantec Corp.* 396,704
-----------
$ 1,780,282
-----------
Shares Value
Data Processing & Outsourced Services - 3.0%
32,700 First Data Corp. $ 1,391,058
-----------
Total Software & Services $ 3,171,340
-----------
Technology Hardware & Equipment - 2.4%
Communications Equipment - 0.3%
9,500 Avaya Inc.* $ 163,400
-----------
Computer Hardware - 1.6%
34,222 Hewlett-Packard Co. $ 717,635
-----------
Electronic Manufacture Services - 0.5%
8,500 Molex, Inc. $ 226,526
-----------
Total Technology Hardware &
Equipment $ 1,107,561
-----------
Semiconductors - 0.4%
7,800 Intel Corp. $ 182,442
-----------
Total Semiconductors $ 182,442
-----------
Telecommunication Services - 1.9%
Wireless Telecommunication Services - 1.9%
32,300 Vodafone Group Plc. (A.D.R.) $ 884,374
-----------
Total Telecommunication Services $ 884,374
-----------
TOTAL COMMON STOCKS
(Cost $24,770,144) $29,060,083
-----------
The accompanying notes are an integral part of these financial statements.
69
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
ASSET BACKED SECURITIES - 0.3%
Diversified Financials - 0.2%
Diversified Financial Services - 0.1%
84,728 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 84,212
-----------
Total Diversified Financials $ 84,212
-----------
Utilities - 0.1%
Electric Utilities - 0.1%
70,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 73,167
-----------
Total Utilities $ 73,167
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $158,096) $ 157,379
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3%
Diversified Financials - 0.3%
Diversified Financial Services - 0.3%
100,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 99,814
50,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 49,750
-----------
Total Diversified Financials $ 149,564
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $150,000) $ 149,564
-----------
CORPORATE BONDS - 11.5%
Energy - 0.8%
Integrated Oil & Gas - 0.2%
30,000 BBB+/Baa1 Occidental Petroleum, 7.65%, 2/15/06 $ 31,406
40,000 BBB+/Baa1 Occidental Petroleum, 6.75%, 1/15/12 45,407
-----------
$ 76,813
-----------
Oil & Gas Exploration & Production - 0.2%
100,000 BBB-/NR Gazprom International SA, 7.201%, 2/1/20 (144A) $ 105,750
-----------
Oil & Gas Refining Marketing & Transportation - 0.4%
205,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 $ 221,688
-----------
Total Energy $ 404,251
-----------
Materials - 1.2%
Commodity Chemicals - 0.2%
100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 106,000
-----------
Diversified Metals & Mining - 0.3%
125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 145,687
-----------
Metal & Glass Containers - 0.1%
40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,943
-----------
Paper Packaging - 0.4%
150,000 A/A2 Bemis Co., Inc., 6.7%, 7/1/05 $ 152,563
-----------
Paper Products - 0.2%
100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 $ 103,000
-----------
Total Materials $ 557,193
-----------
70 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Capital Goods - 0.7%
Construction & Engineering - 0.1%
50,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 55,125
-----------
Electrical Components & Equipment - 0.2%
75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,269
-----------
Industrial Conglomerates - 0.2%
55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 60,246
30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 35,114
-----------
$ 95,360
-----------
Industrial Machinery - 0.2%
100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) $ 105,000
-----------
Total Capital Goods $ 337,754
-----------
Commercial Services & Supplies - 0.0%
Diversified Commercial Services - 0.0%
25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 (144A) $ 24,678
-----------
Total Commercial Services & Supplies $ 24,678
-----------
Automobiles & Components - 0.4%
Automobile Manufacturers - 0.4%
200,000 BBB-/Baa2 General Motors, 7.2%, 1/15/11 $ 205,128
-----------
Total Automobiles & Components $ 205,128
-----------
Hotels, Restaurants & Leisure - 0.5%
Hotels, Resorts & Cruise Lines - 0.5%
200,000 BBB-/Baa3 Hilton Hotels, 7.625%, 12/1/12 $ 233,885
-----------
Total Hotels, Restaurants & Leisure $ 233,885
-----------
Media - 1.2%
Broadcasting & Cable Television - 0.8%
250,000 BBB/Baa3 Comcast Cable Corp., 7.125%, 6/15/13 $ 289,636
100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,086
-----------
$ 401,722
-----------
Publishing - 0.4%
170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 194,794
-----------
Total Media $ 596,516
-----------
Retailing - 0.2%
Specialty Stores - 0.2%
100,000 BB/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 99,250
-----------
Total Retailing $ 99,250
-----------
Food, Beverage & Tobacco - 0.4%
Tobacco - 0.4%
150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 162,532
-----------
Total Food, Beverage & Tobacco $ 162,532
-----------
Health Care Equipment & Services - 0.7%
Health Care Facilities - 0.5%
200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 202,841
-----------
Health Care Supplies - 0.2%
100,000 BBB-/Ba1 Bausch & Lomb, 7.125%, 8/1/28 $ 106,550
-----------
Total Health Care Equipment & Services $ 309,391
-----------
The accompanying notes are an integral part of these financial statements.
71
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Banks - 0.3%
Diversified Banks - 0.3%
50,000 NR/Aaa KFW - Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,209
75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 85,383
-----------
$ 134,592
-----------
Total Banks $ 134,592
-----------
Diversified Financials - 1.3%
Consumer Finance - 0.2%
100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,642
-----------
Investment Banking & Brokerage - 0.2%
75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) $ 80,625
-----------
Diversified Financial Services - 0.4%
100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 105,806
100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 96,748
-----------
$ 202,554
-----------
Specialized Finance - 0.5%
100,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) $ 100,250
100,000 B/B2 MDP Acquistions, 9.625%, 10/1/12 111,500
-----------
$ 211,750
-----------
Total Diversified Financials $ 594,571
-----------
Insurance - 1.2%
Life & Health Insurance - 0.2%
100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 96,625
-----------
Multi-Line Insurance - 0.1%
50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 48,353
-----------
Property & Casualty Insurance - 0.7%
85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 88,126
100,000 BBB-/Baa3 Arch Capital Group, Ltd., 7.35%, 5/1/34 106,616
150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 161,429
-----------
$ 356,171
-----------
Reinsurance - 0.2%
100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 110,296
-----------
Total Insurance $ 611,445
-----------
Real Estate - 0.6%
Real Estate Investment Trusts - 0.6%
150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 $ 165,629
100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 103,869
-----------
$ 269,498
-----------
Total Real Estate $ 269,498
-----------
Technology Hardware & Equipment - 0.9%
Communications Equipment - 0.1%
50,000 BB/Ba3 Rogers Wireless Inc., Floating Rate Note, 12/15/10 (144A) $ 52,376
-----------
Computer Hardware - 0.8%
250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 276,039
100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 107,000
-----------
$ 383,039
-----------
Total Technology Hardware & Equipment $ 435,415
-----------
72 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Telecommunication Services - 0.4%
Integrated Telecommunication Services - 0.4%
100,000 BBB+/Ba3 Intelsat, Ltd. 6.5%, 11/1/13 $ 91,000
100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,074
-----------
$ 192,074
-----------
Total Telecommunication Services $ 192,074
-----------
Utilities - 0.2%
Electric Utilities - 0.2%
95,000 BBB-/Baa3 FLP Energy American Wind LLC, 6.639%, 6/20/23 (144A) $ 101,306
-----------
Total Utilities $ 101,306
-----------
TOTAL CORPORATE BONDS
(Cost $4,957,864) $ 5,269,479
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.5%
Government - 22.5%
449,572 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 $ 457,005
186,807 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 193,183
159,028 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 164,515
1,156,543 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,196,375
105,004 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 108,620
35,818 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 37,582
56,705 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 59,741
17,789 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 18,671
145,347 AAA/Aaa Federal National Mortgage Association, 5.0%, 6/1/34 144,284
203,751 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/17 210,912
127,905 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/34 129,926
222,719 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/34 226,239
263,593 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/34 267,760
299,126 AAA/Aaa Federal National Mortgage Association, 5.5%, 10/1/34 303,854
223,574 AAA/Aaa Federal National Mortgage Association, 5.5%, 11/1/33 227,169
136,532 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 141,241
110,000 AAA/Aaa Federal National Mortgage Association, 6.125%, 3/15/12 122,216
67,610 AAA/Aaa Federal National Mortgage Association, 6.5%, 4/1/29 71,353
143,018 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 150,115
94,578 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 99,286
21,208 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/13 22,509
20,623 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/14 21,886
62,139 AAA/Aaa Federal National Mortgage Association, 6.5%, 9/1/32 65,442
50,412 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 52,914
17,685 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 18,562
67,948 AAA/Aaa Federal National Mortgage Association, 6.5%, 12/1/21 71,713
10,000 AAA/Aaa Federal National Mortgage Association, 7.125%, 6/15/10 11,494
36,108 AAA/Aaa Federal National Mortgage Association, 9.0%, 4/1/33 39,090
389,233 AAA/Aaa Freddie Mac, 5.0%, 4/1/34 386,788
241,158 AAA/Aaa Freddie Mac, 5.0%, 5/1/34 239,643
150,000 AAA/Aaa Freddie Mac, 5.75%, 1/15/12 163,413
45,389 AAA/Aaa Freddie Mac, 6.0%, 6/1/34 46,910
260,832 AAA/Aaa Freddie Mac, 6.0%, 11/1/33 269,561
115,459 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/34 115,601
96,149 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/33 98,294
The accompanying notes are an integral part of these financial statements.
73
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
(U.S. Government and Agency Obligations Cont.)
239,253 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/19 $ 249,518
166,589 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 170,305
51,297 AAA/Aaa Government National Mortgage Association, 5.5%, 9/15/33 52,490
353,413 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/32 367,116
133,507 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 140,575
53,615 AAA/Aaa Government National Mortgage Association, 6.5%, 10/15/28 56,547
262,925 AAA/Aaa Government National Mortgage Association I, 5.5%, 6/15/33 268,789
183,588 AAA/Aaa Government National Mortgage Association I, 5.5%, 7/15/33 187,683
148,787 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/32 154,387
467,764 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/33 485,108
297,330 AAA/Aaa Government National Mortgage Association II, 6.0%, 10/20/33 308,997
181,240 AAA/Aaa Government National Mortgage Association II, 5.5%, 2/20/34 185,030
25,322 AAA/Aaa Government National Mortgage Association II, 7.5%, 9/20/29 27,092
470,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 11/15/12 469,210
300,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 11/15/08 314,214
200,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 5/15/14 208,422
130,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 140,573
500,000 AAA/Aaa U.S. Treasury Notes, 5.625%, 5/15/08 536,289
-----------
Total Government $10,276,212
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $10,185,772) $10,276,212
-----------
TOTAL INVESTMENTS IN SECURITIES - 98.1%
(Cost $40,221,876) $44,912,717
-----------
OTHER ASSETS AND LIABILITIES - 1.9% $ 851,493
-----------
TOTAL NET ASSETS - 100.0% $45,764,210
===========
(A.D.R.) American Depositary Receipt
* Non-income producing 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, 2004,th evalue of these securities amounted to $824,112 or
1.8% of net assets.
NR Not rated by either S&P or Moody's
74 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
S&P/Moody's
Ratings
Shares (unaudited) Value
CONVERTIBLE PREFERRED STOCKS - 2.5%
Materials - 2.5%
Construction Materials - 0.1%
1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638
------------
Diversified Metals & Mining - 2.4%
3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500
------------
Total Materials $ 3,021,138
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,077,338) $ 3,021,138
------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited)
CONVERTIBLE CORPORATE BONDS - 32.0%
Materials - 5.4%
Commodity Chemicals - 0.4%
200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750
------------
Diversified Metals & Mining - 1.4%
500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000
500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375
------------
$ 1,744,375
------------
Gold - 0.9%
1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000
250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563
------------
$ 1,171,563
------------
Specialty Chemicals - 0.4%
800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000
------------
Steel - 2.3%
3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750
------------
Total Materials $ 6,615,438
------------
Capital Goods - 4.2%
Aerospace & Defense - 1.8%
1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344
400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000
------------
$ 2,262,344
------------
Construction & Engineering - 1.1%
875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250
500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000
------------
$ 1,376,250
------------
Electrical Component & Equipment - 1.0%
2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381
------------
Industrial Machinery - 0.3%
300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625
------------
Total Capital Goods $ 5,248,600
------------
Media - 1.9%
Advertising - 1.9%
1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000
------------
Total Media $ 2,358,000
------------
The accompanying notes are an integral part of these financial statements.
75
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Retailing - 1.2%
Specialty Stores - 1.2%
1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500
------------
Total Retailing $ 1,492,500
------------
Health Care Equipment & Services - 0.7%
Health Care Equipment - 0.7%
375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438
600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500
------------
Total Health Care Equipment & Services $ 879,938
------------
Pharmaceuticals & Biotechnology - 5.7%
Biotechnology - 0.9%
300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875
850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500
------------
$ 1,159,375
------------
Pharmaceuticals - 4.8%
2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719
2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125
400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500
------------
$ 5,853,344
------------
Total Pharmaceuticals & Biotechnology $ 7,012,719
------------
Real Estate - 0.6%
Real Estate Management & Development - 0.6%
500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625
------------
Total Real Estate $ 695,625
------------
Software & Services - 0.9%
Application Software - 0.7%
200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250
500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250
------------
$ 796,500
------------
IT Consulting & Other Services - 0.2%
400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500
------------
Total Software & Services $ 1,091,000
------------
Technology Hardware & Equipment - 6.1%
Communications Equipment - 1.2%
1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750
------------
Computer Storage & Peripherals - 0.6%
700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125
------------
Electronic Equipment & Instruments - 1.2%
300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500
1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500
------------
$ 1,475,000
------------
Electronic Manufacturing Services - 2.7%
3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500
------------
Technology Distributors - 0.4%
400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500
------------
Total Technology Hardware & Equipment $ 7,450,875
------------
76 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Semiconductors - 5.2%
Semiconductor Equipment - 3.9%
700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500
200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500
700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624
500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500
2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000
------------
$ 4,780,124
------------
Semiconductors - 1.3%
1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500
500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375
------------
$ 1,645,875
------------
Total Semiconductors $ 6,425,999
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $38,069,020) $ 39,270,694
------------
CORPORATE BONDS - 68.1%
Energy - 3.6%
Oil & Gas Equipment and Services - 0.2%
200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500
------------
Oil & Gas Refining Marketing & Transportation - 3.4%
300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000
1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950
1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000
------------
$ 4,185,950
------------
Total Energy $ 4,407,450
------------
Materials - 16.4%
Commodity Chemicals - 4.7%
1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000
2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500
1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500
------------
$ 5,732,000
------------
Diversified Metals & Mining - 1.1%
1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406
------------
Metal & Glass Containers - 2.1%
1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000
1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000
------------
$ 2,550,000
------------
Paper Products - 5.8%
2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438
885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652
3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540
------------
$ 7,192,630
------------
Specialty Chemicals - 2.7%
2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000
1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500
------------
$ 3,304,500
------------
Total Materials $ 20,145,536
------------
The accompanying notes are an integral part of these financial statements.
77
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Capital Goods - 11.3%
Aerospace & Defense - 5.6%
2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500
700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500
1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063
850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875
1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000
------------
$ 6,887,938
------------
Industrial Machinery - 5.7%
800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000
800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000
5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000
300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500
------------
$ 7,045,500
------------
Total Capital Goods $ 13,933,438
------------
Transportation - 0.4%
Air Freight & Couriers - 0.4%
500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500
------------
Total Transportation $ 547,500
------------
Automobiles & Components - 0.2%
Tires & Rubber - 0.2%
300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500
------------
Total Automobiles & Components $ 304,500
------------
Media - 1.8%
Advertising - 1.8%
2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242
------------
Total Media $ 2,171,242
------------
Retailing - 2.3%
Department Stores - 0.8%
1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000
------------
Specialty Stores - 1.5%
1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613
------------
Total Retailing $ 2,879,613
------------
Health Care Equipment & Services - 1.9%
Health Care Facilities - 0.4%
500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384
------------
Health Care Supplies - 1.5%
1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500
------------
Total Health Care Equipment & Services $ 2,280,884
------------
Pharmaceuticals & Biotechnology - 2.3%
Pharmaceuticals - 2.3%
2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000
------------
Total Pharmaceuticals & Biotechnology $ 2,808,000
------------
78 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Real Estate - 9.6%
Real Estate Management & Development - 5.4%
2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100
2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375
1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500
------------
$ 6,631,975
------------
Real Estate Investment Trusts - 4.2%
500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000
2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500
2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000
------------
$ 5,193,500
------------
Total Real Estate $ 11,825,475
------------
Technology Hardware & Equipment - 9.1%
Communications Equipment - 4.1%
4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536
700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770
------------
$ 5,011,306
------------
Electronic Equipment & Instruments - 1.7%
1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550
------------
Technology Distributors - 3.3%
2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145
1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504
------------
$ 4,041,649
------------
Total Technology Hardware & Equipment $ 11,126,505
------------
Utilities - 9.2%
Electric Utilities - 6.1%
3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000
1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624
1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000
1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250
------------
$ 7,426,874
------------
Multi-Utilities & Unregulated Power - 3.1%
3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187
------------
Total Utilities $ 11,244,061
------------
TOTAL CORPORATE BONDS
(Cost $79,489,329) $ 83,674,204
------------
The accompanying notes are an integral part of these financial statements.
79
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Ratings
Shares (unaudited) Value
TEMPORARY CASH INVESTMENT - 2.9%
Security Lending Collateral - 2.9%
3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $3,541,345) $ 3,541,345
------------
TOTAL INVESTMENTS IN SECURITIES - 105.5%
(Cost $124,177,032) $129,507,381
------------
OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919)
------------
TOTAL NET ASSETS - 100.0% $122,801,462
============
NR Not rated by either S&P or Moody's
* Non-income producing 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, 2004,
the value of these securities amounted to $15,276,000 or 12.4% of net
assets.
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728
1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080
285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275
-----------
Total $ 3,388,083
===========
80 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
CONVERTIBLE CORPORATE BONDS - 0.7%
Technology Hardware & Equipment - 0.3%
Electronic Manufacturing Services - 0.3%
150,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 144,750
-----------
Total Technology Hardware & Equipment $ 144,750
-----------
Semiconductors - 0.4%
Semiconductor Equipment - 0.4%
170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 165,538
-----------
Total Semiconductors $ 165,538
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $277,820) $ 310,288
-----------
ASSET BACKED SECURITIES - 2.4%
Diversified Financials - 0.9%
Consumer Finance - 0.0%
DKK 69,512 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 13,387
-----------
Diversified Financial Services - 0.8%
216,055 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 214,739
167,399 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 176,179
-----------
$ 390,918
-----------
Total Diversified Financials $ 404,305
-----------
Utilities - 1.5%
Electric Utilities - 1.5%
233,750 BBB-/Baa3 Empresa Electric Guacolda, 8.625%, 4/30/13 (144A) $ 266,943
425,700 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 439,003
-----------
Total Utilities $ 705,946
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $1,085,047) $ 1,110,251
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
Diversified Financials - 0.9%
Diversified Financial Services - 0.9%
160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 159,703
265,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 263,675
-----------
Total Diversified Financials $ 423,378
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $425,000) $ 423,378
-----------
CORPORATE BONDS - 53.8%
Energy - 5.2%
Oil & Gas Drilling - 0.9%
ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 $ 211,697
215,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 (144A) 212,850
-----------
$ 424,547
-----------
Oil & Gas Equipment & Services - 0.7%
240,000 BB-/Ba3 Hornbeck Offshore Service , 6.125%, 12/1/14 (144A) $ 241,200
76,000 B+/B3 Transmontaigne, Inc., 9.125%, 6/1/10 82,460
-----------
$ 323,660
-----------
The accompanying notes are an integral part of these financial statements.
81
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Oil & Gas Exploration & Production - 2.7%
300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 321,000
60,000 BB-/Ba3 Chesapeake Energy Corp., 6.375%, 6/15/15 (144A) 61,650
55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 56,788
300,000 BB-/Ba2 Gaz Capital SA, 8.625%, 4/28/34 (144A) 351,000
250,000 BBB-/NR Gazprom International SA., 7.201%, 2/1/20 (144A) 264,375
160,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 (144A) 159,600
-----------
$ 1,214,413
-----------
Oil & Gas Refining Marketing & Transportation - 0.9%
50,000 BB/Ba2 Citgo Petroleum Corp., 6.0%, 10/15/11 (144A) $ 49,750
350,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 378,492
-----------
$ 428,242
-----------
Total Energy $ 2,390,862
-----------
Materials - 12.2%
Aluminum - 0.3%
135,000 B-/B3 Imco Recycling Escrow, 9.0%, 11/15/14 144A $ 140,400
-----------
Commodity Chemicals - 1.1%
110,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 125,400
13,000 B+/B1 Lyondell Petrochemical Co., 9.875%, 5/1/07 13,618
300,000 BBB-/Ba1 Methanex Corp., 8.75%, 8/15/12 350,250
-----------
$ 489,268
-----------
Construction Materials - 1.0%
NOK 3,200,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 $ 423,158
60,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 48,150
-----------
$ 471,308
-----------
Diversified Chemical - 0.3%
EUR 79,000 CCC+/Caa1 Huntsman ICI Chemicals LLC, 10.125%, 7/1/09 $ 112,881
-----------
Diversified Metals & Mining - 2.8%
140,000 B+/B1 Freeport-McMoran Copper & Gold, 10.125%, 2/1/10 $ 159,950
250,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 248,438
100,000 BBB/Ba1 Kennametal, Inc., 7.2%, 6/15/12 111,124
400,000 NR/Ba2 Vale Overseas, Ltd., 8.25%, 1/17/34 421,000
340,000 BB/Ba2 Vedenta Resources Plc, 6.625%, 2/22/10 (144A) 344,050
-----------
$ 1,284,562
-----------
Forest Products - 1.2%
225,000 B+/B1 Ainsworth Lumber, 6.75%, 3/15/14 $ 220,219
300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) 327,750
-----------
$ 547,969
-----------
Metal & Glass Containers - 0.9%
EUR 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 157,482
130,000 B+/B1 Greif Brothers Corp., 8.875%, 8/1/12 144,625
100,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 103,750
-----------
$ 405,857
-----------
Paper Products - 0.2%
100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 95,375
-----------
82 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Specialty Chemicals - 2.9%
43,000 B+/B1 Arco Chemical Co., 9.375%, 12/15/05 $ 44,935
340,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) 312,800
300,000 BB+/Baa3 Ferro Corp., 7.125%, 4/1/28 297,432
25,000 BB+/Baa3 Ferro Corp., 7.625%, 5/1/13 25,858
170,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 181,050
EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 196,717
EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 62,161
50,000 B-/B3 Rockwood Specialties Group, 7.625%, 11/15/14 (144A) 69,832
135,000 B-/B3 United Industries Co., 9.875%, 4/1/09 141,244
-----------
$ 1,332,029
-----------
Steel - 1.5%
100,000 BB-/B1 CSN Islands IX Corp., 10.0%, 1/15/15 (144A) $ 107,375
225,000 BB-/B1 CSN Islands VIII Corp., 9.75%, 12/16/13 (144A) 240,750
325,000 BBB/B3 Ispat Inland ULC, Floating Rate, 4/1/10 (b) 353,438
-----------
$ 701,563
-----------
Total Materials $ 5,581,212
-----------
Capital Goods - 4.5%
Building Products - 1.0%
215,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 217,150
195,000 B/B2 Resolution Performance Products, 8.0%, 12/15/09 209,625
50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 53,875
-----------
$ 480,650
-----------
Construction & Farm Machinery & Heavy Trucks - 0.3%
140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 146,300
-----------
Construction & Engineering - 1.3%
225,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) $ 250,875
315,000 B+/Ba3 Shaw Group, Inc., 10.75%, 3/15/10 (a) 347,288
-----------
$ 598,163
-----------
Heavy Electrical Equipment - 0.9%
398,923 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 $ 398,923
-----------
Industrial Machinery - 1.0%
175,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 (a) $ 187,250
250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 262,500
-----------
$ 449,750
-----------
Total Capital Goods $ 2,073,786
-----------
Commercial Services & Supplies - 1.9%
Diversified Commercial Services - 1.2%
115,000 B-/B3 Cornell Co's., Inc., 10.75%, 7/1/12 $ 122,906
215,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 215,000
215,000 B+/B2 United Rentals NA, Inc., 7.75%, 11/15/13 (a) 210,700
-----------
$ 548,606
-----------
Environmental Services - 0.7%
200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 224,000
75,000 B+/B3 IESI Corp., 10.25%, 6/15/12 87,750
-----------
$ 311,750
-----------
Total Commercial Services & Supplies $ 860,356
-----------
The accompanying notes are an integral part of these financial statements.
83
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Transportation - 3.3%
Air Freight & Couriers - 0.3%
130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 142,350
-----------
Airlines - 0.9%
35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 28,175
50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 39,000
85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 61,625
150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 123,100
25,000 CCC+/Caa1 Northwest Airlines, Inc., 8.7%, 3/15/07 22,125
150,000 CCC+/Caa1 Northwest Airlines, Inc., 9.875%, 3/15/07 (a) 135,375
-----------
$ 409,400
-----------
Marine - 1.0%
100,000 CCC+/B3 Horizon Lines LLC., 9.0%, 11/1/12 (144A) $ 107,500
325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 334,750
-----------
$ 442,250
-----------
Railroads - 0.5%
210,000 CCC+/B3 Atlantic Express Transport, 12.0%, 4/15/08 $ 205,013
-----------
Transportation - 0.3%
150,000 B/B2 TFM SA De CV, 11.75%, 6/15/09 $ 152,813
-----------
Trucking - 0.3%
145,000 B-/B3 Trailer Bridge, Inc. 9.25%, 11/15/11 (144A) $ 148,988
-----------
Total Transportation $ 1,500,814
-----------
Automobiles & Components - 0.4%
Auto Parts & Equipment - 0.3%
135,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (144A) $ 140,400
-----------
Automobile Manufacturers - 0.1%
35,000 BBB-/A3 Ford Motor Credit Co., 5.8%, 1/12/09 $ 35,775
-----------
Total Automobiles & Components $ 176,175
-----------
Consumer Durables & Apparel - 0.6%
Textiles - 0.6%
240,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) $ 267,600
-----------
Total Consumer Durables & Apparel $ 267,600
-----------
Media - 0.7%
Broadcasting & Cable Television - 0.7%
150,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 $ 172,500
100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 159,518
-----------
$ 332,018
-----------
Total Media $ 332,018
-----------
Retailing - 0.6%
Specialty Stores - 0.6%
145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 143,550
35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 35,481
100,000 BB/Ba2 Toys "R" Us, 7.375%, 10/15/18 92,500
-----------
$ 271,531
-----------
Total Retailing $ 271,531
-----------
84 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Food & Drug Retailing - 0.5%
Drug Retail - 0.5%
170,000 CCC/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (144A) $ 154,700
60,000 B-/B2 Duane Reade, Inc., Floating Rate, 12/15/10 (144A) (b) 60,900
-----------
$ 215,600
-----------
Total Food & Drug Retailing $ 215,600
-----------
Food, Beverage & Tobacco - 0.8%
Brewers - 0.6%
220,000 BBB/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 $ 256,300
-----------
Soft Drinks - 0.2%
80,000 BBB/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 100,400
-----------
Total Food, Beverage & Tobacco $ 356,700
-----------
Health Care Equipment & Services - 1.7%
Health Care Distributors - 0.1%
60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 60,300
-----------
Health Care Facilities - 1.3%
350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972
210,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) 213,938
-----------
$ 568,910
-----------
Health Care Supplies - 0.3%
125,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 130,625
-----------
Total Health Care Equipment & Services $ 759,835
-----------
Banks - 0.5%
Diversified Banks - 0.5%
200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) $ 207,500
15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 16,086
-----------
$ 223,586
-----------
Total Banks $ 223,586
-----------
Diversified Financials - 7.1%
Consumer Finance - 0.6%
265,000 A/A2 SLM Corp., Floating Rate, 7/25/14 (b) $ 264,051
-----------
Investment Banking & Brokerage - 2.1%
EUR 200,000 B-/B3 BCP Caylux Holdings Lux SCA, 10.375%, 6/15/14 (144A) $ 316,321
EUR 50,000 B-/B3 BCP Caylux Holdings Lux SCA, 9.625%, 6/15/14 (144A) 56,375
325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) 349,375
250,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 (144A) 273,750
-----------
$ 995,821
-----------
Diversified Financial Services - 2.9%
157,000 CCC/Caa1 Alamosa Delaware, Inc., 0.0%, 7/31/09 $ 170,345
250,000 BB+/Ba2 Aries Vermogensverwaltng, 9.6%, 10/25/14 (144A) 307,500
210,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 227,850
425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 411,178
200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 218,750
-----------
$ 1,335,623
-----------
The accompanying notes are an integral part of these financial statements.
85
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Specialized Finance - 1.4%
95,000 CCC+/B3 Aventine Renewable Energy, Floating Rate, 12/15/11 (144A) (b) $ 95,950
55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 (144A) 56,788
145,000 B+/Ba3 Magnachip Semiconductor, Floating Rate, 12/15/11 (b) 148,988
225,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 225,563
100,000 B-/B3 UGS Corp., 10.0%, 6/1/12 (144A) 113,750
-----------
$ 641,039
-----------
Total Diversified Financials $ 3,236,534
-----------
Insurance - 3.8%
Life & Health Insurance - 1.4%
365,000 B+/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 365,000
300,000 BB+/Ba1 Provident Companies, Inc., 7.0%, 7/15/18 (a) 289,875
-----------
$ 654,875
-----------
Multi-Line Insurance - 0.5%
210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 213,929
-----------
Property & Casualty Insurance - 1.4%
285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 295,480
350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 376,669
-----------
$ 672,149
-----------
Reinsurance - 0.5%
200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 220,592
-----------
Total Insurance $ 1,761,545
-----------
Real Estate - 1.3%
Real Estate Management & Development - 0.7%
185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 196,100
100,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 112,624
-----------
$ 308,724
-----------
Real Estate Investment Trusts - 0.6%
120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 123,600
155,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 169,723
-----------
$ 293,323
-----------
Total Real Estate $ 602,047
-----------
Software & Services - 0.3%
Application Software - 0.3%
100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 $ 145,263
-----------
Total Software & Services $ 145,263
-----------
Technology Hardware & Equipment - 0.8%
Communications Equipment - 0.8%
50,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 50,111
150,000 BB+/Ba2 Corning, Inc., 6.3%, 3/1/09 157,320
200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 (144A) 173,358
-----------
$ 380,789
-----------
Total Technology Hardware & Equipment $ 380,789
-----------
86 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Telecommunication Services - 5.4%
Integrated Telecommunication Services - 2.5%
325,000 B+/B2 GCI Inc., 7.25%, 2/15/14 $ 325,000
145,000 B+/B2 Innova S De R.L., 9.375%, 9/19/13 164,938
180,000 B-/B3 NTL Cable Plc., 8.75%, 4/15/14 (144A) 272,470
375,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 386,250
-----------
$ 1,148,658
-----------
Wireless Telecommunication Services - 2.9%
200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 $ 208,000
130,000 CCC+/B3 Iwo Escrow Co., Floating Rate, 1/15/12 (144A) (b) 130,975
170,000 CCC+/B3 MetroPCS, Inc., 10.75%, 10/1/11 (144A) 181,900
150,000 B-/B3 Mobifon Holdings, 12.5%, 7/31/10 (144A) 177,937
115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 117,300
CAD 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 214,886
275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 308,688
-----------
$ 1,339,686
-----------
Total Telecommunication Services $ 2,488,344
-----------
Utilities - 2.2%
Electric Utilities - 2.2%
150,000 CCC/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 163,875
350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) 349,992
250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 251,000
250,000 BB-/Ba2 MSW Energy Holdings, 7.375%, 9/1/10 262,500
-----------
$ 1,027,367
-----------
Total Utilities $ 1,027,367
-----------
TOTAL CORPORATE BONDS
(Cost $22,963,833) $24,651,964
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.3%
49,633 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 $ 49,321
79,514 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 82,257
199,797 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 203,100
358,609 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 375,630
20,671 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 21,383
86,944 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 89,854
450,000 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 465,083
15,278 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 15,804
951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694
298,548 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 308,540
118,338 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 122,403
67,990 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 70,325
128,343 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 132,783
198,134 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 201,266
166,061 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 171,799
13,994 AAA/Aaa Federal National Mortgage Association, 6.0%, 2/1/32 14,490
134,097 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 140,597
14,754 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 15,276
449,455 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 464,956
9,894 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/31 10,245
145,157 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,163
The accompanying notes are an integral part of these financial statements.
87
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
U.S. Government and Agency Obligations - (Cont.)
177,250 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 183,363
AUD 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 638,810
11,958 AAA/Aaa Federal National Mortgage Association, 6.5%, 2/1/32 12,554
2,108 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/31 2,214
7,397 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 7,765
1,736 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,842
460 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 492
188,900 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 184,437
187,405 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 191,324
71,532 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 73,096
496,112 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 517,398
497,067 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 507,930
361,022 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 380,447
51,042 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 52,935
37,103 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 38,478
110,588 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 114,688
72,794 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 75,546
37,990 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 40,031
35,885 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 37,813
277,895 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 292,826
93,191 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 96,646
74,872 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 77,648
62,068 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 64,370
132,790 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 137,713
707,891 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 745,964
225,479 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 237,603
150,775 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 156,365
59,656 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 61,867
101,283 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 105,039
499,075 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 517,609
13,740 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 14,477
43,755 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 46,072
192,578 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 202,766
35,569 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 37,476
52,338 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/29 55,163
39,310 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/32 41,418
81,978 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 86,318
4,190 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 4,415
50,371 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 53,071
2,005 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,131
4,892 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 5,200
25,219 AAA/Aaa Government National Mortgage Association, 7.5%, 5/15/23 26,943
182,274 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 186,087
387,393 AAA/Aaa Government National Mortgage Association II, 6.0%, 11/20/33 401,272
175,000 AAA/Aaa U.S. Treasury Notes, 5.25%, 2/15/29 183,572
120,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 129,759
-----------
$11,119,922
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $10,991,307) $11,119,922
-----------
88 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
FOREIGN GOVERNMENT BONDS - 11.9%
ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0%, 4/28/10 $ 397,631
CAD 27,000 AAA/Aaa Government of Canada, 4.25%, 9/1/08 23,139
CAD 659,000 AAA/Aaa Government of Canada, 4.25%, 9/1/09 562,973
CAD 315,000 AAA/Aaa Government of Canada, 5.25%, 6/1/12 281,542
EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 556,888
SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 274,070
SEK 2,955,000 TSY/Aaa Government of Sweden, 5.5%, 10/8/12 496,200
SEK 2,150,000 TSY/Aaa Government of Sweden, 8.0%, 8/15/07 365,979
JPY 10,000,000 TSY/Tsy Government of Japan, 1.5%, 1/20/05 97,729
NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 246,852
NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 609,083
AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 409,458
AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 167,600
315,605 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 362,946
250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 260,000
185,000 BB-/Ba3 Republic of Peru, 8.375%, 5/3/16 207,200
DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 146,377
-----------
$ 5,465,667
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $4,501,809) $ 5,465,667
-----------
SOVEREIGN ISSUES - 0.6%
75,000 CC/B3 Domincan Republic, 9.04%, 1/23/13 (144A) $ 62,063
100,000 BB-/Ba3 Republic of Peru, 9.875%, 2/06/15 122,500
75,000 BB-/Ba3 Republic of Peru, 9.125%, 2/21/12 87,375
-----------
TOTAL SOVEREIGN ISSUES
(Cost $266,679) $ 271,938
-----------
MUNICIPAL BONDS - 1.9%
Government - 1.0%
90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 90,050
175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue,
7.0%, 11/15/30 154,257
105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 103,106
60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 60,602
100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 87,404
-----------
$ 495,419
-----------
Muni Airport - 0.1%
50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 $ 40,630
-----------
Muni Tobacco - 0.7%
300,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/43 $ 279,105
50,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/42 46,411
-----------
$ 325,516
-----------
Total Government $ 861,565
-----------
TOTAL MUNICIPAL BONDS
(Cost $773,830) $ 861,565
-----------
The accompanying notes are an integral part of these financial statements.
89
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Strategic Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
S&P/Moody's
Shares Ratings Value
TEMPORARY CASH INVESTMENT - 2.6%
Security Lending Collateral - 2.6%
1,191,203 Securities Lending Investment Fund, 2.18% $ 1,191,203
-----------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $1,191,203) $ 1,191,203
-----------
TOTAL INVESTMENTS IN SECURITIES - 99.1%
(Cost $42,476,528) (b) $45,406,176
-----------
OTHER ASSETS AND LIABILITIES - 0.9% $ 434,717
-----------
TOTAL NET ASSETS - 100.0% $45,840,892
============
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, 2004,
the value of these securities amounted to $10,546,821 or 24.1% of net
assets.
NR Not rated by either S&P or Moody's
TSY Treasury Security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
33,250 AMR Corp., 9.0%, 8/1/12 $ 26,766
166,250 JLG Industries, Inc., 8.375%, 6/15/12 177,888
142,250 Northwest Airlines, Inc., 9.875%, 3/15/07 128,381
285,000 Provident Companies, Inc., 7.0%, 7/15/18 276,450
299,250 Shaw Group, Inc., 10.75%, 3/15/10 329,174
204,250 United Rentals NA, Inc., 7.75%, 11/15/13 200,165
-----------
Total $ 1,138,824
===========
(b) Debt obligation initially issued at one coupon which converts to a higher
coupon at a specified date. The rate shown is the rate at period end.
NOTE: Principal amounts are denominated in U.S. dollars unless otherwise noted.
DEM Deutsche Marks.
EURO Euro
SEK Swedish Krona.
NOK Norwegian Kroner.
ITL Italian Lira.
CAD Canadian Dollar.
AUD Australian Dollar.
JPY Japanese Yen.
DKK Danish Kroner
90 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Principal
Amount Value
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.4%
Government - 0.4%
$ 176,290 Freddie Mac, 5.0%, 1/15/16 $ 179,566
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $182,044) $ 179,566
-----------
CORPORATE BONDS - 0.5%
Miscellaneous - 0.5%
250,000 Private Export Funding, 3.375%, 2/15/09 $ 246,378
-----------
TOTAL CORPORATE BONDS
(Cost $250,000) $ 246,378
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.8%
275,973 Fannie Mae, 5.5%, 6/1/23 $ 282,311
250,000 Fannie Mae, Floating Rate Note, 3/1/19 247,845
250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 249,358
400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 390,855
100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 107,537
200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 211,468
400,000 Federal Home Loan Bank, 4.53%, 10/30/06 409,193
850,000 Federal Home Loan Bank, 5.875%, 11/15/07 905,489
300,000 Federal Home Loan Bank, 5.89%, 6/30/08 322,649
290,891 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 295,700
251,395 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 260,053
1,175,562 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,214,904
899,518 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 929,668
105,850 Federal Home Loan Mortgage Corp., 6.0%, 10/1/32 109,496
218,792 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 226,328
488,433 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 505,255
57,634 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 59,619
187,579 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,040
76,135 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 80,041
62,203 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 65,331
38,797 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 40,770
104,969 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 111,272
51,493 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 54,083
295,687 Federal Home Loan Mortgage Corp., 6.5%, 4/1/32 310,484
102,288 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 107,407
313,916 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 332,419
101,667 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 106,780
140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 149,258
28,003 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 29,688
31,723 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,769
3,927 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 4,163
54,342 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 57,612
9,139 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,688
4,628 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,906
12,064 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 12,786
51,676 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 55,390
279,272 Federal National Mortgage Association, 4.5%, 4/1/19 278,559
111,964 Federal National Mortgage Association, 5.0%, 3/1/09 113,931
The accompanying notes are an integral part of these financial statements.
91
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
U.S. Government and Agency Obligations - (Cont.)
$ 251,032 Federal National Mortgage Association, 5.0%, 7/1/19 $ 255,213
268,174 Federal National Mortgage Association, 5.5%, 2/1/33 272,313
377,212 Federal National Mortgage Association, 5.5%, 3/1/18 390,263
290,566 Federal National Mortgage Association, 5.5%, 3/1/34 295,159
397,281 Federal National Mortgage Association, 5.5%, 4/1/18 412,484
458,366 Federal National Mortgage Association, 5.5%, 4/1/19 474,224
406,282 Federal National Mortgage Association, 5.5%, 9/1/33 412,816
425,363 Federal National Mortgage Association, 5.5%, 11/1/33 432,203
597,379 Federal National Mortgage Association, 6.0%, 3/1/33 618,531
157,145 Federal National Mortgage Association, 6.0%, 4/1/33 162,709
219,343 Federal National Mortgage Association, 6.0%, 5/1/33 226,908
187,628 Federal National Mortgage Association, 6.0%, 6/1/33 194,099
198,880 Federal National Mortgage Association, 6.0%, 7/1/34 205,753
227,731 Federal National Mortgage Association, 6.0%, 9/1/34 235,601
60,951 Federal National Mortgage Association, 6.0%, 10/1/32 63,109
96,547 Federal National Mortgage Association, 6.0%, 11/1/32 99,965
137,611 Federal National Mortgage Association, 6.0%, 11/1/32 142,484
314,302 Federal National Mortgage Association, 6.0%, 11/1/32 325,431
267,902 Federal National Mortgage Association, 6.0%, 12/1/11 281,400
65,962 Federal National Mortgage Association, 6.0%, 12/1/31 68,299
57,772 Federal National Mortgage Association, 6.5%, 1/1/29 60,686
46,300 Federal National Mortgage Association, 6.5%, 1/1/32 48,605
116,621 Federal National Mortgage Association, 6.5%, 1/1/32 122,426
29,107 Federal National Mortgage Association, 6.5%, 3/1/32 30,564
45,679 Federal National Mortgage Association, 6.5%, 3/1/32 47,953
48,840 Federal National Mortgage Association, 6.5%, 3/1/32 51,296
100,354 Federal National Mortgage Association, 6.5%, 3/1/32 105,334
121,433 Federal National Mortgage Association, 6.5%, 4/1/32 127,459
59,308 Federal National Mortgage Association, 6.5%, 7/1/21 62,594
106,676 Federal National Mortgage Association, 6.5%, 7/1/32 111,970
486,710 Federal National Mortgage Association, 6.5%, 7/1/34 510,579
63,447 Federal National Mortgage Association, 6.5%, 8/1/32 66,595
205,197 Federal National Mortgage Association, 6.5%, 8/1/32 215,379
101,389 Federal National Mortgage Association, 6.5%, 8/1/32 106,435
57,390 Federal National Mortgage Association, 6.5%, 9/1/32 60,238
12,729 Federal National Mortgage Association, 6.5%, 10/1/31 13,363
95,957 Federal National Mortgage Association, 6.5%, 10/1/31 100,733
93,880 Federal National Mortgage Association, 6.5%, 11/1/28 98,652
13,239 Federal National Mortgage Association, 7.0%, 1/1/29 14,046
38,406 Federal National Mortgage Association, 7.0%, 1/1/32 40,714
8,740 Federal National Mortgage Association, 7.0%, 5/1/31 9,268
26,507 Federal National Mortgage Association, 7.0%, 7/1/31 28,100
40,400 Federal National Mortgage Association, 7.0%, 8/1/19 43,079
64,486 Federal National Mortgage Association, 7.0%, 9/1/18 68,802
170,257 Federal National Mortgage Association, 7.0%, 9/1/30 180,633
26,521 Federal National Mortgage Association, 7.5%, 2/1/31 28,417
73,023 Federal National Mortgage Association, 9.0%, 4/1/33 79,055
300,000 Freddie Mac, 5.25%, 11/15/12 305,040
247,909 Government National Mortgage Association, 4.5%, 6/15/34 242,051
488,855 Government National Mortgage Association, 4.5%, 6/15/34 477,304
92 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Amount Value
U.S. Government and Agency Obligations - (Cont.)
$ 438,519 Government National Mortgage Association, 4.5%, 8/15/33 $ 428,316
329,901 Government National Mortgage Association, 5.0%, 7/15/17 339,859
196,084 Government National Mortgage Association, 5.0%, 7/15/19 201,156
248,621 Government National Mortgage Association, 5.0%, 11/20/19 254,089
201,597 Government National Mortgage Association, 5.5%, 2/15/19 210,260
246,379 Government National Mortgage Association, 5.5%, 3/15/33 251,875
191,210 Government National Mortgage Association, 5.5%, 4/15/31 195,673
270,409 Government National Mortgage Association, 5.5%, 4/15/33 276,441
425,040 Government National Mortgage Association, 5.5%, 6/15/17 443,325
244,603 Government National Mortgage Association, 5.5%, 7/15/19 255,097
337,566 Government National Mortgage Association, 5.5%, 7/15/33 345,096
249,372 Government National Mortgage Association, 5.5%, 10/15/34 254,822
199,585 Government National Mortgage Association, 5.5%, 11/20/34 203,759
135,810 Government National Mortgage Association, 6.0%, 1/15/33 140,939
289,888 Government National Mortgage Association, 6.0%, 1/15/33 300,636
266,577 Government National Mortgage Association, 6.0%, 2/15/18 280,921
502,825 Government National Mortgage Association, 6.0%, 2/15/33 521,469
281,601 Government National Mortgage Association, 6.0%, 3/15/34 292,058
481,495 Government National Mortgage Association, 6.0%, 3/15/34 499,377
118,398 Government National Mortgage Association, 6.0%, 5/15/17 124,759
169,002 Government National Mortgage Association, 6.0%, 6/20/16 177,564
430,701 Government National Mortgage Association, 6.0%, 7/15/23 449,745
186,862 Government National Mortgage Association, 6.0%, 7/20/19 196,282
198,278 Government National Mortgage Association, 6.0%, 8/15/19 208,939
193,812 Government National Mortgage Association, 6.0%, 8/15/34 201,187
199,269 Government National Mortgage Association, 6.0%, 8/15/34 206,669
159,562 Government National Mortgage Association, 6.0%, 9/15/32 165,568
376,937 Government National Mortgage Association, 6.0%, 9/15/33 390,912
149,538 Government National Mortgage Association, 6.0%, 9/15/34 155,091
54,936 Government National Mortgage Association, 6.0%, 10/15/32 57,003
100,101 Government National Mortgage Association, 6.0%, 10/15/32 103,869
158,187 Government National Mortgage Association, 6.0%, 10/15/32 164,141
186,854 Government National Mortgage Association, 6.0%, 10/15/32 193,887
349,345 Government National Mortgage Association, 6.0%, 10/15/34 362,319
499,075 Government National Mortgage Association, 6.0%, 10/15/34 517,609
209,478 Government National Mortgage Association, 6.0%, 11/15/32 217,362
272,746 Government National Mortgage Association, 6.0%, 11/15/32 283,860
306,538 Government National Mortgage Association, 6.0%, 12/15/32 319,918
288,866 Government National Mortgage Association, 6.5%, 1/15/34 304,148
37,525 Government National Mortgage Association, 6.5%, 2/15/29 39,551
38,193 Government National Mortgage Association, 6.5%, 2/15/32 40,591
24,629 Government National Mortgage Association, 6.5%, 3/15/26 26,010
52,950 Government National Mortgage Association, 6.5%, 4/15/17 56,480
120,823 Government National Mortgage Association, 6.5%, 4/15/17 128,879
43,252 Government National Mortgage Association, 6.5%, 4/15/32 45,571
47,217 Government National Mortgage Association, 6.5%, 4/15/32 49,748
83,717 Government National Mortgage Association, 6.5%, 5/15/29 88,284
174,227 Government National Mortgage Association, 6.5%, 5/15/29 183,633
220,009 Government National Mortgage Association, 6.5%, 5/15/29 231,986
71,073 Government National Mortgage Association, 6.5%, 5/15/31 74,882
The accompanying notes are an integral part of these financial statements.
93
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
U.S. Government and Agency Obligations - (Cont.)
$ 35,969 Government National Mortgage Association, 6.5%, 6/15/17 $ 38,367
60,894 Government National Mortgage Association, 6.5%, 6/15/28 64,223
69,534 Government National Mortgage Association, 6.5%, 6/15/28 73,356
9,091 Government National Mortgage Association, 6.5%, 6/15/29 9,581
72,881 Government National Mortgage Association, 6.5%, 6/15/31 76,787
354,205 Government National Mortgage Association, 6.5%, 6/15/31 373,187
34,467 Government National Mortgage Association, 6.5%, 6/15/32 36,314
46,460 Government National Mortgage Association, 6.5%, 6/15/32 48,951
50,698 Government National Mortgage Association, 6.5%, 6/15/32 53,415
117,221 Government National Mortgage Association, 6.5%, 7/15/31 123,503
109,376 Government National Mortgage Association, 6.5%, 7/15/32 115,239
104,642 Government National Mortgage Association, 6.5%, 9/15/31 110,250
134,252 Government National Mortgage Association, 6.5%, 10/15/31 141,447
40,151 Government National Mortgage Association, 6.5%, 12/15/31 42,303
81,034 Government National Mortgage Association, 6.5%, 12/15/31 85,377
16,161 Government National Mortgage Association, 7.0%, 1/15/26 17,231
40,750 Government National Mortgage Association, 7.0%, 1/15/29 43,347
60,301 Government National Mortgage Association, 7.0%, 2/15/28 64,192
44,369 Government National Mortgage Association, 7.0%, 2/15/31 47,159
117,595 Government National Mortgage Association, 7.0%, 2/20/29 124,683
52,848 Government National Mortgage Association, 7.0%, 3/15/28 56,258
26,131 Government National Mortgage Association, 7.0%, 4/15/28 27,817
30,698 Government National Mortgage Association, 7.0%, 5/15/31 32,629
141,847 Government National Mortgage Association, 7.0%, 5/15/32 150,755
37,838 Government National Mortgage Association, 7.0%, 6/15/29 40,249
45,696 Government National Mortgage Association, 7.0%, 7/15/26 48,723
20,983 Government National Mortgage Association, 7.0%, 7/15/29 22,320
45,098 Government National Mortgage Association, 7.0%, 7/15/29 47,972
38,315 Government National Mortgage Association, 7.0%, 8/15/31 40,725
23,557 Government National Mortgage Association, 7.0%, 9/15/27 25,088
63,087 Government National Mortgage Association, 7.0%, 11/15/28 67,158
6,305 Government National Mortgage Association, 7.0%, 12/15/30 6,702
22,876 Government National Mortgage Association, 7.5%, 1/15/31 24,569
33,466 Government National Mortgage Association, 7.5%, 1/15/32 35,941
1,856 Government National Mortgage Association, 7.5%, 6/15/23 2,007
2,186 Government National Mortgage Association, 7.5%, 8/15/23 2,364
8 Government National Mortgage Association, 7.5%, 8/15/29 8
7,983 Government National Mortgage Association, 7.5%, 8/15/29 8,575
9,870 Government National Mortgage Association, 7.5%, 10/15/22 10,677
33,802 Government National Mortgage Association, 7.5%, 10/15/29 36,312
44,869 Government National Mortgage Association, 7.5%, 11/15/29 48,201
125,390 Government National Mortgage Association I, 6.0%, 2/15/29 130,320
75,232 Government National Mortgage Association I, 7.0%, 11/15/30 79,969
39,724 Government National Mortgage Association I, 7.0%, 12/15/30 42,226
386,916 Government National Mortgage Association II, 5.0%, 12/20/18 395,665
453,100 Government National Mortgage Association II, 5.5%, 2/20/34 462,576
477,815 Government National Mortgage Association II, 5.5%, 7/20/19 496,824
373,784 Government National Mortgage Association II, 6.0%, 6/20/34 387,198
279,628 Government National Mortgage Association II, 6.0%, 11/20/33 289,646
83,628 Government National Mortgage Association II, 6.0%, 12/20/18 87,866
94 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Amount Value
U.S. Government and Agency Obligations - (Cont.) $ 48,500
$ 46,129 Government National Mortgage Association II, 6.5%, 9/20/31 47,030
44,673 Government National Mortgage Association II, 6.5%, 8/20/28 63,525
60,358 Government National Mortgage Association II, 6.5%, 12/20/28 24,358
22,993 Government National Mortgage Association II, 7.0%, 1/20/31 61,139
57,526 Government National Mortgage Association II, 7.0%, 5/20/26 10,451
9,749 Government National Mortgage Association II, 7.5%, 8/20/27 3,815
3,516 Government National Mortgage Association II, 8.0%, 8/20/25 299,880
12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 2,165,873
1,850,000 U.S. Treasury Bonds, 6.25%, 8/15/23 500,687
400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 390,791
375,000 U.S. Treasury Notes, 4.75%, 5/15/14 1,110,722
925,000 U.S. Treasury Notes, 6.375%, 8/15/27 5,321,095
4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 -----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $44,212,173
(Cost $43,313,182) -----------
TEMPORARY CASH INVESTMENT - 3.3%
Repurchase Agreement - 3.3%
1,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase price of
$1,500,000 plus accrued interest on 1/3/05 $ 1,500,000
collateralized by $1,495,000 U.S. Treasury Bill, 6.75%, 5/15/05 -----------
TOTAL TEMPORARY CASH INVESTMENT $ 1,500,000
(Cost $1,500,000) -----------
TOTAL INVESTMENTS IN SECURITIES - 100.0% $46,138,116
(Cost $45,245,226) -----------
OTHER ASSETS AND LIABILITIES - (0.0)% $ (5,019)
TOTAL NET ASSETS - 100.0% -----------
$46,133,097
===========
The accompanying notes are an integral part of these financial statements.
95
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Principal
Amount Value
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.3%
Banks - 2.3%
Thrifts & Mortgage Finance - 2.3%
$ 994,371 Federal Home Loan Mortgage Corp.
Multifamily VRD Certificate, 1.12%,
1/15/42 $ 994,371
-----------
Total Banks $ 994,371
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $994,371) $ 994,371
-----------
CORPORATE BONDS - 43.8%
Capital Goods - 5.3%
Industrial Conglomerates - 3.0%
500,000 General Electric Capital Corp., Floating
Rate, 12/16/05 $ 500,000
800,000 General Electric Capital Corp., Floating
Rate, 1/9/06 800,760
-----------
$ 1,300,760
-----------
Industrial Machinery - 2.3%
1,000,000 Caterpillar Financial Service Corp.,
Floating Rate, 4/25/05 $ 1,000,956
-----------
Total Capital Goods $ 1,000,956
-----------
Food & Drug Retailing - 4.7%
Hypermarkets & Supercenters - 4.7%
2,000,000 Wal-Mart Stores, Inc., Floating Rate,
2/22/05 $ 1,999,932
-----------
Total Food & Drug Retailing $ 1,999,932
-----------
Banks - 7.8%
Diversified Banks - 7.8%
750,000 Bank of America Corp., Floating Rate,
1/31/05 $ 750,226
750,000 Bank of America Corp., Floating Rate,
4/28/05 750,535
1,000,000 Wells Fargo Financial, 6.75%, 6/1/05 1,018,429
800,000 Wells Fargo Financial, 7.6%, 5/3/05 813,625
-----------
$ 3,332,815
-----------
Total Banks $ 3,332,815
-----------
Diversified Financials - 23.7%
Asset Management & Custody Banks - 2.2%
910,000 Mellon Funding Corp., 7.5%, 6/15/05 $ 930,828
-----------
Principal
Amount Value
Consumer Finance - 8.6%
$ 450,000 American Express Credit, Floating Rate,
10/14/05 $ 450,377
1,200,000 American Express, Floating Rate,
4/18/05 1,200,531
1,000,000 National Rural Utilities, 6.125%, 5/15/05 1,014,686
1,000,000 National Rural Utilities, 1.76%, 3/10/05 1,000,682
-----------
$ 3,666,276
-----------
Investment Banking & Brokerage - 3.0%
200,000 Lehman Brothers Holdings, 8.75%,
3/15/05 $ 202,621
600,000 Merrill Lynch, 4.54%, 3/08/05 602,393
500,000 Merrill Lynch, Floating Rate, 12/9/05 500,000
-----------
$ 1,305,014
-----------
Diversified Financial Services - 9.9%
125,000 Associates Corp., 6.10%, 1/15/05 $ 125,217
1,000,000 Associates Corp., Floating Rate, 6/27/05 1,000,000
1,200,000 Bank One Corp., Floating Rate, 8/23/05 1,201,226
175,000 Citigroup Global Markets, 6.25%,
6/15/05 178,036
750,000 Citigroup Inc., Floating Rate, 9/1/05 750,404
1,000,000 First Union Corp., Floating Rate, 3/31/05 1,001,598
-----------
$ 4,256,481
-----------
Total Diversified Financials $10,158,599
-----------
Real Estate - 2.3%
Real Estate Management &
Development - 2.3%
1,000,000 Security Capital Group, 7.8%, 1/19/05 $ 1,002,987
-----------
Total Real Estate $ 1,002,987
-----------
TOTAL CORPORATE BONDS
(Cost $18,796,049) $18,796,049
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 17.5%
Banks - 9.3%
Thrifts & Mortgage Finance - 9.3%
1,000,000 Federal National Mortgage Association,
1.56%, 5/16/05 $ 1,000,000
1,000,000 Federal National Mortgage Association,
Floating Rate, 4/28/05 999,967
2,000,000 Freddie Mac, Floating Rate, 2/4/05 1,999,949
-----------
$ 3,999,916
-----------
Total Banks $ 3,999,916
-----------
96 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal
Amount Value
Government - 8.2%
$ 1,000,000 Federal Home Loan Mortgage Corp.,
1.28%, 4/22/05 $ 1,000,000
1,000,000 Federal Home Loan Mortgage Corp.,
1.38%, 3/28/05 1,000,000
500,000 Federal Home Loan Mortgage Corp.,
1.47%, 3/1/05 500,000
1,000,000 Federal Home Loan Mortgage Corp.,
1.7%, 5/24/05 1,000,000
-----------
Total Government $ 3,500,000
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $7,499,916) $ 7,499,916
-----------
TEMPORARY CASH INVESTMENTS - 36.6%
Commercial Paper - 21.2%
1,000,000 AIG Funding, Inc., 2.23%, 1/18/05 $ 999,053
1,000,000 Caterpillar, 2.25%, 1/20/05 998,813
1,000,000 Coca Cola Co., 2.17%, 1/24/05 998,613
1,000,000 Coca Cola Co., 2.21%, 1/12/05 999,325
1,000,000 Federal National Mortgage Association,
2.27%, 2/2/05 997,981
2,000,000 IBM Corp., 2.20%, 1/25/05 1,997,067
1,000,000 Minnesota Mining, 2.20%, 1/5/05 999,756
1,106,000 Paccar Financial, 2.28%, 1/12/05 1,105,230
-----------
$ 9,095,838
===========
Principal
Amount Value
Repurchase Agreement - 15.4%
$ 6,600,000 UBS Warburg, Inc., 1.00% dated
12/31/04, repurchase price of
$6,600,000 plus accrued interest on
1/3/05 collateralized by $6,277,000
U.S. Treasury Bill, 6.5%, 10/15/06 $ 6,600,000
-----------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $15,695,838) $15,695,838
-----------
TOTAL INVESTMENTS IN SECURITIES - 100.2%
(Cost $42,986,174) $42,986,174
-----------
OTHER ASSETS
AND LIABILITIES - (0.2)% $ (89,982)
-----------
TOTAL NET ASSETS - 100.0% $42,896,192
===========
The accompanying notes are an integral part of these financial statements.
97
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Emerging Markets VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 17.37 $ 11.03 $ 11.23 $ 12.10 $ 18.75
------- ------- ------- ------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.22 $ 0.20 $ 0.06 $ 0.15 $ (0.12)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 3.04 6.20 ( 0.19) ( 1.02) ( 6.20)
------- ------- ------- ------- --------
Net increase (decrease) from investment operations $ 3.26 $ 6.40 $ (0.13) $ (0.87) $ (6.32)
Distributions to shareowners:
Net investment income (0.15) ( 0.06) ( 0.07) -- --
Net realized gain -- -- -- -- ( 0.33)
------- ------- ------- ------- --------
Net increase (decrease) in net asset value $ 3.11 $ 6.34 $ (0.20) $ (0.87) $ (6.65)
------- ------- ------- ------- --------
Net asset value, end of period $ 20.48 $ 17.37 $ 11.03 $ 11.23 $ 12.10
======= ======= ======== ======== =========
Total return* 18.93% 58.17% ( 1.20)% ( 7.19)% (34.20)%
Ratio of net expenses to average net assets+ 1.75% 1.75% 1.75% 1.66% 1.79%
Ratio of net investment income (loss) to average net assets+ 1.12% 1.43% 0.63% 1.30% ( 0.59)%
Portfolio turnover rate 66% 79% 124% 175% 156%
Net assets, end of period (in thousands) $ 8,633 $ 8,399 $ 5,886 $ 6,896 $ 9,446
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.87% 2.51% 2.88% 3.83% 2.45%
Net investment income (loss) 1.00% 0.67% ( 0.50)% ( 0.87)% ( 1.25)%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.75% 1.75% 1.75% 1.66% 1.75%
Net investment income (loss) 1.12% 1.43% 0.63% 1.30% ( 0.55)%
* 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.
98 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Europe VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 9.05 $ 6.82 $ 8.42 $ 11.07 $ 13.61
------- ------ -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.11 $ 0.09 $ 0.05 $ 0.01 $ (0.06)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.55 2.17 ( 1.65) ( 2.51) ( 2.45)
------- ------ -------- -------- --------
Net increase (decrease) from investment operations $ 1.66 $ 2.26 $ (1.60) $ (2.50) $ (2.51)
Distributions to shareowners:
Net investment income ( 0.07) (0.03) -- ( 0.15) ( 0.02)
Net realized gain -- -- -- -- ( 0.01)
------- ------- -------- -------- --------
Net increase (decrease) in net asset value $ 1.59 $ 2.23 $ (1.60) $ (2.65) $ (2.54)
------- ------- -------- -------- --------
Net asset value, end of period $ 10.64 $ 9.05 $ 6.82 $ 8.42 $ 11.07
======= ======= ======== ======== ========
Total return* 18.48% 33.26% (19.00)% (22.66)% (18.46)%
Ratio of net expenses to average net assets+ 1.50% 1.50% 1.50% 1.50% 1.48%
Ratio of net investment income (loss) to average net assets+ 0.92% 1.14% 0.68% 0.25% ( 0.28)%
Portfolio turnover rate 55% 52% 94% 73% 92%
Net assets, end of period (in thousands) $ 9,478 $9,330 $ 8,696 $ 12,417 $ 18,474
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.94% 2.52% 2.21% 1.99% 1.55%
Net investment income (loss) 0.48% 0.12% 0.03% (0.24)% (0.35)%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.50% 1.50% 1.50% 1.50% 1.48%
Net investment income (loss) 0.92% 1.14% 0.68% 0.25% ( 0.28)%
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 10.06 $ 7.79 $ 9.00 $ 11.83 $ 15.38
------- ------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.05 $ 0.07 $ 0.03 $ 0.02 $ 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.82 2.26 (1.23) ( 2.83) ( 3.45)
------- ------- -------- -------- --------
Net increase (decrease) from investment operations $ 1.87 $ 2.33 $ (1.20) $ (2.81) $ (3.44)
Distributions to shareowners:
Net investment income ( 0.05) ( 0.06) ( 0.01) ( 0.02) ( 0.11)
------- ------- -------- -------- --------
Net increase (decrease) in net asset value $ 1.82 $ 2.27 $ (1.21) $ (2.83) $ (3.55)
------- ------- -------- -------- --------
Net asset value, end of period $ 11.88 $ 10.06 $ 7.79 $ 9.00 $ 11.83
======= ======= ======== ======== =========
Total return* 18.71% 30.06% (13.31)% (23.74)% (22.50)%
Ratio of net expenses to average net assets+ 1.75% 1.69% 1.46% 1.38% 1.25%
Ratio of net investment income (loss) to average net assets+ 0.45% 0.68% 0.62% 0.21% 0.10%
Portfolio turnover rate 129% 99% 31% 39% 55%
Net assets, end of period (in thousands) $22,859 $22,506 $ 21,271 $ 32,083 $ 48,380
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.75% 1.69% 1.46% 1.38% 1.25%
Net investment income 0.45% 0.68% 0.62% 0.21% 0.10%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.75% 1.69% 1.46% 1.38% 1.25%
Net investment income 0.45% 0.68% 0.62% 0.21% 0.10%
* 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.
99
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
11/08/01
Year Ended Year Ended Year Ended to
Class I 12/31/04 12/31/03 12/31/02 12/31/01(a)
Net asset value, beginning of period $ 12.50 $ 9.23 $ 10.87 $ 10.00
------- ------- -------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.03) $ -- $ (0.01) $ 0.01
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 2.55 3.27 ( 1.63) 0.86
------- ------- -------- -------
Net increase (decrease) from investment operations $ 2.52 $ 3.27 $ (1.64) $ 0.87
Distributions to shareowners
Net investment income -- -- ( 0.00)(b) 0.00
Net realized gain -- -- ( 0.00)(b) --
------- ------- -------- ---------
Net increase (decrease) in net asset value $ 2.52 $ 3.27 $ (1.65) $ 0.87
------- ------- -------- ---------
Net asset value, end of period $ 15.02 $ 12.50 $ 9.23 $ 10.87
======= ======= ======== =========
Total return* 20.16% 35.43% (15.08)% 8.70%
Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.21%**
Ratio of net investment income (loss) to average net assets+ ( 0.21)% 0.03% ( 0.05)% 0.86%**
Portfolio turnover rate 36% 74% 50% 0%
Net assets, end of period (in thousands) $17,993 $12,049 $ 6,603 $ 504
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.30% 2.40% 2.76% 77.48%**
Net investment income (loss) ( 0.26)% ( 1.12)% ( 1.56)% (75.41)%**
Ratios with waiver of management fees and assumption of expenses
by PIM and reduction for fees paid indirectly:
Net expenses 1.25% 1.25% 1.25% 1.21%
Net investment income (loss) ( 0.21)% 0.03% ( 0.05)% 0.86%
(a) Shares of Pioneer Small Cap Value VCT Portfolio were first publicly offered
on November 8, 2001.
(b) 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.
** Annualized
100 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended
Class I 12/31/04 12/31/03
Net asset value, beginning of period $ 11.44 $ 9.13
------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.03) $ 0.00(b)
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 1.56 2.31
------- ---------
Net increase (decrease) from investment operations $ 1.53 $ 2.31
Distributions to shareowners:
Net investment income -- --
------- ---------
Net increase (decrease) in net asset value $ 1.53 $ 2.31
------- ---------
Net asset value, end of period $ 12.97 $ 11.44
======= =========
Total return* 13.38% 25.30%
Ratio of net expenses to average net assets+ 1.25% 1.25%
Ratio of net investment income (loss) to average net assets+ ( 0.25)% 0.02%
Portfolio turnover rate 114% 38%
Net assets, end of period (in thousands) $ 3,784 $ 3,875
Ratios with no waiver of management fees and assumption of expenses by PIM
and no reduction for fees paid indirectly:
Net expenses 1.53% 2.42%
Net investment income (loss) ( 0.53)% ( 1.15)%
Ratio with waiver of management fees and assumption of expenses by PIM
and reduction for fees paid indirectly:
Net expenses 1.25% 1.25%
Net investment income (loss) ( 0.25)% 0.02%
01/19/01
Year Ended to
Class I 12/31/02 12/31/01(a)
Net asset value, beginning of period $ 10.97 $ 10.00
-------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.00(b) $ 0.02
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ( 1.84) 0.95
-------- -------
Net increase (decrease) from investment operations $ (1.84) $ 0.97
Distributions to shareowners:
Net investment income ( 0.00)(b) --
-------- -------
Net increase (decrease) in net asset value $ (1.84) $ 0.97
-------- -------
Net asset value, end of period $ 9.13 $ 10.97
======== =======
Total return* (16.75)% 9.70%
Ratio of net expenses to average net assets+ 1.25% 1.24%**
Ratio of net investment income (loss) to average net assets+ 0.07% 0.30%**
Portfolio turnover rate 53% 72%
Net assets, end of period (in thousands) $ 3,441 $ 2,375
Ratios with no waiver of management fees and assumption of expenses by PIM
and no reduction for fees paid indirectly:
Net expenses 2.68% 7.49%**
Net investment income (loss) ( 1.36)% (5.95)%**
Ratio with waiver of management fees and assumption of expenses by PIM
and reduction for fees paid indirectly:
Net expenses 2.68% 1.24%* *
Net investment income (loss) 1.36% 0.30%* *
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26
------- ------- -------- ------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.08 $ 0.14 $ 0.07 $ 0.07 $ 0.13
Net realized and unrealized gain (loss) on investments 4.41 5.45 ( 1.97) 1.06 2.62
------- ------- -------- ------- --------
Net increase (decrease) from investment operations $ 4.49 $ 5.59 $ (1.90) $ 1.13 $ 2.75
Distributions to shareowners:
Net investment income (0.08) ( 0.06) ( 0.05) ( 0.10) ( 0.13)
Net realized gain (0.21) -- ( 0.46) ( 1.47) ( 1.09)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ 4.20 $ 5.53 $ (2.49) $ (0.44) $ 1.53
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.47 $ 14.94 $ 17.35 $ 17.79
======== ======== ========= ======== ========
Total return* 22.12% 37.48% (11.21)% 6.49% 18.00%
Ratio of net expenses to average net assets+ 0.72% 0.76% 0.80% 0.79% 0.77%
Ratio of net investment income (loss) to average net assets+ 0.53% 0.86% 0.46% 0.45% 0.63%
Portfolio turnover rate 55% 52% 68% 95% 85%
Net assets, end of period (in thousands) $303,138 $ 170,237 $120,687 $128,340 $111,466
Ratio with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.72% 0.76% 0.80% 0.79% 0.77%
Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
Ratio with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.72% 0.76% 0.80% 0.79% 0.77%
Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
(a) Shares of Pioneer Small Company VCT Portfolio were first publicly offered
on January 19, 2001.
(b) 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.
** Annualized
The accompanying notes are an integral part of these financial statements.
101
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Growth Shares VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended
Class I 12/31/04 12/31/03
Net asset value, beginning of period $ 12.22 $ 9.75
------- ---------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.09 $ (0.01)
Net realized and unrealized gain (loss) on investments 0.73 2.48
------- ---------
Net increase (decrease) from investment operations $ 0.82 $ 2.47
Distributions to shareowners:
Net investment income -- ( 0.00)(a)
Net realized gain -- --
------- ---------
Net increase (decrease) in net asset value $ 0.82 $ 2.47
------- ---------
Net asset value, end of period $ 13.04 $ 12.22
======= =========
Total return* 6.71% 25.35%
Ratio of net expenses to average net assets+ 0.96% 1.08%
Ratio of net investment income (loss) to average net assets+ 0.71% ( 0.05%)
Portfolio turnover rate 206% 58%
Net assets, end of period (in thousands) $32,300 $ 35,750
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.97% 1.08%
Net investment income (loss) 0.71% ( 0.05%)
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.96% 1.08%
Net investment income (loss) 0.71% ( 0.05%)
Year Ended Year Ended Year Ended
Class I 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 14.95 $ 18.39 $ 21.92
-------- --------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.00(a) $ 0.01 $ (0.03)
Net realized and unrealized gain (loss) on investments ( 5.19) ( 3.45) ( 1.91)
--------- --------- -------
Net increase (decrease) from investment operations $ (5.19) $ (3.44) $ (1.94)
Distributions to shareowners:
Net investment income ( 0.01) -- ( 0.00)
Net realized gain -- -- ( 1.59)
--------- --------- -------
Net increase (decrease) in net asset value $ (5.20) $ (3.44) $ (3.53)
--------- --------- -------
Net asset value, end of period $ 9.75 $ 14.95 $ 18.39
========= ========= =======
Total return* (34.71)% (18.71)% ( 7.88)%
Ratio of net expenses to average net assets+ 0.97% 0.85% 0.73%
Ratio of net investment income (loss) to average net assets+ 0.01% 0.07% ( 0.11%)
Portfolio turnover rate 86% 111% 95%
Net assets, end of period (in thousands) $ 34,746 $ 72,456 $105,855
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.97% 0.85% 0.73%
Net investment income (loss) 0.01% 0.07% ( 0.11%)
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.97% 0.85% 0.73%
Net investment income (loss) 0.01% 0.07% ( 0.11%)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Real Estate Shares VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.57 $ 14.47 $ 14.77 $ 14.42 $ 11.73
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.52 $ 0.74 $ 0.62 $ 0.68 $ 0.71
Net realized and unrealized gain (loss) on investments 5.99 4.16 ( 0.23) 0.40 2.67
------- ------- ------- ------- -------
Net increase (decrease) from investment operations $ 6.51 $ 4.90 $ 0.39 $ 1.08 $ 3.38
Distributions to shareowners:
Net investment income ( 0.45) ( 0.64) ( 0.69) ( 0.56) ( 0.59)
Net realized gain ( 0.33) -- -- -- --
Tax return of capital -- ( 0.16) -- ( 0.17) ( 0.10)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 5.73 $ 4.10 $ (0.30) $ 0.35 $ 2.69
------- ------- ------- ------- -------
Net asset value, end of period $ 24.30 $ 18.57 $ 14.47 $ 14.77 $ 14.42
======= ======= ======= ======= ========
Total return* 35.74% 34.75% ( 2.53)% 7.80% 29.51%
Ratio of net expenses to average net assets+ 0.98% 1.03% 1.07% 1.16% 1.10%
Ratio of net investment income to average net assets+ 2.41% 4.49% 4.76% 4.71% 5.02%
Portfolio turnover rate 35% 20% 29% 34% 31%
Net assets, end of period (in thousands) $36,447 $31,891 $29,873 $33,026 $32,982
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.98% 1.03% 1.07% 1.16% 1.10%
Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.98% 1.03% 1.07% 1.16% 1.10%
Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
(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.
102 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 I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70
------- ------- ------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.24 $ 0.20 $ 0.19 $ 0.17 $ 0.18
Net realized and unrealized gain (loss) on investments 1.85 3.41 ( 3.81) ( 2.57) 0.10
------- ------- -------- -------- ---------
Net increase (decrease) from investment operations $ 2.09 $ 3.61 $ (3.62) $ (2.40) $ 0.28
Distributions to shareowners:
Net investment income ( 0.22) ( 0.19) ( 0.18) ( 0.17) ( 0.18)
Net realized gain -- -- -- ( 1.02) ( 0.13)
-------- -------- -------- -------- ---------
Net increase (decrease) in net asset value $ 1.87 $ 3.42 $ (3.80) $ (3.59) $ (0.03)
-------- -------- -------- -------- ---------
Net asset value, end of period $ 20.57 $ 18.70 $ 15.28 $ 19.08 $ 22.67
======== ======== ======== ======== =========
Total return* 11.26% 23.76% 19.03% (10.85)% 1.22%
Ratio of net expenses to average net assets+ 0.71% 0.76% 0.80% 0.74% 0.69%
Ratio of net investment income (loss) to average net assets+ 1.26% 1.16% 1.09% 0.83% 0.78%
Portfolio turnover rate 17% 11% 11% 7.0% 37%
Net assets, end of period (in thousands) $454,136 $154,839 $141,892 $199,160 $222,107
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.71% 0.76% 0.80% 0.74% 0.69%
Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.71% 0.76% 0.80% 0.74% 0.69%
Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Equity Income VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.09 $ 15.11 $ 18.40 $ 21.28 $ 20.72
-------- ------- -------- ------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.44 $ 0.41 $ 0.42 $ 0.40 $ 0.51
Net realized and unrealized gain (loss) on investments 2.49 2.96 ( 3.30) (1.86) 2.28
-------- ------- -------- ------- --------
Net increase (decrease) from investment operations $ 2.93 $ 3.37 $ (2.88) $ (1.46) $ 2.79
Distributions to shareowners:
Net investment income ( 0.44) ( 0.39) ( 0.41) (0.36) (0.49)
Net realized gain -- -- -- (1.06) (1.74)
-------- -------- -------- ------- --------
Net increase (decrease) in net asset value $ 2.49 $ 2.98 $ (3.29) $ (2.88) $ 0.56
-------- -------- -------- ------- --------
Net asset value, end of period $ 20.58 $ 18.09 $ 15.11 $ 18.40 $ 21.28
======== ======== ======== ======== ========
Total return* 16.39% 0.86% (15.82)% (6.97)% 14.85%
Ratio of net expenses to average net assets+ 0.72% 0.78% 0.80% 0.75% 0.71%
Ratio of net investment income (loss) to average net assets+ 2.40% 2.55% 2.48% 2.07% 2.40%
Portfolio turnover rate 19% 12% 12% 13% 13%
Net assets, end of period (in thousands) $188,234 $155,634 $133,258 $164,019 $181,920
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.72% 0.78% 0.80% 0.75% 0.71%
Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.72% 0.78% 0.80% 0.75% 0.71%
Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
* 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 with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
103
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01(a) 12/31/00
Net asset value, beginning of period $ 14.04 $ 12.27 $ 13.91 $ 14.60 $ 14.31
------- ------- -------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.28 $ 0.23 $ 0.21 $ 0.34 $ 0.48
Net realized and unrealized gain (loss) on investments 0.39 1.80 (1.63) (0.67) 0.29
------- ------- -------- ------- -------
Net increase (decrease) from investment operations $ 0.67 $ 2.03 $ (1.42) $ (0.33) $ 0.77
Distributions to shareowners:
Net investment income ( 0.31) ( 0.26) (0.22) (0.36) (0.48)
Net realized gain -- -- -- -- --
------- ------- -------- ------- -------
Net increase (decrease) in net asset value $ 0.36 $ 1.77 $ (1.64) $ (0.69) $ 0.29
------- ------- -------- ------- -------
Net asset value, end of period $ 14.40 $ 14.04 $ 12.27 $ 13.91 $ 14.60
======= ======= ======== ======= =======
Total return* 4.79% 16.71% (10.27)% (2.26)% 5.45%
Ratio of net expenses to average net assets+ 0.90% 0.91% 0.95% 0.84% 0.82%
Ratio of net investment income to average net assets+ 1.96% 1.75% 1.62% 2.42% 3.21%
Portfolio turnover rate 30% 37% 179% 136% 15%
Net assets, end of period (in thousands) $35,312 $40,773 $ 42,849 $56,890 $59,545
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.90% 0.91% 0.95% 0.84% 0.82%
Net investment income 1.96% 1.75% 1.62% 2.42% 3.21%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.90% 0.91% 0.95% 0.84% 0.82%
Net investment income 1.96% 1.75% 1.62% 2.42% 3.21%
PIONEER VARIABLE CONTRACTS TRUST
Pioneer High Yield VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
5/1/00
Year Ended Year Ended Year Ended Year Ended to
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00(b)
Net asset value, beginning of period $ 11.45 $ 9.27 $ 10.33 $ 9.82 $ 10.00
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.62 $ 0.76 $ 0.92 $ 0.95 $ 0.61
Net realized and unrealized gain (loss) on investments 0.27 2.18 (1.06) 0.62 (0.18)
------- ------- ------- ------- --------
Net increase (decrease) from investment operations $ 0.89 $ 2.94 $ (0.14) $ 1.57 $ 0.43
Distributions to shareowners:
Net investment income ( 0.62) ( 0.76) (0.92) ( 0.95) (0.61)
Net realized gain ( 0.05) -- -- ( 0.11) --
------- ------- ------- ------- --------
Net increase (decrease) in net asset value $ 0.22 $ 2.18 $ (1.06) $ 0.51 $ (0.18)
------- ------- ------- ------- --------
Net asset value, end of period $ 11.67 $ 11.45 $ 9.27 $ 10.33 $ 9.82
======= ======= ======== ======= ========
Total return* 8.03% 32.78% ( 1.42)% 16.60% 4.12%
Ratio of net expenses to average net assets+ 0.78% 0.89% 1.02% 1.15% 1.25%**
Ratio of net investment income (loss) to average net assets+ 5.40% 7.22% 9.39% 9.15% 9.18%**
Portfolio turnover rate 42% 48% 42% 36% 33%
Net assets, end of period (in thousands) $70,890 $66,587 $41,111 $32,331 $6,849
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.78% 0.89% 1.02% 1.28% 2.35%**
Net investment income (loss) 5.40% 7.22% 9.39% 9.02% 8.08%**
(a) The Portfolio began accreting discounts and amortizing premiums on debt
securities. The effect of this change for the year ended December 31, 2001,
was to decrease net investment income by $0.00, increase net realized and
unrealized gain (loss) by $0.00 (both amounts round to less than one cent
per share) and to decrease the ratio of net investment income to average net
assets with waiver of management fees by PIM and reduction for fees paid
indirectly. Per share ratios and supplemental data for periods prior to
January 1, 2001, have not been restated to reflect this change in
presentation.
(b) Shares of Pioneer High Yield VCT Portfolio were first publicly offered on
May 1, 2000
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
104 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 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 11.01 $ 9.67 $ 9.33 $ 9.43 $ 9.75
------- ------- ------ ------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.60 $ 0.62 $ 0.65 $ 0.67 $ 0.73
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.47 1.38 0.32 (0.04) (0.32)
------- ------- ------ ------- -------
Net increase (decrease) from investment operations $ 1.07 $ 2.00 $ 0.97 $ 0.63 $ 0.41
Distributions to shareowners:
Net investment income ( 0.66) ( 0.66) (0.63) (0.67) (0.73)
Net realized gain ( 0.16) -- -- (0.06) --
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ 0.25 $ 1.34 $ 0.34 $(0.10) $ (0.32)
------- ------- ------- ------- -------
Net asset value, end of period $ 11.26 $ 11.01 $ 9.67 $ 9.33 $ 9.43
======= ======= ======= ======= =======
Total return* 10.25% 21.24% 10.72% 6.90% 4.51%
Ratio of net expenses to average net assets+ 1.03% 1.25% 1.25% 1.25% 1.30%
Ratio of net investment income to average net assets+ 5.52% 5.95% 6.75% 7.16% 7.53%
Portfolio turnover rate 53% 68% 50% 55% 54%
Net assets, end of period (in thousands) $20,814 $19,312 $14,692 $ 7,479 $ 3,265
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.03% 1.25% 1.62% 2.44% 2.97%
Net investment income 5.52% 5.95% 6.38% 5.97% 5.86%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.03% 1.25% 1.25% 1.25% 1.25%
Net investment income 5.52% 5.95% 6.75% 7.16% 7.58%
* 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.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
105
PIONEER VARIABLE CONTRACTS TRUST
Pioneer America Income VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01(a) 12/31/00
Net asset value, beginning of period $ 10.35 $ 10.59 $ 10.06 $ 9.97 $ 9.47
------- ------- ------- ------- ------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.37 $ 0.35 $ 0.46 $ 0.52 $ 0.58
Net realized and unrealized gain (loss) on investments ( 0.03) ( 0.16) 0.56 0.12 0.50
------- ------- ------- ------- ------
Net increase (decrease) from investment operations $ 0.34 $ 0.19 $ 1.02 $ 0.64 $ 1.08
Distributions to shareowners:
Net investment income ( 0.58) ( 0.43) ( 0.49) ( 0.55) (0.58)
Net realized gain -- -- -- -- --
------- ------- ------- ------- -------
Net increase (decrease) in net asset value $ (0.24) $ (0.24) $ 0.53 $ 0.09 $ 0.50
-------- --------- ------- ------- -------
Net asset value, end of period $ 10.11 $ 10.35 $ 10.59 $ 10.06 $ 9.97
======== ========= ======== ======== ========
Total return* 3.42% 1.81% 10.32% 6.48% 11.76%
Ratio of net expenses to average net assets+ 0.79% 0.78% 0.81% 0.83% 0.84%
Ratio of net investment income (loss) to average net assets+ 3.74% 3.45% 4.39% 5.19% 6.00%
Portfolio turnover rate 37% 34% 54% 71% 55%
Net assets, end of period (in thousands) $ 32,342 $ 44,526 $69,551 $37,381 $25,791
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.79% 0.78% 0.81% 0.85% 0.84%
Net investment income (loss) 3.74% 3.45% 4.39% 5.17% 6.00%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.79% 0.78% 0.81% 0.82% 0.81%
Net investment income (loss) 3.74% 3.45% 4.39% 5.20% 6.03%
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------ ------ ------
Increase (decrease) from investment operations:
Net investment income $ 0.007 $ 0.006 $ 0.01 $ 0.03 $ 0.06
-------- -------- ------ ------ ------
Distributions to shareowners:
Net investment income (0.007) (0.006) (0.01) (0.03) (0.06)
-------- -------- ------- ------- -------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ========
Total return* 0.65% 0.56% 1.19% 3.39% 5.71%
Ratio of net expenses to average net assets+ 0.74% 0.72% 0.78% 0.78% 0.76%
Ratio of net investment income to average net assets+ 0.66% 0.58% 1.11% 3.16% 5.58%
Net assets, end of period (in thousands) $ 42,896 $ 34,736 $59,521 $49,545 $36,979
Ratios with no waiver of fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 0.74% 0.72% 0.78% 0.78% 0.76%
Net investment income 0.66% 0.58% 1.11% 3.16% 5.58%
Ratios with waiver of fees and assumption of expenses by
PIM and reduction for fees paid indirectly:
Net expenses 0.74% 0.72% 0.78% 0.78% 0.75%
Net investment income 0.66% 0.58% 1.11% 3.16% 5.59%
(a) The Portfolio began accreting discounts and amortizing premiums on debt
securities. The effect of this change for the year ended December 31, 2001,
was to decrease net investment income by $0.00, increase net realized and
unrealized gain (loss) by $0.00 (both amounts round to less than one cent
per share) and to decrease the ratio of net investment income to average net
assets with waiver of management fees by PIM and reduction for fees paid
indirectly from 5.38% to 5.17%. Per share ratios and supplemental data for
periods prior to January 1, 2001, have not been restated to reflect this
change in presentation.
* 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.
106 The accompanying notes are an integral part of these financial statements.
(This page has been left blank intentionally.)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
Pioneer
Emerging Pioneer
Markets Europe
VCT Portfolio VCT Portfolio
ASSETS:
Investment in securities, at value (including securities loaned of $3,055,085, $0,
$909,605,$1,097,011, $557,149, $64,941,683 and $399,911, respectively)
(Cost $29,844,356, $13,116,988, $21,606,112, $22,278,590, $13,342,234,
$768,884,831, and $37,216,150, respectively) $ 40,537,238 $ 17,529,793
Cash 1,524,906 247,120
Cash held as collateral for futures contracts -- --
Futures collateral -- --
Foreign currencies, at value (Cost $97,982, $0, $0, $0, $0, $0, and $0, respectively) 116,115 --
Receivables --
Investment securities sold 34,194 --
Fund shares sold -- 4,231
Variation margin -- --
Dividends, interest and foreign taxes withheld 161,539 32,798
Forward foreign currency settlement contracts, net -- --
Forward foreign currency portfolio hedge contracts, open -- net -- --
Due from Pioneer Investment Management, Inc. -- --
Other 5,163 1,489
------------ ------------
Total assets $ 42,379,155 $ 17,815,431
------------ ------------
LIABILITIES:
Payables --
Investment securities purchased $ 15,338 $ --
Fund shares repurchased 86,231 17,293
Dividends -- --
Upon return of securities loaned 3,125,761 --
Variation margin -- --
Forward foreign currency settlement contracts, net -- --
Forward foreign currency portfolio hedge contracts, net -- --
Reserve for repatriation taxes 35,490 --
Due to bank -- --
Due to affiliates 45,670 21,663
Accrued expenses 90,460 50,837
Other -- --
------------ ------------
Total liabilities $ 3,398,950 $ 89,793
------------ ------------
NET ASSETS:
Paid-in capital $ 30,602,099 $ 21,052,463
Undistributed net investment income (loss) 44,879 103,181
Accumulated undistributed net realized gain (loss) (2,331,912) (7,845,397)
Net unrealized gain (loss) on:
Investments 10,657,392 4,412,805
Futures contracts -- --
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 7,747 2,586
------------ ------------
Total net assets $ 38,980,205 $ 17,725,638
------------ ------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 8,632,913 $ 9,477,976
Shares outstanding 421,530 891,363
------------ ------------
Net asset value per share $ 20.48 $ 10.64
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 30,347,292 $ 8,247,662
Shares outstanding 1,493,013 790,400
------------ ------------
Net asset value per share $ 20.33 $ 10.44
108 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer
International Small Cap Small Mid Cap Growth
Value Value Company Value Shares
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
$ 27,757,174 $ 27,379,617 $ 14,243,009 $ 913,040,396 $ 40,192,913
678,505 2,653,135 182,717 -- 400,152
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
432,458 -- 101,557 1,342,101 106,827
-- 70,286 57,675 206,665 368
-- 1,125 -- -- --
43,107 37,933 25,451 591,214 72,271
4,089 -- -- -- --
-- -- -- -- --
-- -- -- -- --
1,841 2,057 1,556 14,869 3,207
------------- ------------ ------------ ------------- -------------
$ 28,917,174 $ 30,144,153 $ 14,611,965 $ 915,195,245 $ 40,775,738
------------- ------------ ------------ ------------- -------------
$ 867,838 $ -- $ 100,703 $ 2,861,531 $ 204,180
11,283 94,176 788 4,004,450 20,701
-- -- -- -- --
946,907 1,134,938 579,352 67,222,328 413,820
-- -- -- -- --
-- -- -- -- --
--
-- -- -- -- --
-- -- -- 434,663 --
25,455 19,919 10,103 582,759 27,526
73,358 57,101 50,903 113,578 60,198
-- -- --
------------- ------------ ------------ ------------- -------------
$ 1,924,841 $ 1,306,134 $ 741,849 $ 75,219,309 $ 726,425
------------- ------------ ------------ ------------- -------------
$ 34,920,512 $ 22,990,010 $ 11,654,699 $ 647,879,874 $ 76,637,190
30,080 260 -- 2,164,900 271,723
(14,107,986) 713,557 1,314,643 45,775,597 (39,836,323)
6,151,062 5,101,027 900,774 144,155,565 2,976,763
-- 33,165 -- -- --
(1,335) -- -- -- --
------------- ------------ ------------ ------------- -------------
$ 26,992,333 $ 28,838,019 $ 13,870,116 $ 839,975,936 $ 40,049,353
------------- ------------ ------------ ------------- -------------
$ 22,859,452 $ 17,992,938 $ 3,784,302 $ 303,138,450 $ 32,299,874
1,923,744 1,197,698 291,770 12,289,796 2,477,134
------------- ------------ ------------ ------------- -------------
$ 11.88 $ 15.02 $ 12.97 $ 24.67 $ 13.04
$ 4,132,881 $ 10,845,081 $ 10,085,814 $ 536,837,486 $ 7,749,479
349,111 725,478 784,728 21,966,264 601,971
------------- ------------ ------------ ------------- -------------
$ 11.84 $ 14.95 $ 12.85 $ 24.44 $ 12.87
The accompanying notes are an integral part of these financial statements.
109
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES 12/31/04 (continued)
- --------------------------------------------------------------------------------
Pioneer
Real Estate Pioneer
Shares Fund
VCT Portfolio VCT Portfolio
ASSETS:
Investment in securities, at value (including securities loaned of $7,948,943,
$3,201,363, $0, $0, $3,388,083, $1,138,824, $0, and $0, respectively)
(Cost $71,947,778, $470,288,010, $216,560,015, $40,221,876, $124,177,032, $42,476,528,
$45,245,226, and $36,386,174, respectively) $ 104,281,934 $ 591,820,004
Temporary cash investments (cost $6,600,000) -- --
------------- -------------
Total Investments In Securities $ 104,281,934 $ 591,820,004
Cash 2,220,578 --
Cash held as collateral for futures contracts -- --
Futures collateral -- --
Foreign currencies, at value (Cost $0, $0, $0, $0, $0, $452,063, $0, and $0 respectively) -- --
Receivables --
Investment securities sold -- --
Fund shares sold 15,950 408,198
Variation margin -- --
Dividends, interest and foreign taxes withheld 561,625 1,035,978
Forward foreign currency settlement contracts, net -- --
Forward foreign currency portfolio hedge contracts, open -- net -- --
Due from Pioneer Investment Management, Inc. -- --
Other 3,635 40,546
------------- -------------
Total assets $ 107,083,722 $ 593,304,726
------------- -------------
LIABILITIES:
Payables --
Investment securities purchased $ 404,407 $ 1,000,388
Fund shares repurchased 60,248 --
Dividends -- --
Upon return for securities loaned 8,225,580 3,264,284
Variation margin -- --
Forward foreign currency settlement contracts, net -- --
Forward foreign currency portfolio hedge contracts, open -- net -- --
Due to bank -- 848,222
Due to affiliates 82,031 307,212
Accrued expenses 65,288 120,791
Other -- --
------------- -------------
Total liabilities $ 8,837,554 $ 5,540,897
------------- -------------
NET ASSETS:
Paid-in capital $ 62,351,060 $ 535,852,814
Undistributed net investment income (loss) 286,854 433,753
Accumulated net realized gain (loss) 3,274,098 (70,054,732)
Net unrealized gain (loss) on:
Investments 32,334,156 121,531,994
Futures contracts -- --
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies -- --
------------- -------------
Total net assets $ 98,246,168 $ 587,763,829
------------- -------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 36,447,028 $ 454,136,359
Shares outstanding 1,499,747 22,081,959
------------- -------------
Net asset value per share $ 24.30 $ 20.57
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 61,799,140 $ 133,627,470
Shares outstanding 2,547,790 6,513,968
------------- -------------
Net asset value per share $ 24.26 $ 20.51
110 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer
Equity Pioneer High Strategic America Money
Income Balanced Yield Income Income Market
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
$ 281,807,959 $ 44,912,717 $ 129,507,381 $45,406,176 $ 46,138,116 $36,386,174
-- -- -- -- -- 6,600,000
------------- ------------ ------------- ----------- ------------ -----------
$ 281,807,959 $ 44,912,717 $ 129,507,381 $45,406,176 $ 46,138,116 $42,986,174
154,992 770,401 392,872 529,987 20,754 44,755
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- 590,712 -- --
-- -- -- 79,688 -- 65,132
257,005 615 100,052 132,751 -- 567
-- -- -- -- -- --
725,532 169,693 1,768,626 676,848 368,514 122,921
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
7,531 3,050 4,893 2,899 2,900 2,807
------------- ------------ ------------- ----------- ------------ -----------
$ 282,953,019 $ 45,856,476 $ 131,773,824 $47,419,061 $ 46,530,284 $43,222,356
------------- ------------ ------------- ----------- ------------ -----------
$ -- $ -- $ 333,848 $ 181,909 $ 201,361 $ --
758,304 7,826 4,952,077 3,445 113,148 259,932
-- -- -- 2,797 -- 1,474
-- -- 3,541,345 1,191,203 -- --
-- -- -- -- -- --
-- -- -- 115,451 -- --
-- -- -- -- -- --
-- -- -- -- -- --
181,072 30,009 83,826 32,524 26,826 17,912
87,865 54,431 61,266 50,840 55,852 37,855
-- -- -- -- -- 8,991
------------- ------------ ------------- ----------- ------------ -----------
$ 1,027,241 $ 92,266 $ 8,972,362 $ 1,578,169 $ 397,187 $ 326,164
------------- ------------ ------------- ----------- ------------ -----------
$ 228,847,694 $ 46,401,274 $ 113,693,485 $41,872,240 $ 46,546,165 $42,897,250
1,228,049 14,409 42,906 311,542 (264,827) 2,001
(13,397,909) (5,342,314) 3,734,722 794,850 (1,041,130) (3,059)
65,247,944 4,690,841 5,330,349 2,929,648 892,889 --
-- -- -- -- -- --
-- -- -- (67,388) -- --
------------- ------------ ------------- ----------- ------------ -----------
$ 281,925,778 $ 45,764,210 $ 122,801,462 $45,840,892 $ 46,133,097 $42,896,192
------------- ------------ ------------- ----------- ------------ -----------
$ 188,234,469 $ 35,312,051 $ 70,889,843 $20,813,544 $ 32,341,802 $42,896,192
9,147,953 2,451,399 6,073,809 1,848,427 3,199,958 42,901,207
------------- ------------ ------------- ----------- ------------ -----------
$ 20.58 $ 14.40 $ 11.67 $ 11.26 $ 10.11 $ 1.00
$ 93,691,309 $ 10,452,159 $ 51,911,619 $25,027,348 $ 13,791,295 $ --
4,529,535 726,928 4,447,914 2,222,576 1,362,373 --
------------- ------------ ------------- ----------- ------------ -----------
$ 20.68 $ 14.38 $ 11.67 $ 11.26 $ 10.12 $ --
The accompanying notes are an integral part of these financial statements.
111
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS 12/31/04
- --------------------------------------------------------------------------------
Pioneer Pioneer
Emerging Markets Europe
VCT Portfolio VCT Portfolio
Year Year
Ended Ended
12/31/04 12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $146,637, $51,698, $53,248, $349,
$149, $12,629, and $4,478, respectively) $ 972,424 $ 355,527
Interest 6,531 3,353
Income on securities loaned, net 8,227 --
Other -- --
---------- ----------
Total investment income $ 987,182 $ 358,880
---------- ----------
EXPENSES:
Management fees $ 395,468 $ 149,784
Transfer agent fees and expenses 3,020 3,049
Distribution fees (Class II) 66,163 15,403
Administrative reimbursements 18,500 18,500
Custodian fees 137,409 66,885
Professional fees 55,020 33,376
Printing expense 15,712 5,807
Fees and expenses of nonaffiliated trustees -- --
Miscellaneous 15,036 13,769
---------- ----------
Total expenses $ 706,328 $ 306,573
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (41,545) (66,223)
Less fees paid indirectly (90) --
---------- ----------
Net expenses $ 664,693 $ 240,350
---------- ----------
Net investment income (loss) $ 322,489 $ 118,530
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (net of foreign capital gains taxes of $179,851) $5,608,134 $1,174,390
Futures Contracts -- --
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (34,951) (19,831)
---------- ----------
$5,573,183 $1,154,559
---------- ----------
Change in net unrealized gain or (loss) from:
Investments (net of decrease in reserve for repatriation taxes of $348,151) $ 17,838 $1,407,564
Futures Contracts -- --
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 4,855 (4,757)
---------- ----------
$ 22,693 $1,402,807
---------- ----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $5,595,876 $2,557,366
========== ===========
Net increase (decrease) in net assets resulting
from operations $5,918,365 $2,675,896
========== ===========
112 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer Pioneer
International Value Small Cap Value Small Company Mid Cap Value Growth Shares
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/04 12/31/04 12/31/04 12/31/04 12/31/04
$ 499,250 $ 193,923 $ 116,978 $ 7,019,067 $ 644,743
4,330 20,839 5,203 207,829 6,132
14,304 2,778 2,321 24,175 1,712
-- -- -- -- --
---------- ---------- ---------- ------------ ----------
$ 517,884 $ 217,540 $ 124,502 $ 7,251,071 $ 652,587
---------- ---------- ---------- ------------ ----------
$ 237,439 $ 153,423 $ 90,872 $ 3,753,733 $ 265,832
2,971 -- 2,009 3,195 3,020
5,526 15,087 21,149 936,681 13,265
18,500 18,500 18,500 117,136 18,500
70,086 38,476 26,887 100,959 30,320
62,141 45,386 32,556 67,108 34,166
13,358 11,214 11,676 107,301 14,534
-- -- -- 3,413 --
14,409 1,717 1,442 7,185 2,307
---------- ---------- ---------- ------------ ----------
$ 424,430 $ 283,803 $ 205,091 $ 5,096,711 $ 381,944
-- (9,953) (33,905) -- --
-- (815) -- (10,627) (1,080)
---------- ---------- ---------- ------------ ----------
$ 424,430 $ 273,035 $ 171,186 $ 5,086,084 $ 380,864
---------- ---------- ---------- ------------ ----------
$ 93,454 $ (55,495) $ (46,684) $ 2,164,987 $ 271,723
---------- ---------- ---------- ------------ ----------
$2,873,604 $1,576,824 $2,004,714 $ 53,898,712 $1,562,700
-- 167,366 13,667 -- --
(63,278) -- (3,021) -- --
---------- ---------- ---------- ------------ ----------
$2,810,326 $1,744,190 $2,015,360 $ 53,898,712 $1,562,700
---------- ---------- ---------- ------------ ----------
$1,321,708 $2,521,390 $ (373,588) $ 70,310,429 $ 618,844
-- 10,731 (11,218) -- --
(11,522) -- -- -- --
---------- ---------- ---------- ------------ ----------
$1,310,186 $2,532,121 $ (384,806) $ 70,310,429 $ 618,844
---------- ---------- ---------- ------------ ----------
$4,120,512 $4,276,311 $1,628,554 $124,209,141 $2,181,544
=========== =========== ========== ============ ==========
$4,213,966 $4,220,816 $1,583,870 $126,374,128 $2,453,267
=========== ========== ========== ============ ==========
The accompanying notes are an integral part of these financial statements.
113
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Pioneer Pioneer
Real Estate Shares Fund
VCT Portfolio VCT Portfolio
Year Year
Ended Ended
12/31/04 12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $3,560, $27,542,
$0, $1,615, $0, $0, $0 and $0, respectively) $ 2,668,265 $ 5,255,783
Interest (net of foreign taxes withheld of $0, $0, $0, $94, $0, $3,344,
$0 and $0, respectively) 28,012 158,731
Income on securities loaned, net 1,856 9,868
Other -- --
----------- -----------
Total investment income $ 2,698,133 $ 5,424,382
----------- -----------
EXPENSES:
Management fees $ 632,167 $ 1,790,664
Transfer agent fees and expenses 3,007 2,736
Distribution fees (Class II) 117,814 273,949
Administrative reimbursements 18,500 24,868
Custodian fees 34,727 47,602
Professional fees 46,225 59,072
Printing expense 37,031 30,024
Fees and expenses of nonaffiliated trustees -- --
Miscellaneous 2,572 --
----------- -----------
Total expenses $ 892,043 $ 2,228,915
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. -- --
Less fees paid indirectly -- (4,581)
----------- -----------
Net expenses $ 892,043 $ 2,224,334
----------- -----------
Net investment income (loss) $ 1,806,090 $ 3,200,048
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 7,508,438 $ 1,095,419
Futures Contracts -- --
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies -- (11,040)
----------- -----------
$ 7,508,438 $ 1,084,379
----------- -----------
Change in net unrealized gain or (loss) from:
Investments $15,633,552 $30,978,376
Futures Contracts -- --
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies -- --
----------- -----------
$15,633,552 $30,978,376
----------- -----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $23,141,990 $32,062,755
=========== ===========
Net increase (decrease) in net assets resulting
from operations $24,948,080 $35,262,803
=========== ===========
114 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Pioneer
Pioneer Pioneer Pioneer Pioneer America Money
Equity Income Balanced High Yield Strategic Income Income Market
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/04 12/31/04 12/31/04 12/31/04 12/31/04 12/31/04
$ 7,227,744 $ 452,044 $ 28,052 $ -- $ -- $ --
128,972 825,144 6,314,255 2,185,006 1,995,831 430,188
7,190 -- 15,124 -- -- --
-- -- -- 3,989 -- --
----------- ---------- ----------- ---------- ---------- --------
$ 7,363,906 $1,277,188 $ 6,357,431 $2,188,995 $1,995,831 $430,188
----------- ---------- ----------- ---------- ---------- --------
$ 1,531,353 $ 288,949 $ 669,359 $ 214,069 $ 243,809 $153,638
3,000 2,987 1,806 2,896 2,896 1,510
181,888 16,887 85,911 31,944 19,905 --
30,408 18,500 19,997 18,500 18,500 18,500
43,740 18,175 21,500 21,476 18,454 24,343
52,063 53,197 56,459 59,577 52,915 25,656
41,880 17,844 30,056 21,159 11,737 --
1,681 -- -- -- -- --
8,282 3,205 4,539 2,272 2,020 1,228
----------- ---------- ----------- ---------- ---------- --------
$ 1,894,295 $ 419,744 $ 889,627 $ 371,893 $ 370,236 $224,875
-- -- (6) -- -- --
(4,731) -- -- -- -- --
----------- ---------- ------------- ---------- ---------- --------
$ 1,889,564 $ 419,744 $ 889,621 $ 371,893 $ 370,236 $224,875
----------- ---------- ------------- ---------- ---------- --------
$ 5,474,342 $ 857,444 $ 5,467,810 $1,817,102 $1,625,595 $205,313
----------- ---------- ------------- ---------- ---------- --------
$ 2,001,864 $1,099,149 $ 3,746,873 $1,126,982 $ 206,989 $ --
-- -- -- -- -- --
-- -- (45,775) -- --
----------- ---------- ------------- ---------- ---------- --------
$ 2,001,864 $1,099,149 $ 3,746,873 $1,081,207 $ 206,989 $ --
----------- ---------- ------------- ---------- ---------- --------
$29,937,321 $ 127,896 $(1,480,061) $ 817,291 $ (352,583) $ --
-- -- -- -- -- --
-- -- -- (49,594) -- --
----------- ---------- ------------- ---------- ---------- --------
$29,937,321 $ 127,896 $(1,480,061) $ 767,697 $ (352,583) $ --
----------- ---------- ------------- ---------- ---------- --------
$31,939,185 $1,227,045 $ 2,266,812 $1,848,904 $ (145,594) $ --
=========== ========== ============= ========== ========== ==========
$37,413,527 $2,084,489 $ 7,734,622 $3,666,006 $1,480,001 $205,313
========== ========== ============== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
115
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 12/31/04
- --------------------------------------------------------------------------------
Pioneer Emerging Pioneer
Markets VCT Portfolio Europe VCT Portfolio
Year Year Year Year
Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 322,489 $ 262,378 $ 118,530 $ 110,674
Net realized gain (loss) on investments 5,573,183 1,187,664 1,154,559 (108,393)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 22,693 10,449,480 1,402,807 3,419,238
------------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 5,918,365 $ 11,899,522 $ 2,675,896 $ 3,421,519
------------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (65,091) $ (25,889) $ (65,951) $ (36,322)
Class II (196,317) (60,429) (38,910) (9,367)
Net realized gain
Class I -- -- -- --
Class II -- -- -- --
Tax return of capital
Class I -- -- -- --
Class II -- -- -- --
------------- ------------ ------------ ------------
Total distributions to shareowners $ (261,408) $ (86,319) $ (104,861) $ (45,689)
------------- ------------ ------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 9,587,268 $ 16,360,576 $ 3,890,105 $ 6,502,123
Reinvestment of distributions 259,912 85,767 104,862 45,689
Cost of shares repurchased (11,459,650) (8,062,148) (3,175,336) (6,113,517)
------------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ (1,612,470) $ 8,384,195 $ 819,631 $ 434,295
------------- ------------ ------------ ------------
Net increase (decrease) in net assets $ 4,044,487 $ 20,197,398 $ 3,390,666 $ 3,810,125
------------- ------------ ------------ ------------
NET ASSETS:
Beginning of year $ 34,935,718 $ 14,738,320 $ 14,334,972 $ 10,524,848
------------- ------------ ------------ ------------
End of year $ 38,980,205 $ 34,935,718 $ 17,725,638 $ 14,334,973
============= ============ ============ ==============
Undistributed net investment income (loss),
end of year $ 44,879 $ 198,789 $ 103,181 $ 109,343
============= ============ ============ ==============
116 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
Pioneer International Pioneer Small Cap Value Pioneer Small Company
Value VCT Portfolio VCT Portfolio VCT Portfolio
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
$ 93,454 $ 136,624 $ (55,495) $ 2,125 $ (46,684) $ (9,162)
2,810,326 (857,791) 1,744,190 (334,168) 2,015,360 (296,269)
1,310,186 6,236,488 2,532,121 3,353,942 (384,806) 2,171,849
------------ ----------- ------------ ------------- ------------ ------------
$ 4,213,966 $ 5,515,321 $ 4,220,816 $ 3,021,899 $ 1,583,870 $ 1,866,418
------------ ----------- ------------ ------------- ------------ ------------
$ (113,573) $ (146,246) $ -- $ -- $ -- $ --
(8,890) (4) -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------ ------------- ------------ ------------- ------------ ------------
$ (122,463) $ (146,250) $ -- $ -- $ -- $ --
------------ ------------- ------------ ------------- ------------ ------------
$ 4,380,480 $ 2,253,340 $ 14,302,057 $ 15,752,093 $ 4,450,765 $ 6,156,243
122,460 146,246 -- -- --
(5,189,620) (5,452,468) (4,493,153) (10,568,904) (3,135,048) (3,911,566)
------------ ------------- ------------ ------------- ------------ ------------
$ (686,680) $(3,052,882) $ 9,808,904 $ 5,183,189 $ 1,315,717 $ 2,244,677
------------ ------------- ------------ ------------- ------------ ------------
$ 3,404,823 $ 2,316,189 $ 14,029,720 $ 8,205,088 $ 2,899,587 $ 4,111,095
------------ ------------- ------------ ------------- ------------ ------------
$ 23,587,510 $21,271,321 $ 14,808,299 $ 6,603,211 $ 10,970,529 $ 6,859,434
------------ ------------- ------------ ------------- ------------ ------------
$ 26,992,333 $23,587,510 $ 28,838,019 $ 14,808,299 $ 13,870,116 $ 10,970,529
============ ============= ============ ============= ============ ============
$ 30,080 $ 122,367 $ 260 $ 3,664 $ -- $ 1,986
============ ============= ============ ============= ============ ============
The accompanying notes are an integral part of these financial statements.
117
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Pioneer Mid Cap Pioneer Growth
Value VCT Portfolio Shares VCT Portfolio
Year Year Year Year
Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 2,164,987 $ 1,803,484 $ 271,723 $ (20,270)
Net realized gain (loss) on investments 53,898,712 6,004,760 1,562,700 (3,697,565)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 70,310,429 75,230,670 618,844 11,680,101
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 126,374,128 $ 83,038,914 $ 2,453,267 $ 7,962,266
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (711,725) $ (438,494) $ -- $ (4,477)
Class II (1,067,643) (236,135) -- --
Net realized gain
Class I (1,863,831) -- -- --
Class II (3,740,321) -- -- --
Tax return of capital
Class I -- -- -- --
Class II -- -- -- --
------------- ------------- ------------ ------------
Total distributions to shareowners $ (7,383,520) $ (674,629) $ -- $ (4,477)
------------- ------------- ------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 331,791,818 $ 161,143,658 $ 5,638,676 $ 4,104,812
Class I shares issued in reorganization 49,670,328 -- -- --
Reinvestment of distributions 7,383,520 674,611 -- 4,477
Cost of shares repurchased (49,217,509) (44,550,616) (6,840,932) (8,277,302)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets resulting
from Fund share transactions $ 339,628,157 $ 117,267,653 $ (1,202,256) $ (4,168,013)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938 $ 1,251,011 $ 3,789,776
------------- ------------- ------------ ------------
NET ASSETS:
Beginning of year $ 381,357,171 $ 181,725,233 $ 38,798,342 $ 35,008,566
------------- ------------- ------------ ------------
End of year $ 839,975,936 $ 381,357,171 $ 40,049,353 $ 38,798,342
============= ============= ============ =============
Undistributed net investment income (loss),
end of year $ 2,164,900 $ 1,779,281 $ 271,723 $ --
============= ============= ============ =============
118 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
Pioneer Real Estate Pioneer Fund Pioneer Equity
Shares VCT Portfolio VCT Portfolio Income VCT Portfolio
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
$ 1,806,090 $ 2,666,503 $ 3,200,048 $ 2,086,873 $ 5,474,342 $ 4,413,641
7,508,438 (441,521) 1,084,379 (8,525,302) 2,001,864 (634,370)
15,633,552 15,916,594 30,978,376 49,662,141 29,937,321 34,115,732
------------- ------------- ------------- ------------- ------------- -------------
$ 24,948,080 $ 18,141,576 $ 35,262,803 $ 43,223,712 $ 37,413,527 $ 37,895,003
------------- ------------- ------------- ------------- ------------- -------------
$ (707,216) $ (1,049,939) $ (1,685,576) $ (1,580,150) $ (3,809,792) $ (3,313,897)
(916,414) (1,121,546) (1,069,680) (520,900) (1,595,526) (860,942)
(493,376) -- -- -- -- --
(803,210) -- -- -- -- --
-- (372,973) -- -- -- --
-- (398,048) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
$ (2,920,216) $ (2,942,506) $ (2,755,256) $ (2,101,050) $ (5,405,318) $ (4,174,839)
------------- ------------- ------------- ------------- ------------- -------------
$ 20,027,996 $ 9,753,610 $ 60,072,885 $ 58,651,489 $ 63,295,941 $ 52,433,019
-- -- 298,220,832 -- -- --
2,920,216 2,942,506 2,755,256 2,101,050 5,405,317 4,174,840
(18,513,875) (17,969,003) (48,119,744) (37,658,369) (34,772,572) (34,680,633)
------------- ------------- ------------- ------------- ------------- -------------
$ 4,434,337 $ (5,272,887) $ 312,929,229 $ 23,094,170 $ 33,928,686 $ 21,927,226
------------- ------------- ------------- ------------- ------------- -------------
$ 26,462,201 $ 9,926,183 $ 345,436,776 $ 64,216,832 $ 65,936,895 $ 55,647,390
------------- ------------- ------------- ------------- ------------- -------------
$ 71,783,967 $ 61,857,784 $ 242,327,053 $ 178,110,221 $ 215,988,883 $ 160,341,493
------------- ------------- ------------- ------------- ------------- -------------
$ 98,246,168 $ 71,783,967 $ 587,763,829 $ 242,327,053 $ 281,925,778 $ 215,988,883
============= ============= ============ ============= ============= =============
$ 286,854 $ 153,315 $ 433,753 $ -- $ 1,228,049 $ 1,156,984
============= ============= ============ ============= ============= =============
The accompanying notes are an integral part of these financial statements.
119
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Pioneer Pioneer High Yield
Balanced VCT Portfolio VCT Portfolio
Year Year Year Year
Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 857,444 $ 718,572 $ 5,467,810 $ 4,106,902
Net realized gain (loss) on investments 1,099,149 336,352 3,746,873 1,124,588
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 127,896 5,309,842 (1,480,061) 10,301,474
------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 2,084,489 $ 6,364,766 $ 7,734,622 $ 15,532,964
------------ ------------ ------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (789,468) $ (800,491) $ (3,715,003) $ (3,817,405)
Class II (155,092) (20,067) (1,764,209) (279,944)
Net realized gain
Class I -- -- (265,040) --
Class II -- -- (135,300) --
Tax return of capital
Class I -- -- -- --
Class II -- -- -- --
------------ ------------ ------------- -------------
Total distributions to shareowners $ (944,560) $ (820,558) $ (5,879,552) $ (4,097,349)
------------ ------------ ------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 8,978,890 $ 4,068,440 $ 75,619,514 $ 45,609,360
Class I shares issued in reorganization -- -- -- --
Reinvestment of distributions 944,549 820,551 5,846,576 4,059,022
Cost of shares repurchased (9,461,531) (9,119,455) (44,707,455) (18,254,761)
------------ ------------ ------------- -------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 461,908 $ (4,230,464) $ 36,758,635 $ 31,413,621
------------ ------------ ------------- -------------
Net increase (decrease) in net assets $ 1,601,837 $ 1,313,744 $ 38,613,705 $ 42,849,236
------------ ------------ ------------- -------------
NET ASSETS:
Beginning of year $ 44,162,373 $ 42,848,629 $ 84,187,757 $ 41,338,521
------------ ------------ ------------- -------------
End of year $ 45,764,210 $ 44,162,373 $ 122,801,462 $ 84,187,757
============ ============ ============= =============
Undistributed net investment income (loss),
end of year $ 14,409 $ 12,808 $ 42,906 $ 42,283
============ ============ ============= =============
120 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
Pioneer Strategic Pioneer America Pioneer Money
Income VCT Portfolio Income VCT Portfolio Market VCT Portfolio
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/04 12/31/03 12/31/04 12/31/03 12/31/04 12/31/03
$ 1,817,102 $ 1,068,721 $ 1,625,595 $ 2,011,935 $ 205,313 $ 277,950
1,081,207 713,901 206,989 193,917 -- 2,354
767,697 1,695,515 (352,583) (1,192,887) -- --
------------ ------------ ------------- ------------- ------------- -------------
$ 3,666,006 $ 3,478,137 $ 1,480,001 $ 1,012,965 $ 205,313 $ 280,304
------------ ------------ ------------- ------------- ------------- -------------
$ (1,210,066) $ (1,087,224) $ (2,102,796) $ (2,321,232) $ (203,312) $ (277,950)
(733,628) (52,386) (401,489) (26,127) -- --
(294,736) -- -- -- -- --
(171,204) -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------ ------------ ------------- ------------- ------------- -------------
$ (2,409,634) $ (1,139,610) $ (2,504,285) $ (2,347,359) $ (203,312) $ (277,950)
------------ ------------ ------------- ------------- ------------- -------------
$ 25,764,732 $ 11,160,025 $ 15,160,465 $ 10,875,454 $ 18,483,087 $ 27,291,288
-- -- -- -- 21,976,837 --
2,367,418 1,105,582 2,504,258 2,347,346 203,307 277,946
(6,523,479) (6,320,659) (17,669,980) (34,276,542) (32,505,228) (52,356,043)
------------ ------------ ------------- ------------- ------------- -------------
$ 21,608,671 $ 5,944,948 $ (5,257) $ (21,053,742) $ 8,157,953 $ (24,786,809)
------------ ------------ ------------- ------------- ------------- -------------
$ 22,865,043 $ 8,283,475 $ (1,029,541) $ (22,388,141) $ 8,159,954 $ (24,784,455)
------------ ------------ ------------- ------------- ------------- -------------
$ 22,975,849 $ 14,692,374 $ 47,162,638 $ 69,550,779 $ 34,736,238 $ 59,520,693
------------ ------------ ------------- ------------- ------------- -------------
$ 45,840,892 $ 22,975,849 $ 46,133,097 $ 47,162,638 $ 42,896,192 $ 34,736,238
============ ============ ============= ============= ============= =============
$ 311,542 $ 152,569 $ (264,827) $ 231,501 $ 2,001 $ --
============ ============ ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
121
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer Variable Contracts Trust (the Trust) is a Delaware statutory trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the "Portfolios", individually the "Portfolio") as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The financial statements of Value Portfolio, Papp America- Pacific Rim
Portfolio, Papp Small and Mid Cap Growth Portfolio, Oak Ridge Large Cap Growth
Portfolio, Growth Opportunities Portfolio, Small Cap Value II Portfolio and
Bond Portfolio and the Class II financial highlights of all the Portfolios are
presented in separate books.
The investment objective of Emerging Markets Portfolio, Europe Portfolio and
International Value Portfolio is to seek long-term capital growth. Small
Company Portfolio, Small Cap Value Portfolio, Mid-Cap Value Portfolio and
Growth Shares Portfolio seek capital appreciation. Real Estate Shares Portfolio
pursues long-term capital growth, with current income as a secondary objective.
Fund Portfolio seeks reasonable income and growth of capital. Equity Income
Portfolio seeks current income and long-term capital growth. Balanced
Portfolio's investment objectives are capital growth and current income. High
Yield Portfolio seeks to maximize total return through a combination of income
and capital appreciation. Strategic Income Portfolio seeks to produce a high
level of current income. America Income Portfolio seeks a high level of current
income as consistent with preservation of capital. Money Market Portfolio
invests for current income consistent with preserving capital and providing
liquidity.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses and gains and losses on investments during the
reporting year. Actual results could differ from those estimates. 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 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
122
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
securities for which sale prices are not generally reported, are valued at
the mean between the last bid and asked prices. Trading in foreign equity
securities is substantially completed each day at various times prior to
the close of the 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.
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 quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees.
The Portfolios also may 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 exchange.
At December 31, 2004, there were no fair valued securities except as
follows. 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
Emerging Markets Portfolio, Europe Portfolio and International Value
Portfolio are fair valued using vendor-supplied pricing updates for each
security to the time of the close of the NYSE. 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 Portfolios determine their net asset values.
Consequently, the Board of Trustees of the Trust has determined that the
use of daily fair valuations as provided by a pricing service is
appropriate for these Portfolios. The Portfolios may also take into
consideration other significant events in determining the fair value of
these securities. At December 31, 2004, the valuation of China Aviation Oil
Singapore was determined by the Board of Trustees of the Trust. Thus, a
Portfolio's securities valuations may differ from prices reported by the
various local exchanges and markets. Temporary cash investments and
securities held by any Portfolio are valued at amortized cost.
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
securities are reported net of unrecoverable foreign taxes withheld at the
applicable country rates.
Gains and losses from 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.
Because Real Estate Shares 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.
Emerging Markets, International Value and Europe Portfolios' investments in
emerging markets or countries with limited or developing markets may
subject these Portfolios 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 Portfolios'
investments and income generated by these investments, as well as the
Portfolios' ability to repatriate such amounts.
High Yield and Strategic Income Portfolios invest in below investment grade
(high yield) debt securities and preferred stocks. Some of 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 periods of economic uncertainty or change, than higher
rated debt securities.
123
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Small capitalization stocks, while offering the potential for higher
returns, such as those in the Small Company and Small Cap Value Portfolios
may be subject to greater short-term price fluctuations than securities of
larger companies.
B. Futures Contracts
The Portfolios may enter into futures transactions to hedge against changes
in interest rates, securities prices, and currency rates or to seek to
increase total return. Upon entering into a futures contract, the
Portfolios are required to deposit with a broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the
associated futures exchange. Subsequent payments for futures contracts
("variation margin") are paid or received by the Portfolios, depending on
the daily fluctuation in the value of the contracts, and are recorded by
the Portfolios as unrealized gains or losses. When the contract is closed,
the Portfolios realize a gain or loss equal to the difference between the
opening and closing value of the contract. The use of futures contracts
involves, to varying degrees, elements of market risk such as the 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 Portfolios' hedging and trading strategies and
potentially result in a loss. As of December 31, 2004, open contracts are
shown at the bottom of this page:
C. Foreign Currency Translation
The books and records of the Portfolios are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent
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.
- ------------------------------------------------------------------------------------------------------------
Number of
Contracts Settlement Unrealized
Portfolio Type Long/(Short) Month Market Value Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------
Small Cap Value Portfolio Russell 2000 5 March 2005 $1,634,875 $33,165
- ------------------------------------------------------------------------------------------------------------
D. Forward Foreign Currency Contracts
Certain Portfolios are authorized to enter into forward foreign currency
contracts (contracts) for the purchase or sale of a specific foreign
currency at a fixed price on a future date as a hedge or cross-hedge
against either specific investment transactions (settlement hedges) or
portfolio positions (portfolio hedges). All contracts are marked to market
daily at the applicable exchange rates, and any resulting unrealized gains
or losses are recorded in the Portfolios' financial statements. The
Portfolios record realized gains and losses at the time a portfolio hedge
is offset by entry into a closing transaction or extinguished by delivery
of the currency. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of the contract
and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar (see Note 8).
E. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
In addition to the requirements of the Internal Revenue Code, the
Portfolios 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, 2004, no such taxes were
paid. In determining the daily net asset value, the Portfolios estimate the
reserve for such taxes, if any, associated with investments in certain
countries. Any estimated reserve for taxes on capital gains is based on the
net unrealized appreciation on certain portfolio securities, the holding
period of such securities and the related tax rates, tax loss carryforward
(if applicable) and other such factors. Any estimated reserve for taxes on
repatriation of foreign currencies is based on principal balances and/or
unrealized appreciation of applicable securities, the holding period of
such investments and the related tax rates and other such factors. As of
December 31, 2004, the Portfolios had no reserves related to taxes on
capital gains, except that Emerging Markets
124
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
Portfolio, which had a reserve of $35,490 for the 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 either from or in
excess of net investment income or net realized gain on investment
transactions, or from paid-in capital, depending on the type of book/tax
differences that may exist.
A portion of the dividend income recorded by Real Estate Shares Portfolio
is from distributions by publicly traded REITs, and such distributions for
tax purposes may also consist of capital gains and return of capital. The
actual return of capital and capital gains portions of such distributions
will be determined by formal notifications from the REITs subsequent to the
calendar year-end. Distributions received from the REITs that are
determined to be a return of capital are recorded by the Trust as a
reduction of the cost basis of the securities held, and those determined to
be capital gains are reflected as such in the Statement of Operations.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, certain Portfolios had capital loss
carryforwards as follows:
- -----------------------------------------------------------------------------------------------------
Fiscal Emerging International Mid Cap Growth
Year Markets Europe Value Value Shares
Ending Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------
2004 $ -- $ -- $ -- $ -- $ --
2005 $ -- $ -- $ -- $ -- $ --
2006 $ -- $ -- $ -- $ -- $ --
2007 $ -- $ -- $ -- $ -- $ --
2008 $ -- $ -- $ -- $ -- $ 2,404,543
2009 $ 864,104 $ 4,296,563 $ 6,653,888 $3,451,474 $ 9,820,202
2010 $ 1,176,783 $ 1,896,288 $ 5,309,516 $2,529,788 $ 19,245,183
2011 $ -- $ 783,043 $ 2,130,998 $ -- $ 7,319,241
2012 $ -- $ -- $ -- $ -- $ --
------------ ----------- ------------ ---------- ------------
Total $ 2,040,887 $ 6,975,894 $ 14,094,402 $5,981,262 $ 38,789,169
============ ============ ============= ============= =============
Fiscal Equity America Money
Year Fund Income Balanced Income Market
Ending Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------
2004 $ -- $ -- $ -- $ -- $ --
2005 $ -- $ -- $ -- $ -- $ --
2006 $ -- $ -- $ -- $ -- $ --
2007 $ -- $ -- $ -- $ -- $ --
2008 $ -- $ -- $ -- $ 382,424 $ --
2009 $ 20,833,698 $ 3,961,413 -- $ -- $ --
2010 $ 35,500,430 $ 6,407,206 $ 2,571,211 $ -- $ 2,813
2011 $ 13,017,527 $ 2,677,654 $ 2,590,145 $ 435,523 $ --
2012 $ -- $ -- $ -- $ 171,643 $ 246
----------------------------------------------------------------------------------------
Total $ 69,351,655 $13,046,273 $ 5,161,356 $ 989,590 $ 3,059
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
The following Portfolios elected to defer capital and/or currency losses
recognized between November 1, 2004 and December 31, 2004 to their fiscal
year ending December 31, 2005.
- ----------------------------------------------------------------------
Portfolio Capital Losses Currency Losses
- ----------------------------------------------------------------------
Growth Shares Portfolio $389,332 $ --
Fund Portfolio $ 23,515 $ --
Equity Income Portfolio $229,369 $ --
Balanced Portfolio $ 90,101 $ --
America Income Portfolio $ 47,565 $ --
- ----------------------------------------------------------------------
125
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
At December 31, 2004, certain Portfolios made reclassifications as described
below. These reclassifications have no impact on the net asset values of the
respective Portfolios and are designed to present the Portfolios' capital
accounts on a tax basis.
- --------------------------------------------------------------------------------
Undistributed Accumulated
Net Investment Realized Gain/Net Paid-in
Portfolio Income (Loss) (Loss) Capital
- --------------------------------------------------------------------------------
Emerging Markets Portfolio $ (214,991) $ 214,991 $ --
Europe Portfolio (19,831) 19,831 --
International Value Portfolio (63,278) 63,278 --
Small Cap Value Portfolio 52,091 6,157 (58,248)
Small Company Portfolio 44,698 15,753 (60,451)
Mid Cap Value Portfolio -- -- --
Growth Shares Portfolio -- -- --
Real Estate Shares Portfolio (48,921) 19,456 29,465
Fund Portfolio (11,039) 11,039 --
Equity Income Portfolio 2,041 (44,116) 42,075
Balanced Portfolio 88,717 (88,717) --
High Yield Portfolio 12,025 (12,025) --
Strategic Income Portfolio 285,565 (285,565) --
America Income Portfolio 382,362 (368,055) (14,307)
Money Market Portfolio -- -- --
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
- --------------------------------------------------------------------------------
Pioneer Pioneer
Emerging Emerging Pioneer Pioneer
Markets Markets Europe Europe
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 261,408 $86,319 $ 104,861 $ 45,689
Long-Term capital gain -- -- -- --
---------------------------------------------------------------------------
$ 261,408 $86,319 $ 104,861 $ 45,689
Return of Capital -- -- -- --
---------------------------------------------------------------------------
Total distributions $ 261,408 $86,319 $ 104,861 $ 45,689
---------------------------------------------------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 211,876 $ 103,181
Undistributed long-term gain/(Capital
loss carryforward) (2,040,887) (6,975,894)
Unrealized appreciation (depreciation) 10,207,117 3,545,888
-----------------------------------------------------------------------------
Total $ 8,378,106 $ (3,326,825)
-----------------------------------------------------------------------------
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
126
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer Pioneer
International International
Value Value
VCT Portfolio VCT Portfolio
2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 122,463 $146,250
Long-Term capital gain -- --
-----------------------------
$ 122,463 $146,250
Return of Capital -- --
-----------------------------
Total distributions $ 122,463 $146,250
-----------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 34,169
Undistributed long-term gain/(Capital
loss carryforward) (14,094,402)
Unrealized appreciation (depreciation) 6,132,054
------------------------------
Total $ (7,928,179)
==============================
- ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer
Small Small
Company Company
VCT Portfolio VCT Portfolio
2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
-----------------------------
$ -- $ --
Return of Capital -- --
-----------------------------
Total distributions $ -- $ --
-----------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ --
Capital loss carryforward from merger --
Undistributed long-term gain/(Capital
loss carryforward) 1,364,989
Unrealized appreciation (depreciation) 850,428
------------------------------
Total $ 2,215,417
==============================
- ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer
Growth Growth
Shares Shares
VCT Portfolio VCT Portfolio
2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ -- $ 4,477
Long-Term capital gain -- --
-----------------------------
$ -- $ 4,477
Return of Capital -- --
------------------------------
Total distributions $ -- $ 4,477
-----------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 271,723
Undistributed long-term gain/(Capital
loss carryforward) (38,789,169)
Post-October loss deferred/REIT Dividend Payable (389,332)
Unrealized appreciation (depreciation) 2,318,941
-----------------------------
Total $(36,587,837)
-----------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer
Small Cap Small Cap
Value Value
VCT Portfolio VCT Portfolio
2004 2003
------------------ -----------------
Distributions paid from:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
--------------------------------
$ -- $ --
Return of Capital -- --
--------------------------------
Total distributions $ -- $ --
--------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ --
Undistributed long-term gain/(Capital
loss carryforward) 1,086,729
Unrealized appreciation (depreciation) 4,761,280
---------------------------------
Total $ 5,848,009
---------------------------------
---------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer
Mid Cap Mid Cap
Value Value
VCT Portfolio VCT Portfolio
2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 3,095,474 $ 674,629
Long-Term capital gain 4,288,046 --
------------- -- -- -----------
$ 7,383,520 $ 674,629
Return of Capital -- --
------------- -- -- -----------
Total distributions $ 7,383,520 $ 674,629
------------- -- -- -----------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 6,505,614
Capital loss carryforward from merger 48,549,164
Undistributed long-term gain/(Capital
loss carryforward) (5,981,262)
Unrealized appreciation (depreciation) 143,022,546
------------- -- -- -----------
Total $192,096,062
------------- -- -- -----------
Pioneer Pioneer
Real Estate Real Estate
Shares Shares
VCT Portfolio VCT Portfolio
2004 2003*
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 2,449,917 $2,171,485
Long-Term capital gain 470,299 --
------------- -----------
$ 2,920,216 $2,171,485
Return of Capital -- 771,021
------------- -----------
Total distributions $ 2,920,216 $2,942,506
------------- -----------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ --
Undistributed long-term gain/(Capital
loss carryforward) 3,564,562
Post-October loss deferred/REIT Dividend Payable 286,854
Unrealized appreciation (depreciation) 32,043,692
------------- -----------
Total $ 35,895,108
- ---------------------------------------------------------------------------------------------------------------------------
127
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Pioneer Pioneer
Pioneer Pioneer Equity Equity
Fund Fund Income Income
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839
Long-Term capital gain -- -- -- $ --
--------------------------------------------------------------------
$ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839
Return of Capital -- -- -- $ --
--------------------------------------------------------------------
Total distributions $ 2,755,256 $2,101,050 $ 5,405,318 $4,174,839
--------------------------------------------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 433,753 $ --
Undistributed long-term gain/(Capital
loss carryforward) (69,351,655) (13,046,273)
Post-October loss deferred (23,515) (229,369)
Unrealized appreciation (depreciation) 120,852,432 66,353,726
------------------------------------------------------------
Total $51,911,015 $ 53,078,084
------------------------------------------------------------
------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Pioneer Pioneer Pioneer Pioneer
Balanced Balanced High Yield High Yield
VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 944,560 $ 820,558 $ 5,479,212 $4,097,349
Long-Term capital gain -- -- 400,340 --
---------------------------------------------------------------------------------
$ 944,560 $ 820,558 $ 5,879,552 $4,097,349
Return of Capital -- -- -- --
---------------------------------------------------------------------------------
Total distributions $ 944,560 $ 820,558 $ 5,879,552 $4,097,349
---------------------------------------------------------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 13,132 $ 613,388
Undistributed long-term gain/(Capital
loss carryforward) (5,161,356) 3,164,280
Post-October loss deferred (90,901) --
Unrealized appreciation (depreciation) 4,602,061 5,330,309
---------------------------------------------------------------------------------
Total $ (637,064) $ $9,107,977
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
128
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pioneer
Strategic Income
VCT Portfolio
2004
------------------------
Distributions paid from:
Ordinary Income $ 2,196,847
Long-Term capital gain/(Capital
loss carryforward) 212,787
------------
$ 2,409,634
Return of Capital --
------------
Total distributions $ 2,409,634
------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 218,814
Undistributed long-term gain/(Capital
loss carryforward) 773,272
Post-October loss deferred --
Unrealized appreciation (depreciation) 2,976,566
------------
Total $ 3,968,652
------------
Pioneer
Money Market
VCT Portfolio
2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 203,312
Long-Term capital gain/Capital
loss carryforward --
------------
$ 203,312
Return of Capital --
------------
Total distributions $ 203,312
------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 2,001
Undistributed long-term gain/(Capital
loss carryforward) (3,059)
Unrealized appreciation (depreciation) --
------------
Total $ (1,058)
------------
- --------------------------------------------------------------------------------
Pioneer Pioneer
Pioneer America America
Strategic Income Income Income
VCT Portfolio VCT Portfolio VCT Portfolio
2003 2004 2003
- -------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $1,139,610 $2,504,285 $2,347,359
Long-Term capital gain/(Capital
loss carryforward) -- -- --
-----------------------------------------------
$1,139,610 $2,504,285 $2,347,359
Return of Capital -- -- --
-----------------------------------------------
Total distributions $1,139,610 $2,504,285 $2,347,359
------------------------------------------------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ --
Undistributed long-term gain/(Capital
loss carryforward) (989,590)
Post-October loss deferred (47,565)
Unrealized appreciation (depreciation) 624,087
------------------------------------------------
Total $(413,068)
Pioneer
Money Market
VCT Portfolio
2003
- -------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 277,950
Long-Term capital gain/Capital
loss carryforward --
----------
$ 277,950
Return of Capital --
----------
Total distributions $ 277,950
----------
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income
Undistributed long-term gain/(Capital
loss carryforward)
Unrealized appreciation (depreciation)
----------
Total
==========
- -------------------------------------------------------------------------------------------------------------
* Included in the Portfolio's distributions from 2003 ordinary income is
$192,564 in excess of investment company taxable income, which, in
accordance with U.S. tax law, is taxable to shareowners as ordinary income
distributions.
For the fiscal year ending December 31, 2004, Emerging Markets Portfolio has
elected to pass through foreign tax credits of $325,677.
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on wash
sales, returns of capital on REITs, the recognition of unrealized gains or
losses on certain futures contracts and the tax treatment of premium
amortization.
F. Portfolio Shares
The Portfolios record sales and repurchases 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 UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475
in commissions on the sale of Trust shares for the year ended December 31,
2004.
Distribution fees for Class II shares are calculated based on the average
daily net asset values attributable to Class II shares of the Portfolio.
129
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
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
share based on their respective percentage of the adjusted net assets at
the beginning of the day. High Yield, Strategic Income, America Income and
Money Market Portfolios declare as daily dividends substantially all of
their respective net investment income. All dividends are paid on a monthly
basis. Short-term capital gain distributions, if any, may be declared with
the daily dividends. Dividends and distributions to shareowners are
recorded on the ex-dividend date. 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 Portfolios lend securities in their portfolios to certain
broker-dealers or other institutional investors, with the Portfolios'
custodian acting as the lending agent. When entering into a loan, the
Portfolio receives collateral which is maintained by the custodian and
earns income in the form of negotiated lenders' fees. The Portfolios also
continue to receive payments in lieu of interest or dividends on the
securities loaned. Gain or loss on the fair value of the loaned securities
that may occur during the term of the loan will be for account of the
Portfolios. The loans are secured by collateral of at least 102%, at all
times, of the fair value of the securities loaned. The amount of the
collateral will be adjusted daily to reflect any price fluctuation in the
value of the loaned securities. The Portfolios have the right under the
lending agreements to recover the securities on loan from the borrower on
demand. The Portfolios invest cash collateral in the Securities Lending
Investment Fund, which is managed by Brown Brothers Harriman & Co., the
Portfolios' custodian.
H. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolios, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreements at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Trust's custodian, or subcustodians. The
Trust's investment adviser, 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 UniCredito Italiano, manages the
Portfolios. Management fees are calculated daily at the following annual rates:
- ------------------------------------------------------------------------------
Management Fee as a Percentage
of each Portfolio's Average
Portfolio Daily Net Assets
- --------------------------------------------------------------------------------
Emerging Markets Portfolio 1.15%
Europe Portfolio 1.00%
International Value Portfolio 1.00%
Small Cap Value Portfolio 0.75%
Small Company Portfolio 0.75%
Mid Cap Value Portfolio 0.65%
Growth Shares Portfolio 0.70%
Real Estate Shares Portfolio 0.80%
Fund Portfolio 0.65%
Equity Income Portfolio 0.65%
Balanced Portfolio 0.65%
High Yield Portfolio 0.65%
Strategic Income Portfolio 0.65%
America Income Portfolio 0.55%
Money Market Portfolio 0.50%
- --------------------------------------------------------------------------------
130
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
PIM has agreed not to impose a portion of its management fees and to assume
other operating expenses for certain Portfolios through December 31, 2004 to
the extent necessary to limit expenses of Class I shares (Class II shares in
the case of High Yield and Value Portfolios) to the following percentages of
the Portfolios' average daily net assets attributable to Class I shares:
- --------------------------------------------------------------------------------
Expense Limitation as a Percentage
of each Portfolio's Average
Portfolio Daily Net Assets
- --------------------------------------------------------------------------------
Emerging Markets Portfolio 1.75%
Europe Portfolio 1.50%
Small Cap Value Portfolio 1.25%
Small Company Portfolio 1.25%
High Yield Portfolio 1.30%
Strategic Income Portfolio 1.25%
- --------------------------------------------------------------------------------
The portion of the Portfolios' expenses attributable to Class II (or Class I
for shares in the case of High Yield Portfolio) will be reduced only to the
extent such expenses are reduced for Class I shares (or 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 Portfolios. At December 31, 2004, the following
amounts were payable to PIM related to management fees, administrative fees and
certain other services and are included in due to affiliates:
- --------------------------------------------------------------------------------
Portfolio Amount
- --------------------------------------------------------------------------------
Emerging Markets Portfolio $39,145
Europe Portfolio 19,630
International Value Portfolio 24,357
Small Cap Value Portfolio 17,466
Small Company Portfolio 7,619
Mid Cap Value Portfolio 467,669
Growth Shares Portfolio 25,622
Real Estate Shares Portfolio 68,694
Fund Portfolio 278,054
Equity Income Portfolio 160,961
Balanced Portfolio 27,524
High Yield Portfolio 72,671
Strategic Income Portfolio 27,040
America Income Portfolio 23,654
Money Market Portfolio 17,777
- --------------------------------------------------------------------------------
131
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. The following amounts of transfer agent fees payable to PIMSS
are included in due to affiliates at December 31, 2004:
- --------------------------------------------------------------------------------
Portfolio Amount
- --------------------------------------------------------------------------------
Emerging Markets Portfolio $271
Europe Portfolio 271
International Value Portfolio 270
Small Cap Value Portfolio 268
Small Company Portfolio 268
Mid Cap Value Portfolio 520
Growth Shares Portfolio 271
Real Estate Shares Portfolio 270
Fund Portfolio 269
Equity Income Portfolio 271
Balanced Portfolio 272
High Yield Portfolio 267
Strategic Income Portfolio 271
America Income Portfolio 271
Money Market Portfolio 135
- --------------------------------------------------------------------------------
4. Distribution Plans
The Portfolios have adopted plans of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plans, 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 each Portfolio's
Class II shares. The following amounts of distribution fees payable to PFD are
included in due to affiliates at December 31, 2004:
- --------------------------------------------------------------------------------
Portfolio Amount
- --------------------------------------------------------------------------------
Emerging Markets Portfolio $ 6,254
Europe Portfolio 1,762
International Value Portolio 828
Small Cap Value Portfolio 2,185
Small Company Portfolio 2,216
Mid Cap Value Portfolio 114,570
Growth Shares Portfolio 1,633
Real Estate Shares Portfolio 13,097
Fund Portfolio 28,889
Equity Income Portfolio 19,840
Balanced Portfolio 2,213
High Yield Portfolio 10,888
Strategic Income Portfolio 5,213
America Income Portfolio 2,901
- --------------------------------------------------------------------------------
132
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
5. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes were as follows:
- --------------------------------------------------------------------------------
Gross Gross Net Appreciation/
Portfolio Tax Cost Appreciation Depreciation (Depreciation)
- ------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio $ 30,302,378 $ 11,097,178 $ (862,318) $ 10,234,860
Europe Portfolio $ 13,986,491 $ 3,915,690 $ (372,388) $ 3,543,302
International Value Portfolio $ 21,619,696 $ 6,175,716 $ (38,238) $ 6,137,478
Small Cap Value Portfolio $ 22,618,337 $ 5,335,071 $ (573,791) $ 4,761,280
Small Company Portfolio $ 13,392,581 $ 1,098,063 $ (247,635) $ 850,428
Mid Cap Value Portfolio $770,017,850 $149,310,096 $ (6,287,550) $143,022,546
Growth Shares Portfolio $ 37,873,972 $ 3,044,465 $ (725,524) $ 2,318,941
Real Estate Shares Portfolio $ 72,577,658 $ 31,782,239 $ (77,963) $ 31,704,276
Fund Portfolio $470,964,572 $139,688,987 $ (18,836,555) $120,852,432
Equity Income Portfolio $215,454,233 $ 69,454,959 $ (3,101,223) $ 66,353,726
Balanced Portfolio $ 40,310,656 $ 5,154,366 $ (552,305) $ 4,602,061
High Yield Portfolio $124,177,071 $ 6,347,617 $ (1,017,307) $ 5,330,310
Strategic Income Portfolio $ 42,477,674 $ 3,004,383 $ (75,881) $ 2,928,502
America Income Portfolio $ 45,514,028 $ 677,456 $ (53,369) $ 624,088
Money Market Portfolio $ 42,986,174 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were as follows:
- --------------------------------------------------------------------------------
Portfolio Purchases Sales
- --------------------------------------------------------------------------------
Emerging Markets Portfolio $ 22,233,472 $ 24,663,852
Europe Portfolio 8,930,700 8,096,127
International Value Portfolio 30,362,933 30,703,827
Small Cap Value Portfolio 16,213,181 6,667,416
Small Company Portfolio 15,556,752 13,097,177
Mid Cap Value Portfolio 609,010,425 312,401,269
Growth Shares Portfolio 77,027,440 77,443,920
Real Estate Shares Portfolio 33,759,977 26,732,885
Fund Portfolio 102,950,656 46,364,816
Equity Income Portfolio 72,185,977 44,337,103
Balanced Portfolio 6,958,907 6,637,518
High Yield Portfolio 83,647,941 42,692,245
Strategic Income Portfolio 25,999,621 12,441,146
America Income Portfolio -- --
Money Market Portfolio -- --
- --------------------------------------------------------------------------------
The cost of purchases and the proceeds from sales of U.S. Government
obligations for the year ended December 31, 2004, were as follows:
- --------------------------------------------------------------------------------
Portfolio Purchases Sales
- --------------------------------------------------------------------------------
Balanced Portfolio $ 7,113,072 $ 6,465,950
Strategic Income Portfolio 10,658,816 4,517,261
America Income Portfolio 15,946,349 17,221,316
Money Market Portfolio 102,657,000 90,158,000
- --------------------------------------------------------------------------------
133
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows for the
fiscal years ended December 31, 2004 and 2003:
- --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount
- ---------------------------------------------------------------------------------------------
Emerging Markets Portfolio
CLASS I:
Shares sold 72,945 $ 1,305,983 143,611 $ 1,837,255
Reinvestment of distributions 3,952 $ 63,595 2,017 25,338
Shares repurchased (138,809) (2,377,707) (195,769) (2,390,909)
-------- ------------ -------- -------------
Net increase (decrease) (61,912) $ (1,008,129) (50,141) (528,316)
========= ============= ========= =============
CLASS II:
Shares sold 468,119 $ 8,281,285 1,162,017 $ 14,523,321
Reinvestment of distributions 12,278 $ 196,317 4,838 60,429
Shares repurchased (524,708) (9,081,943) (435,883) (5,671,239)
-------- ------------ --------- -------------
Net increase (decrease) (44,311) $ (604,341) 730,972 $ 8,912,511
========= ============= ========= =============
Europe Portfolio
CLASS I:
Shares sold 43,531 $ 395,370 59,876 $ 462,031
Reinvestment of distributions 7,232 65,952 4,817 36,322
Shares repurchased (190,688) (1,758,638) (308,777) (2,225,749)
-------- ------------ --------- -------------
Net increase (decrease) (139,925) $ (1,297,316) (244,084) $ (1,727,396)
========= ============= ========= =============
CLASS II:
Shares sold 374,441 $ 3,494,736 836,602 $ 6,040,092
Reinvestment of distributions 4,343 38,910 1,262 9,637
Shares repurchased (151,264) (1,416,699) (547,441) (3,887,768)
-------- ------------ --------- -------------
Net increase (decrease) 227,520 $ 2,116,947 290,423 $ 2,161,691
========= ============= ========= =============
International Value Portfolio:
CLASS I:
Shares sold 125,954 $ 1,319,269 148,266 $ 1,260,116
Reinvestment of distributions 10,994 113,572 17,452 146,246
Shares repurchased (449,994) (4,643,483) (658,580) (5,442,461)
-------- ------------ --------- -------------
Net increase (decrease) (313,046) $ (3,210,642) (492,862) $ (4,036,099)
========= ============= ========= =============
CLASS II:
Shares sold 294,244 $ 3,061,211 108,723 $ 993,224
Reinvestment of distributions 862 8,888 -- --
Shares repurchased (53,626) (546,137) (1,092) (10,007)
-------- ------------ --------- -------------
Net increase (decrease) 241,480 $ 2,523,962 107,631 $ 983,217
========= ============= ========= =============
Small Cap Value Portfolio
CLASS I:
Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675
Reinvestment of distributions -- -- -- --
Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382)
-------- ------------ ---------- -------------
Net increase (decrease) 233,763 $ 3,102,122 248,156 $ 2,649,293
========= ============= ========= =============
CLASS II:
Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418
Reinvestment of distributions -- -- -- --
Shares repurchased (61,897) (820,452) (14,089) (159,522)
-------- ------------ ---------- -------------
Net increase (decrease) 504,239 $ 6,706,782 221,239 $ 2,533,896
========= ============= ========= =============
- ---------------------------------------------------------------------------------------------
134
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount
- ------------------------------------------------------------------------------------------------------------
Small Company Portfolio
CLASS I:
Shares sold 56,890 $ 670,369 286,397 $ 2,774,242
Reinvestment of distributions -- -- -- --
Shares repurchased (103,931) (1,215,329) (324,514) (3,132,628)
------------------------------------------------------------
Net increase (decrease) (47,041) $ (544,960) (38,117) $ (358,386)
============================================================
CLASS II:
Shares sold 320,212 $ 3,780,396 328,726 $ 3,382,001
Reinvestment of distributions -- -- -- --
Shares repurchased (160,864) (1,919,719) (80,215) (778,938)
------------------------------------------------------------
Net increase (decrease) 159,348 $ 1,860,677 248,511 $ 2,603,063
============================================================
Mid Cap Value Portfolio
CLASS I:
Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551
Class I shares issued in reorganization 2,087,866 49,670,328 -- --
Reinvestment of distributions 117,982 2,575,556 26,084 438,476
Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863)
--------------------------------------------------------------
Net increase (decrease) 3,973,911 $ 91,266,478 237,992 $ 6,003,164
============================================================
CLASS II:
Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107
Reinvestment of distributions 221,974 4,807,964 93,450 236,135
Shares repurchased (881,455) (19,626,013) (249,002) (3,957,753)
--------------------------------------------------------------
Net increase (decrease) 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489
============================================================
Growth Shares Portfolio
CLASS I:
Shares sold 66,360 $ 806,587 91,892 $ 1,012,931
Reinvestment of distributions -- -- 403 4,477
Shares repurchased (515,053) (6,176,527) (731,375) (7,757,809)
--------------------------------------------------------------
Net increase (decrease) (448,693) $ (5,369,940) (639,080) $ (6,740,401)
============================================================
CLASS II:
Shares sold 406,516 $ 4,832,089 271,796 $ 3,091,881
Reinvestment of distributions -- -- -- --
Shares repurchased (56,565) (664,405) (46,885) (519,493)
--------------------------------------------------------------
Net increase (decrease) 349,951 $ 4,167,684 224,911 $ 2,572,388
============================================================
Real Estate Shares Portfolio
CLASS I:
Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266
Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912
Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017)
--------------------------------------------------------------
Net increase (decrease) (217,394) $ (4,104,806) (347,178) $ (5,232,839)
============================================================
CLASS II:
Shares sold 820,863 $ 16,857,146 424,038 $ 7,208,344
Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594
Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986)
--------------------------------------------------------------
Net increase (decrease) 397,199 $ 8,560,780 (62,278) $ (40,048)
============================================================
- ------------------------------------------------------------------------------------------------------------
135
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount
- ------------------------------------------------------------------------------------------------------------
Fund Portfolio
CLASS I:
Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870
Class I shares issued in reorganization 14,822,109 298,220,832 -- --
Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150
Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,564,887)
---------------------------------------------------------------
Net increase (decrease) 13,800,320 $ 278,626,053 (1,002,042) $ (15,504,867)
===============================================================
CLASS II:
Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619
Reinvestment of distributions 55,486 1,069,680 30,685 520,900
Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482)
--------------------------------------------------------------
Net increase (decrease) 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037
==============================================================
Equity Income Portfolio
CLASS I:
Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979
Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898
Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038)
--------------------------------------------------------------
Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161)
===============================================================
CLASS II:
Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040
Reinvestment of distributions 82,473 1,595,526 52,432 860,942
Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595)
--------------------------------------------------------------
Net increase (decrease) 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387
===============================================================
Balanced Portfolio
CLASS I:
Shares sold 78,321 $ 1,113,192 58,603 $ 777,329
Reinvestment of distributions 55,609 789,468 60,877 800,492
Shares repurchased (586,843) (8,291,593) (705,902) (9,066,098)
--------------------------------------------------------------
Net increase (decrease) (452,913) (6,388,933) (586,422) $ (7,488,277)
===============================================================
CLASS II:
Shares sold 557,386 $ 7,865,698 244,252 $ 3,291,111
Reinvestment of distributions 10,920 155,081 1,455 20,059
Shares repurchased (83,119) (1,169,938) (3,966) (53,357)
-------------------------------------------------------------
Net increase (decrease) 485,187 $ 6,850,841 241,741 $ 3,257,813
===============================================================
High Yield Portfolio
CLASS I:
Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319
Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086
Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254)
-------------------------------------------------------------
Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151
===============================================================
CLASS II:
Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041
Reinvestment of distributions 166,648 1,899,530 25,089 279,936
Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,507)
-------------------------------------------------------------
Net increase (decrease) 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470
==============================================================
- -----------------------------------------------------------------------------------------------------------
136
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
'04 Shares '04 Amount '03 Shares '03 Amount
- --------------------------------------------------------------------------------------------------------------
Strategic Income Portfolio
CLASS I:
Shares sold 453,590 $ 4,955,590 712,653 $ 7,385,764
Reinvestment of distributions 134,927 1,462,624 100,561 1,053,192
Shares repurchased (494,192) (5,414,640) (579,108) (6,045,569)
--------------------------------------------------------------
Net increase (decrease) 94,325 $ 1,002,986 234,106 $ 2,393,387
===============================================================
CLASS II:
Shares sold 1,907,997 $ 20,809,730 353,538 $ 3,774,292
Reinvestment of distributions 83,281 904,794 4,862 52,365
Shares repurchased (101,494) (1,108,839) (25,608) (275,096)
--------------------------------------------------------------
Net increase (decrease) 1,889,784 $ 20,605,685 332,792 $ 3,551,561
===============================================================
America Income Portfolio
CLASS I:
Shares sold 245,204 $ 2,472,061 711,258 $ 8,118,733
Reinvestment of distributions 206,467 2,102,795 221,712 2,321,232
Shares repurchased (1,551,998) (15,847,044) (3,202,256) (34,132,706)
--------------------------------------------------------------
Net increase (decrease) (1,100,327) $ (11,272,188) 2,269,286 (23,692,741)
===============================================================
CLASS II:
Shares sold 1,247,751 $ 12,688,404 265,643 $ 2,756,721
Reinvestment of distributions 39,513 401,463 2,521 26,114
Shares repurchased (179,116) (1,822,936) (13,939) (143,836)
--------------------------------------------------------------
Net increase (decrease) 1,108,148 $ 11,266,931 254,225 $ 2,638,999
===============================================================
Money Market Portfolio
CLASS I:
Shares sold 18,483,037 $ 18,483,037 27,291,288 $ 27,291,288
Class I shares issued in reorganization 21,976,837 21,976,837 -- --
Reinvestment of distributions 203,307 203,307 277,946 277,946
Shares repurchased (32,505,228) (32,505,228) (52,356,043) (52,356,043)
-----------------------------------------------------------------
Net increase (decrease) 8,157,953 $ 8,157,953 (24,786,809) $ (24,786,809)
===============================================================
- --------------------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts
During the year ended December 31, 2004, certain Portfolios had entered into
various contracts that obligate the Portfolios to deliver currencies at
specified future dates. At the maturity of a contract, the Portfolios must make
delivery of the foreign currency. Alternatively, prior to the
settlement date of a portfolio hedge, the Portfolio may close out such
contracts by entering into an offsetting hedge contract.
As of December 31, 2004, the Portfolios' open portfolio hedges were as follows:
- ------------------------------------------------------------------------------
Contracts to In Exchange Settlement Net
Portfolio Deliver For Date Value Unrealized Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
Strategic Income Portfolio AUD (200,000) $ 151,140 2/8/05 $ (156,097) $ (4,957)
Strategic Income Portfolio EURO (1,551,000) $1,995,676 1/26/05 $ (2,106,170) $ (110,494)
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding forward currency settlement contracts as of December 31, 2004 were
as follows:
- ----------------------------------------------------------------------------------------------------
Net
Gross Settlement Gross Receivable/
Portfolio Receivable Date Payable (Payable)
- ----------------------------------------------------------------------------------------------------
International Value Portfolio $ (432,458) 1/3/05 $ (429,646) $ (2,812)
International Value Portfolio $ 867,839 1/3/05 $ 860,938 $ 6,901
- ----------------------------------------------------------------------------------------------------
137
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
9. Merger Information
On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio
("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco
RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that
comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan
of Reorganization that provided for the mergers listed below. These tax-free
reorganizations were accomplished on December 10, 2004 ("Closing Date"), by
exchanging all of the Safeco's net assets for Class I shares as indicated
below, based on Class I shares' ending net asset value on the Closing Date. The
following charts show the details of the reorganizations as of that closing
date Closing Date:
Pioneer Fund VCT Portfolio
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Pioneer Fund Safeco RST Core Pioneer Fund
VCT Portfolio Equity Portfolio VCT Portfolio
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- ----------------------------------------------------------------------------------------------------
Net Assets $281,591,969 $298,220,832 $879,147,352
Shares Outstanding 13,990,134 12,804,673 28,812,243
Class I Shares Issued 14,822,109
- ----------------------------------------------------------------------------------------------------
Pioneer Money Market VCT Portfolio
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Pioneer Money Pioneer Money
Market VCT Safeco RST Money Market VCT
Portfolio Market Portfolio Portfolio
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- ----------------------------------------------------------------------------------------------------
Net Assets $23,493,640 $21,976,837 $67,613,266
Shares Outstanding 23,500,655 21,976,837 45,477,492
Class I Shares Issued 21,976,837
- ----------------------------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Pioneer Mid Cap Pioneer Mid Cap
Value VCT Safeco RST Multi- Value VCT
Portfolio Cap Core Portfolio Portfolio
(Pre-Reorganization) (Pre-Reorganization) (Post-Reorganization)
- ----------------------------------------------------------------------------------------------------
Net Assets $757,206,652 $49,670,328 $858,922,877
Shares Outstanding 32,072,498 2,399,533 34,160,364
Class I Shares Issued 2,087,866
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Unrealized Realized
Appreciation on Gain/(Loss)
Closing Date on Closing Date
- ----------------------------------------------------------------------------------------------------
Safeco RST Core Equity Portfolio $68,714,366 $20,662,968
Safeco RST Money Market Portfolio -- --
Safeco RST Multi-Cap Core Portfolio $ 5,550,191 $ 7,992,587
- ----------------------------------------------------------------------------------------------------
138
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Class I Shareowners of
Pioneer Variable Contracts Trust:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of Emerging Markets VCT Portfolio,
Europe VCT Portfolio, International Value VCT Portfolio, Small Cap Value VCT
Portfolio, Small Company VCT Portfolio, Mid Cap Value VCT Portfolio, Growth
Shares VCT Portfolio, Real Estate Shares VCT Portfolio, Pioneer Fund VCT
Portfolio, Equity Income VCT Portfolio, Balanced VCT Portfolio, High Yield VCT
Portfolio, Strategic Income VCT Portfolio, America Income VCT Portfolio and
Money Market VCT Portfolio (fifteen of the portfolios constituting the Pioneer
Variable Contracts Trust (the "Trust"), the "Portfolios"), as of December 31,
2004, and the related statements 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit includes 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 as of December 31, 2004, 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 each
of the fifteen Portfolios of the Pioneer Variable Contracts Trust referred to
above at December 31, 2004, 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 three years in the
period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young
Boston, Massachusetts
February 11, 2005
139
Pioneer Variable Contracts Trust
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
Custodian with their rincipal occupations during the past five years. Trustees who
Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as
Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S.
registered investment portfolios for which Pioneer Investment Management,
Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address
Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State
Street, Boston, Massachusetts 02109.
Legal Counsel The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available
upon request, without charge, by calling 1-800-225-6292.
Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number
Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc.
online at pioneerfunds.com. online at pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd.
Jr. (78)* Board, Trustee successor trustee until retirement or removal
President and is elected or or earlier retirement Deputy
removal Chairman and a Director of
Pioneer Global Asset Management
S.p.A. ("PGAM"); Non-Executive
Chairman and a Director of
Pioneer Investment Manage
("PIM-USA"); Chairman and a
Director of Pio of Pioneer
Alternative Investment Managemen
(Dublin); President and a
Director of Pione Investment
Management (Bermuda) Limited and
funds; President and Director of
Pioneer Fu Inc. ("PFD");
President of all of the Pione Of
Counsel (since 2000, partner
prior to 20 Pickering Hale and
Dorr LLP (counsel to PIM Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive None
(52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003
President elected or earlier (Director since January 2001);
retirement or removal President and Director of Pioneer
since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
140
Pioneer Variable Contracts Trust
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment
Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing
3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York
Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage
Washington, company) (2001-present); REIT)
DC 20007 Managing Partner, Federal
City Capital Advisors
(boutique merchant
bank)(1995-2000; 2002 to
2004); Executive Vice
President and Chief
Financial Officer, Pedestal
Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial
(56) 3509 2000. successor trustee is (international inancial identification and specialty coated material
Woodbine elected or earlier advisory firm) products manufacturer), Millennium
Street, retirement or removal Chemicals, Inc. (commodity chemicals),
Chevy Chase, Mortgage Guaranty Insurance Corporation,
MD 20815 and R.J. Reynolds Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Trustee since Serves until Founding Director, The None
B.W. Graham 2000. successor trustee is Winthrop Group, Inc.
(57) 1001 elected or earlier (consulting firm); Professor
Sherbrooke retirement or removal of Management, Faculty of
Street West, Management, McGill
Montreal, University
Quebec,
Canada H3A
1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund,
A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company)
(56) One trustee is Company, Inc. (investment
Boston elected or banking firm)
Place, 28th earlier
Floor, retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetic Fund, Inc.
West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP
125 Broad is elected or earlier PLC (investment managers)
Street, New retirement or removal
York, NY
10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Trustee since Serves until President, John Winthrop & CO., None
Winthrop September, successor trustee Inc.(private investment firm)
(68) One 2000. is elected or earlier
North Adgers retirement or removal
Wharf,
Charleston,
SC 29401
- ------------------------------------------------------------------------------------------------------------------------------------
141
Pioneer Variable Contracts Trust
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Complianc of PIM-USA from
April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the discretion Assistant Vice President and None
Kelley (40) Secretary of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the discretion Partner, Wilmer Cutler None
Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Treasurer Serves at the discretion Vice President-Fund None
Nave (59) of the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of all
of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Bradley (45) Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of
all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the discretion Assistant Vice President - None
Presutti (39) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None
(46) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
142
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None
Sullivan (31) Treasurer of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration
and Custody Services (Fund
Accounting Manager from
August 1999 to May 2002, Fund
Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None
(37) Compliance of the Board Pioneer (Director of
Officer Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
143
[LOGO]
PIONEER
Investments(R)
Pioneer Variable Contracts Trust
Issuer
Allmerica Financial Life Insurance and Annuity Company, Contract Form A3025-96
In New York and Hawaii, issued by First Allmerica Financial Life Insurance
Company,
Contract Form A3025-96 GRC
General Distributor
Veravest Investments, Inc.
400 Lincoln Street
Worcester, MA 01653
Please consider a Portfolio's investment objective, risks, charges and expenses
carefully before investing. The prospectus contains this and other information
about a Portfolio and should be read carefully before you invest or send money.
To obtain a prospectus and for other information on any Pioneer Portfolio,
contact our adviser, call 1-800-225-6292 or visit our web site at
www.pioneerfunds.com.
[LOGO] PIONEER
INVESTMENT(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER BOND VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Bond VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 10
Notes to Financial Statements 14
Report of Independent Registered Public Accounting Firm 18
Trustees, Officers and Service Providers 19
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER
PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment in securities)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Government Securities 67.4%
U.S. Corporate Bonds 28.6%
Asset Backed Securities 1.8%
Municipal Bonds 1.1%
Collateralized Mortgage Obligations 1.1%
QUALITY DISTRIBUTION
(As a percentage of total investment in securities)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Cash 1.26%
Treasury/Agency 69.70%
AA 1.39%
A 8.94%
BBB 15.56%
BB 3.15%
FIVE LARGEST HOLDINGS
(As a percentage of long-term holdings)
1. Government National Mortgage
Association, 6.0%, 9/15/34 6.66%
2. US Treasury Notes, 3.5%,
1/15/11 4.96
3. Government National Mortgage
Association, 5.5%,
10/15/33 4.54
4. Federal National Mortgage
Association, 4.816%,
12/1/12 3.97
5. Federal National Mortgage
Association, 5.0%, 12/1/17 3.58
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 11.61 $ 11.24
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.02545 $ -- $ --
- --------------------------------------------------------------------------------
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 Lehman Brothers
Aggregate Bond Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Lehman Bros Pioneer Bond
Aggregate Bond Index VCT Portfolio
7/87 10,000 10,000
10,301 10,179
12/88 11,113 10,894
12,728 12,125
12/90 13,868 12,921
16,087 14,728
12/92 17,278 15,733
18,962 17,393
12/94 18,409 16,883
21,810 19,900
12/96 22,602 20,007
24,784 21,690
12/98 26,937 23,621
26,716 22,679
12/00 29,822 25,353
32,340 27,198
12/02 35,657 29,317
37,120 30,279
12/04 38,730 31,371
The Lehman Brothers Aggregate Bond Index is a measure of the U.S. bond market.
A market value-weighted measure of treasure 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 any Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
10 Years 6.39%
5 Years 6.70%
1 Year 3.61%
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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
- --------------------------------------------------------------------------------
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 BOND VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,036.10
Expenses Paid During Period* $ 4.54
* Expenses are equal to the Portfolio's annualized expense ratio of 0.89% 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 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). 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 BOND VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.66
Expenses Paid During Period* $ 4.50
* Expenses are equal to the Portfolio's annualized expense ratio of 0.89% 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 BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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.
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 THE PORTFOLIO ARE SUBJECT TO POSSIBLE LOSS DUE TO THE FINANCIAL
FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR DEBT
OBLIGATIONS. THE SECURITIES ISSUED BY U.S. GOVERNMENT SPONSORED ENTITIES (I.E.,
FNMA, FREDDIE MAC) IS NEITHER GUARANTEED NOR ISSUED BY THE U.S. GOVERNMENT.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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 domestic economy grew at a healthy pace throughout 2004, encouraging the
U.S. Federal Reserve finally to begin raising short-term rates from the
unusually low levels to which they had fallen. The fixed income market reacted
favorably to the Fed's series of measured increases in the Fed funds rate, with
the yields of longer-term Treasuries actually declining modestly. Meanwhile
corporate bonds and mortgages continued to outperform Treasuries as investors
sought out higher-yielding investments in an environment of continued low, by
historical standards, interest rates. In the following discussion, Kenneth J.
Taubes discusses the factors that influenced Pioneer Bond VCT Portfolio's
performance during the 12 months. Mr. Taubes, Director of Pioneer's Fixed
Income Group, oversees the team responsible for daily management of the
Portfolio. This team took portfolio management responsibility for Pioneer Bond
VCT Portfolio during the final month of the 12-month period.
Q: HOW DID THE PORTFOLIO PERFORM 2004?
A: The Portfolio's Class I had a total return of 3.61% for the 12 months ended
December 31, 2004. During the same 12 months, the Lehman Aggregate Bond
Index returned 4.34%.
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.
Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE 12 MONTHS?
A: With increasing evidence that the domestic economic recovery was continuing
and sustainable, the Federal Reserve Board began signaling in the spring of
2004 that it was likely to begin tightening monetary policy by raising the
Fed funds rate and dampen the potential for increasing inflationary
pressures. On June 30, the Fed began a series of modest tightening steps,
which resulted in the rate rising from 1.00% to 2.25% by the end of the
year. Despite rising short-term rates, market rates for longer-maturity
securities actually tended to decline during the year, as investors reacted
in a show of confidence about the economy and the Fed's policy to head off
inflationary pressures. While longer-term Treasuries performed consistent
with a stable environment of flat-to-declining interest rates, the backdrop
of a strengthening economy and improving corporate cash flow encouraged
investors to seek out greater yields through corporate bonds and
mortgage-backed securities. Both corporate bonds and mortgage securities
outperformed Treasuries, with high-yield corporate debt turning in the best
performance among the sectors in the domestic bond market.
As the Pioneer Fixed Income Group took responsibility for the Portfolio
during the final month of 2004, we repositioned it to emphasize high-yield
and investment-grade corporate bonds as well as mortgage securities. At the
end of the 12-month period, about 55% of assets were invested in mortgages
and about 40% were invested in corporate debt, including almost 15%
high-yield bonds. We reduced our high-yield positions slightly in the final
quarter of the year. As we did so, we increased our investments in mortgage
securities, which offered yields competitive with corporates but with
higher quality. Overall average credit quality of the Portfolio was A+.
We also kept the Portfolio's sensitivity to interest-rate changes - as
measured by duration - close to that of the benchmark Lehman Aggregate Bond
Index.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We anticipate that the Federal Reserve will continue to raise the Fed funds
rate at a measured pace during 2005. The fixed income market already has
anticipated in current bond prices a series of further increases that would
bring the Fed funds rate from 2.25% to near 3.5% by the end of the year. We
believe the market rates of longer-term and intermediate-term securities
already are close to being fairly valued. As a result, we anticipate that
the yield curve - which measures the relationship between short-term and
longer-term interest rates - likely will flatten during the year as
short-term rates move up.
In general, valuations of corporate securities appear relatively high by
historical standards, but they probably are justified given the strong
economic fundamentals both in the United States and throughout the globe.
Strengthening economies are now helping companies across all sectors,
resulting in improved cash flows and corporate profits. In this
environment, we think corporate bonds should perform well, consistent with
their yield advantage over Treasuries. As a result, we will continue to
look for opportunities in the corporate sector. However, we expect to also
put greater emphasis on mortgage securities, which offer virtually the same
yields as corporate debt but have the advantage of higher credit ratings.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
ASSET BACKED SECURITIES - 1.8%
DIVERSIFIED FINANCIALS - 1.3%
CONSUMER FINANCE - 0.3%
$ 156,028 AAA/Aaa Americredit Automobile Receivables Trust, Floating Rate Note, 12/12/07 $ 156,126
------------
SPECIALIZED FINANCE - 0.9%
420,000 AAA/Aaa MBNA Credit Card Master Note, Floating Rate Note, 12/15/08 $ 420,574
------------
TOTAL DIVERSIFIED FINANCIALS $ 576,700
------------
UTILITIES - 0.5%
ELECTRICAL UTILITIES - 0.5%
222,310 BB+/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 229,257
------------
TOTAL UTILITIES $ 229,257
------------
TOTAL ASSET BACKED SECURITIES
(Cost $806,100) $ 805,957
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.0%
DIVERSIFIED FINANCIALS - 1.0%
CONSUMER FINANCE - 0.1%
37,157 Asset Securitization Corp., Floating Rate Note, 1/13/30 $ 37,270
------------
OTHER DIVERSIFIED FINANCIAL SERVICES - 0.9%
450,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 $ 447,750
------------
TOTAL DIVERSIFIED FINANCIALS $ 485,020
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $488,522) $ 485,020
------------
CORPORATE BONDS - 25.6%
ENERGY - 2.5%
INTEGRATED OIL & Gas - 0.8%
215,000 BBB/Baa2 Petro-Canada, 4.0%, 7/15/13 $ 201,398
140,000 BBB+/Baa1 USX Corp., 6.85%, 3/1/08 152,322
------------
$ 353,720
------------
OIL & GAS EXPLORATION & PRODUCTION - 1.0%
370,000 BBB-/Baa1 Pemex Project Funding Master, 9.125%, 10/13/10 $ 443,630
------------
OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.7%
295,000 BBB+/Baa1 Kinder Morgan Energy Partners, 6.75%, 3/15/11 $ 329,347
------------
TOTAL ENERGY $ 1,126,697
------------
MATERIALS - 0.7%
FERTILIZERS & AGRICULTURAL CHEMICALS - 0.5%
220,000 BBB+/Baa2 Potash Corp. Saskatchewan, 4.875%, 3/1/13 $ 221,133
------------
FOREST PRODUCTS - 0.2%
81,000 BBB/Baa2 Weyerhaeuser Co., 5.5%, 3/15/05 $ 81,373
------------
TOTAL MATERIALS $ 302,506
------------
CAPITAL GOODS - 2.0%
AEROSPACE & DEFENSE - 1.9%
190,000 A/A3 Boeing Co., 5.125%, 2/15/13 $ 196,548
585,000 A/A2 Honeywell International, 7.5%, 3/1/10 675,874
------------
$ 872,422
------------
CONSTRUCTION & ENGINEERING - 0.1%
40,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 44,100
------------
TOTAL CAPITAL GOODS $ 916,522
------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
AUTOMOBILES & COMPONENTS - 3.1%
AUTOMOBILE MANUFACTURERS - 3.1%
$ 635,000 BBB-/Baa1 Ford Motor Co., 7.25%, 10/1/08 $ 681,165
725,000 BBB-/Baa1 GMAC, 6.125%, 9/15/06 743,258
------------
$ 1,424,423
------------
TOTAL AUTOMOBILES & COMPONENTS $ 1,424,423
------------
CONSUMER DURABLES & APPAREL - 0.6%
HOUSEWARES & Specialties - 0.6%
275,000 BBB+/Baa2 Newell Rubbermaid, Inc., 4.625%, 12/15/09 $ 277,593
------------
TOTAL CONSUMER DURABLES & APPAREL $ 277,593
------------
MEDIA - 1.3%
BROADCASTING & CABLE TELEVISION - 0.8%
335,000 BBB/Baa3 Comcast Corp., 5.3%, 1/15/14 $ 345,490
------------
MOVIES & ENTERTAINMENT - 0.5%
215,000 BBB+/Baa1 Time Warner, Inc., 6.75%, 4/15/11 $ 241,845
------------
TOTAL MEDIA $ 587,335
------------
RETAILING - 0.3%
DEPARTMENT STORES - 0.3%
140,000 A-/Baa1 Nordstrom, Inc., 5.625%, 1/15/09 $ 148,166
------------
TOTAL RETAILING $ 148,166
------------
FOOD, BEVERAGE & TOBACCO - 2.0%
BREWERS - 0.7%
280,000 BBB+/Baa1 Miller Brewing Co., 5.5%, 8/15/13 (144A) $ 292,669
------------
PACKAGED FOODS & MEATS - 0.7%
280,000 A+/A1 Unilever Capital Corp., 7.125%, 11/1/10 $ 322,062
------------
SOFT DRINKS - 0.6%
280,000 A/A3 Bottling Group LLC., 5.0%, 11/15/13 $ 288,674
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 903,405
------------
HEALTH CARE EQUIPMENT & SERVICES - 1.6%
HEALTH CARE DISTRIBUTORS - 0.8%
360,000 BBB/Baa3 Cardinal Health, Inc., 6.0%, 1/15/06 $ 367,609
------------
HEALTH CARE FACILITIES - 0.8%
350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972
------------
TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 722,581
------------
BANKS - 1.1%
DIVERSIFIED BANKS - 0.5%
225,000 A+/Aa3 US Bancorp, 3.125%, 3/15/08 $ 221,056
------------
REGIONAL BANKS - 0.6%
280,000 A-/A2 Keycorp, 2.75%, 2/27/07 $ 274,850
------------
TOTAL BANKS $ 495,096
------------
DIVERSIFIED FINANCIALS - 3.2%
CONSUMER FINANCE - 2.1%
460,000 A/A2 National Rural Utilities, 7.25%, 3/1/12 $ 530,934
415,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 413,514
------------
$ 944,448
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
DIVERSIFIED FINANCIAL SERVICES - 1.1%
$ 497,300 BBB-/Baa3 Bombardier Capital, Inc., 7.09%, 3/30/07 $ 505,000
------------
TOTAL DIVERSIFIED FINANCIALS $ 1,499,448
------------
INSURANCE - 2.5%
LIFE & HEALTH INSURANCE - 1.9%
415,000 AA/A1 Jackson National Life Fund, Floating Rate Note, 3/11/05 (144A) $ 415,091
450,000 A-/A3 Lincoln National Corp., 5.25%, 6/15/07 466,088
------------
$ 881,179
------------
PROPERTY & CASUALTY INSURANCE - 0.6%
250,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 $ 269,049
------------
TOTAL INSURANCE $ 1,150,228
------------
REAL ESTATE - 0.8%
REAL ESTATE INVESTMENT TRUSTS - 0.8%
350,000 BBB-/Baa3 Health Care REIT, 6.0%, 11/15/13 $ 362,239
------------
TOTAL REAL ESTATE $ 362,239
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 0.8%
COMMUNICATIONS EQUIPMENT - 0.8%
350,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 350,776
------------
TOTAL TECHNOLOGY HARDWARE & Equipment $ 350,776
------------
TELECOMMUNICATION SERVICES - 0.5%
INTEGRATED TELECOMMUNICATION SERVICES - 0.5%
190,000 A+/A2 Verizon Global Funding Corp., 7.375%, 9/1/12 $ 223,589
------------
TOTAL TELECOMMUNICATION SERVICES $ 223,589
------------
UTILITIES - 2.8%
ELECTRIC UTILITIES - 1.3%
260,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) $ 261,040
305,000 BBB/Baa1 PSE&G Power, 6.95%, 6/1/12 343,687
------------
$ 604,727
------------
MULTI-UTILITIES & UNREGULATED POWER - 1.4%
470,000 BBB-/Baa3 Avista Corp., 7.75%, 1/1/07 $ 504,360
140,000 BBB+/Baa1 Dominion Resources, 6.25%, 6/30/12 152,850
------------
$ 657,210
------------
TOTAL UTILITIES $ 1,261,937
------------
TOTAL CORPORATE BONDS
(Cost $11,258,585) $ 11,703,351
------------
SUPERNATIONAL BONDS - 1.9%
DIVERSIFIED BANKS - 1.9%
855,000 AAA/Aaa International Bank for Reconstruction & Development, 4.375%, 9/28/06 $ 873,254
------------
TOTAL SUPERNATIONAL BONDS
(Cost $889,548) $ 873,254
------------
The accompanying notes are an integral part of these financial statements. 7
Pioneer Bond VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
U.S. GOVERNMENT AGENCY OBLIGATIONS - 66.3%
GOVERNMENT - 66.3%
$ 730,000 AAA/Aaa Fannie Mae, 5.24%, 8/7/18 $ 728,042
951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694
165,092 AAA/Aaa Federal National Mortgage Association, 3.5%, 9/15/10 165,132
1,746,771 AAA/Aaa Federal National Mortgage Association, 4.816%, 12/1/12 1,785,123
1,468,297 AAA/Aaa Federal National Mortgage Association, 5.0%, 3/1/33 1,459,684
769,739 AAA/Aaa Federal National Mortgage Association, 5.0%, 5/1/34 764,105
1,583,460 AAA/Aaa Federal National Mortgage Association, 5.0%, 12/1/17 1,610,781
1,322,740 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/18 1,373,362
627,725 AAA/Aaa Federal National Mortgage Association, 5.5%, 7/1/23 642,141
1,053,879 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/17 1,090,341
44,053 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/29 45,708
361,965 AAA/Aaa Federal National Mortgage Association, 6.0%, 3/1/31 374,788
955,000 AAA/Aaa Federal National Mortgage Association, 6.0%, 4/15/32 998,376
101,504 AAA/Aaa Federal National Mortgage Association, 6.0%, 6/1/15 106,587
443,634 AAA/Aaa Federal National Mortgage Association, 6.0%, 8/1/32 459,341
155,494 AAA/Aaa Federal National Mortgage Association, 6.0%, 9/1/29 161,142
64,887 AAA/Aaa Federal National Mortgage Association, 6.5%, 1/1/15 68,860
228,628 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/29 240,250
95,096 AAA/Aaa Federal National Mortgage Association, 7.0%, 3/1/12 100,828
33,575 AAA/Aaa Federal National Mortgage Association, 8.0%, 1/1/31 36,405
77,981 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/29 84,861
31,684 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 34,441
6,095 AAA/Aaa Federal National Mortgage Association, 8.0%, 2/1/30 6,625
408,015 AAA/Aaa Federal National Mortgage Association, 8.0%, 3/1/31 443,531
47,605 AAA/Aaa Federal National Mortgage Association, 8.0%, 4/1/8 49,835
12,280 AAA/Aaa Federal National Mortgage Association, 8.0%, 4/1/30 13,317
19,527 AAA/Aaa Federal National Mortgage Association, 8.0%, 5/1/31 21,173
35,298 AAA/Aaa Federal National Mortgage Association, 8.0%, 7/1/30 38,275
77,207 AAA/Aaa Federal National Mortgage Association, 8.0%, 10/1/30 83,716
27,595 AAA/Aaa Federal National Mortgage Association, 9.5%, 2/1/21 31,239
200,000 AAA/Aaa Freddie Mac, 6.0% 30 Yr., TBA 12/04 206,650
249,976 AAA/Aaa Government National Mortgage Association, 5.0%, 7/15/19 256,607
1,078,900 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 1,102,966
1,999,801 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/33 2,044,408
1,097,718 AAA/Aaa Government National Mortgage Association, 5.5%, 11/20/34 1,120,678
435,000 AAA/Aaa Government National Mortgage Association, 5.5%, 12/15/34 444,507
12,341 AAA/Aaa Government National Mortgage Association, 6.0%, 4/15/14 13,021
84,772 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/13 89,430
482,061 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/34 499,963
1,452,445 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 1,506,384
2,891,061 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/34 2,998,426
75,752 AAA/Aaa Government National Mortgage Association, 7.0%, 4/15/28 80,640
27,543 AAA/Aaa Government National Mortgage Association, 7.75%, 11/15/29 29,746
685,000 AAA/Aaa U.S. Treasury Bonds, 3.125%, 10/15/08 677,696
160,000 AAA/Aaa U.S. Treasury Bonds, 4.25%, 8/15/13 161,264
685,000 AAA/Aaa U.S. Treasury Bonds, 7.125%, 2/15/23 874,098
405,000 AAA/Aaa U.S. Treasury Notes, 1.5%, 7/31/05 402,517
1,820,000 AAA/Aaa U.S. Treasury Notes, 3.5%, 1/15/11 2,232,462
900,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 973,195
8 The accompanying notes are an integral part of these financial statements.
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
S&P/MOODY'S
PRINCIPAL RATINGS
AMOUNT (UNAUDITED) VALUE
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONT'D.)
$ 575,000 AAA/Aaa U.S. Treasury Notes, 5.5%, 8/15/28 $ 622,348
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $30,078,552) $ 30,338,709
------------
MUNICIPAL BONDS - 1.1%
GOVERNMENT - 1.1%
515,000 BBB+/A3 California State Department of Water Resources & Power Supply, 4.33%, 5/1/06 $ 520,232
------------
TOTAL MUNICIPAL BONDS
(Cost $514,721) $ 520,232
------------
TOTAL INVESTMENTS IN SECURITIES - 97.7%
(Cost $44,036,028) $ 44,726,523
------------
OTHER ASSETS AND LIABILITIES - 2.3% $ 1,066,849
------------
TOTAL NET ASSETS - 100.0% $ 45,793,372
============
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, 2004, the
value of these securities amounted to $1,198,057 or 2.6% of net assets.
TBA (To Be Assigned) Securities are purchased on a forward commitment basis
with and approximate (generally plus or minus 2.5%) principal amount and no
definite maturity date period. The actual principal amount and maturity
date will be determined upon settlement when the specific mortgage pools
are assigned.
The accompanying notes are an integral part of these financial statements. 9
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
CLASS I 12/31/04 (a) 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 11.24 $ 11.39 $ 11.12 $ 10.92 $ 10.33
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations:
Net investment income $ 0.44 $ 0.46 $ 0.52 $ 0.59 $ 0.63
Net realized and unrealized gain (loss) on investments (0.04) (0.09) 0.35 0.20 0.59
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ 0.40 $ 0.37 $ 0.87 $ 0.79 $ 1.22
Distributions to shareowners:
Net Investment Income (0.03) (0.52) (0.60) (0.59) (0.63)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ 0.37 $ (0.15) $ 0.27 $ 0.20 $ 0.59
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.61 $ 11.24 $ 11.39 $ 11.12 $ 10.92
======== ======== ======== ======== ========
Total return* 3.56% 3.28% 7.79% 7.28% 11.79%
Ratio of net expenses to average net assets 0.89% 0.86% 0.84% 0.82% 0.90%
Ratio of net investment income to average net assets 3.61% 3.79% 4.87% 5.56% 6.03%
Portfolio turnover rate 57% 56% 87% 133% 104%
Net assets, end of period (in thousands) $ 45,793 $ 51,565 $ 51,201 $ 44,847 $ 36,743
(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.
10 The accompanying notes are an integral part of these financial statements.
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities (Cost $44,036,028) $ 44,726,523
Cash 1,384,720
Receivables --
Dividends, interest and foreign taxes withheld 421,742
------------
Total assets $ 46,532,985
------------
LIABILITIES:
Payables --
Investment securities purchased $ 529,421
Fund shares repurchased 156,110
Dividends 25
Due to affiliates 11,441
Accrued expenses 42,616
------------
Total liabilities $ 739,613
------------
NET ASSETS:
Paid-in capital $ 44,077,337
Undistributed net investment income 1,759,777
Accumulated net realized loss (734,237)
Net unrealized gain on:
Investments 690,495
------------
Total net assets $ 45,793,372
------------
NET ASSET VALUE PER SHARE:
CLASS I:
(No par value, unlimited number of shares authorized)
Net assets $ 45,793,372
Shares outstanding 3,944,447
------------
Net asset value per share $ 11.61
The accompanying notes are an integral part of these financial statements. 11
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Interest $ 2,179,041
Income on securities loaned, net 2,734
------------
Total investment income $ 2,181,775
------------
EXPENSES:
Management fees $ 352,288
Transfer agent fees and expenses 125
Custodian fees 10,947
Professional fees 31,402
Printing expense 12,456
Fees and expenses of nonaffiliated trustees 9,645
Miscellaneous 15,128
------------
Total expenses $ 431,991
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (1,927)
------------
Net expenses $ 430,064
------------
Net investment income (loss) $ 1,751,711
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investments $ 270,731
------------
$ 270,731
------------
Change in net unrealized gain or loss from:
Investments $ (328,382)
------------
$ (328,382)
------------
Net loss on investments, futures contracts and
foreign currency transactions $ (57,651)
============
Net increase in net assets resulting from operations $ 1,694,060
============
12 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
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income $ 1,751,711 $ 2,020,449
Net realized gain on investments 270,731 683,216
Change in net unrealized gain or loss on
investments, futures contracts and
foreign currency transactions (328,382) (975,258)
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 1,694,060 $ 1,728,407
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS
Net investment income:
Class I $ (118,093) $ (2,292,765)
------------- -------------
Total distributions to shareowners $ (118,093) $ (2,292,765)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 8,055,931 $ 14,395,843
Reinvestment of distributions 118,093 2,292,765
Cost of shares repurchased (15,521,812) (15,759,792)
------------- -------------
Net increase (decrease) in net assets resulting from
Fund share transactions $ (7,347,788) $ 928,816
------------- -------------
Net increase (decrease) in net assets $ (5,771,821) $ 364,458
NET ASSETS:
Beginning of year 51,565,193 51,200,735
------------- -------------
End of year $ 45,793,372 $ 51,565,193
============= =============
Undistributed (distributions in excess of) net investment income, end of year $ 1,759,777 $ (134,448)
============= =============
The accompanying notes are an integral part of these financial statements. 13
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Bond VCT Portfolio (The Portfolio) (formerly Safeco RST Bond
Portfolio) is a portfolio of Pioneer Variable Contracts Trust (the Trust) which
is a Delaware business trust registered under the Investment Company Act of 1940
as an open-end management investment company. The Trust consists of twenty two
separate diversified portfolios, fourteen of which issue both Class I and Class
II shares (collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The investment objective of Bond Portfolio is to seek current income as
consistent with preservation of capital.
As of December 31, 2004, no Class II shares were outstanding for the Portfolio.
The Portfolio, organized on December 10, 2004, is the successor to the Safeco
RST Bond Portfolio. Safeco RST Bond Portfolio, one of six series of portfolios
that comprised Safeco Resource Series Trust, transferred all of the net assets
of Trust shares in exchange for the Portfolio's Class I shares in a one- to-one
exchange ratio, on December 10, 2004, pursuant to an agreement and plan of
reorganization (the "reorganization" which was approved by the shareholders of
Safeco RST Bond Portfolio on December 8, 2004). The Portfolio had no assets or
liabilities prior to the reorganization. Accordingly, the reorganization, which
was a tax-free exchange, had no effect on the Portfolio's operations.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting years. Actual results could differ from those estimates.
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 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
Exchange. In computing the net asset values.
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 quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. Interest income,
14
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Bond VCT Portfolio had a capital loss
carryforward of $726,843, of which the following amounts will expire
between 2008 and 2010 not utilized: $145,998 in 2008 and $680,855 in 2010.
The portfolio elected to defer $7,394 in capital losses recognized between
November 1, 2004 and December 31, 2004 to its fiscal year ending December
31, 2005.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED
NET ACCUMULATED
INVESTMENT REALIZED
INCOME GAIN PAID-IN
PORTFOLIO (LOSS) (LOSS) CAPITAL
- -------------------------- ------------- ----------- ---------
Pioneer Bond VCT Portfolio $ 260,607 $ (286,066) $ (25,459)
========= ========== =========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
15
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 118,093 $ 2,292,765
Long-Term capital gain -- --
----------- -----------
$ 118,093 $ 2,292,765
Return of Capital -- --
----------- -----------
Total distributions $ 118,093 $ 2,292,765
=========== ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 1,846,884
Undistributed long-term gain/capital loss carryforward (726,843)
Post-October loss deferred (7,394)
Unrealized appreciation (depreciation) 603,338
-----------
Total $ 1,716,035
===========
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, and the tax treatment of premium
amortization.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004.
D. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated at the following annual rate of 0.50%
of the Portfolio's average daily net assets.
Prior to the reorganization, the Portfolio was advised by Safeco Asset
Management, which received an annual fee equal to 0.74% of its average daily
net assets.
Through December 10, 2006, 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 0.62% 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. At December 31, 2004, $11,316 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
Since the reorganization PIMSS, a wholly owned indirect subsidiary of UniCredito
Italiano provides substantially all transfer agent and shareowner services to
the Trust at
16
PIONEER BOND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
negotiated rates. Included in due to affiliates is $125 in transfer
agent fees payable to PIMSS at December 31, 2004. Prior to the reorganization
Safeco services corporation was the transfer and shareholder servicing agent.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------- ------------ --------------
Bond Portfolio $ 44,395,836 $ 711,539 $ (108,152) $ 603,387
============ ========= ========== =========
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $5,270,734 and $11,053,420, respectively. The cost of
purchases and the proceeds from sales of investments in U.S. Government
obligations for the year ended December 31, 2004, were $21,377,799 and
$21,148,464, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
BOND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ------------------------------------ ---------- ------------- ---------- -------------
Shares sold 698,811 $ 7,985,736 1,244,220 $ 14,395,843
Reinvestment of distributions -- -- 203,983 2,292,765
Shares repurchased (1,359,793) (15,521,812) (1,357,594) (15,759,792)
Shares transferred in reorganization (3,993,012) (46,518,595)
CLASS I:
Shares sold 8,248 95,681
Reinvestment of distributions 10,191 118,316
Shares issued in reorganization 3,993,012 46,518,595
---------- ------------- ---------- -------------
Net increase (decrease) (642,543) $ (7,322,079) 90,609 $ 928,816
========== ============= ========== =============
17
PIONEER BOND 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 CLASS I SHAREOWNERS OF PIONEER BOND VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Bond VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"),
(formerly Bond Portfolio, one of the portfolios that comprised the Safeco
Resource Series Trust) as of December 31, 2004, 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. An audit
includes 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, 2004, 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 of the Pioneer Variable Contracts Trust at December
31, 2004, 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 11, 2005
18
PIONEER BOND VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over
the affairs of the Trust. The officers of the Trust are
CUSTODIAN responsible for the Trust's operations. The Trust's Trustees
Brown Brothers Harriman & Co. and 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 Portfolio within the meaning of the
Ernst & Young LLP Investment Company Act of 1940 are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust
PRINCIPAL UNDERWRITER are referred to as Independent Trustees. Each of the Trustees
Pioneer Funds Distributor, Inc. serves as a trustee of each of the 73 U.S. registered
investment portfolios for which Pioneer Investment Management,
LEGAL COUNSEL Inc. ("Pioneer") serves as investment adviser (the "Pioneer
Wilmer Cutler Pickering Hale and Dorr LLP Funds"). The address for all Interested Trustees and all
officers of the Portfolio is 60 State Street, Boston,
SHAREOWNER SERVICES AND TRANSFER Massachusetts 02109.
Shareholder Services, Inc.
The Trust's statement of additional information provides more
detailed information regarding the Trust's Trustees and is
available upon request, without charge, by calling
1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available
without charge, upon Agent request, by calling our toll free
number (1-800-225-6292). This information is also available
online at pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor
Board, Trustee successor retirement or removal; Deputy Chairman Global Company, Ltd.
and President trustee and a Director of Pioneer Global Asset
is elected or Management S.p.A. ("PGAM");
earlier Non-Executive Chairman and a Director
retirement of Pioneer Investment Management USA
or removal Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin); President
and a Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None
Executive successor PIM-USA since May 2003 (Director since
Vice President trustee January 2001); President and Director
is elected or of Pioneer since May 2003; Chairman
earlier and Director of Pioneer Investment
retirement or Management Shareholder Services, Inc.
removal ("PIMSS") since May 2003; Executive
Vice President of all of the Pioneer
Funds since June 2003; Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior
Vice President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
19
PIONEER BOND VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise
3050 K. Street NW, 2005. successor Financial Officer, I-trax, Inc. Social Investment Company
Washington, DC 20007 trustee is (publicly traded health care services (privately-held affordable
elected or company) (2001-present); Managing housing finance company);
earlier Partner, Federal City Capital Advisors Director of New York
retirement or (boutique merchant bank)(1995-2000; Mortgage Trust (publicly
removal 2002 to 2004); Executive Vice traded mortgage REIT)
President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage
trading company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady Corporation
3509 Woodbine Street, 2000. successor (international financial advisory (industrial identification
Chevy Chase, MD 20815 trustee is firm) and specialty coated material
elected or products manufacturer),
earlier Millennium Chemicals, Inc.
retirement or (commodity chemicals),
removal Mortgage Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc. (tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since Serves until Founding Director, The Winthrop Group, None
1001 Sherbrooke Street 2000. successor Inc. (consulting firm); Professor of
West, Montreal, Quebec, trustee is Management, Faculty of Management,
Canada H3A 1G5 elected or McGill University
earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Officer, Director of New America High
One Boston Place, 1995. successor Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end
28th Floor, trustee is (investment banking firm) investment company)
Boston, MA 02108 elected or
earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia
125 Broad Street, 1995. successor (law firm) Fund, Inc. (closed-end
New York, NY 10004 trustee is investment company) and
elected or AMVESCAP PLC (investment
earlier managers)
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None
One North Adgers Wharf, September, successor (private investment firm)
Charleston, SC 29401 2000. trustee is
elected or
earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
20
PIONEER BOND VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None
discretion President - Legal of Pioneer; and
of the Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None
(40) Secretary discretion Counsel of Pioneer since July 2002;
of the Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to July
2000); Assistant Secretary of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Secretary discretion and Dorr LLP; Assistant Secretary of
of the Board all Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion Administration and Custody Services of
of the Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer
from June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None
Treasurer discretion 2004; Treasurer and Senior Vice
of the Board President, CDC IXIS Asset Management
Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion Accounting, Administration and Custody
of the Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion Accounting, Administration and Custody
of the Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
21
PIONEER BOND VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
Katharine Kim Sullivan Assistant Serves at the Fund Administration Manager - Fund None
(31) Treasurer discretion Accounting, Administration and Custody
of the Board Services since June 2003; Assistant
Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None
Officer discretion (Director of Compliance and Senior
of the Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
22
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
23
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
24
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
25
[LOGO] PIONEER
INVESTMENTS(R)
[PIONEER INVESTMENTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER MID CAP VALUE VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
TABLE OF CONTENTS
Pioneer Mid Cap Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 18
Trustees, Officers and Service Providers 19
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER
PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO UPDATE 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 90.8%
Depositary Receipts for International Stocks 1.0%
Temporary Cash Investment 8.2%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[PIE CHART]
Financials 20.1%
Consumer Discretionary 19.7%
Information Technology 12.6%
Industrials 11.1%
Materials 8.7%
Health Care 8.5%
Consumer Staples 7.7%
Energy 6.0%
Utilities 5.5%
Telecommunication Services 0.1%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Foot Locker Inc. 2.55%
2. Mattel, Inc. 2.19%
3. Safeway, Inc. 1.81%
4. Triad Hospitals, Inc. 1.76%
5. CIGNA Corp. 1.76%
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 24.67 $ 20.47
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.080 $ - $ 0.2095
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in Pioneer
Mid Cap Value VCT Portfolio at net asset value, compared to that of the Russell
Midcap Value Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[LINE GRAPH]
Russell Midcap Pioneer Mid Cap Value
Value Index VCT Portfolio
"3/95" 10,000 10,000
12,263 11,819
"12/96" 14,748 13,596
19,812 16,952
"12/98" 20,820 16,271
20,799 18,407
"12/00" 24,789 21,721
25,369 23,130
"12/02" 22,920 20,537
31,643 28,234
"12/04" 39,142 34,478
Index comparison begins 3/31/95. 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, 2004)
NET ASSET VALUE
Life-of-Class 13.30%
(3/1/95)
5 Years 13.37%
1 Year 22.12%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 MID CAP 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 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 [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, 2004 through December 31, 2004
SHARE CLASS I II
- --------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,121.91 $ 1,120.03
Expenses Paid During Period* $ 3.88 $ 5.20
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73% and
0.98% for Class I and Class II C 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). 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 MID CAP VALUE VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I II
- --------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.26
Expenses Paid During Period* $ 3.70 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73%, and
0.98% for Class I and Class II, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
3
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
Domestic equity markets moved in fits and starts, both up and down, through the
first nine months of 2004 before finally staging a strong rally following the
November elections. In the final two months of the year, stock indices moved
upward, with small- and mid-cap companies outperforming large-cap corporations,
and value stocks outpacing growth stocks. In the following interview, Rod
Wright discusses the market environment and factors that affected performance
during 2004. Mr. Wright is responsible for day-to-day portfolio management of
Pioneer Mid Cap Value VCT Portfolio.
Q: HOW DID THE PORTFOLIO PERFORM?
A: The Portfolio delivered strong results, despite trailing its benchmark
index. For the 12 months ended December 31, 2004, the Portfolio had a total
return of 22.12% at net asset value, while the Russell Midcap Value Index
returned 23.71%.
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.
Q: WHAT WERE THE PRINCIPAL FACTORS THAT AFFECTED PERFORMANCE?
A: The Portfolio participated in the final end-of-year rally that raised stock
averages. For much of the year, a variety of factors and potential problems
affected investors, who worried about the effects of rising interest rates,
increasing energy prices, instability in Iraq and the political uncertainty
resulting from a fiercely contested Presidential election.
During the year, our selections in the health care, telecommunications,
energy, financials and utilities sectors helped performance, while
investments in materials, technology, industrials and consumer staples
sectors detracted from results.
Q: WHAT WERE SOME OF THE INDIVIDUAL INVESTMENTS THAT HAD THE GREATEST IMPACT ON
PORTFOLIO RESULTS?
A: Although technology investments tended to be a drag on performance, one
technology company - NCR - had the single greatest positive impact on the
Portfolio's return. NCR, which already had established itself as a leader
in producing ATM and automatic retail scanning and check-out equipment, saw
greatly improved results from its technology that helps companies store and
manage large quantities of data. NCR's stock had been selling at a deep
discount, but the effects of a corporate reorganization and the policies of
a new management team helped lead to greatly improved earnings.
Reliant Energy, which is involved in both electric power generation and in
power distribution, was the Portfolio's second-largest contributor, as its
stock appreciated after a reorganization of company debt.
Other stocks that helped performance substantially included: Transocean,
which operates oil drilling rigs and benefited from rising oil prices; W.W.
Grainger, a national distributor of industrial parts and machinery, which
enjoyed improved earnings as a result of a restructuring; and Ball, a
packaging company which manufactures cans and bottles for beverage companies.
Two health care sector investments that helped were: Becton Dickinson, a
medical supply company; and Cigna, an HMO.
Also adding to results were three companies involved in acquisitions at
premiums to their stock valuations: Charter Bank, which was taken over by
Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a
producer of research equipment for medical laboratories, which was acquired
by Fisher Scientific; and Veritas Software, a developer of data management
software, which announced it was being acquired by Symantec.
Holdings that detracted from results included UTStarcom, a manufacturer of
inexpensive hand-held telephones, which was hurt by intense competition in
China. While we sold our position in UTStarcom, we retained three other
stocks that were a drag on performance: Safeway, toy company Mattel and
mortgage insurer PMI, all of which gained, but still lagged the mid-cap value
market.
Portfolio results were held back by not owning three companies that were
performance leaders during 2004: TXU, a Texas utility; Apple Computer, the
developer of the popular iPod product; and Monsanto, which produces
genetically modified seeds for the agriculture industry.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We are reasonably optimistic about the economy and investment opportunities
in the stock market. After a year in which corporate earnings rose faster
than stock prices, stock valuations - as measured by price/earnings ratios
- are more reasonable than they were a year ago. At the same time, interest
rates remain low by historical standards, even though the Federal Reserve
has raised short-term rates several times, while the economy continues to
expand and support rising corporate earnings.
Although we expect to continue to de-emphasize stocks of companies that may
be vulnerable to rapid increases in interest rates, we are moderately bullish
about the overall market.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
A WORD ABOUT RISK:
Investing in mid-sized companies may offer the potential for higher returns,
but these companies are also subject to greater short-term price fluctuations
than larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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 porfolios. 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 MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE
COMMON STOCKS - 99.8%
ENERGY - 5.9%
INTEGRATED OIL & Gas - 0.9%
7,700 BP Amoco Plc (A.D.R.) $ 449,680
129,540 Occidental Petroleum Corp. 7,559,954
------------
$ 8,009,634
------------
OIL & GAS DRILLING - 2.8%
175,915 ENSCO International, Inc. $ 5,583,542
111,530 Nabors Industries, Inc.* 5,720,374
30,000 Pride International, Inc* 616,200
141,630 Transocean Offshore, Inc.* 6,003,696
102,035 Weatherford International, Inc.* 5,234,396
------------
$ 23,158,208
------------
OIL & GAS EXPLORATION & PRODUCTION - 2.0%
14,200 Apache Corp. $ 718,094
11,700 Anadarko Petroleum Corp. 758,277
185,022 Devon Energy Corp. 7,201,056
203,585 Pioneer Natural Resources Co. 7,145,834
19,300 XTO Energy, Inc. 682,834
------------
$ 16,506,095
------------
OIL & GAS REFINING MARKETING &
TRANSPORTATION - 0.3%
27,385 Sun Co., Inc. $ 2,237,628
------------
TOTAL ENERGY $ 49,911,565
------------
MATERIALS - 8.6%
COMMODITY CHEMICALS - 1.2%
171,545 Air Products & Chemicals, Inc. $ 9,944,464
------------
DIVERSIFIED CHEMICAL - 1.6%
7,200 Olin Corp. $ 158,544
197,420 PPG Industries, Inc. 13,456,147
------------
$ 13,614,691
------------
DIVERSIFIED METALS & MINING - 1.8%
141,700 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 5,417,191
100,785 Phelps Dodge Corp. 9,969,652
------------
$ 15,386,843
------------
METAL & GLASS CONTAINERS - 1.6%
305,720 Ball Corp. $ 13,445,566
------------
PAPER PRODUCTS - 2.3%
278,467 Flowserve Corp.* $ 7,668,981
351,900 Meadwestvaco Corp. 11,925,891
------------
$ 19,594,872
------------
SPECIALTY CHEMICALS - 0.1%
16,500 Ecolab, Inc. $ 579,645
------------
TOTAL MATERIALS $ 72,566,081
------------
CAPITAL GOODS - 5.2%
AEROSPACE & DEFENSE - 1.0%
11,800 Northrop Grumman Corp. $ 641,448
166,500 United Defense Industries, Inc.* 7,867,125
------------
$ 8,508,573
------------
CONSTRUCTION, FARM MACHINERY & HEAVY
TRUCKS - 0.1%
13,100 Terex Corp.* $ 624,215
------------
ELECTRICAL COMPONENT & EQUIPMENT - 1.3%
627,890 Symbol Technologies, Inc. $ 10,862,497
------------
INDUSTRIAL CONGLOMERATES - 2.8%
259,780 American Standard Co., Inc.* $ 10,734,110
148,520 ITT Industries, Inc. 12,542,514
------------
$ 23,276,624
------------
TOTAL CAPITAL GOODS $ 43,271,909
------------
COMMERCIAL SERVICES & SUPPLIES - 4.3%
COMMERCIAL PRINTING - 1.4%
344,740 R.R. Donnelly & Sons Co. $ 12,165,875
------------
DIVERSIFIED COMMERCIAL SERVICES - 1.3%
26,700 FTI Consulting, Inc.* $ 562,569
209,010 H & R Block, Inc. 10,241,490
------------
$ 10,804,059
------------
ENVIRONMENTAL SERVICES - 1.6%
396,435 Republic Services, Inc. $ 13,296,430
------------
TOTAL COMMERCIAL SERVICES & SUPPLIES $ 36,266,364
------------
TRANSPORTATION - 1.7%
AIR FREIGHT & COURIERS - 0.1%
9,600 Expeditors International of
Washington, Inc. $ 536,448
------------
AIRLINES - 0.6%
294,810 Southwest Airlines Co. $ 4,799,507
------------
RAILROADS - 1.0%
139,920 Canadian National Railway Co. $ 8,570,100
------------
TOTAL TRANSPORTATION $ 13,906,055
------------
AUTOMOBILES & COMPONENTS - 0.1%
AUTOMOBILE MANUFACTURERS - 0.1%
19,300 Monaco Coach Corp. $ 397,001
8,800 PACCAR, Inc. 708,224
------------
$ 1,105,225
------------
TOTAL AUTOMOBILES & COMPONENTS $ 1,105,225
------------
The accompanying notes are an integral part of these financial statements.
5
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE
CONSUMER DURABLES & APPAREL - 4.5%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.3%
99,391 The Limited Brands, Inc. $ 2,287,981
------------
HOUSEWARES & SPECIALTIES - 0.8%
31,700 Leggett & Platt, Inc. $ 901,231
174,600 Yankee Candle Co.* 5,793,228
------------
$ 6,694,459
------------
LEISURE PRODUCTS - 2.2%
940,930 Mattel, Inc. $ 18,338,726
------------
PHOTOGRAPHIC PRODUCTS - 1.2%
316,300 Eastman Kodak Co. (a) $ 10,200,675
------------
TOTAL CONSUMER DURABLES & APPAREL $ 37,521,841
------------
HOTELS, RESTAURANTS & LEISURE - 1.7%
HOTELS, RESORTS & CRUISE LINES - 0.1%
27,600 Ambassadors Group, Inc. $ 982,836
------------
RESTAURANTS - 1.6%
333,400 Ruby Tuesday, Inc. $ 8,695,072
91,905 Tricon Global Restaurants, Inc. 4,336,078
------------
$ 13,031,150
------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 14,013,986
------------
MEDIA - 3.7%
ADVERTISING - 1.7%
1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760
------------
BROADCASTING & CABLE TV - 1.2%
275,200 Entercom Communications Corp.* $ 9,876,928
------------
MOVIES & ENTERTAINMENT - 0.8%
315,360 Regal Entertainment Group (a) $ 6,543,720
16,900 Viacom, Inc. (Class B) 614,991
------------
$ 7,158,711
------------
TOTAL MEDIA $ 31,325,399
------------
RETAILING - 9.6%
APPAREL RETAIL - 1.1%
221,900 Liz Claiborne, Inc. $ 9,366,399
------------
DEPARTMENT STORES - 0.7%
150,300 J.C. Penney Co., Inc. $ 6,222,420
------------
GENERAL MERCHANDISE STORES - 0.8%
265,100 American Greetings Corp. (a) $ 6,720,285
------------
INTERNET RETAIL - 1.4%
418,500 InterActive Corp.* $ 11,558,970
------------
SPECIALTY STORES - 5.6%
984,000 Blockbuster, Inc. (a) $ 9,387,360
793,230 Foot Locker, Inc. 21,361,684
210,700 Tiffany & Co. 6,736,079
471,700 Toys "R" Us, Inc.* 9,655,699
------------
$ 47,140,822
------------
TOTAL RETAILING $ 81,008,896
------------
FOOD & DRUG RETAILING - 7.6%
DRUG RETAIL - 1.3%
233,170 CVS Corp. $ 10,508,972
------------
FOOD DISTRIBUTORS - 1.3%
9,800 Amerisourcebergen Corp. $ 575,064
322,700 McKesson HBOC, Inc. 10,152,142
21,900 Performance Food Group Co.* 589,329
------------
$ 11,316,535
------------
FOOD RETAIL - 3.4%
284,790 ConAgra, Inc. $ 8,387,066
111,818 Dean Foods Co.* 3,684,403
62,000 Kroger Co.* 1,087,480
770,100 Safeway, Inc. 15,201,774
------------
$ 28,360,723
------------
HYPERMARKETS & SUPERCENTERS - 1.6%
447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453
13,000 Costco Wholesale Corp. 629,330
------------
$ 13,675,783
------------
TOTAL FOOD & DRUG RETAILING $ 63,862,013
------------
FOOD, BEVERAGE & TOBACCO - 0.1%
SOFT DRINKS - 0.1%
13,600 PepsiCo, Inc. $ 709,920
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 709,920
------------
HEALTH CARE EQUIPMENT & SERVICES - 6.5%
HEALTH CARE DISTRIBUTORS - 0.8%
147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826
21,200 Wyeth 902,908
------------
$ 7,014,734
------------
HEALTH CARE FACILITIES - 3.0%
971,100 Tenet Healthcare Corp.* $ 10,662,678
397,360 Triad Hospitals, Inc.* 14,785,766
------------
$ 25,448,444
------------
HEALTH CARE SERVICES - 0.8%
17,200 Accredo Health, Inc.* $ 476,784
111,330 Laboratory Corp. of America Holdings* 5,546,461
23,200 Ims Health, Inc. 538,472
------------
$ 6,561,717
------------
The accompanying notes are an integral part of these financial statements.
6
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
HEALTH CARE SUPPLIES - 0.1%
11,200 Cooper Co., Inc. $ 790,608
------------
MANAGED HEALTH CARE - 1.8%
180,400 CIGNA Corp. $ 14,715,228
------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 54,530,731
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.0%
PHARMACEUTICALS - 2.0%
648,200 IVAX Corp.* (a) $ 10,254,524
356,100 Mylan Laboratories, Inc. (a) 6,295,848
23,900 Pfizer, Inc. 642,671
------------
$ 17,193,043
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 17,193,043
------------
BANKS - 7.1%
DIVERSIFIED BANKS - 0.0%
10,200 U.S. Bancorp $ 319,464
------------
REGIONAL BANKS - 4.7%
120,600 City National Corp. $ 8,520,390
175,830 KeyCorp 5,960,637
184,865 Marshall & IIsley Corp. 8,171,033
264,456 North Fork Bancorporation, Inc. 7,629,556
28,852 Washington Banking Co. 523,664
36,000 West Coast Bancorp Oregon 914,760
120,200 Zions Bancorporation 8,177,206
------------
$ 39,897,246
------------
THRIFTS & MORTGAGE FINANCE - 2.4%
145,098 Countrywide Financial Corp. $ 5,370,077
323,160 The PMI Group, Inc. 13,491,930
21,500 Washington Mutual, Inc. 909,020
------------
$ 19,771,027
------------
TOTAL BANKS $ 59,987,737
------------
DIVERSIFIED FINANCIALS - 6.6%
CONSUMER FINANCE - 1.4%
18,414 White Mountains Insurance Group, Ltd. $ 11,895,444
------------
ASSET MANAGEMENT & CUSTODY BANKS - 1.2%
314,990 Federated Investors, Inc. $ 9,575,696
23,600 Waddell & Reed Financial, Inc. 563,804
------------
$ 10,139,500
------------
CONSUMER FINANCE - 1.7%
29,000 MBNA Corp. $ 817,510
832,100 Providian Financial Corp.* 13,704,687
------------
$ 14,522,197
------------
INVESTMENT BANKING & BROKERAGE - 2.3%
322,000 A.G. Edwards, Inc. $ 13,913,620
248,150 Investment Technology Group, Inc.* 4,963,000
------------
$ 18,876,620
------------
TOTAL DIVERSIFIED FINANCIALS $ 55,433,761
------------
INSURANCE - 6.4%
INSURANCE BROKERS - 2.3%
278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551
259,540 Willis Group Holdings, Ltd. (a) 10,685,262
------------
$ 19,343,813
------------
LIFE & HEALTH INSURANCE - 2.0%
111,030 Jefferson - Pilot Corp. $ 5,769,119
6,900 Stancorp Financial Group, Inc. 569,250
554,700 UNUM Corp. (a) 9,951,318
------------
$ 16,289,687
------------
PROPERTY & CASUALTY INSURANCE - 2.1%
64,905 Ambac Financial Group, Inc. $ 5,330,648
238,000 Safeco Corp. 12,433,120
------------
$ 17,763,768
------------
TOTAL INSURANCE $ 53,397,268
------------
SOFTWARE & SERVICES - 4.4%
APPLICATION SOFTWARE - 1.6%
71,100 Captaris, Inc.* $ 366,876
14,600 Intuit, Inc.* 642,546
18,200 Microsoft Corp. 486,122
407,100 Veritas Software Corp.* 11,622,705
------------
$ 13,118,249
------------
DATA PROCESSING & OUTSOURCED SERVICES - 2.7%
584,730 The BISYS Group, Inc.* $ 9,618,809
14,800 Fiserv, Inc.* 594,812
437,829 SunGard Data Systems, Inc.* 12,403,696
------------
$ 22,617,317
------------
SYSTEMS SOFTWARE - 0.1%
19,020 Netiq Corp.* $ 232,234
36,000 WatchGuard Technologies, Inc.* 159,480
------------
$ 391,714
------------
TOTAL SOFTWARE & SERVICES $ 36,127,280
------------
TECHNOLOGY, HARDWARE & EQUIPMENT - 8.0%
COMMUNICATIONS EQUIPMENT - 2.0%
356,600 Century Telephone Enterprises, Inc. $ 12,648,602
480,221 Tellabs, Inc.* 4,125,098
------------
$ 16,773,700
------------
The accompanying notes are an integral part of these financial statements.
7
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
VALUE
SHARES
COMPUTER HARDWARE - 0.6%
76,360 NCR Corp.* $ 5,286,403
------------
COMPUTER STORAGE & PERIPHERALS - 3.1%
275,600 Imation Corp. $ 8,772,348
277,500 Sandisk Corp.* 6,929,174
333,900 Storage Technology Corp.* 10,554,579
------------
$ 26,256,101
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.1%
123,980 W.W. Grainger, Inc. $ 8,259,548
28,000 Ingram Micro, Inc.* 582,400
------------
$ 8,841,948
------------
TECHNOLOGY DISTRIBUTORS - 1.2%
150,320 Fisher Scientific International, Inc.* $ 9,376,962
19,600 Tektronix, Inc. 592,115
------------
$ 9,969,077
------------
TOTAL TECHNOLOGY, HARDWARE &
EQUIPMENT $ 67,127,229
------------
SEMICONDUCTORS - 0.2%
SEMICONDUCTOR EQUIPMENT - 0.0%
24,500 FEI Co.* $ 514,500
------------
SEMICONDUCTORS - 0.2%
36,300 Intel Corp. $ 849,057
36,700 Micron Technology, Inc.* 453,245
50,400 Triquint Semiconductor, Inc.* 224,280
------------
$ 1,526,582
------------
TOTAL SEMICONDUCTORS $ 2,041,082
------------
TELECOMMUNICATION SERVICES - 0.1%
INTEGRATED TELECOMMUNICATION SERVICES - 0.1%
20,600 SBC Communications, Inc. $ 530,862
14,700 Verizon Communications, Inc. 595,498
------------
$ 1,126,360
------------
TOTAL TELECOMMUNICATION SERVICES $ 1,126,360
------------
UTILITIES - 5.5%
ELECTRIC UTILITIES - 4.1%
45,800 Avista Corp. $ 809,286
168,475 Constellation Energy Group 7,364,041
131,915 Entergy Corp. 8,916,137
122,500 NSTAR 6,649,300
322,500 PG&E Corp.* 10,732,800
------------
$ 34,471,564
------------
MULTI-UTILITIES & UNREGULATED POWER - 1.4%
836,100 Reliant Energy* (a) $ 11,412,762
------------
TOTAL UTILITIES $ 45,884,323
------------
TOTAL COMMON STOCKS
(Cost $694,162,506) $838,318,071
------------
PRINCIPAL
AMOUNT
TEMPORARY CASH INVESTMENTS - 8.9%
REPURCHASE AGREEMENT - 0.9%
$7,500,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,500,000 plus accrued interest on
1/3/05 collateralized by $7,133,000
U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000
------------
SHARES
SECURITY LENDING COLLATERAL - 8.0%
67,222,325 Securities Lending
Investment Fund, 2.18% $ 67,222,325
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $74,722,325) $ 74,722,325
------------
TOTAL INVESTMENTS IN
SECURITIES - 108.7%
(Cost $768,884,831) $913,040,396
------------
OTHER ASSETS
AND LIABILITIES - (8.7%) $(73,064,457)
------------
TOTAL NET ASSETS - 100.0% $839,975,936
============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
261,495 American Greetings Corp. $ 6,628,898
386,336 BJ'S Wholesale Club, Inc.* 11,253,968
775,700 Blockbuster, Inc. 7,400,178
100,000 Eastman Kodak Co. 3,225,000
122,760 IVAX Corp.* 1,942,063
338,295 Mylan Laboratories, Inc. 5,981,056
294,557 Regal Entertainment Group 6,112,058
214,400 Reliant Energy* 2,926,560
521,740 UNUM Corp. 9,360,016
245,613 Willis Group Holdings, Ltd. 10,111,886
-----------
TOTAL $64,941,683
===========
The accompanying notes are an integral part of these financial statements.
8
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 20.47 $ 14.94 $ 17.35 $ 17.79 $ 16.26
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.08 $ 0.14 $ 0.07 $ 0.07 $ 0.13
Net realized and unrealized gain (loss) on investments 4.41 5.45 (1.97) 1.06 2.62
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ 4.49 $ 5.59 $ (1.90) $ 1.13 $ 2.75
Distributions to shareowners:
Net investment income (0.08) (0.06) (0.05) (0.10) (0.13)
Net realized gain (0.21) -- (0.46) (1.47) (1.09)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ 4.20 $ 5.53 $ (2.49) $ (0.44) $ 1.53
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.47 $ 14.94 $ 17.35 $ 17.79
======== ======== ======== ======== ========
Total return* 22.12% 37.48% (11.21)% 6.49% 18.00%
Ratio of net expenses to average net assets+ 0.72% 0.76% 0.80% 0.79% 0.77%
Ratio of net investment income (loss) to average net assets+ 0.53% 0.86% 0.46% 0.45% 0.63%
Portfolio turnover rate 55% 52% 68% 95% 85%
Net assets, end of period (in thousands) $303,138 $170,237 $120,687 $128,340 $111,466
Ratio with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.72% 0.76% 0.80% 0.79% 0.77%
Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
Ratio with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.72% 0.76% 0.80% 0.79% 0.77%
Net investment income (loss) 0.53% 0.86% 0.46% 0.45% 0.63%
* 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 MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
ASSETS:
Investment in securities, at value (including securities loaned of $64,941,683) $913,040,396
(cost $768,884,831)
Receivables --
Investment securities sold 1,342,101
Fund shares sold 206,665
Dividends, interest and foreign taxes withheld 591,214
Other 14,869
------------
Total assets $915,195,245
------------
LIABILITIES:
Payables --
Investment securities purchased $ 2,861,531
Fund shares repurchased 4,004,450
Dividends
Upon return of securities loaned 67,222,328
Due to bank 434,663
Due to affiliates 582,759
Accrued expenses 113,578
------------
Total liabilities $ 75,219,309
------------
NET ASSETS:
Paid-in capital $647,879,874
Undistributed net investment income (loss) 2,164,900
Accumulated undistributed net realized gain (loss) 45,775,597
Net unrealized gain (loss) on:
Investments 144,155,565
------------
Total net assets $839,975,936
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $303,138,450
Shares outstanding 12,289,796
------------
Net asset value per share $ 24.67
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $536,837,486
Shares outstanding 21,966,264
------------
Net asset value per share $ 24.44
The accompanying notes are an integral part of these financial statements.
10
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $12,629) $ 7,019,067
Interest 207,829
Income on securities loaned, net 24,175
------------
Total investment income $ 7,251,071
------------
EXPENSES:
Management fees $ 3,753,733
Transfer agent fees and expenses 3,195
Distribution fees (Class II) 936,681
Administrative reimbursements 117,136
Custodian fees 100,959
Professional fees 67,108
Printing expense 107,301
Fees and expenses of nonaffiliated trustees 3,413
Miscellaneous 7,185
------------
Total expenses $ 5,096,711
Less fees paid indirectly (10,627)
------------
Net expenses $ 5,086,084
------------
Net investment income (loss) $ 2,164,987
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 53,898,712
------------
$ 53,898,712
------------
Change in net unrealized gain or (loss) from:
Investments $ 70,310,429
------------
$ 70,310,429
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $124,209,141
============
Net increase (decrease) in net assets resulting
from operations $126,374,128
============
The accompanying notes are an integral part of these financial statements.
11
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 2,164,987 $ 1,803,484
Net realized gain (loss) on investments 53,898,712 6,004,760
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 70,310,429 75,230,670
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 126,374,128 $ 83,038,914
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (711,725) $ (438,494)
Class II (1,067,643) (236,135)
Net realized gain
Class I (1,863,831) --
Class II (3,740,321) --
------------- -------------
Total distributions to shareowners $ (7,383,520) $ (674,629)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 331,791,818 $ 161,143,658
Class I shares issued in reorganization 49,670,328 --
Reinvestment of distributions 7,383,520 674,611
Cost of shares repurchased (49,217,509) (44,550,616)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 339,628,157 $ 117,267,653
------------- -------------
Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938
------------- -------------
NET ASSETS:
Beginning of year $ 381,357,171 $ 181,725,233
------------- -------------
End of year $ 839,975,936 $ 381,357,171
============= =============
Undistributed net investment income (loss),
end of year $ 2,164,900 $ 1,779,281
============= =============
The accompanying notes are an integral part of these financial statements.
12
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The investment objective of Mid Cap Value Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
13
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
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. 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Mid Cap Value Portfolio had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Mid Cap Value VCT Portfolio had a capital loss
carryforward of $5,981,262, of which the following amounts will expire
between 2009 and 2010 if not utilized: $3,451,474 in 2009 and $2,529,788 in
2010.
14
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------ ---------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 3,095,474 $674,629
Long-Term capital gain 4,288,046 --
------------ --------
$ 7,383,520 $674,629
Return of Capital -- --
------------ --------
Total distributions $ 7,383,520 $674,629
------------ --------
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 6,505,614
Capital loss carryforward from merger 48,549,164
Undistributed long-term gain/(capital loss carryforward) (5,981,262)
Unrealized appreciation (depreciation) 143,022,546
------------
Total $192,096,062
============
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, 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.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payment in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
15
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
Portfolio. Management fees are calculated daily at the following 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 accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $467,669 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $520 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
Mid Cap Value Portfolio $770,017,850 $149,310,096 $ (6,287,550) $ 143,022,546
------------ ------------ ------------ -------------
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $609,010,425 and $312,401,269, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
MID CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ------------------------------------------ ------------ ------------- ----------- -------------
CLASS I:
Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551
Class I Shares issued in reorganization 2,087,866 49,670,328 -- --
Reinvestment of distributions 117,982 2,575,556 26,084 438,476
Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863)
---------- ------------- ---------- -------------
Net increase 3,973,911 $ 91,266,478 237,992 $ 6,003,164
========== ============= ========== =============
CLASS II:
Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107
Reinvestment of distributions 221,974 4,807,964 93,450 236,135
Shares repurchased (881,455) (19,626,013) (1,080,224) (3,957,753)
---------- ------------- ---------- -------------
Net increase 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489
========== ============= ========== =============
16
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
7. MERGER INFORMATION
On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio
("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco
RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that
comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan
of Reorganization that provided for the mergers listed below. These tax-free
reorganizations were accomplished on December 10, 2004 ("Closing Date"), by
exchanging all of the Safeco's net assets for Class I shares as indicated
below, based on Class I shares' ending net asset value on the Closing Date. The
following charts show the details of the reorganizations as of that closing
date Closing Date:
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER
MID CAP VALUE SAFECO RST MULTI- PIONEER MID CAP
VCT PORTFOLIO CAP CORE PORTFOLIO VALUE VCT PORTFOLIO
(PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION)
---------------------- ---------------------- ----------------------
Net Assets $757,206,652 $49,670,328 $858,922,877
Shares Outstanding 32,072,498 2,399,533 34,160,364
Class I Shares Issued 2,087,866
ACCUMULATED
UNREALIZED APPRECIATION REALIZED GAIN
ON CLOSING DATE ON CLOSING DATE
------------------------- ----------------
Safeco RST Multi-Cap Core Portfolio $5,550,191 $7,992,587
17
PIONEER MID CAP VALUE 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 CLASS I
SHAREOWNERS OF PIONEER MID CAP VALUE VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Mid Cap Value VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit includes 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, 2004, 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
18
PIONEER MID CAP 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc.
TRUSTEES AND OFICERS
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The officers of the Trust are responsible for the Trust's operations. The
Trust's Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Portfolio within the meaning of the Investment Company Act of 1940 are
referred to as Interested Trustees. Trustees who are not interested persons of
the Fund are referred to as Independent Trustees. Each of the Trustees serves as
a trustee of each of the 73 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Trust"). The address for all Interested Trustees and all officers of the
Portfolio is 60 State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneerfunds.com.
INTERESTED TRUSTEES
POSITIONS HELD 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. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor
Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd.
President earlier retirement or Deputy Chairman and a Director
removal 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; Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May 2003
President earlier retirement or (Director since January 2001);
removal President and Director of
Pioneer since May 2003; Chairman
and Director of Pioneer
Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
19
PIONEER MID CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock** (61) Trustee since 2005. Serves until a successor Senior Vice President and Chief Director of The
3050 K. Street NW, trustee is elected or Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 earlier retirement or (publicly traded health care Investment Company
removal services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank) (1995-2000; 2002 to 2004); Mortgage Trust (publicly
Executive Vice President and traded mortgage REIT)
Chief Financial Officer,
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, trustee is elected or (international financial Corporation (industrial
Chevy Chase, MD 20815 earlier retirement or advisory firm) identification and
removal specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
Margaret B.W. Graham (57) Trustee since 2000. Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty
Canada H3A 1G5 removal of Management, McGill University
Marguerite A. Piret (56) Trustee since 1995. Serves until successor President and Chief Executive Director of New America
One Boston Place, trustee is elected or Officer, Newbury, Piret & High Income Fund, Inc.
28th Floor, Boston, earlier retirement or Company, Inc. (investment (closed-end investment
MA 02108 removal banking firm) company)
Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end investment
removal company) and AMVESCAP
PLC (investment
managers)
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 earlier retirement or
removal
20
PIONEER MID CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the discretion Secretary of PIM-USA; Senior None
of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
Christopher J. Kelley Assistant Secretary Serves at the discretion Assistant Vice President and None
(40) of the Board Senior Counsel of Pioneer since
July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
David C. Phelan (47) Assistant Secretary Serves at the discretion Partner, Wilmer Cutler Pickering None
of the Board Hale and Dorr LLP; Assistant
Secretary of all Pioneer Funds
since September 2003
Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None
of the Board Accounting, Administration and
Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
Mark E. Bradley (45) Assistant Treasurer Serves at the discretion Deputy Treasurer of Pioneer None
of the Board since 2004; Treasurer and Senior
Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
Luis I. Presutti (39) Assistant Treasurer Serves at the discretion Assistant Vice President - Fund None
of the Board Accounting, Administration and
Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
Gary Sullivan (46) Assistant Treasurer Serves at the discretion Fund Accounting Manager - Fund None
of the Board Accounting, Administration and
Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
21
PIONEER MID CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Sullivan Assistant Treasurer Serves at the discretion Fund Administration Manager - None
(31) of the Board Fund Accounting, Administration
and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None
Officer of the Board Pioneer (Director of Compliance
and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the larg est
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
22
[PIONEER INVESTMENTS(R) LOGO]
[PIONEER INVESTMENTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER EQUITY INCOME VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 16
Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER
PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 94.2%
Convertible Corporate Bonds 0.1%
Convertible Preferred Stocks 1.2%
Temporary Cash Investment 4.5%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[PIE CHART]
Financials 21.9%
Consumer Staples 6.4%
Telecommunication Services 6.5%
Materials 7.2%
Health Care 6.2%
Information Technology 3.1%
Energy 9.8%
Industrials 10.0%
Consumer Discretionary 12.1%
Utilities 16.8%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. PACCAR, Inc. 4.48%
2. Exxon Mobil Corp. 3.35%
3. ChevronTexaco Corp. 3.31%
4. Washington Mutual, Inc. 3.07%
5. T. Rowe Price Associates, Inc. 2.61%
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 20.58 $ 18.09
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.4372 $ - $ -
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.
[LINE GRAPH]
Russell 1000 Pioneer Equity Income
Value Index VCT Portfolio
"3/95" 10,000 10,000
12,632 12,025
"12/96" 15,366 13,852
20,773 18,732
"12/98" 24,021 22,816
25,787 23,092
"12/00" 27,597 26,522
26,054 24,673
"12/2" 22,010 20,770
28,620 25,466
"12/04" 33,339 29,638
Index comparison begins 2/28/95. 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 any Index.
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
NET ASSET VALUE
Life-of-Class 11.99%
(3/1/95)
5 Years 5.12%
1 Year 16.39%
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 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 EQUITY INCOME VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I II
- ----------------------------------------------------------------------------
Beginning Account Value On (7/1/04) $ 1,000.00 $ 1,000.00
Ending Account Value On (12/31/04) $ 1,119.78 $ 1,117.81
Expenses Paid During Period* $ 3.82 $ 5.19
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and
0.98% 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). 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 EQUITY INCOME VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I II
- --------------------------------------------------------------------------
Beginning Account Value On 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value On 12/31/04 $ 1,021.52 $ 1,020.21
Expenses Paid During Period* $ 3.65 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and
0.98% 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 12/31/04
In the following discussion, John Carey, portfolio manager of Pioneer Equity
Income VCT Portfolio, reviews the past year and gives an overview of the
Portfolio's performance over that period.
Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU ATTRIBUTE
THE PERFORMANCE?
A: Pioneer Equity Income VCT Portfolio showed a good gain in 2004, rising by
16.38% at net asset value. That was in line with the Russell 1000 Value
Index, which rose by 16.49%.
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.
As a whole, it was, as the numbers suggest, a good year for stocks, though
most of the performance came in the second half and particularly in the
fourth quarter. During the earlier part of the year, the market largely
backed and filled as investors worried about rising interest rates, the war
in Iraq, the weak dollar, rising oil prices, terrorist threats, and the
upcoming Presidential election. Around the middle of October, however, the
market as measured by most major indexes began to move higher, and it
continued the upward move following the election and right through to the end
of the year.
The sectors in the Russell 1000 Value Index performing above average for the
year were energy, utilities, industrials, consumer staples, and materials,
and those performing below average were telecommunications services,
financials, consumer discretionary, information technology, and health care.
Pioneer Equity Income VCT Portfolio was overweight in four of the five top
performing sectors, and underweight in three of the five underperforming
sectors. Oddly enough, though, the principal contributor to relative positive
performance for the Portfolio was our stock selection in one of the
underperforming sectors, financials, our biggest underweight relative to the
index! The performance was attributable to premium take-over offers received
by two of our banks, Charter One Financial and SouthTrust, and significant
price increases for T. Rowe Price, a money-management company, and Simon
Property Group, a real-estate investment trust. We also did not own any
shares of Citigroup, an important index name that underperformed. At the same
time, while we were appropriately underweight in information technology, we
happened to own a very poor performer in the sector, convertible preferred
shares of Electronic Data Systems, which we did sell during the year.
Industrials and materials were bright spots for both the index and the
Portfolio. In addition to being overweight in both sectors, we enjoyed
superior performance from our holdings relative to the sector averages.
Positive stand-outs for us in those sectors were PACCAR, builder of heavy
trucks, and Roanoke Electric Steel, a small steel mill. Offsetting
negative-return contributions came from holdings in the troubled health-care
sector, where we were overweight and also suffered from below-average results
from Eli Lilly and Merck.
Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE YEAR?
A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the
favorable fundamentals in energy, materials, and industrials, we looked for
additional investments in those sectors. Occidental Petroleum (oil and
natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge
(copper mining), ServiceMaster (commercial and residential maintenance
services), and Vulcan Materials (construction materials) were situations we
found attractive. With our "value" orientation, we also looked in some of the
underperforming sectors for names we thought unaccountably "cheap." In
financials, we added Comerica, U.S. Bancorp, and State Street, and we also
received shares of Wachovia in exchange for SouthTrust, which Wachovia
acquired. In consumer discretionary, we bought Tupperware and common shares
of Ford Motor in addition to our previous position in Ford convertible
preferred shares; in information technology, we added Motorola; and in health
care, we purchased Bristol-Myers Squibb and a small position in a new issue
of convertible securities from Schering-Plough. Rounding out our additions
were Clorox in consumer staples and Atmos Energy, Equitable Resources, and
Ameren in utilities.
Securities liquidated included stocks such as Biomet and Illinois Tool Works
on which we had taken significant profits and whose prices we thought
adequately reflected values, and stocks such as Pfizer and Coca-Cola about
which we became concerned in a longer-term fundamental way. Other names sold
during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck, Bank of
America, Merrill Lynch, St. Paul Travelers, Equity Office Properties,
Electonic Data Systems convertible preferred, and Hewlett-Packard.
The most meaningful effects of our trading on sector weights were in
materials and utilities, where our weightings increased versus the portfolio
weightings in the sectors at year end 2003, and in health care, where our
weighting decreased versus a year ago, though part of the decrease was due
just to weak share-price moves for our health-care stocks relative to large
price increases in some other sectors.
Q: WHAT IS YOUR OUTLOOK FOR 2005?
A: The economic outlook appears favorable over the coming year. Interest rates
are expected to continue rising, but not so fast that they should present
impediments to further economic growth. We think earnings growth should
continue, albeit potentially at a slower pace than in 2003 and 2004. Federal
tax law, with the maximum 15% tax rate on qualified dividends and 15% rate on
long-term capital gains, is likewise favorable to the stock market. Of course
there are concerns, including energy and other commodity prices and the high
trade and Federal budget deficits. We aim to mitigate the risk from those
factors by investing on the one hand in companies benefiting from rising
materials prices and, on the other hand, avoiding companies with poor cost
controls. Otherwise we are always interested in companies that not only can
do better but that also have a plan in place and a management committed to
achieve the better results. A good economy creates more opportunities for
companies to execute such turn-arounds.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
Call 800-688-9915 or visit www.pioneerfunds.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
SCHEDULE OF INVESTMENTS 12/31/04
VALUE
SHARES
CONVERTIBLE PREFERRED STOCKS - 1.2%
AUTOMOBILES & COMPONENTS - 1.1%
AUTOMOBILE MANUFACTURERS - 1.1%
2,600 General Motors, 5.25%, 3/6/32 $ 59,800
57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718
------------
$ 3,085,518
------------
TOTAL AUTOMOBILES & COMPONENTS $ 3,085,518
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.1%
PHARMACEUTICALS - 0.0%
4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 247,322
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,000,714) $ 3,332,840
------------
PRINCIPAL
AMOUNT
USD ($)
CONVERTIBLE CORPORATE BOND - 0.1%
RETAILING - 0.1%
APPAREL RETAIL - 0.1%
200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250
------------
TOTAL RETAILING $ 265,250
------------
TOTAL CONVERTIBLE CORPORATE BOND
(Cost $200,000) $ 265,250
------------
SHARES
COMMON STOCKS - 94.2%
ENERGY - 9.3%
INTEGRATED OIL & GAS - 9.3%
71,813 ConocoPhillips $ 6,235,523
169,714 ChevronTexaco Corp. 8,911,682
176,110 Exxon Mobil Corp. 9,027,399
36,142 Occidental Petroleum Corp. 2,109,247
------------
$ 26,283,851
------------
TOTAL ENERGY $ 26,283,851
------------
MATERIALS - 6.9%
COMMODITY CHEMICALS - 1.6%
51,941 Air Products & Chemicals, Inc. $ 3,011,020
28,233 E.I. du Pont de Nemours and Co. 1,384,829
------------
$ 4,395,849
------------
CONSTRUCTION MATERIALS - 0.7%
36,142 Vulcan Materials Co. $ 1,973,715
------------
DIVERSIFIED CHEMICAL - 0.9%
37,925 PPG Industries, Inc. $ 2,584,968
------------
DIVERSIFIED METALS & MINING - 1.0%
29,700 Phelps Dodge Corp. $ 2,937,924
------------
PAPER PRODUCTS - 0.8%
64,436 Meadwestvaco Corp. $ 2,183,736
------------
SPECIALTY CHEMICALS - 0.8%
42,784 Valspar Corp. $ 2,139,628
------------
STEEL - 1.1%
51,012 Nucor Corp. $ 2,669,968
20,704 Roanoke Electric Steel Corp. 427,972
------------
$ 3,097,940
------------
TOTAL MATERIALS $ 19,313,760
------------
CAPITAL GOODS - 8.1%
AEROSPACE & DEFENSE - 2.7%
53,284 Boeing Co. $ 2,758,513
46,899 General Dynamics Corp. 4,905,635
------------
$ 7,664,148
------------
ELECTRICAL COMPONENTS & EQUIPMENT - 1.5%
60,925 Emerson Electric Co. $ 4,270,843
------------
INDUSTRIAL CONGLOMERATES - 2.8%
66,280 Johnson Controls, Inc. $ 4,204,803
33,767 United Technologies Corp. 3,489,819
------------
$ 7,694,622
------------
INDUSTRIAL MACHINERY - 1.1%
28,397 Gorman-Rupp Co. $ 653,131
95,208 The Timken Co. 2,477,312
------------
$ 3,130,443
------------
TOTAL CAPITAL GOODS $ 22,760,056
------------
COMMERCIAL SERVICES & SUPPLIES - 0.6%
EMPLOYMENT SERVICES - 0.6%
128,355 Servicemaster Co. $ 1,770,015
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 1,770,015
------------
TRANSPORTATION - 0.9%
RAILROADS - 0.9%
52,265 Burlington Northern, Inc. $ 2,472,657
------------
TOTAL TRANSPORTATION $ 2,472,657
------------
AUTOMOBILES & COMPONENTS - 5.7%
AUTOMOBILE MANUFACTURERS - 5.7%
154,894 Ford Motor Corp. $ 2,267,648
46,700 General Motors Corp. 1,870,802
149,912 PACCAR, Inc. 12,064,918
------------
$ 16,203,368
------------
TOTAL AUTOMOBILES & COMPONENTS $ 16,203,368
------------
CONSUMER DURABLES & APPAREL - 0.4%
HOUSEWARES & SPECIALTIES - 0.4%
47,700 Tupperware Corp. $ 988,344
------------
TOTAL CONSUMER DURABLES & APPAREL $ 988,344
------------
The accompanying notes are an integral part of these financial statements.
5
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
VALUE
SHARE
MEDIA - 3.1%
MOVIES & ENTERTAINMENT - 1.7%
149,253 Cedar Fair, L.P. $ 4,910,424
------------
PUBLISHING - 1.4%
41,821 McGraw-Hill Co., Inc. $ 3,828,294
------------
TOTAL MEDIA $ 8,738,718
------------
RETAILING - 1.2%
DEPARTMENT STORES - 1.2%
111,354 May Department Stores Co. $ 3,273,808
------------
TOTAL RETAILING $ 3,273,808
------------
FOOD, BEVERAGE & TOBACCO - 4.7%
PACKAGED FOODS & MEATS - 4.2%
152,313 Campbell Soup Co. $ 4,552,636
62,343 General Mills, Inc. 3,099,071
76,105 H.J. Heinz Co., Inc. 2,967,334
48,430 Sara Lee Corp. 1,169,100
------------
$ 11,788,141
------------
SOFT DRINKS - 0.5%
29,533 PepsiCo, Inc. $ 1,541,623
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 13,329,764
------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.4%
HOUSEHOLD PRODUCTS - 1.4%
40,479 Colgate-Palmolive Co. $ 2,070,906
30,353 Clorox Co. 1,788,702
------------
$ 3,859,608
------------
TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 3,859,608
------------
HEALTH CARE EQUIPMENT & SERVICES - 4.0%
HEALTH CARE DISTRIBUTORS - 3.2%
99,784 Abbott Laboratories $ 4,654,924
28,800 Bristol-Myers Squibb Co. 737,856
59,163 Johnson & Johnson 3,752,117
------------
$ 9,144,897
------------
HEALTH CARE EQUIPMENT - 0.8%
39,446 Becton, Dickinson & Co. $ 2,240,533
------------
TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 11,385,430
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.8%
PHARMACEUTICALS - 1.8%
59,789 Eli Lilly & Co. $ 3,393,026
53,124 Merck & Co., Inc. 1,707,405
------------
$ 5,100,431
------------
TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 5,100,431
------------
BANKS - 11.7%
DIVERSIFIED BANKS - 4.4%
25,400 Comerica, Inc. $ 1,549,908
88,909 U.S. Bancorp 2,784,630
83,196 Wachovia Corp. 4,376,110
60,514 Wells Fargo & Co. 3,760,945
------------
$ 12,471,593
------------
REGIONAL BANKS - 4.3%
64,229 First Horizon National Corp. $ 2,768,912
100,062 National City Corp. 3,757,328
76,456 SunTrust Banks, Inc. 5,648,569
------------
$ 12,174,809
------------
THRIFTS & MORTGAGE FINANCE - 3.0%
195,686 Washington Mutual, Inc. $ 8,273,604
------------
TOTAL BANKS $ 32,920,006
------------
DIVERSIFIED FINANCIALS - 4.8%
ASSET MANAGEMENT & CUSTODY BANKS - 4.1%
61,735 Eaton Vance Corp. $ 3,219,480
27,800 State Street Corp. 1,365,536
113,009 T. Rowe Price Associates, Inc. 7,029,160
------------
$ 11,614,176
------------
INVESTMENT BANKING & BROKERAGE - 0.7%
44,506 A.G. Edwards, Inc. $ 1,923,104
------------
TOTAL DIVERSIFIED FINANCIALS $ 13,537,280
------------
INSURANCE - 3.2%
PROPERTY & CASUALTY INSURANCE - 3.2%
57,533 Chubb Corp. $ 4,424,288
89,632 Safeco Corp. 4,682,376
------------
$ 9,106,664
------------
TOTAL INSURANCE $ 9,106,664
------------
REAL ESTATE - 1.2%
REAL ESTATE INVESTMENT TRUSTS - 1.2%
53,284 Simon DeBartolo Group, Inc. $ 3,445,876
------------
TOTAL REAL ESTATE $ 3,445,876
------------
SOFTWARE & SERVICES - 0.9%
APPLICATION SOFTWARE - 0.3%
32,011 Microsoft Corp. $ 855,014
------------
DATA PROCESSING & OUTSOURCED SERVICES - 0.6%
40,616 Automatic Data Processing, Inc. $ 1,801,320
------------
TOTAL SOFTWARE & SERVICES $ 2,656,334
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 2.0%
COMMUNICATIONS EQUIPMENT - 0.6%
91,600 Motorola, Inc. $ 1,575,520
------------
The accompanying notes are an integral part of these financial statements.
6
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
VALUE
SHARES
COMPUTER HARDWARE - 1.4%
62,145 Diebold, Inc. $ 3,463,341
6,402 IBM Corp. 631,109
------------
$ 4,094,450
------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 5,669,970
------------
TELECOMMUNICATION SERVICES - 6.2%
INTEGRATED TELECOMMUNICATION SERVICES - 6.2%
53,541 Alltel Corp. $ 3,146,069
140,143 BellSouth Corp. 3,894,574
175,340 SBC Communications, Inc. 4,518,512
64,047 AT&T Corp. 1,220,736
113,589 Verizon Communications, Inc. 4,601,490
------------
$ 17,381,381
------------
TOTAL TELECOMMUNICATION SERVICES $ 17,381,381
------------
UTILITIES - 16.1%
ELECTRIC UTILITIES - 10.2%
79,358 Ameren Corp. $ 3,979,010
66,696 American Electric Power Co., Inc. 2,290,341
121,608 Constellation Energy Group 5,315,486
76,537 Consolidated Edison, Inc. 3,348,494
34,077 FPL Group, Inc. 2,547,256
108,460 Great Plains Energy, Inc. 3,284,169
66,088 NSTAR 3,587,257
127,476 Southern Co. 4,272,996
------------
$ 28,625,009
------------
GAS UTILITIES - 4.2%
15,400 Atmos Energy Corp. $ 421,190
128,160 KeySpan Energy Corp. 5,055,912
124,991 Questar Corp. 6,369,541
------------
$ 11,846,643
------------
MULTI-UTILITIES & UNREGULATED POWER - 1.1%
50,083 Equitable Resources, Inc. $ 3,038,035
------------
WATER UTILITIES - 0.6%
73,317 Aqua America, Inc. $ 1,802,861
------------
TOTAL UTILITIES $ 45,312,548
------------
TOTAL COMMON STOCKS
(Cost $200,659,301) $265,509,869
------------
PRINCIPAL
AMOUNT
TEMPORARY CASH INVESTMENT - 4.5%
Repurchase Agreement - 4.5%
$12,700,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$12,700,000 plus accrued interest on
1/3/05 collateralized by $12,654,000
U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $12,700,000) $ 12,700,000
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $216,560,015) $281,807,959
------------
OTHER ASSETS
AND LIABILITIES - 0.0% $ 117,819
------------
TOTAL NET ASSETS - 100.0% $281,925,778
------------
The accompanying notes are an integral part of these financial statements.
7
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.09 $ 15.11 $ 18.40 $ 21.28 $ 20.72
---------- ---------- ---------- ---------- ----------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.44 $ 0.41 $ 0.42 $ 0.40 $ 0.51
Net realized and unrealized gain (loss) on investments 2.49 2.96 (3.30) (1.86) 2.28
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment operations $ 2.93 $ 3.37 $ (2.88) $ (1.46) $ 2.79
Distributions to shareowners:
Net investment income (0.44) (0.39) (0.41) (0.36) (0.49)
Net realized gain -- -- -- (1.06) (1.74)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value $ 2.49 $ 2.98 $ (3.29) $ (2.88) $ 0.56
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.58 $ 18.09 $ 15.11 $ 18.40 $ 21.28
========== ========== ========== ========== ==========
Total return* 16.39% 0.86% (15.82)% (6.97)% 14.85%
Ratio of net expenses to average net assets+ 0.72% 0.78% 0.80% 0.75% 0.71%
Ratio of net investment income (loss) to average net assets+ 2.40% 2.55% 2.48% 2.07% 2.40%
Portfolio turnover rate 19% 12% 12% 13% 13%
Net assets, end of period (in thousands) $ 188,234 $ 155,634 $ 133,258 $ 164,019 $ 181,920
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.72% 0.78% 0.80% 0.75% 0.71%
Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.72% 0.78% 0.80% 0.75% 0.71%
Net investment income (loss) 2.40% 2.55% 2.48% 2.07% 2.40%
* 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 with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
8
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
ASSETS:
Investment in securities, at value (Cost $216,560,015) $ 281,807,959
Cash 154,992
Receivables --
Fund shares sold 257,005
Dividends, interest and foreign taxes withheld 725,532
Other 7,531
-------------
Total assets $ 282,953,019
-------------
LIABILITIES:
Payables --
Fund shares repurchased 758,304
Due to affiliates 181,072
Accrued expenses 87,865
-------------
Total liabilities $ 1,027,241
-------------
NET ASSETS:
Paid-in capital $ 228,847,694
Undistributed net investment income (loss) 1,228,049
Accumulated undistributed net realized gain (loss) (13,397,909)
Net unrealized gain (loss) on:
Investments 65,247,944
-------------
Total net assets $ 281,925,778
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 188,234,469
Shares outstanding 9,147,953
-------------
Net asset value per share $ 20.58
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 93,691,309
Shares outstanding 4,529,535
-------------
Net asset value per share $ 20.68
The accompanying notes are an integral part of these financial statements.
9
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends $ 7,227,744
Interest 128,972
Income on securities loaned, net 7,190
-----------
Total investment income $ 7,363,906
-----------
EXPENSES:
Management fees $ 1,531,353
Transfer agent fees and expenses 3,000
Distribution fees (Class II) 181,8884
Administrative reimbursements 30,408
Custodian fees 43,740
Professional fees 52,063
Printing expense 41,880
Fees and expenses of nonaffiliated trustees 1,681
Miscellaneous 8,282
-----------
Total expenses $ 1,894,295
Less fees paid indirectly (4,731)
-----------
Net expenses $ 1,889,564
-----------
Net investment income (loss) $ 5,474,342
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 2,001,864
-----------
$ 2,001,864
-----------
Change in net unrealized gain or (loss) from:
Investments $29,937,321
-----------
$ 2,937,321
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $31,939,185
===========
Net increase (decrease) in net assets resulting
from operations $37,413,527
===========
The accompanying notes are an integral part of these financial statements.
10
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 5,474,342 $ 4,413,641
Net realized gain (loss) on investments 2,001,864 (634,370)
Change in net unrealized gain or (loss) on
investments, futures contracts and foreign
currency transactions 29,937,321 34,115,732
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 37,413,527 $ 37,895,003
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (3,809,792) $ (3,313,897)
Class II (1,595,526) (860,942)
------------- -------------
Total distributions to shareowners $ (5,405,318) $ (4,174,839)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 63,295,941 $ 52,433,019
Reinvestment of distributions 5,405,317 4,174,840
Cost of shares repurchased (34,772,572) (34,680,633)
------------- -------------
Net increase (decrease) in net assets resulting
from Fund share transactions $ 33,928,686 $ 21,927,226
------------- -------------
Net increase (decrease) in net assets $ 65,936,895 $ 55,647,390
------------- -------------
NET ASSETS:
Beginning of year $ 215,988,883 $ 160,341,493
------------- -------------
End of year $ 281,925,778 $ 215,988,883
============= =============
Undistributed net investment income (loss), end of year $ 1,228,049 $ 1,156,984
============= =============
The accompanying notes are an integral part of these financial statements.
11
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Equity Income VCT Portfolio is a portfolio of the Pioneer Variable
Contracts Trust (the Trust) which is a Delaware business trust registered under
the Investment Company Act of 1940 as an open-end management investment company.
The Trust consists of twenty two separate diversified portfolios fourteen of
which issue both Class I and Class II shares (collectively, the Portfolios,
individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objective of Equity Income Portfolio is to seek capital
appreciation.
Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, in its
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 value for 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 Exchange. In
computing the net asset values, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are not
generally reported, are valued at the mean between the last bid and asked
prices. 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
Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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
12
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
market quotations are not readily available are valued at their fair values
as determined by, or under the direction of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have passed
are recorded as soon as the Portfolio 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, 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. 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, 2004, the portfolio had no
open futures contracts.
C. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
The portfolio elected to defer $229,369 in capital losses recognized between
November 1, 2004 and December 31, 2004, to its fiscal year ending December
31, 2005.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Equity Income VCT Portfolio had a capital loss
carryforward of $13,046,223, of which will the following amounts expire
between 2009 and 2011 if not utilized: $3,961,413 in 2009, $6,407,206 in
2010, and $2,677,654, in 2011.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED
NET ACCUMULATED
INVESTMENT NET REALIZED
INCOME GAIN PAID-IN
PORTFOLIO (LOSS) (LOSS) CAPITAL
- -------------- -------------- ------------ --------
Pioneer Equity
Income VCT
Portfolio $2,041 $(44,116) $(42,075)
====== ======== ========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 5,405,318 $4,174,839
Long-Term capital gain -- --
------------- ----------
$ 5,405,318 $4,174,839
Return of Capital -- --
------------- ----------
Total distributions $ 5,405,318 $4,174,839
============= ==========
DISTRIBUTABLE EARNINGS
(ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/
(capital loss carryforward) (13,046,273)
Unrealized appreciation
(depreciation) 66,353,726
Post-October loss deferred (229,369)
-------------
Total $ 53,078,084
=============
13
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, and the recognition of unrealized
gains or losses on certain futures contracts.
D. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc.
(PFD), the principal underwriter for the Trust and a wholly owned indirect
subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in
commissions on the sale of Trust shares for the year ended December 31, 2004.
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 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, with the Portfolio's custodian acting as the
lending agent. When entering into a loan, the Portfolio receives collateral
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Portfolio also continues to receive payments in
lieu of interest or dividends on the securities loaned. Gain or loss in the
fair value of the securities loaned that may occur during the term of the
loan, will be for account of the Trust. The loans are secured by collateral
of at least 102%, at all times, of the fair value of the securities loaned.
The fair value of the collateral will be adjusted daily to reflect any price
fluctuation in the value of the loaned securities. The Trust has the right
under the lending agreement to recover the securities on loan from the
borrower on demand. The Trust invests cash collateral in the Securities
Lending Investment Fund which is managed by Brown Brothers Harriman & Co.,
the Trust's custodian.
F. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase. The
collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at least
equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
Portfolio. Management fees are calculated daily at the following 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. At December 31, 2004, $160,961 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolio's aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
Equity Income Portfolio $215,454,233 $69,458,677 $ (3,101,223) $66,353,736
============ =========== ============ ===========
14
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $72,185,977 and $44,337,103, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
EQUITY INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- -------------------------------------------------------------------------------------------------
CLASS I:
Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979
Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898
Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038)
---------- ------------- ---------- -------------
Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161)
========== ============= ========== =============
CLASS II:
Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040
Reinvestment of distributions 82,473 1,595,526 54,432 860,942
Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595)
---------- ------------- ---------- -------------
Net increase 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387
========== ============= ========== =============
15
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 CLASS I SHAREOWNERS OF PIONEER EQUITY INCOME VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Equity Income VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, by correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/S/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
16
PIONEER EQUITY 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder
Services, Inc.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees provides officers of the Trust are responsible for
the Trust's are listed below, together with their principal occupations during
the past five years. Trustees who are interested persons of the Portfolio within
the meaning of the Investment Company Act of 1940 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
73 U.S. registered investment portfolios for which Pioneer Investment
Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The
address for all Interested Trustees and all officers of the Portfolio is 60
State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneerfunds.com.
INTERESTED TRUSTEES
POSITIONS HELD 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. (78)* Chairman of the Board, Serves until successor Trustee and President Serves Director of Harbor
Trustee and President trustee is elected or until retirement or removal; Global Company, Ltd.
earlier retirement or Deputy Chairman and a Director
removal 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; Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
Osbert M. Hood (52)** Trustee and Executive Serves until successor President and Chief Executive None
Vice President trustee is elected or Officer, PIM-USA since May 2003
earlier retirement or (Director since January 2001);
removal President and Director of
Pioneer since May 2003; Chairman
and Director of Pioneer
Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
17
PIONEER EQUITY INCOME VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock** (61) Trustee since 2005. Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, successor trustee is Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 elected or earlier (publicly traded health care Investment Company
retirement or removal. services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank)(1995-2000; 2002 to 2004); Mortgage Trust
Executive Vice President and (publicly traded
Chief Financial Officer, mortgage REIT)
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, trustee is elected or (international financial Corporation
Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial
removal identification and
specialty coated
material products
manufacturer),
Millennium
Chemicals, Inc.
(commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and
R.J. Reynolds
Tobacco Holdings,
Inc. (tobacco)
Margaret B.W. Graham (57) Trustee since 2000. Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty
Canada H3A 1G5 removal of Management, McGill University
Marguerite A. Piret (56) Trustee since 1995. Serves until successor President and Chief Executive Director of New
One Boston Place, trustee is elected or Officer, Newbury, Piret & America High Income
28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc.
Boston, MA 02108 removal banking firm) (closed-end
investment company)
Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end
removal investment company)
and AMVESCAP PLC
(investment
managers)
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 earlier retirement or
removal
18
PIONEER EQUITY INCOME VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
Christopher J. Kelley Assistant Secretary Serves at the Assistant Vice President and None
(40) discretion of the Board Senior Counsel of Pioneer since
July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler Pickering None
discretion of the Board Hale and Dorr LLP; Assistant
Secretary of all Pioneer Funds
since September 2003
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Board Accounting, Administration and
Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None
discretion of the Board since 2004; Treasurer and Senior
Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - Fund None
discretion of the Board Accounting, Administration and
Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None
discretion of the Board Accounting, Administration and
Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
19
PIONEER EQUITY INCOME VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS OFFICER
Katharine Kim Sullivan Assistant Treasurer Serves at the Fund Administration Manager - None
(31) discretion of the Board Fund Accounting, Administration
and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Board Pioneer (Director of Compliance
and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional
and other clients.
20
THIS PAGE FOR YOUR NOTES.
21
[PIONEER INVESTMENTS(R) LOGO]
[PIONEER INVESTMENTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER FUND VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
TABLE OF CONTENTS
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 14
Report of Independent Registered Public Accounting Firm 19
Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER
PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO UPDATE 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 94.6%
International Common Stocks 1.1%
Depositary Receipts for International Stocks 2.5%
Temporary Cash Investments 1.8%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[PIE CHART]
Utilities 1.7%
Telecommunication Services 3.1%
Materials 6.5%
Energy 7.9%
Consumer Staples 10.1%
Health Care 12.3%
Industrials 13.2%
Consumer Discretionary 14.0%
Information Technology 15.5%
Financials 15.7%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Exxon Mobil Corp. 2.58%
2. ChevronTexaco Corp. 2.18
3. Target Corp. 2.04
4. United Technologies Corp. 1.98
5. Microsoft Corp. 1.97
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 20.57 $ 18.70
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.2186 $ - $ -
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.
[LINE GRAPH]
S&P 500 Pioneer
Index Fund VCT Portfolio
"10/97" 10,000 10,000
10,643 10,543
"12/98" 13,686 13,296
16,565 15,411
"12/00" 15,060 15,600
13,275 13,908
"12/02" 10,342 11,261
13,306 13,936
"12/04" 14,747 15,504
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, 2004)
NET ASSET VALUE
Life-of-Class 6.31%
(10/31/97)
5 Years 0.12
1 Year 11.26
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 FUND 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 FUND VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I II
- ---------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,090.36 $ 1,088.30
Expenses Paid During Period* $ 3.72 $ 5.02
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and
0.96% for Class I and Class II C 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). 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 FUND VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I II
- ------------------------------------------ ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.57 $ 1,020.31
Expenses Paid During Period* $ 3.60 $ 4.85
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71%, and
0.96% for Class I and Class II, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the one-half
year period).
3
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT
Portfolio, reviews the past year and gives an overview of the Portfolio's
performance over that period.
Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU
ATTRIBUTE THE PERFORMANCE?
A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. The
Portfolio rose 11.25% at net asset value for the calendar year. Most of
the gain came in the fourth quarter, which saw the Portfolio rise 9.26%.
By comparison, the Standard & Poor's 500 Index increased by 11.04% for the
year and 9.23% in the fourth quarter.
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
origianl cost.
For Pioneer Fund VCT Portfolio, the better-than-average performance was
derived both from our solid weightings in many of the old-economy stocks,
especially in energy, industrials, and materials, and from our good stock
selection in the four sectors that underperformed the S&P 500 average,
consumer staples, financials, health care, and information technology.
Among our best-performing stocks were Norfolk Southern and PACCAR in
industrials and T. Rowe Price in financials, but we also benefited from
having only modest relative exposure to Pfizer and Cisco Systems (which we
sold during the year) and no holdings of Coca-Cola, all stocks that did
poorly. We did suffer from having above-market weightings in two of the
dismal semi-conductor names, Applied Materials and Texas Instruments, but
on the whole we managed to avoid most of the "disaster" stocks. We were
particularly pleased that consumer discretionary, the sector we had
highlighted in our annual report for 2003 as the "major culprit" in our
relative underperformance versus the S&P during that year, was a positive
contributor to performance in 2004. Three of our largest gains were from
stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons.
Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE SECOND HALF?
A: The list of 32 additions to and 10 deletions from the portfolio in the
second half of 2004 makes it look as though the period was a singularly
busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally
busy time, but due to the merger of an acquired fund, the Safeco Core
Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up
with some new, transferred positions. Most of the Safeco fund, overlapped
with positions already owned in the Portfolio, but we inherited the others
as well. Rather than "throwing them all out with the wash," we thought
that we would take our time to study them in the expectation that some
might prove to be worthwhile longer-term holdings for Pioneer Fund VCT
Portfolio. The merger itself marked an exciting increase to the asset base
of Pioneer Fund VCT Portfolio, and also to our shareholder family. To our
new, formerly Safeco shareholders, a hearty welcome!
The total effect of the portfolio activity on sector weights was modest,
with no sector weighting going up or down by as much as 2%. Materials,
industrials, consumer discretionary, information technology, and
telecommunications services all increased as a percentage of the
Portfolio, and energy, consumer staples, health care, financials, and
utilities all decreased. As examples, in materials we added: BHP Billiton,
a major Australian-based mining and minerals company; Inco, the Canadian
nickel producer; and Newmont Mining, a leading gold miner. Two new
materials names came from the Safeco fund, Praxair, supplier of industrial
gases, and Ball, a packaging company. Among industrials, Northrup Grumman
and Ingersoll-Rand were both Safeco holdings, and in the case of consumer
discretionary, five of the eight new stocks came from the Safeco fund. The
two largest additions, however, were our own purchases, Nordstrom and Gap,
both of them retailing companies showing signs of meaningful operational
improvement over the past couple of years.
Information technology rose somewhat with: our purchase of Veritas
Software, which has received a merger proposal from another portfolio
company, Symantec; the receipt of shares of Freescale Semiconductor from
our holding Motorola; and the inclusion of EMC, an information storage
specialist, from the Safeco fund. Telecommunications saw one purchase by
us, Nextel Communications, and two additions attributable to the Safeco
fund, CenturyTel and Verizon. Subsequent to our purchase of Nextel, the
company entered into merger discussions with Sprint.
Call 800-688-9915 or visit www.pioneerfunds.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 FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
In regard to the sectors where the weightings decreased, the reasons in
some cases had to do with weaker relative share-price performance and in
other cases with sales from the portfolio. In energy, we realized a gain
on a large position in Smith International and replaced it with a smaller
holding of Schlumberger. With consumer staples, despite the addition of
two small positions from the Safeco portfolio, Kellogg and Kimberly Clark,
the sector declined as a percent of the Portfolio due to underperformance
versus the market averages. In the case of health care, it was a
combination of selling in excess of purchasing and woeful stock
performance from some of the pharmaceuticals, especially Mylan Labs, which
announced an acquisition that many investors thought ill conceived. During
the six months, we realized significant percentage gains on our sales of
Biomet and Wellpoint Health Networks, while adding two names in the
health-care equipment and supplies industry, Stryker and Medtronic, and
one name in biotechnology, Amgen. Medtronic and Amgen were both from the
Safeco fund.
Financials saw SouthTrust stock exchanged for shares of Wachovia in a
merger and our shares of Charter One Financial acquired for cash by the
Royal Bank of Scotland. We sold our position in St. Paul Travelers after
discouragement over the company's need to set up additional reserves
following the merger creating the company. Finally, in utilities, we sold
a position in Vectren and received a smaller position in Exelon from the
Safeco fund.
Q: WHAT IS YOUR OUTLOOK FOR 2005?
A: The economic outlook appears favorable over the coming year. Interest
rates are expected to continue rising, but not so fast that they should
present impediments to further economic growth. Earnings growth will
moderate somewhat, which is normal as a business cycle lengthens, but
should still be adequate to fuel additional share-price advances. Federal
tax law, with the maximum 15% tax rate on qualified dividends and
long-term capital gains, is likewise favorable to the stock market. Of
course there are concerns, including energy and other commodity prices and
the high trade and Federal budget deficits. At some point, too, investors
will begin looking ahead to the next downturn in the economy and thinking
about ways to position themselves more defensively. A lot rides on the
length of the current business cycle. That is, will this be a "normal"
cycle of four years or thereabouts, or could it become another extended
cycle like the one of the 1990s, which continued for more than six years?
Making the forecasting even more difficult is the unusual circumstance
that this is a wartime cycle, with some economic activity not conforming
to more predictable business patterns.
As always, though, we are mainly interested in companies that have the
financial and management strengths to survive and do well regardless of
the economic climate, and especially companies with the potential, as well
as a plan and the management commitment, to do better than they have in
the past. A good economy creates more opportunities for such companies to
achieve improved results.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
5
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE
COMMON STOCKS - 98.9%
ENERGY - 7.8%
INTEGRATED OIL & GAS - 5.8%
20,126 BP Amoco Plc (A.D.R.) $ 1,175,358
31,052 ConocoPhillips 2,696,245
241,264 ChevronTexaco Corp. 12,668,773
292,714 Exxon Mobil Corp. 15,004,520
44,680 Occidental Petroleum Corp. 2,607,525
------------
$ 34,152,421
------------
OIL & GAS DRILLING - 0.7%
60,277 Schlumberger, Ltd. $ 4,035,545
------------
OIL & GAS EXPLORATION & PRODUCTION - 1.3%
99,995 Apache Corp. $ 5,056,747
70,551 Pioneer Natural Resources Co. 2,476,340
------------
$ 7,533,087
------------
TOTAL ENERGY $ 45,721,053
------------
MATERIALS - 6.5%
ALUMINUM - 0.6%
117,716 Alcoa, Inc. $ 3,698,637
------------
COMMODITY CHEMICALS - 1.3%
27,138 Air Products & Chemicals, Inc. $ 1,573,190
46,466 E.I. du Pont de Nemours and Co. 2,279,157
88,000 Praxair, Inc. 3,885,200
------------
$ 7,737,547
------------
DIVERSIFIED CHEMICAL - 0.3%
21,688 PPG Industries, Inc. $ 1,478,254
------------
DIVERSIFIED METALS & MINING - 2.7%
112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778
81,386 Inco, Ltd.* 2,993,377
39,803 Phelps Dodge Corp. 3,937,313
200,118 Rio Tinto Plc 5,886,829
------------
$ 15,520,297
------------
METAL & GLASS CONTAINERS - 0.8%
104,000 Ball Corp. $ 4,573,920
------------
PAPER PRODUCTS - 0.3%
53,073 Meadwestvaco Corp. $ 1,798,644
------------
PRECIOUS METALS & MINERALS - 0.3%
40,047 Newmont Mining Corp. $ 1,778,487
------------
SPECIALTY CHEMICALS - 0.2%
39,222 Ecolab, Inc. $ 1,377,869
------------
TOTAL MATERIALS $ 37,963,655
------------
CAPITAL GOODS - 10.3%
AEROSPACE & DEFENSE - 1.4%
48,104 General Dynamics Corp. $ 5,031,678
54,000 Northrop Grumman Corp. 2,935,440
------------
$ 7,967,118
------------
ELECTRICAL COMPONENTS & EQUIPMENT - 2.1%
65,964 Emerson Electric Co. $ 4,624,076
206,300 General Electric Co. 7,529,950
------------
$ 12,154,026
------------
INDUSTRIAL CONGLOMERATES - 4.5%
79,790 Illinois Tool Works, Inc. $ 7,394,937
120,984 Johnson Controls, Inc. 7,675,225
111,551 United Technologies Corp. 11,528,796
------------
$ 26,598,958
------------
INDUSTRIAL MACHINERY - 2.3%
40,569 Caterpillar, Inc. $ 3,955,883
86,222 Deere & Co. 6,414,917
40,000 Ingersoll-Rand Co. 3,212,000
------------
$ 13,582,800
------------
TOTAL CAPITAL GOODS $ 60,302,902
------------
COMMERCIAL SERVICES & SUPPLIES - 0.5%
OFFICE SERVICES & SUPPLIES - 0.5%
58,698 Canon, Inc. (A.D.R.) $ 3,184,953
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 3,184,953
------------
TRANSPORTATION - 2.3%
AIRLINES - 0.5%
170,807 Southwest Airlines Co. $ 2,780,738
------------
RAILROADS - 1.5%
50,040 Burlington Northern, Inc. $ 2,367,392
180,893 Norfolk Southern Corp. 6,546,518
------------
$ 8,913,910
------------
TRUCKING - 0.3%
21,253 United Parcel Service (a) $ 1,816,281
------------
TOTAL TRANSPORTATION $ 13,510,929
------------
AUTOMOBILES & COMPONENTS - 2.1%
AUTOMOBILE MANUFACTURERS - 2.1%
253,315 Ford Motor Corp. $ 3,708,532
108,616 PACCAR, Inc. 8,741,416
------------
$ 12,449,948
------------
TOTAL AUTOMOBILES & COMPONENTS $ 12,449,948
------------
The accompanying notes are an integral part of these financial statements.
6
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
CONSUMER DURABLES & APPAREL - 0.6%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.2%
65,267 Gap, Inc. $ 1,378,439
------------
HOUSEWARES & SPECIALTIES - 0.4%
84,000 Leggett & Platt, Inc. $ 2,388,120
------------
TOTAL CONSUMER DURABLES & APPAREL $ 3,766,559
------------
MEDIA - 4.5%
ADVERTISING - 0.6%
43,791 Omnicom Group $ 3,692,457
------------
MOVIES & ENTERTAINMENT - 0.2%
51,957 The Walt Disney Co. $ 1,444,405
------------
PUBLISHING - 3.7%
48,893 Elsevier NV $ 665,764
90,111 Gannett Co. 7,362,069
149,146 John Wiley & Sons, Inc. 5,196,247
78,179 McGraw-Hill Co., Inc. 7,156,506
28,800 Tribune Co. 1,213,632
------------
$ 21,594,218
------------
TOTAL MEDIA $ 26,731,080
------------
RETAILING - 6.5%
APPAREL RETAIL - 0.2%
24,633 Liz Claiborne, Inc. $ 1,039,759
------------
COMPUTER & ELECTRONICS RETAIL - 0.6%
60,000 Best Buy Co., Inc. $ 3,565,200
11,064 Game Stop Corp. (Class B)* 247,944
------------
$ 3,813,144
------------
DEPARTMENT STORES - 2.0%
80,000 Kohl's Corp.* $ 3,933,600
88,332 May Department Stores Co. 2,596,961
118,523 Nordstrom, Inc. 5,538,580
------------
$ 12,069,141
------------
GENERAL MERCHANDISE STORES - 2.2%
34,432 Family Dollar Stores, Inc. $ 1,075,311
228,656 Target Corp. 11,874,106
------------
$ 12,949,417
------------
HOME IMPROVEMENT RETAIL - 1.3%
110,000 Home Depot, Inc. $ 4,701,400
48,716 Lowe's Co., Inc. 2,805,554
------------
$ 7,506,954
------------
SPECIALTY STORES - 0.2%
30,603 Barnes & Noble, Inc.* $ 987,559
------------
TOTAL RETAILING $ 38,365,974
------------
FOOD & DRUG RETAILING - 2.5%
DRUG RETAIL - 0.9%
139,003 Walgreen Co. $ 5,333,545
------------
FOOD DISTRIBUTORS - 1.4%
83,493 Cardinal Health, Inc. $ 4,855,118
84,201 Sysco Corp. 3,213,952
------------
$ 8,069,070
------------
FOOD RETAIL - 0.2%
28,200 Kellogg Co. $ 1,259,412
------------
TOTAL FOOD & DRUG RETAILING $ 14,662,027
------------
FOOD, BEVERAGE & TOBACCO - 3.7%
PACKAGED FOODS & MEATS - 2.1%
86,457 Campbell Soup Co. $ 2,584,200
44,844 General Mills, Inc. 2,229,195
73,219 H.J. Heinz Co., Inc. 2,854,809
54,767 Hershey Foods Corp. 3,041,759
76,005 Sara Lee Corp. 1,834,761
------------
$ 12,544,724
------------
SOFT DRINKS - 1.6%
178,941 PepsiCo, Inc. $ 9,340,720
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 21,885,444
------------
HOUSEHOLD & PERSONAL PRODUCTS - 3.8%
HOUSEHOLD PRODUCTS - 3.2%
90,211 Colgate-Palmolive Co. $ 4,615,195
15,015 Clorox Co. 884,834
80,030 Estee Lauder Co. 3,662,973
171,470 Procter & Gamble Co. 9,444,568
------------
$ 18,607,570
------------
PERSONAL PRODUCTS - 0.6%
58,000 Kimberly-Clark Corp. $ 3,816,980
------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 22,424,550
------------
HEALTH CARE EQUIPMENT & SERVICES - 6.6%
HEALTH CARE DISTRIBUTORS - 3.4%
204,554 Abbott Laboratories $ 9,542,444
163,188 Johnson & Johnson 10,349,383
------------
$ 19,891,827
------------
HEALTH CARE EQUIPMENT - 2.8%
73,222 Becton, Dickinson & Co. $ 4,159,010
32,057 Guidant Corp. 2,311,310
85,000 Medtronic, Inc. 4,221,950
123,159 Stryker Corp. 5,942,422
------------
$ 16,634,692
------------
The accompanying notes are an integral part of these financial statements.
7
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE
MANAGED HEALTH CARE - 0.4%
23,937 United Healthcare Group, Inc. $ 2,107,174
------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 38,633,693
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.6%
BIOTECHNOLOGY - 0.8%
68,200 Amgen, Inc.* $ 4,375,030
------------
PHARMACEUTICALS - 4.8%
55,362 Barr Laboratorie, Inc. $ 2,521,185
95,302 Eli Lilly & Co. 5,408,389
236,082 Merck & Co., Inc. 7,587,675
104,212 Mylan Laboratories, Inc. (a) 1,842,468
56,907 Novartis AG 2,876,080
78,800 Pfizer, Inc. 2,118,932
18,810 Roche Holdings AG (A.D.R) 2,184,311
180,617 Schering-Plough Corp. 3,771,283
------------
$ 28,310,323
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 32,685,353
------------
BANKS - 8.1%
DIVERSIFIED BANKS - 3.7%
288,277 U.S. Bancorp $ 9,028,836
41,456 Wachovia Corp. 2,180,586
174,435 Wells Fargo & Co. 10,841,135
------------
$ 22,050,557
------------
REGIONAL BANKS - 3.1%
98,868 First Horizon National Corp. $ 4,262,199
59,000 Fifth Third Bancorp 2,789,520
140,351 National City Corp. 5,270,180
57,444 SunTrust Banks, Inc. 4,243,963
23,185 Zions Bancorporation 1,577,276
------------
$ 18,143,138
------------
THRIFTS & MORTGAGE FINANCE - 1.3%
177,481 Washington Mutual, Inc. $ 7,503,897
------------
TOTAL BANKS $ 47,697,592
------------
DIVERSIFIED FINANCIALS - 5.4%
ASSET MANAGEMENT & CUSTODY BANKS - 2.6%
114,875 The Bank of New York Co., Inc. $ 3,839,123
45,290 Federated Investors, Inc. 1,376,816
77,103 State Street Corp. 3,787,299
101,277 T. Rowe Price Associates, Inc. 6,299,429
------------
$ 15,302,667
------------
CONSUMER FINANCE - 2.2%
138,272 American Express Co. $ 7,794,393
172,000 MBNA Corp. 4,848,680
------------
$ 12,643,073
------------
INVESTMENT BANKING & BROKERAGE - 0.6%
60,698 Merrill Lynch & Co., Inc. $ 3,627,919
------------
DIVERSIFIED FINANCIAL SERVICES - 0.0%
1 Citigroup, Inc. $ 48
------------
TOTAL DIVERSIFIED FINANCIALS $ 31,573,707
------------
INSURANCE - 1.9%
MULTI-LINE INSURANCE - 0.9%
78,394 American International Group, Inc. $ 5,148,134
------------
PROPERTY & CASUALTY INSURANCE - 1.0%
56,844 Chubb Corp. $ 4,371,304
33,919 Safeco Corp. 1,771,929
------------
$ 6,143,233
------------
TOTAL INSURANCE $ 11,291,367
------------
SOFTWARE & SERVICES - 5.5%
APPLICATION SOFTWARE - 3.1%
44,591 Adobe Systems, Inc. $ 2,797,639
429,081 Microsoft Corp. 11,460,754
62,259 Symantec Corp.* 1,603,792
82,800 Veritas Software Corp.* 2,363,940
------------
$ 18,226,125
------------
DATA PROCESSING & OUTSOURCED SERVICES - 2.4%
107,497 Automatic Data Processing, Inc. $ 4,767,492
38,501 Computer Sciences Corp.* 2,170,301
26,882 DST Systems, Inc.* 1,401,090
29,998 Fiserv, Inc.* 1,205,620
158,920 SunGard Data Systems, Inc.* 4,502,204
------------
$ 14,046,707
------------
TOTAL SOFTWARE & SERVICES $ 32,272,832
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 6.2%
COMMUNICATIONS EQUIPMENT - 2.1%
95,000 Century Telephone Enterprises, Inc. $ 3,369,650
221,762 Motorola, Inc. 3,814,306
326,377 Nokia Corp. (A.D.R) 5,114,328
------------
$ 12,298,284
------------
COMPUTER HARDWARE - 3.7%
27,643 Diebold, Inc. $ 1,540,544
203,265 Dell, Inc.* 8,565,587
76,270 Hewlett-Packard Co. 1,599,382
81,063 IBM Corp. 7,991,191
403,137 Sun Microsystems, Inc.* 2,168,877
------------
$ 21,865,581
------------
COMPUTER STORAGE & PERIPHERALS - 0.4%
160,000 EMC Corp.* $ 2,379,200
------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 36,543,065
------------
The accompanying notes are an integral part of these financial statements.
8
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
SEMICONDUCTORS - 3.6%
SEMICONDUCTOR EQUIPMENT - 0.9%
308,306 Applied Materials, Inc.* $ 5,272,033
------------
SEMICONDUCTORS - 2.7%
24,815 Freescale Semiconductors, Inc.* $ 455,602
349,426 Intel Corp. 8,173,074
294,793 Texas Instruments, Inc. 7,257,804
------------
$ 15,886,480
------------
TOTAL SEMICONDUCTORS $ 21,158,513
------------
TELECOMMUNICATION SERVICES - 3.1%
INTEGRATED TELECOMMUNICATION SERVICES - 3.0%
23,765 Alltel Corp. $ 1,396,431
146,005 BellSouth Corp. 4,057,479
218,671 SBC Communications, Inc. 5,635,151
164,000 Verizon Communications, Inc. 6,643,640
------------
$ 17,732,701
------------
WIRELESS TELECOMMUNICATION SERVICES - 0.1%
17,897 Nextel Communications, Inc.* $ 536,910
------------
TOTAL TELECOMMUNICATION SERVICES $ 18,269,611
------------
UTILITIES - 1.7%
ELECTRIC UTILITIES - 1.4%
32,838 American Electric Power Co., Inc. $ 1,127,655
36,216 Consolidated Edison, Inc. 1,584,450
90,000 Exelon Corp. 3,966,300
57,799 Southern Co. 1,937,422
------------
$ 8,615,827
------------
GAS UTILITIES - 0.2%
27,431 KeySpan Energy Corp. $ 1,082,153
------------
WATER UTILITIES - 0.1%
18,826 Aqua America, Inc. $ 462,931
------------
TOTAL UTILITIES $ 10,160,911
------------
TOTAL COMMON STOCKS
(Cost $459,723,725) $581,255,718
------------
PRINCIPAL
AMOUNT VALUE
TEMPORARY CASH INVESTMENTS - 1.8%
REPURCHASE AGREEMENT - 1.2%
$ 7,300,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,300,000 plus accrued interest on
1/3/05 collateralized by $6,902,000
U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000
------------
SHARES
SECURITY LENDING COLLATERAL - 0.6%
3,264,285 Securities Lending
Investment Fund, 2.18% $ 3,264,286
------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $10,564,285) $ 10,564,286
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.7%
(Cost $470,288,010) $591,820,004
------------
OTHER ASSETS
AND LIABILITIES - (0.7)% $ (4,056,175)
------------
TOTAL NET ASSETS - 100.0% $587,763,829
============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
99,001 Mylan Laboratories, Inc. $ 1,750,338
16,979 United Parcel Service 1,451,025
-----------
TOTAL $ 3,201,363
===========
The accompanying notes are an integral part of these financial statements.
9
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.70 $ 15.28 $ 19.08 $ 22.67 $ 22.70
----------- ----------- ----------- ----------- -----------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.24 $ 0.20 $ 0.19 $ 0.17 $ 0.18
Net realized and unrealized gain (loss) on investments 1.85 3.41 (3.81) (2.57) 0.10
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from investment operations $ 2.09 $ 3.61 $ (3.62) $ (2.40) $ 0.28
Distributions to shareowners:
Net investment income (0.22) (0.19) (0.18) (0.17) (0.18)
Net realized gain -- -- -- (1.02) (0.13)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net asset value $ 1.87 $ 3.42 $ (3.80) $ (3.59) $ (0.03)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 20.57 $ 18.70 $ 15.28 $ 19.08 $ 22.67
=========== =========== =========== =========== ===========
Total return* 11.26% 23.76% 19.03% (10.85)% 1.22%
Ratio of net expenses to average net assets+ 0.71% 0.76% 0.80% 0.74% 0.69%
Ratio of net investment income (loss) to average
net assets+ 1.26% 1.16% 1.09% 0.83% 0.78%
Portfolio turnover rate 17% 11% 11% 7.0% 37%
Net assets, end of period (in thousands) $ 454,136 $ 154,839 $ 141,892 $ 199,160 $ 222,107
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction for
fees paid indirectly:
Net expenses 0.71% 0.76% 0.80% 0.74% 0.69%
Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.71% 0.76% 0.80% 0.74% 0.69%
Net investment income (loss) 1.26% 1.16% 1.09% 0.83% 0.78%
* 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.
10
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
ASSETS:
Investment in securities, at value (including securities loaned of $3,201,363)
(Cost $470,288,010) $ 591,820,004
Receivables --
Fund shares sold 408,198
Dividends, interest and foreign taxes withheld 1,035,978
Other 40,546
-------------
Total assets $ 593,304,726
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 1,000,388
Upon return for securities loaned 3,264,284
Due to bank 848,222
Due to affiliates 307,212
Accrued expenses 120,791
-------------
Total liabilities $ 5,540,897
-------------
NET ASSETS:
Paid-in capital $ 535,852,814
Undistributed net investment income (loss) 433,753
Accumulated undistributed net realized gain (loss) (70,054,732)
Net unrealized gain (loss) on:
Investments 121,531,994
-------------
Total net assets $ 587,763,829
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 454,136,359
Shares outstanding 22,081,959
-------------
Net asset value per share $ 20.57
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 133,627,470
Shares outstanding 6,513,968
-------------
Net asset value per share $ 20.51
The accompanying notes are an integral part of these financial statements.
11
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $27,542) $ 5,255,783
Interest 158,731
Income on securities loaned, net 9,868
-----------
Total investment income $ 5,424,382
-----------
EXPENSES:
Management fees $ 1,790,664
Transfer agent fees and expenses 2,736
Distribution fees (Class II) 273,949
Administrative reimbursements 24,868
Custodian fees 47,602
Professional fees 59,072
Printing expense 30,024
-----------
Total expenses $ 2,228,915
Less fees paid indirectly (4,581)
-----------
Net expenses $ 2,224,334
-----------
Net investment income (loss) $ 3,200,048
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 1,095,419
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (11,040)
-----------
$ 1,084,379
-----------
Change in net unrealized gain or (loss) from:
Investments $30,978,376
-----------
$30,978,376
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $32,062,755
===========
Net increase (decrease) in net assets resulting
from operations $35,262,803
===========
The accompanying notes are an integral part of these financial statements.
12
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 3,200,048 $ 2,086,873
Net realized gain (loss) on investments 1,084,379 (8,525,302)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 30,978,376 49,662,141
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 35,262,803 $ 43,223,712
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (1,685,576) $ (1,580,150)
Class II (1,069,680) (520,900)
------------- -------------
Total distributions to shareowners $ (2,755,256) $ (2,101,050)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 60,072,885 $ 58,651,489
Class I shares issued in reorganization 298,220,832 --
Reinvestment of distributions 2,755,256 2,101,050
Cost of shares repurchased (48,119,744) (37,658,369)
------------- -------------
Net increase (decrease) in net assets
resulting from fund share transactions $ 312,929,229 $ 23,940,170
------------- -------------
Net increase (decrease) in net assets $ 345,436,776 $ 64,216,832
------------- -------------
NET ASSETS:
Beginning of period $ 242,327,053 $ 178,110,221
------------- -------------
End of period $ 587,763,829 $ 242,327,053
============= =============
Undistributed net investment income (loss),
end of year $ 433,753 $ --
============= =============
The accompanying notes are an integral part of these financial statements.
13
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. Organization and Significant Accounting Policies The Pioneer Fund VCT
Portfolio (the Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the
Trust) which is a Delaware business trust registered under the Investment
Company Act of 1940 as an open-end management investment company. The Trust
consists of twenty two seperarate portfolios, fourteen of which issue both Class
I and Class II shares (collectively, the Portfolios, individually the Portfolio)
as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio)
(Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The investment objective of Fund Portfolio is to seek capital appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded.
Securities that have not traded on the date of valuation, or securities
for which sale prices are not generally reported, are valued at the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available are valued at their fair values as
determined by, or under the direction of, the Board of Trustees. The
Portfolio also may 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, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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
14
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
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. 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 realize a gain or loss equal to the difference between the
opening and closing value of the contract. The use of futures contracts
involves, to varying degrees, elements of market risk which may exceed the
amounts recognized by the 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, 2004, Fund Portfolio had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount
of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are
not segregated in the statement of operations from the effects of changes
in market price of those securities but are included with the net realized
and unrealized gain or loss on investments.
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Fund VCT Portfolio had a capital loss
carryforward of $69,351,655, of which the following amounts will expire
between 2009 and 2011 if not utilized: $20,833,698 in 2009, $35,500,430 in
2010 and $13,017,527 in 2011.
The Portfolio has elected to defer $23,515 in capital losses recognized
between November 1, 2004 and December 31, 2004 to its fiscal year ended
December 31, 2005.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of
the portfolio and are designed to present the portfolio's capital accounts
on a tax basis.
15
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED GAIN PAID-IN
PORTFOLIO (LOSS) (LOSS) CAPITAL
- ----------------------------- ------------------- ----------------- --------
Pioneer Fund VCT Portfolio $ (11,039) $11,039 $ (0)
========= ======= ====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,755,256 $2,101,050
Long-Term capital gain -- --
------------- ----------
$ 2,755,256 $2,101,050
Return of Capital -- --
------------- ----------
Total distributions $ 2,755,256 $2,101,050
============= ==========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 433,753
Undistributed long-term gain/(capital loss carryforward) (69,351,655)
Unrealized appreciation (depreciation) 120,852,432
Post-October loss deferred (23,515)
-------------
Total $ 51,911,015
=============
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 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. Dividends and
distributions to shareowners are recorded on the ex-dividend date.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain
or loss in the fair value of the securities loaned that may occur during
the term of the loan, will be for account of the Trust. The loans are
secured by collateral of at least 102%, at all times, of the fair value of
the securities loaned. The fair value of the collateral will be adjusted
daily to reflect any price fluctuation in the value of the loaned
securities. The Trust has the right under the lending agreement to recover
the securities on loan from the borrower on demand. The Trust invests cash
collateral in the Securities Lending Investment Fund which is managed by
Brown Brothers Harriman & Co., the Trust's custodian.
16
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest received from counterparties, is required to be at least equal to
or in excess of the value of the repurchase agreement at the time of
purchase. The collateral for all repurchase agreements is held in
safekeeping in the customer-only account of the Portfolio's custodian, or
subcustodian. The Trust's investment adviser, Pioneer Investment
Management, Inc. (PIM), is responsible for determining that the value of
the collateral remains at least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following 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 accounting, regulatory reporting and insurance premiums, are paid by
the Portfolio. At December 31, 2004, $278,054 was payable to PIM related to
management fees, administrative fees and certain other services, and is
included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $269 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Fund Portfolio $470,964,572 $139,688,987 $(18,836,555) $120,852,432
------------ ------------ ------------ ------------
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $102,950,656 and $46,364,816, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
FUND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ---------------------------------------- ---------- ------------ ---------- -------------
CLASS I:
Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870
Class I Shares issued in reorgainzation 14,822,109 298,220,832 - -
Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150
Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,664,887)
---------- ------------ ---------- ------------
Net increase 13,800,320 $278,626,053 (1,156,042) $(15,504,867)
========== ============ ========== ============
CLASS II:
Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619
Reinvestment of distribution 55,486 1,069,680 30,685 520,900
Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482)
---------- ------------ ---------- ------------
Net increase 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037
========== ============ ========== ============
7. MERGER INFORMATION
On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio
("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco
RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that
comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan
of Reorganization that provided for the mergers listed below. These tax-free
reorganizations were accomplished on December 10, 2004 ("Closing Date"), by
exchanging all of the Safeco's net
17
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
assets for Class I shares as indicated below, based on Class I shares' ending
net asset value on the Closing Date.
The following charts show the details of the reorganizations as of that closing
date Closing Date:
PIONEER SAFECO RST PIONEER
FUND CORE EQUITY FUND
PIONEER FUND VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO
VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION)
- ------------- -------------------- -------------------- ---------------------
Net Assets $281,591,969 $298,220,832 $879,147,352
Shares Outstanding 13,990,134 12,804,673 28,812,243
------------ ------------ ------------
Class I Shares Issued 14,822,109
============
UNREALIZED REALIZED
APPRECIATION ON GAIN/(LOSS)
CLOSING DATE ON CLOSING DATE
----------------- ----------------
Safeco RST Core Equity Portfolio $68,714,366 $20,662,968
18
PIONEER FUND 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 CLASS I
SHAREOWNERS OF PIONEER FUND VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Fund VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit includes 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, 2004, by
correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at December
31, 2004, 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 three years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
19
PIONEER FUND 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees provides officers of the Trust are responsible for
the Trust's are listed below, together with their principal occupations during
the past five years. Trustees who are interested persons of the Portfolio within
the meaning of the Investment Company Act of 1940 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
73 U.S. registered investment portfolios for which Pioneer Investment
Management, Inc. ("Pioneer") serves as investment adviser (the "Trust"). The
address for all Interested Trustees and all officers of the Portfolio is 60
State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon resquest,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneer funds.com.
INTERESTED TRUSTEES
POSITIONS HELD 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. (78)* Chairman of the Serves until successor Trustee and President Serves until Director of
Board, Trustee trustee is elected or retirement or removal; Deputy Harbor Global
and President earlier retirement or Chairman and a Director of Pioneer Company, Ltd.
removal 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; Director of
Pioneer Alternative Investment
Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated
funds; President and Director of
Pioneer Funds Distributor, Inc.
("PFD"); President of all of the
Pioneer Funds; and Of Counsel
(since 2000, partner prior to
2000), Wilmer Cutler Pickering Hale
and Dorr LLP (counsel to PIM-USA
and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May 2003
President earlier retirement or (Director since January 2001);
removal President and Director of Pioneer
since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
20
PIONEER FUND VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since 2005. Serves until a successor Senior Vice President and Director of The Enterprise
3050 K. Street NW, trustee is elected or Chief Financial Officer, Social Investment Company
Washington, DC 20007 earlier retirement or I-trax, Inc. (publicly traded (privately-held affordable
removal. health care services company) housing finance company);
(2001 - present); Managing Director of New York
Partner, Federal City Capital Mortgage Trust (publicly
Advisors (boutique merchant traded mortgage REIT)
bank) (1995 - 2000; 2002 to
2004); Executive Vice
President and Chief Financial
Officer, Pedestal Inc.
(internet-based mortgage
trading company) (2000 - 2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
Mary K. Bush (56) Trustee since 2000. Serves until successor President, Bush Director of Brady
3509 Woodbine Street, trustee is elected or International (international Corporation (industrial
Chevy Chase, MD 20815 earlier retirement or financial advisory firm) identification and
removal specialty coated material
products manufacturer),
Millennium Chemicals, Inc.
(commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J. Reyn
Tobacco Holdings, Inc.
(tobacco)
Margaret B.W. Trustee since 2000. Serves until successor Founding Director, The None
Graham (57) trustee is elected or Winthrop Group, Inc.
1001 Sherbrooke earlier retirement (consulting firm);
Street West, or removal Professor of Management,
Montreal, Quebec, Faculty of Management,
Canada H3A 1G5 McGill University
Marguerite A. Trustee since 1995. Serves until successor President and Chief Executive Director of New America
Piret (56) trustee is elected or Officer, Newbury, Piret & High Income Fund, Inc.
One Boston Place, earlier retirement or Company, Inc. (investment (closed-end investment
28th Floor, Boston, removal banking firm) company)
MA 02108
Stephen K. West (76) Trustee since 1995. Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end investment
removal company) and AMVESCAP PLC
(investment managers)
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None
One North Adgers September, 2000. trustee is elected or Co., Inc. (private investment
Wharf, Charleston, earlier retirement or firm)
SC 29401 removal
21
PIONEER FUND VCT PORTFOLIO
TRUSTEE, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-subsidiaries
since October 2000; Secretary
of all of the Pioneer Funds
since September 2003
(Assistant Secretary from
November 2000 to September
2003); and Senior Counsel,
Assistant Vice President and
Director of Compliance of
PIM-USA from April 1998
through October 2000
Christopher J. Assistant Secretary Serves at the discretion Assistant Vice President and None
Kelley (40) of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
David C. Phelan (47) Assistant Secretary Serves at the discretion Partner, Wilmer Cutler None
of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None
of the Board Accounting, Administration and
Custody Services of Pioneer;
and Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
Mark E. Bradley (45) Assistant Treasurer Serves at the discretion Deputy Treasurer of Pioneer None
of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management Services
from 2002 to 2003; Assistant
Treasurer and Vice President,
MFS Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the
Pioneer Funds since November
2004
Luis I. Presutti (39) Assistant Treasurer Serves at the discretion Assistant Vice President - None
of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
Gary Sullivan (46) Assistant Treasurer Serves at the discretion Fund Accounting Manager - Fund None
of the Board Accounting, Administration and
Custody Services of Pioneer;
and Assistant Treasurer of all
of the Pioneer Funds since May
2002
22
PIONEER FUND VCT PORTFOLIO
TRUSTEE, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Assistant Treasurer Serves at the discretion Fund Administration Manager - None
Sullivan (31) of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund
Accounting Manager from August
1999 to May 2002, Fund
Accounting Services Supervisor
from 1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since September
2003
Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None
Officer of the Board Pioneer (Director of
Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned by UniCredito Italiano S.p.A. ("UniCredito
Italiano"), one of the larg est banking groups in Italy. PIM, the Trust's investment adviser, provides investment management and
financial services to mutual funds, institutional and other clients.
23
THIS PAGE FOR YOUR NOTES.
24
THIS PAGE FOR YOUR NOTES.
25
THIS PAGE FOR YOUR NOTES.
26
[PIONEER INVESTMENTS(R) LOGO]
[LOGO] PIONEER
INVESTMENT (R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO - CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 16
Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR
SEND MONEY. TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER
PORTFOLIO, CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 82.1%
Temporary Cash Investment 10.7%
Exchange Traded Funds 5.4%
Depositary Receipts for International Stocks 1.6%
Warrants 0.2%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 27.3%
Information Technology 16.7%
Consumer Discretionary 16.4%
Industrials 12.9%
Health Care 12.4%
Consumer Staples 6.2%
Energy 5.0%
Materials 3.1%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Micros Systems, Inc. 3.39%
2. W Holding Co., Inc. 3.08
3. PolyMedical Corp. 2.92
4. Doral Financial Corp. 2.88
5. American Healthways, Inc. 2.84
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 23.78 $ 19.44
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
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 Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Pioneer Growth Opportunities Russell 2000
VCT Portfolio Value Index
1/93 10,000 10,000
13,473 11,499
12/94 15,079 11,289
21,261 14,501
12/96 28,077 16,893
40,587 20,670
12/98 41,329 20,144
43,658 24,426
12/00 40,966 23,688
48,808 24,277
12/02 30,422 19,304
43,486 28,426
12/04 52,829 33,637
The Russell 2000 Index is an unmanaged measure of the 2,000 smallest stocks,
based on capitalization, in the Russell 3000 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.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
10 Year 13.36%
5 Year 3.89%
1 Year 21.48%
All total returns shown assume reinvestment of distributions at net asset
value. Please refer to the variable product's annual report for performance
that reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 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 GROWTH OPPORTUNITIES VCT
PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,114.50
Expenses Paid During Period* $ 4.39
* Expenses are equal to the Portfolio's annualized expense ratio of 0.83% 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 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). 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 GROWTH OPPORTUNITIES VCT
PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.06
Expenses Paid During Period* $ 4.20
* Expenses are equal to the Portfolio's annualized expense ratio of 0.83% 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 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
BY CONCENTRATING ON ONE INDUSTRY OR ON A GROUP OF RELATED INDUSTRIES, THE
PORTFOLIO IS MORE SUSCEPTIBLE TO ADVERSE ECONOMIC, POLITICAL OR REGULATORY
DEVELOPMENTS AFFECTING THOSE INDUSTRIES THAN IS A PORTFOLIO THAT INVESTS MORE
BROADLY. INVESTING IN FOREIGN AND/OR EMERGING MARKETS SECURITIES INVOLVES RISKS
RELATING TO INTEREST RATES, CURRENCY EXCHANGE RATES, ECONOMIC, AND POLITICAL
CONDITIONS. INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER
RETURNS, BUT THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE
FLUCTUATIONS THAN LARGER, MORE ESTABLISHED COMPANIES.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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, Michael Rega and Diego Franzin, members of Pioneer
Growth Opportunities VCT Portfolio management team, discuss the factors that
influenced performance for the twelve months ended December 31, 2004. The
current portfolio team assumed the Fund's management duties on December 10,
2004.
Q: WHAT FACTORS AFFECTED THE PERFORMANCE OF U.S. EQUITIES DURING THE PAST
YEAR?
A: The stock market performed very well in 2004 despite a potentially
challenging environment. Investors had to contend with a host of obstacles
throughout the year, including a sharp increase in oil prices, rising
short-term interest rates, the uncertainty associated with the U.S.
presidential election and the ongoing insurgency in Iraq. Nevertheless, the
market remained well supported by its strong underlying fundamentals. The
economy continued to grow at a steady pace, but not so fast that the
Federal Reserve felt compelled to accelerate its measured pace of rate
increases. Corporate earnings also remained robust, finishing the year at a
much higher level than most analysts had anticipated. Strong earnings, in
turn, translated into increased dividends and a continued improvement in
corporate balance sheets. Taken together, those factors helped the stock
market climb the "wall of worry" and post a double-digit gain for the year.
Amid this generally positive environment, small-cap stocks outperformed
their large-cap counterparts by a wide margin, reflecting the superior
earnings growth of companies in the asset class. Within small-caps, value
outperformed growth: for the year, the Russell 2000 Value Index returned
22.25% versus 14.31% for the Russell 2000 Growth Index. Given the
Portfolio's focus on reasonably valued small- and medium-sized companies,
the strong returns within those market segments provided a favorable
tailwind to performance.
Q: HOW DID THE PORTFOLIO PERFORM IN RELATION TO ITS BENCHMARK?
A: The Portfolio produced a total return of 21.48% at net asset value during
the twelve-month period ended December 31, 2004, compared to a return of
18.33% for its benchmark, the Russell 2000 Index.
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.
Q: AS NEW MANAGERS OF THE PORTFOLIO, WHAT CHANGES DO YOU ANTICIPATE MAKING TO
THE PORTFOLIO AND ITS OVERALL INVESTMENT STYLE?
A: We do not plan to do a major rebalancing of the Portfolio, but we expect to
make a series of gradual changes throughout the year as market conditions
warrant. First, we intend to bring greater diversification to the portfolio
by owning more stocks and taking smaller positions in individual names.
Second, we plan to keep the Portfolio "sector neutral," meaning that its
industry weightings will usually be very closely in line with those of the
benchmark index. In this way, the majority of the Portfolio's performance
will be the result of individual stock selection. We believe we can add
more value through company research than by attempting to predict the
direction of the overall market or the relative performance of specific
industries.
Q: HOW DO YOU INTEND TO SELECT STOCKS FOR THE PORTFOLIO?
A: We start by dividing the Russell 2000 Index into a number of distinct
sectors and subsectors, then we use a disciplined stock selection model to
identify the most attractive stocks in each sector based on four factors:
growth, quality, valuation and momentum. That enables us to analyze the
entire universe of 2,000 companies and select what our criteria show to be
the top 20% in each sector. Next, we focus our research capabilities to
conduct a fundamental analysis of each stock that has been selected. We
believe that the approach provides both breadth and depth to our stock
picking.
We expect that this investment style will provide more stability to the
portfolio and reduce the extent of the variation in its return with respect
to the benchmark index. Our goal is not to hit home runs, but to hit
singles and doubles and, in the process, try to deliver market-beating
returns on a long-term basis.
Q: WHAT IS YOUR OVERALL VIEW OF THE MARKET AT THIS JUNCTURE?
A: We believe a focus on individual stock selection will be critical in the
year ahead. Small-caps have outperformed large-caps for six years in a row,
which suggests that it may be time for large stocks to come back into
favor. What's more, our analysis shows that on an historical basis, growth
stocks have been this inexpensive in relation to value less than 5% of the
time. This has two implications: first, it means that gains in the
small-cap value area are not likely to come as easily as they did in 2004.
As a result, fundamental research should play a very important role in
generating outperformance. Second, it means that in assessing the outlook
for individual stocks, we will place a higher than normal emphasis on
companies with the most attractive growth characteristics. We believe these
steps will help the Portfolio effectively navigate the year ahead even in
the event that the stellar relative performance of the small-cap value
asset class begins to cool off.
Q: IN WHAT AREAS ARE YOU FINDING THE BEST INVESTMENT OPPORTUNITIES?
A: In 2004, every major sector in the Russell 2000 Index provided double-digit
returns with the exception of technology. We expect a greater dispersion of
returns in 2005, which again would work to our advantage as individual
stock pickers. We will be looking for opportunities in technology and
health care, two areas that underperformed the broad-based index during
2004. One of the Fund's top holding, Micros Systems, is a tech stock that
in our view is among those that have additional upside. Micros develops and
markets software applications to the hospitality industry, mostly
table-service restaurants. Their software allows restaurants to improve
coordination between servers and kitchen staff and reduce costs by
improving inventory management and product reordering. A key driver of
future growth is expansion into the hotel industry, as the industry embarks
on a 5- to 7-year technology infrastructure upgrade cycle.
Within health care, we will be closely looking for opportunities in the
biotechnology sector. We believe biotechs are less risky than in the past,
since there are more companies that have been public for four or five years
and, therefore, have a longer earnings history and more experienced
management teams. We will look to capitalize on companies we identify as
quality-managed and staffed, along with a proven record of execution. On
the other side of the coin, we find the consumer staples and real estate
areas to be less compelling. And within financials, we intend to focus on
companies that have an asset/liability mix that favors a flattening yield
curve environment and exposure to expanding markets such as Florida and
Texas.
Q: DO YOU HAVE ANY FINAL THOUGHTS FOR INVESTORS?
A: We believe that the most important aspect of asset management is individual
stock selection, and we will remain committed to our research-driven
approach. Regardless of the direction of the overall market, we believe
Portfolio shareholders have the potential to benefit from our efforts to
identify the highest quality small-cap stocks in the market.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 82.7%
ENERGY - 4.4%
OIL & GAS DRILLING - 1.1%
145,000 Pride International, Inc.* $ 2,978,300
42,000 Tidewater, Inc. 1,495,620
-------------
$ 4,473,920
-------------
OIL & GAS EQUIPMENT & SERVICES - 0.9%
103,600 FMC Technologies, Inc.* $ 3,335,920
-------------
OIL & GAS EXPLORATION &
PRODUCTION - 2.4%
109,700 Forest Oil Corp.* $ 3,479,684
97,000 Newfield Exploration Co.* 5,727,850
-------------
$ 9,207,534
-------------
TOTAL ENERGY $ 17,017,374
-------------
MATERIALS - 2.7%
CONSTRUCTION MATERIALS - 2.3%
147,700 Florida Rock Industries, Inc. $ 8,792,581
-------------
SPECIALTY CHEMICALS - 0.4%
273,200 Omnova Solutions, Inc.* $ 1,535,384
-------------
TOTAL MATERIALS $ 10,327,965
-------------
CAPITAL GOODS - 4.2%
AEROSPACE & DEFENSE - 1.3%
75,800 Alliant Techsystems, Inc.* $ 4,955,804
-------------
INDUSTRIAL CONGLOMERATES - 1.8%
157,200 Pentair, Inc. $ 6,847,632
-------------
INDUSTRIAL MACHINERY - 1.1%
190,500 AGCO Corp.* $ 4,170,045
-------------
TOTAL CAPITAL GOODS $ 15,973,481
-------------
COMMERCIAL SERVICES & SUPPLIES - 4.5%
COMMERCIAL PRINTING - 0.5%
56,637 R.R. Donnelly & Sons Co. $ 1,998,720
-------------
DIVERSIFIED COMMERCIAL SERVICES - 2.4%
92,600 Concorde Career Colleges, Inc.* $ 1,879,780
266,361 NCO Group, Inc.* 6,885,432
41,400 Rent-Way, Inc.* 331,614
-------------
$ 9,096,826
-------------
EMPLOYMENT SERVICES - 1.6%
185,200 Monster Worldwide, Inc.* $ 6,230,128
-------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 17,325,674
-------------
TRANSPORTATION - 2.7%
TRUCKING - 2.7%
295,500 Old Dominion Freight Line, Inc* $ 10,283,400
-------------
TOTAL TRANSPORTATION $ 10,283,400
-------------
CONSUMER DURABLES & APPAREL - 6.9%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.1%
239,071 Harold's Stores, Inc.* $ 344,262
-------------
FOOTWEAR - 1.4%
88,300 The Timberland Co.* $ 5,533,761
-------------
HOMEBUILDING - 5.4%
540,500 Champion Enterprises, Inc.* $ 6,388,710
68,800 Meritage Corp.* 7,753,760
103,100 Standard-Pacific Corp. 6,612,834
-------------
$ 20,755,304
-------------
TOTAL CONSUMER DURABLES & Apparel $ 26,633,327
-------------
HOTELS, RESTAURANTS & LEISURE - 4.7%
CASINOS & GAMING - 4.7%
339,400 Scientific Games Corp.* $ 8,091,296
184,900 Station Casinos, Inc. 10,110,332
$ 18,201,628
-------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 18,201,628
-------------
RETAILING - 2.8%
APPAREL RETAIL - 0.6%
123,500 Steven Madden, Ltd.* $ 2,329,210
-------------
HOME IMPROVEMENT RETAIL - 1.2%
61,800 Scottes Co.* $ 4,543,536
-------------
SPECIALTY STORES - 1.0%
150,200 West Marine, Inc.* $ 3,717,450
-------------
TOTAL RETAILING $ 10,590,196
-------------
FOOD & DRUG RETAILING - 2.2%
FOOD RETAIL - 2.2%
183,000 Casey's General Stores, Inc. $ 3,321,450
178,300 Fresh Del Monte Produce Inc. 5,279,463
-------------
$ 8,600,913
-------------
TOTAL FOOD & DRUG RETAILING $ 8,600,913
-------------
FOOD, BEVERAGE & TOBACCO - 0.8%
SOFT DRINKS - 0.8%
51,100 Coca-Cola Bottling Co. $ 2,915,766
-------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 2,915,766
-------------
HOUSEHOLD & PERSONAL PRODUCTS - 2.5%
HOUSEHOLD PRODUCTS - 1.6%
235,900 Nu Skin Enterprises, Inc. $ 5,987,142
-------------
PERSONAL PRODUCTS - 0.9%
145,300 NBTY, Inc.* $ 3,488,653
-------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 9,475,795
-------------
HEALTH CARE EQUIPMENT & SERVICES - 7.8%
HEALTH CARE DISTRIBUTORS - 0.0%
8,200 American Medical Alert Corp.* $ 42,066
-------------
HEALTH CARE EQUIPMENT - 3.5%
280,000 Conceptus, Inc.* $ 2,272,200
296,700 PolyMedica Corp. 11,063,943
-------------
$ 13,336,143
-------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
HEALTH CARE SERVICES - 4.3%
325,400 American Healthways, Inc.* $ 10,751,216
149,550 Matria Healthcare, Inc.* 5,842,919
-------------
$ 16,594,135
-------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 29,972,344
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 3.1%
BIOTECHNOLOGY - 3.1%
169,200 Connetics Corp.* $ 4,109,868
352,200 Serologicals Corp.* 7,790,664
-------------
$ 11,900,532
-------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 11,900,532
-------------
BANKS - 9.9%
DIVERSIFIED BANKS - 4.2%
221,750 Doral Financial Corp. $ 10,921,188
221,833 Fulton Financial Corp. 5,170,927
-------------
$ 16,092,115
-------------
REGIONAL BANKS - 2.7%
104,800 United Bankshares, Inc. $ 3,998,120
109,200 Westamerica Bancorporation 6,367,452
-------------
$ 10,365,572
-------------
THRIFTS & MORTGAGE FINANCE - 3.0%
508,368 W Holding Co., Inc. $ 11,661,962
-------------
TOTAL BANKS $ 38,119,649
-------------
DIVERSIFIED FINANCIALS - 1.6%
DIVERSIFIED FINANCIAL SERVICES - 1.6%
87,900 Affiliated Managers Group, Inc.* $ 5,954,346
-------------
TOTAL DIVERSIFIED FINANCIALS $ 5,954,346
-------------
INSURANCE - 4.1%
LIFE & HEALTH INSURANCE - 2.3%
108,000 Stancorp Financial Group, Inc. $ 8,910,000
-------------
REINSURANCE - 1.8%
261,100 Scottish RE Group, Ltd. $ 6,762,490
-------------
TOTAL INSURANCE $ 15,672,490
-------------
REAL ESTATE - 3.1%
REAL ESTATE INVESTMENT TRUSTS - 3.1%
89,700 Alexandria Real Estate Equities, Inc. $ 6,675,474
80,400 New Century Financial Corp. 5,138,364
-------------
$ 11,813,838
-------------
TOTAL REAL ESTATE $ 11,813,838
-------------
SOFTWARE & SERVICES - 7.4%
DATA PROCESSING & OUTSOURCED SERVICES - 2.2%
279,420 Iron Mountain, Inc.* $ 8,519,516
-------------
HOME ENTERTAINMENT SOFTWARE - 1.6%
256,700 THQ, Inc.* $ 5,888,698
-------------
INTERNET SOFTWARE & SERVICES - 2.2%
166,900 Websense, Inc.* $ 8,465,168
-------------
SYSTEMS SOFTWARE - 1.4%
560,900 Ciber, Inc.* $ 5,407,076
-------------
TOTAL SOFTWARE & SERVICES $ 28,280,458
-------------
TECHNOLOGY HARDWARE & EQUIPMENT - 6.8%
COMPUTER STORAGE & PERIPHERALS - 3.4%
164,500 Micros Systems, Inc.* $ 12,840,870
-------------
TECHNOLOGY DISTRIBUTORS - 3.4%
145,100 DRS Technologies, Inc.* $ 6,197,221
228,700 Tektronix, Inc. 6,909,027
-------------
$ 13,106,248
-------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 25,947,118
-------------
SEMICONDUCTORS - 0.6%
96,300 DSP Group, Inc.* $ 2,150,379
-------------
TOTAL SEMICONDUCTORS $ 2,150,379
-------------
TOTAL COMMON STOCKS
(Cost $204,543,831) $ 317,156,673
-------------
RIGHTS/WARRANTS - 0.3%
HEALTH CARE EQUIPMENT - 0.1%
49,880 Endocare, Inc., Exp. 11/23/05* $ --
140,000 Lifepoint, Inc., Exp. 4/1/07* --
84,000 Lifepoint, Inc., Exp. 7/21/07* --
37,165 NCO Group, Exp. 9/28/06* --
250,000 Photomedex, Inc., Exp. 6/13/07* 200,000
92,800 SpectRx, Inc., Exp. 6/4/06* --
-------------
TOTAL HEALTH CARE EQUIPMENT $ 200,000
-------------
PHARMACEUTICALS - 0.2
105,000 Nastech Warrants Expiration 3/22/06* $ 604,013
-------------
TOTAL PHARMACEUTICALS $ 604,013
-------------
TOTAL RIGHTS/WARRANTS
(Cost $21,608) $ 804,013
-------------
EXCHANGE TRADED FUNDS - 5.3%
30,700 iShares Russell 2000 (ETF) $ 3,975,650
20,300 iShares Russell 2000 Value (ETF) 3,917,088
91,200 iShares Russell 2000 Growth (ETF) 6,136,847
59,400 S&P Small Cap 600/BARRA Growth
Index (ETF) 6,361,740
-------------
$ 20,391,325
-------------
TOTAL EXCHANGE TRADED FUNDS
(Cost $16,626,620) $ 20,391,325
-------------
6 The accoccompanying notes are an integral part of these financial statements.
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
TEMPORARY CASH INVESTMENT - 10.6%
REPURCHASE AGREEMENT - 10.6%
$ 40,700,000 UBS Warburg, Inc., 1.00%, dated
12/31/04, repurchase price of
40,700,000 plus accrued interest
on 1/3/05 collateralized by
$40,767,000 U.S. Treasury Bill,
1.625%, 9/30/05 and $880,000 U.S.
Treasury Bill, 6.75%, 5/15/05 $ 40,700,000
-------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $40,700,000) $ 40,700,000
-------------
TOTAL INVESTMENTS IN
SECURITIES - 98.9%
(Cost $261,892,059) $ 379,052,011
-------------
OTHER ASSETS AND
LIABILITIES - (1.1)% $ 4,416,384
-------------
TOTAL NET ASSETS - 100.0% $ 383,468,395
=============
* Non-Income producing security
The accompanying notes are an integral part of these financial statements. 7
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
CLASS I 12/31/04 (b) 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 19.44 $ 13.60 $ 21.89 $ 18.81 $ 22.50
--------- --------- --------- --------- ---------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.01) $ (0.02) $ (0.10) $ (0.10) $ (0.12)
Net realized and unrealized gain (loss) on investments 4.35 5.86 (8.12)(a) 3.67 (1.27)
--------- --------- --------- --------- ---------
Net increase (decrease) from investment operations $ 4.34 $ 5.84 $ (8.22) $ 3.57 $ (1.39)
--------- --------- --------- --------- ---------
Distributions to shareowners:
Net realized gain $ -- $ -- $ (0.07) $ (0.49) $ (2.30)
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value $ 4.34 $ 5.84 $ (8.29) $ 3.08 $ (3.69)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 23.78 $ 19.44 $ 13.60 $ 21.89 $ 18.81
========= ========= ========= ========= =========
Total return* 22.33% 42.94% (37.67)% 19.14% (6.16)%
Ratio of net expenses to average net assets 0.81% 0.80% 0.79% 0.78% 0.77%
Ratio of net investment loss to average net assets (0.06)% (0.16)% (0.58)% (0.53)% (0.57)%
Portfolio turnover rate 19% 54% 38% 47% 66%
Net assets, end of period (in thousands) 383,468 337,573 245,954 428,013 354,932
* 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, and no sales
charges. Total return would be reduced if sales charges were taken into
account.
(a) Includes $0.01 related to investment reimbursement by advisor. (Safeco
Asset Management)
(b) Effective August 2, 2004, PIM became the sub-advisor of the Fund and
subsequently became the advisor on December 10, 2004.
8 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 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (cost $221,192,059) $ 338,352,011
Temporary Cash Investment (cost $40,700,000) 40,700,000
-------------
Total investment in securities (cost $261,892,059) $ 379,052,011
Cash 3,330,893
Receivables -
Investment securities sold 1,873,614
Fund shares sold 61,598
Dividends, interest and foreign taxes withheld 171,448
Other 45,861
-------------
Total assets $ 384,535,425
-------------
LIABILITIES:
Payables -
Fund shares repurchased $ 787,443
Due to affiliates 161,709
Accrued expenses 117,878
-------------
Total liabilities $ 1,067,030
-------------
NET ASSETS:
Paid-in capital $ 355,755,408
Accumulated undistributed net realized gain (loss) (89,446,965)
Net unrealized gain (loss) on:
Investments 117,159,952
Total net assets $ 383,468,395
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
(No par value, unlimited number of shares authorized)
Net assets $ 383,468,395
Shares outstanding 16,126,459
-------------
Net asset value per share $ 23.78
-------------
The accompanying notes are an integral part of these financial statements. 9
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS 12/31/04
- --------------------------------------------------------------------------------
Year
Ended
12/31/04
INVESTMENT INCOME:
Dividends $ 2,277,558
Interest 155,899
Income on securities loaned, net 178,120
------------
Total investment income $ 2,611,577
------------
EXPENSES:
Management fees $ 2,595,439
Transfer agent fees 125
Custodian fees 34,184
Professional fees 49,469
Printing 97,912
Fees and expenses of nonaffiliated trustees 5,146
Miscellaneous 20,596
------------
Total expenses $ 2,802,871
------------
Net expenses $ 2,802,871
------------
Net investment income (loss) $ (191,294)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 579,315
------------
$ 579,315
------------
Change in net unrealized gain or loss from:
Investments $ 71,554,233
------------
$ 71,554,233
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 72,133,548
============
Net increase (decrease) in net assets resulting
from operations $ 71,942,254
============
10 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 12/31/04
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ (191,294) $ (431,306)
Net realized gain (loss) on investments 579,315 (15,020,094)
Change in net unrealized gain or loss on
investments, futures contracts and
foreign currency transactions 71,554,233 114,949,555
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 71,942,254 $ 99,498,155
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 48,727,340 $ 58,543,445
Cost of shares repurchased (74,774,095) (66,422,513)
------------- -------------
Net increase in net assets
resulting from Fund share transactions $ (26,046,755) $ (7,879,068)
------------- -------------
Net increase in net assets $ 45,895,499 $ 91,619,087
NET ASSETS:
Beginning of year 337,572,896 245,954,000
------------- -------------
End of year $ 383,468,395 $ 337,572,896
============= =============
The accompanying notes are an integral part of these financial statements. 11
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Growth Opportunities VCT Portfolio (the Portfolio) (formerly SAFECO
RST Growth Opportunities Portfolio) a Portfolio of Pioneer Variable Contracts
Trust (the Trust) which is a Delaware business trust registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Trust consists of twenty two separate portfolios, fourteen of which issue
both Class I and Class II shares (collectively, the Portfolios, individually
the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
As of December 31, 2004, no Class II Shares were outstanding for the Portfolio.
The Portfolio, organized on December 10, 2004, is the successor to the Safeco
RST Growth Opportunities Portfolio. Safeco RST Growth Opportunities Portfolio,
one of six series of portfolios that that comprised Safeco Resource Series
Trust, transferred all of the net assets of Trust shares in exchange for the
Portfolio's Class I shares in a one-to-one exchange ratio, on December 10,
2004, pursuant to an agreement and plan of reorganization (the "reorganization"
which was approved by the shareholders of Safeco RST Growth Opportunities
Portfolio on December 8, 2004). The Portfolio had no assets or liabilities
prior to the reorganization. Accordingly, the reorganization, which was a
tax-free exchange, had no effect on the Portfolio's operations.
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The investment objective of The Pioneer Growth Opportunities VCT Portfolio is
to seek capital appreciation.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
12
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
bid and asked prices. The Portfolio also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Growth Opportunities VCT Portfolio had a
capital loss carryforward of $89,435,215, of which the following amounts
will expire between 2010 and 2012 if not utilized: $54,386,902 in 2010,
$34,799,107 in 2011 and $249,206 in 2012.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
PORTFOLIO INCOME (LOSS) GAIN (LOSS) PAID-IN CAPITAL
- ------------------------------------------ -------------- ------------ ---------------
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO $ 191,294 $ (0) $ (191,294)
========= ==== ==========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004.
There were no distributions paid during the fiscal years ended December 31,
2004, and 2003.
PIONEER GROWTH PIONEER GROWTH
OPPORTUNITIES OPPORTUNITIES
VCT PORTFOLIO VCT PORTFOLIO
2004 2003
-------------- --------------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
------------- ------------
$ -- $ --
------------- ------------
Return of Capital -- --
Total distributions $ -- $ --
============= ============
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(capital loss carryforward) (89,435,215)
Unrealized appreciation (depreciation) 117,148,202
-------------
Total $ 27,712,987
=============
13
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is attributable to the tax deferral of losses on wash sales.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004.
D. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
interest or dividends on the securities loaned, and gain or loss in the
fair value of the securities loaned that may occur during the term of the
loan, will be for account of the Portfolio. The loans are secured by
collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Portfolio has the right under the lending agreement to recover the
securities on loan from the borrower on demand. The Portfolio invests cash
collateral in the Securities Lending Investment Fund which is managed by
Brown Brothers Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolio. Management fees are calculated at the following annual rate of 0.74%
of the Portfolio's average daily net assets.
Prior to the reorganization, the Portfolio was advised by Safeco Asset
Management, which received an annual fee equal to 0.74% of its average daily
net assets.
Through December 10, 2006, 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 0.79% 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. At December 31, 2004, $161,584 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
Since the reorganization, Pioneer Investment Management Shareholder Services,
Inc. (PIMSS), a wholly owned indirect subsidiary of UniCredito Italiano
provides substantially all transfer agent and shareowner services to the Trust
at negotiated rates. Included in due to affiliates is $125 in transfer agent
fees payable to PIMSS at December 31, 2004. Prior to the reorganization Safeco
Services Corporation was the Transfer and Shareholder Servicing agent.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------- ------------- --------------
Growth Opportunities Portfolio $ 261,903,809 $ 127,577,497 $ (10,429,295) $ 117,148,202
============= ============= ============= =============
14
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $63,687,337 and $118,988,491, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
GROWTH OPPORTUNITIES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------------- ----------- -------------- ---------- -------------
SAFECO TRUST SHARES:
Shares sold -- Safeco 2,250,905 $ 46,344,245 3,713,393 $ 58,543,445
Shares repurchased-Safeco (3,399,953) (70,300,296) (4,429,693) (66,422,513)
Shares transferred in reorganiztion (16,214,763) (374,885,314)
CLASS I:
Shares Sold 101,479 2,383,096
Shares repurchased (189,783) (4,473,799)
Shares issued in reorganiztion 16,214,763 374,885,312
----------- -------------- ---------- -------------
Net increase (decrease) (1,237,351) $ (26,046,755) (716,300) $ (7,879,068)
=========== ============== ========== =============
15
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 CLASS I SHAREOWNERS OF PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Growth Opportunities VCT Portfolio, one
of the portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"),
(formerly Growth Opportunities Portfolio, one of the portfolios that comprised
the Safeco Resource Series Trust) as of December 31, 2004, 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. An audit includes 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, 2004, by
correspondence with the custodian. 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 of the Pioneer Variable Contracts
Trust at December 31, 2004, 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 11, 2005
16
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Fund are responsible for the Trust's
CUSTODIAN operations. The Trust's Trustees and officers are listed below, together
Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees
who are interested persons of the Portfolio within the meaning of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees.
Ernst & Young LLP 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
PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer
Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the
"Trusts"). The address for all Interested Trustees and all officers of
the Portfolio is 60 State Street, Boston, Massachusetts 02109.
LEGAL COUNSEL The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor
Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd.
President earlier retirement Deputy Chairman and a Director
or removal 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; Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May 2003
President earlier retirement or (Director since January 2001);
removal President and Director of
Pioneer since May 2003; Chairman
and Director of Pioneer
Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
17
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 elected or earlier (publicly traded health care Investment Company
retirement or removal. services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank) (1995-2000; 2002 to 2004); Mortgage Trust
Executive Vice President and (publicly traded
Chief Financial Officer, mortgage REIT)
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, 2000. trustee is elected or (international financial Corporation
Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial
removal identification and
specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty
Canada H3A 1G5 removal of Management, McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New
One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income
28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc.
Boston, MA 02108 removal banking firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end
removal investment company)
and AMVESCAP PLC
(investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, 2000. trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 earlier retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None
Secretary discretion of the Senior Counsel of Pioneer since
Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and Senior
Board Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
19
PIONEER GROWTH OPPORTUNITIES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None
Treasurer discretion of the Fund Accounting, Administration
Board and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of Compliance
Board and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
21
[LOGO] PIONEER
INVESTMENTS(R)
[PIONEER INVESTMENTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER HIGH YIELD VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
TABLE OF CONTENTS
Pioneer High Yield VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 11
Notes to Financial Statements 15
Report of Independent Registered Public Accounting Firm 19
Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment in securities)
[PIE CHART]
U.S Corporate Bonds 64.6%
Convertible Corporate Bonds 30.3%
Temporary Cash Investment 2.7%
Convertible Performed Stocks 2.4%
MATURITY DISTRIBUTION
(As a percentage of total investment in securities)
[PIE CHART]
4-6 years 48.8%
6-8 years 11.2%
8+ years 8.5%
1-3 years 16.5%
3-4 years 15.0%
FIVE LARGEST HOLDINGS
(As a percentage of long-term holdings)
1. Mueller Industries, Inc.
6.0%, 11/1/14 3.97%
2. Corning, Inc., 5.9%, 3/15/14 3.42
3. CMS Energy Corp. 7.75%,
8/1/10 3.03
4. Bowater, Inc., 6.5%,
6/15/13 3.02
5. SCI Systems, Inc., 3.0%,
3/15/07 2.68
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 11.67 $ 11.45
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.6177 $ - $ 0.047
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.
[LINE GRAPH]
ML Convertible ML High Yield Pioneer
Bond Speculative Master II High Yield
Quality Index Index VCT Portfolio
"5/00" 10,000 10,000 10,000
8,424 9,770 10,623
7,882 10,207 12,387
"12/02" 7,744 10,013 12,211
10,529 12,830 16,215
"12/04" 11,861 14,227 17,517
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.
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, 2004)
Net Asset Value
Life-of-Class 12.27%
(5/1/00)
1 Year 8.03
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.pioneerfunds.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. Please refer to the variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 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 HIGH YIELD VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,077.61 $ 1,076.31
Expenses Paid During Period* $ 4.11 $ 5.50
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and
1.05% for Class I and 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 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). 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 HIGH YIELD VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
- ------------------------------------------ -------------- --------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.22 $ 1,019.91
Expenses Paid During Period* $ 4.00 $ 5.35
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and
1.05% for Class I and 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 HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
Q: HOW DID THE PORTFOLIO PERFORM?
A: During the 12 months ended December 31, 2004, the Portfolio's Class I shares
had a total return based on net asset value of 8.03%. By comparison, the
Merrill Lynch High Yield Master II Index returned 10.87%.
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.
Q: WHAT WAS THE ENVIRONMENT LIKE FOR THE HIGH-YIELD MARKET DURING 2004?
A: All sectors of the high-yield market generally rallied, reflecting a pick-up
in the economy. Defaults continued to decline steadily from their peak in
2002. Although short-term interest rates were on the rise - as the Federal
Reserve Board began to implement a tightening policy - high-yield bonds
continued to offer a substantial yield advantage over comparable-maturity
Treasuries and cash equivalents. Furthermore, the supply of newly issued
high-yield corporate bonds was not sufficient to meet the demand for
higher-yielding securities. As a result, high-yield bond prices continued to
rise.
Q. WHY DID THE PORTFOLIO'S PERFORMANCE LAG THAT OF THE MERRILL LYNCH HIGH YIELD
MASTER II INDEX?
A. Because of its investments in convertible bonds. Convertibles underperformed
conventional high-yield bonds because they tend to be more sensitive to the
changes in short-term interest rates that we experienced than high-yield
issues. In addition, the period was characterized by underlying equity-market
volatility that was lower than historical averages, a factor that also
typically leads to the underperformance of convertible securities. Overall,
the lower credit tiers of the market performed best, at a time when we were
moving the Portfolio's average credit quality higher. The Portfolio had
minimal exposure to the distressed and lower-tier credits that led the market
during the past 12 months, particularly in such sectors as telecommunications
and media.
Q: WHICH INVESTMENTS PROVED TO BE SOME OF THE TOP PERFORMERS DURING THE FISCAL
YEAR? WHICH DISAPPOINTED?
A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand
conditions. Millennium Chemicals, benefited from its acquisition by Lyondell,
as well as from a brighter outlook for basic chemicals. Several biotechnology
holdings also fared well, including Cubist Pharmaceuticals, which offers a
drug for soft-tissue infections; CV Therapeutics, which sells products to
treat angina; and Human Genome, which advanced due to clinical successes and
management's focus on reducing research and development expenditures.
Disappointments included Intermet, an auto-parts manufacturer that defaulted
on its debt due to raw materials pricing pressure. Two technology holdings
also lagged, Maxtor, a data storage manufacturer, and Adaptec, which makes
computer-networking products. Those securities fell in concert with the
technology sector, which struggled through most of the year because of
weaker-than-expected corporate technology spending.
Q: WHAT IS YOUR OUTLOOK?
A: We remain optimistic that the economy should continue to grow near its
long-term historical average during the coming year. While the Fed is likely
to continue to raise short-term rates, we expect any increases to be gradual.
In addition, we anticipate that defaults should remain below long-term
averages, providing solid support for high-yield bonds. Because the
high-yield market has experienced such a run-up in the recent past, we
believe that returns in 2005 will be driven more by interest income than by
capital appreciation. We have been able to find the best value in the
higher-quality tiers of the market. They should be better insulated if
financial market volatility increases. Although convertible securities
detracted from Portfolio performance, we believe that, over time, they offer
an opportunity to participate in the future growth of the underlying stocks,
making the asset class attractive to long-term-oriented investors.
Investments in high-yield or lower-rated securities are subject to
greater-than-average risk.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
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.
When concentrating on one issuer, the Portfolio is sensitive to changes in the
value of these securities. 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.
Call 800-688-9915 or visit www.pioneerfunds.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 high-yield market generated solid returns during the 12 months ended
December 31, 2004. In the following interview, Portfolio Manager Margaret Patel
describes the market backdrop and why the Portfolio underperformed its
benchmark index.
4
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04
S&P/MOODY'S
RATINGS
(UNAUDITED) VALUE
SHARES
CONVERTIBLE PREFERRED STOCKS - 2.5%
MATERIALS - 2.5%
CONSTRUCTION MATERIALS - 0.1%
1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638
------------
DIVERSIFIED METALS & Mining - 2.4%
3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500
------------
TOTAL MATERIALS $ 3,021,138
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,077,338) $ 3,021,138
------------
PRINCIPAL
AMOUNT
USD ($)
CONVERTIBLE CORPORATE BONDS - 32.0%
MATERIALS - 5.4%
COMMODITY CHEMICALS - 0.4%
200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750
------------
DIVERSIFIED METALS & Mining - 1.4%
500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000
500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375
------------
$ 1,744,375
------------
GOLD - 0.9%
1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000
250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563
------------
$ 1,171,563
------------
SPECIALTY CHEMICALS - 0.4%
800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000
------------
STEEL - 2.3%
3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750
------------
TOTAL MATERIALS $ 6,615,438
------------
CAPITAL GOODS - 4.2%
AEROSPACE & Defense - 1.8%
1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344
400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000
------------
$ 2,262,344
------------
CONSTRUCTION & Engineering - 1.1%
875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250
500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000
------------
$ 1,376,250
------------
ELECTRICAL COMPONENT & Equipment - 1.0%
2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381
------------
INDUSTRIAL MACHINERY - 0.3%
300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625
------------
TOTAL CAPITAL GOODS $ 5,248,600
------------
MEDIA - 1.9%
ADVERTISING - 1.9%
1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000
------------
TOTAL MEDIA $ 2,358,000
------------
The accompanying notes are an integral part of these financial statements.
5
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
RETAILING - 1.2%
SPECIALTY STORES - 1.2%
1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500
------------
TOTAL RETAILING $ 1,492,500
------------
HEALTH CARE EQUIPMENT & SERVICES - 0.7%
HEALTH CARE EQUIPMENT - 0.7%
375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438
600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500
------------
TOTAL HEALTH CARE EQUIPMENT & Services $ 879,938
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.7%
BIOTECHNOLOGY - 0.9%
300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875
850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500
------------
$ 1,159,375
------------
PHARMACEUTICALS - 4.8%
2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719
2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125
400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500
------------
$ 5,853,344
------------
TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 7,012,719
------------
REAL ESTATE - 0.6%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.6%
500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625
------------
TOTAL REAL ESTATE $ 695,625
------------
SOFTWARE & SERVICES - 0.9%
APPLICATION SOFTWARE - 0.7%
200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250
500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250
------------
$ 796,500
------------
IT CONSULTING & OTHER SERVICES - 0.2%
400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500
------------
TOTAL SOFTWARE & SERVICES $ 1,091,000
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 6.1%
COMMUNICATIONS EQUIPMENT - 1.2%
1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750
------------
COMPUTER STORAGE & PERIPHERALS - 0.6%
700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2%
300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500
1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500
------------
$ 1,475,000
------------
ELECTRONIC MANUFACTURING SERVICES - 2.7%
3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500
------------
TECHNOLOGY DISTRIBUTORS - 0.4%
400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500
------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 7,450,875
------------
The accompanying notes are an integral part of these financial statements.
6
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
SEMICONDUCTORS - 5.2%
SEMICONDUCTOR EQUIPMENT - 3.9%
700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500
200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500
700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624
500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500
2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000
------------
$ 4,780,124
------------
SEMICONDUCTORS - 1.3%
1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500
500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375
------------
$ 1,645,875
------------
TOTAL SEMICONDUCTORS $ 6,425,999
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $38,069,020) $ 39,270,694
------------
CORPORATE BONDS - 68.1%
ENERGY - 3.6%
OIL & GAS EQUIPMENT AND SERVICES - 0.2%
200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500
------------
OIL & GAS REFINING MARKETING & TRANSPORTATION - 3.4%
300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000
1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950
1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000
------------
$ 4,185,950
------------
TOTAL ENERGY $ 4,407,450
------------
MATERIALS - 16.4%
COMMODITY CHEMICALS - 4.7%
1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000
2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500
1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500
------------
$ 5,732,000
------------
DIVERSIFIED METALS & MINING - 1.1%
1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406
------------
METAL & GLASS CONTAINERS - 2.1%
1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000
1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000
------------
$ 2,550,000
------------
PAPER PRODUCTS - 5.8%
2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438
885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652
3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540
------------
$ 7,192,630
------------
SPECIALTY CHEMICALS - 2.7%
2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000
1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500
------------
$ 3,304,500
------------
TOTAL MATERIALS $ 20,145,536
------------
The accompanying notes are an integral part of these financial statements.
7
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
CAPITAL GOODS - 11.3%
AEROSPACE & DEFENSE - 5.6%
2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500
700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500
1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063
850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875
1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000
------------
$ 6,887,938
------------
INDUSTRIAL MACHINERY - 5.7%
800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000
800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000
5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000
300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500
------------
$ 7,045,500
------------
TOTAL CAPITAL GOODS $ 13,933,438
------------
TRANSPORTATION - 0.4%
AIR FREIGHT & COURIERS - 0.4%
500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500
------------
TOTAL TRANSPORTATION $ 547,500
------------
AUTOMOBILES & COMPONENTS - 0.2%
TIRES & RUBBER - 0.2%
300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500
------------
TOTAL AUTOMOBILES & COMPONENTS $ 304,500
------------
MEDIA - 1.8%
ADVERTISING - 1.8%
2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242
------------
TOTAL MEDIA $ 2,171,242
------------
RETAILING - 2.3%
DEPARTMENT STORES - 0.8%
1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000
------------
SPECIALTY STORES - 1.5%
1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613
------------
TOTAL RETAILING $ 2,879,613
------------
HEALTH CARE EQUIPMENT & SERVICES - 1.9%
HEALTH CARE FACILITIES - 0.4%
500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384
------------
HEALTH CARE SUPPLIES - 1.5%
1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500
------------
TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,280,884
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.3%
PHARMACEUTICALS - 2.3%
2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000
------------
TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 2,808,000
------------
The accompanying notes are an integral part of these financial statements.
8
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
REAL ESTATE - 9.6%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.4%
2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100
2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375
1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500
------------
$ 6,631,975
------------
REAL ESTATE INVESTMENT TRUSTS - 4.2%
500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000
2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500
2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000
------------
$ 5,193,500
------------
TOTAL REAL ESTATE $ 11,825,475
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 9.1%
COMMUNICATIONS EQUIPMENT - 4.1%
4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536
700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770
------------
$ 5,011,306
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.7%
1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550
------------
TECHNOLOGY DISTRIBUTORS - 3.3%
2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145
1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504
------------
$ 4,041,649
------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 11,126,505
------------
UTILITIES - 9.2%
ELECTRIC UTILITIES - 6.1%
3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000
1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624
1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000
1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250
------------
$ 7,426,874
------------
MULTI-UTILITIES & UNREGULATED POWER - 3.1%
3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187
------------
TOTAL UTILITIES $ 11,244,061
------------
TOTAL CORPORATE BONDS
(Cost $79,489,329) $ 83,674,204
------------
The accompanying notes are an integral part of these financial statements.
9
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
S&P/MOODY'S
RATINGS
SHARES (UNAUDITED) VALUE
TEMPORARY CASH INVESTMENT - 2.9%
SECURITY LENDING COLLATERAL - 2.9%
3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $3,541,345) $ 3,541,345
------------
TOTAL INVESTMENTS IN SECURITIES - 105.5%
(Cost $124,177,032) $129,507,381
------------
OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919)
------------
TOTAL NET ASSETS - 100.0% $122,801,462
============
N/R Not rated by either S&P or Moody's
* Non-income producing 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, 2004,
the value of these securities amounted to $15,276,000 or 12.4% of net
assets. (a) At December 31, 2004, the following securities were out on
loan:
SHARES SECURITY MARKET VALUE
1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728
1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080
285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275
------------
TOTAL $ 3,388,083
------------
The accompanying notes are an integral part of these financial statements.
10
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
5/1/00
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
CLASS I (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 11.45 $ 9.27 $ 10.33 $ 9.82 $ 10.00
------- ------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.62 $ 0.76 $ 0.92 $ 0.95 $ 0.61
Net realized and unrealized gain (loss) on investments 0.27 2.18 (1.06) 0.62 (0.18)
------- ------- ------- ------- --------
Net increase (decrease) from investment operations $ 0.89 $ 2.94 $ (0.14) $ 1.57 $ 0.43
Distributions to shareowners:
Net investment income (0.62) (0.76) (0.92) (0.95) (0.61)
Net realized gain (0.05) -- -- (0.11) --
------- ------- ------- ------- --------
Net increase (decrease) in net asset value $ 0.22 $ 2.18 $ (1.06) $ 0.51 $ (0.18)
------- ------- ------- ------- --------
Net asset value, end of period $ 11.67 $ 11.45 $ 9.27 $ 10.33 $ 9.82
======= ======= ======= ======= ========
Total return* 8.03% 32.78% (1.42)% 16.60% 4.12%
Ratio of net expenses to average net assets+ 0.78% 0.89% 1.02% 1.15% 1.25%**
Ratio of net investment income (loss) to average net assets+ 5.40% 7.22% 9.39% 9.15% 9.18%**
Portfolio turnover rate 42% 48% 42% 36% 33%
Net assets, end of period (in thousands) $70,890 $66,587 $41,111 $32,331 $ 6,849
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.78% 0.89% 1.02% 1.28% 2.35%**
Net investment income (loss) 5.40% 7.22% 9.39% 9.02% 8.08%**
(a) Shares of Pioneer High Yield VCT Portfolio were first publicly offered on
May 1, 2000
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
11
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES
ASSETS:
Investment in securities, at value (including securities loaned of $3,388,083)
(Cost $124,177,032) $ 129,507,381
Cash 392,872
Receivables --
Fund shares sold 100,052
Dividends, interest and foreign taxes withheld 1,768,626
Other 4,893
-------------
Total assets $ 131,773,824
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 333,848
Fund shares repurchased 4,952,077
Upon return for securities loaned 3,541,345
Due to affiliates 83,826
Accrued expenses 61,266
-------------
Total liabilities $ 8,972,362
-------------
NET ASSETS:
Paid-in capital $ 113,693,485
Undistributed net investment income (loss) 42,906
Accumulated undistributed net realized gain (loss) 3,734,722
Net unrealized gain (loss) on:
Investments 5,330,349
-------------
Total net assets $ 122,801,462
-------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 70,889,843
Shares outstanding 6,073,809
-------------
Net asset value per share $ 11.67
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 51,911,619
Shares outstanding 4,447,914
-------------
Net asset value per share $ 11.67
The accompanying notes are an integral part of these financial statements.
12
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends $ 28,052
Interest 6,314,255
Income on securities loaned, net 15,124
-------------
Total investment income $ 6,357,431
-------------
EXPENSES:
Management fees $ 669,359
Transfer agent fees and expenses 1,806
Distribution fees (Class II) 85,911
Administrative reimbursements 19,997
Custodian fees 21,500
Professional fees 56,459
Printing expense 30,056
Miscellaneous 4,539
-------------
Total expenses $ 889,627
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (6)
-------------
Net expenses $ 889,621
-------------
Net investment income (loss) $ 5,467,810
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 3,746,873
-------------
$ 3,746,873
-------------
Change in net unrealized gain or (loss) from:
Investments $ (1,480,061)
-------------
$ (1,480,061)
-------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 2,266,812
=============
Net increase (decrease) in net assets resulting
from operations $ 7,734,622
=============
The accompanying notes are an integral part of these financial statements.
13
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 5,467,810 $ 4,106,902
Net realized gain (loss) on investments 3,746,873 1,124,588
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions (1,480,061) 10,301,474
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 7,734,622 $ 15,532,964
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (3,715,003) $ (3,817,405)
Class II (1,764,209) (279,944)
Net realized gain
Class I (265,040) --
Class II (135,300) --
------------- -------------
Total distributions to shareowners $ (5,879,552) $ (4,097,349)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 75,619,514 $ 45,609,360
Reinvestment of distributions 5,846,576 4,059,022
Cost of shares repurchased (44,707,455) (18,254,761)
------------- -------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 36,758,635 $ 31,413,621
------------- -------------
Net increase (decrease) in net assets $ 38,613,705 $ 42,849,236
------------- -------------
NET ASSETS:
Beginning of year $ 84,187,757 $ 41,338,521
------------- -------------
End of year $ 122,801,462 $ 84,187,757
============= =============
Undistributed net investment income (loss),
end of year $ 42,906 $ 42,283
============= =============
The accompanying notes are an integral part of these financial statements.
14
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer High Yield VCT Portfolio (The Portfolio) is a portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of High Yield Portfolio is to maximize total return
through a combination of income and capital appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
Generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. 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
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 Exchange. In
computing the net asset values, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are not
generally reported, are valued at the mean between the last bid and asked
prices. 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 also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
Fixed income securities are valued at prices supplied by independent pricing
services, which consider such
15
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
factors as Treasury spreads, yields, maturities and ratings. Valuations may
be supplemented by dealers and other sources, as required. Securities for
which market quotations are not readily available are valued at their fair
values as determined by, or under the direction of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have passed
are recorded as soon as the Portfolio 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, 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.
The High Yield Portfolio invests in below investment grade (high yield) debt
securities and preferred 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. The
Portfolio is not diversified, which means that it can invest a higher
percentage of its asset in any one issuer than a diversified fund. Being
non-diversified may magnify the fund's losses from adverse events affecting a
particular issuer.
In addition, the non-diversified Portfolios have concentrations in certain
asset types, which may subject the Portfolios to additional risks. Further
description of these risks is included in the Trust's Prospectus.
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 represent, the
net realized gains and losses on foreign currency contracts, disposition of
foreign currencies, and the difference between the amount of income accrued
and the U.S. dollar actually received. Further, the effects of changes in
foreign currency exchange rates on investments are not segregated in the
statement of operations from the effects of changes in market price of those
securities but are included with the net realized and unrealized gain or loss
on investments.
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.
D. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, the 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 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, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
16
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED PAID-IN
PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL
- ----------------------------------- -------------- --------------- -------
Pioneer High Yield VCT Portfolio $ 12,025 $(12,025) $ (0)
======== ======== ====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
---------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $5,479,212 $4,097,349
Long-Term capital gain 400,340 --
---------- ----------
$5,879,552 $4,097,349
Return of Capital -- --
---------- ----------
Total distributions $5,879,552 $4,097,349
---------- ----------
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 613,388
Undistributed long-term gain/(capital loss carryforward) 3,164,280
Unrealized appreciation (depreciation) 5,330,309
----------
Total $9,107,977
==========
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, the recognition of unrealized gains
or losses on certain futures contracts, and the tax treatment of premium
amortization.
E. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc.
(PFD), the principal underwriter for the Trust and a wholly owned indirect
subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano), $1,231,475 in
commissions on the sale of Trust shares for the year ended December 31, 2004.
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. 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, with the Portfolio's custodian acting as the
lending agent. When entering into a loan, the Portfolio receives collateral
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Portfolio also continues to receive payments in
lieu of interest or dividends on the securities loaned. Gain or loss in the
fair value of the securities loaned that may occur during the term of the
loan, will be for account of the Trust. The loans are secured by collateral
of at least 102%, at all times, of the fair value of the securities loaned.
The fair value of the collateral will be adjusted daily to reflect any price
fluctuation in the value of the loaned securities. The Trust has the right
under the lending agreement to recover the securities
17
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
on loan from the borrower on demand. The Trust invests cash collateral in the
Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
G. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase. The
collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at least
equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Portfolio. Management fees are calculated daily at the following annual rate of
0.65% of the Portfolio's average daily net assets.
The portion of the Portfolios' expenses attributable to Class II (or Class I for
shares in the case of High Yield Portfolios) will be reduced only to the extent
such expenses are reduced for Class I shares (or Class II shares).
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. At December 31, 2004, $72,761 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $267 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ----------- ------------- --------------
High Yield Portfolio $124,177,071 $6,347,617 $ (1,017,307) $5,330,310
============ ========== ============ ==========
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $83,647,941 and $42,692,245, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
HIGH YIELD PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- -------------------------------- ---------- ------------- ---------- -------------
CLASS I:
Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319
Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086
Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254)
---------- ------------- ---------- -------------
Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151
========== ============= ========== =============
CLASS II:
Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041
Reinvestment of distributions 166,648 1,899,530 25,089 279,836
Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,726)
---------- ------------- ---------- -------------
Net increase 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470
========== ============= ========== =============
18
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 Class I Shareowners of Pioneer High Yield VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer High Yield VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period then
ended December 31, 2001 were audited by other auditors who have ceased
operations and whose report, dated February 8, 2002, expressed an unqualified
opinion on those financial highlights.
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. An audit
includes 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, 2004, 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended in, conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
19
PIONEER HIGH YIELD 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The officers of the Trust are responsible for the Trust's operations. The
Trust's Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Portfolio within the meaning of the Investment Company Act of 1940 are
referred to as Interested Trustees. Trustees who are not interested persons of
the Fund are referred to as Independent Trustees. Each of the Trustees serves as
a trustee of each of the 73 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Pioneer Funds"). The address for all Interested Trustees and all officers
of the Portfolio is 60 State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneerfunds.com.
INTERESTED TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor trustee Trustee and President Director of Harbor Global
Board, Trustee is elected or earlier Serves until retirement or Company, Ltd.
and President retirement or removal removal; 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;
Director of Pioneer
Alternative Investment
Management Limited(Dublin);
President and a Director of
Pioneer Alternative
Investment Management
(Bermuda) Limited and
affiliated funds; President
and Director of Pioneer
Funds Distributor, Inc.
("PFD"); President of all
of the Pioneer Funds; and
Of Counsel (since 2000,
partner prior to 2000),
Wilmer Cutler Pickering
Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
Osbert M. Hood (52)** Trustee and Serves until successor trustee President and Chief None
Executive Vice is elected or earlier Executive Officer, PIM-USA
President retirement or removal since May 2003 (Director
since January 2001);
President and Director of
Pioneer since May 2003;
Chairman and Director of
Pioneer Investment
Management Shareholder
Services, Inc. ("PIMSS")
since May 2003; Executive
Vice President of all of
the Pioneer Funds since
June 2003; Executive Vice
President and Chief
Operating Officer of
PIM-USA, November 2000 to
May 2003; Executive Vice
President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999
to November 2000; Senior
Vice President and Chief
Financial Officer, John
Hancock Advisers, L.L.C.,
April 1997 to November
1999. **Mr. Hood is an
Interested Trustee because
he is an officer or
director of Pioneer and
certain of its affiliates.
20
PIONEER HIGH YIELD VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a successor Senior Vice President and Director of The
3050 K. Street NW, 2005. trustee is elected or earlier Chief Financial Officer, Enterprise Social
Washington, DC 20007 retirement or removal. I-trax, Inc. (publicly Investment Company
traded health care services (privately-held
company) (2001-present); affordable housing
Managing Partner, Federal finance company);
City Capital Advisors Director of New York
(boutique merchant bank) Mortgage Trust (publicly
(1995-2000; 2002 to 2004); traded mortgage REIT)
Executive Vice President
and Chief Financial
Officer, Pedestal Inc.
(internet-based mortgage
trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
Mary K. Bush (56) Trustee since Serves until successor President, Bush Director of Brady
3509 Woodbine Street, 2000. trustee is elected or earlier International Corporation (industrial
Chevy Chase, MD 20815 retirement or removal. (international financial identification and
advisory firm) specialty coated material
products manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
(tobacco)
Margaret B.W. Graham Trustee since Serves until successor Founding Director, The None
(57) 1001 Sherbrooke 2000. trustee is elected or earlier Winthrop Group, Inc.
Street West, Montreal, retirement or removal. (consulting firm);
Quebec, Canada H3A 1G5 Professor of Management,
Faculty of Management,
McGill University
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Director of New America
One Boston Place, 1995. trustee is elected or earlier Executive Officer, Newbury, High Income Fund, Inc.
28th Floor, retirement or removal. Piret & Company, Inc. (closed-end investment
Boston, MA 02108 (investment banking firm) company)
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. trustee is elected or earlier Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 retirement or removal. (closed-end investment
company) and AMVESCAP PLC
(investment managers)
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None
One North Adgers Wharf, September, trustee is elected or earlier Co., Inc. (private
Charleston, SC 29401 2000. retirement or removal. investment firm)
21
PIONEER HIGH YIELD VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the discretion of Secretary of PIM-USA; None
the Board Senior Vice President -
Legal of Pioneer; and
Secretary/Clerk of most of
PIM- subsidiaries since
October 2000; Secretary of
all of the Pioneer Funds
since September 2003
(Assistant Secretary from
November 2000 to September
2003); and Senior Counsel,
Assistant Vice President
and Director of Compliance
of PIM-USA from April 1998
through October 2000
Christopher J. Kelley Assistant Serves at the discretion of Assistant Vice President None
(40) Secretary the Board and Senior Counsel of
Pioneer since July 2002;
Vice President and Senior
Counsel of BISYS Fund
Services, Inc. (April 2001
to June 2002); Senior Vice
President and Deputy
General Counsel of Funds
Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000);
Assistant Secretary of all
Pioneer Funds since
September 2003
David C. Phelan (47) Assistant Serves at the discretion of Partner, Wilmer Cutler None
Secretary the Board Pickering Hale and Dorr
LLP; Assistant Secretary of
all Pioneer Funds since
September 2003
Vincent Nave (59) Treasurer Serves at the discretion of Vice President - Fund None
the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of
all of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
Mark E. Bradley (45) Assistant Serves at the discretion of Deputy Treasurer of Pioneer None
Treasurer the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and
Vice President, MFS
Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the
Pioneer Funds since
November 2004
Luis I. Presutti (39) Assistant Serves at the discretion of Assistant Vice President - None
Treasurer the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all
of the Pioneer Funds since
November 2000
Gary Sullivan (46) Assistant Serves at the discretion of Fund Accounting Manager - None
Treasurer the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all
of the Pioneer Funds since
May 2002
22
PIONEER HIGH YIELD VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Katharine Kim Sullivan Assistant Serves at the discretion Fund Administration Manager None
(31) Treasurer of the Board - Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation
from June 2002 to June 2003
(formerly Deutsche Bank
Asset Management); Pioneer
Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to
May 2002, Fund Accounting
Services Supervisor from
1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since
September 2003
Martin J. Wolin (37) Chief Compliance Serves at the discretion of Chief Compliance Officer of None
Officer the Board Pioneer (Director of
Compliance and Senior
Counsel from November 2000
to September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company)
from February 1998 to
November 2000; and Chief
Compliance Officer of all
of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
23
THIS PAGE FOR YOUR NOTES.
24
THIS PAGE FOR YOUR NOTES.
25
[PIONEER INVESTMENTS(R) LOGO]
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER MONEY MARKET VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Money Market VCT Portfolio
Comparing Ongoing Portfolio Expenses 2
Portfolio and Performance Update 3
Schedule of Investments 4
Financial Statements 6
Notes to Financial Statements 10
Report of Independent Registered Public Accounting Firm 13
Trustees, Officers and Service Providers 14
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 MONEY MARKET 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 MONEY MARKET VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,003.99
Expenses Paid During Period* $ 4.01
* Expenses are equal to the Portfolio's annualized expense ratio of 0.80% 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 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). 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 MONEY MARKET VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004
SHARE CLASS I
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.42
Expenses Paid During Period* $ 4.05
* Expenses are equal to the Portfolio's annualized expense ratio of 0.80% for
Class I shares multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
2
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO AND PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Although the U.S. Federal Reserve started to raise short-term interest rates
from the lowest levels reached in more than four decades, 2004 remained a year
in which money market investments offered extremely low yields by historical
measures. Despite five increases in interest rates between June 30 and December
31, the key Fed Funds Rate ended the year at just 2.25%. Throughout the 12
months ended December 31, 2004, Pioneer Money Market VCT Portfolio maintained a
$1 share price and provided modest income consistent with the yields available
in the money market. The Portfolio invests exclusively in high-quality money
market instruments issued by the U.S. government and domestic corporations and
banks. All issues have the highest ratings from the two nationally recognized
ratings organizations: A1 by Standard & Poor's Investors Services and P1 by
Moody's Investor Services. (Ratings apply to underlying securities, not
Portfolio shares.)
In the following discussion, Andrew D. Feltus reviews the investment environment
and the strategies that affected Pioneer Money Market VCT Portfolio over the 12
months ended December 31, 2004. Mr. Feltus is a member of Pioneer's Fixed Income
Group, which is responsible for the daily management of the Portfolio.
Q: HOW DID THE PORTFOLIO PERFORM DURING 2004?
A: For the 12 months ended December 31, 2004, Pioneer Money Market VCT
Portfolio had a total return of 0.65% at net asset value. On December 31,
2004, the Portfolio's seven-day effective yield for Class A shares was
1.38%.
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.
Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE YEAR?
A: For virtually the entire first half of 2004, the influential Fed Funds Rate
remained at a 46-year low of 1.00%. The situation began to change when the
Federal Reserve raised the rate on June 30 by one-quarter of one percentage
point and signaled that it intended to initiate further increases on a
gradual basis. The central bank raised the rate four more times, and the
Fed Funds Rate stood at 2.25% at the end of the year.
The rate increases occurred against a backdrop of continued economic growth
and hints of an increase in inflationary pressure. Economic growth, as
measured by growth in Gross Domestic Product (GDP), rose by an average
annualized rate of 4.6% during the first nine months of 2004. Affected by
the higher costs of energy, the Consumer Price Index rose to about 3.5% by
the end of November. While periodic concerns about low new-job creation did
arise, in general the Federal Reserve Board believed that the economy was
gathering enough strength that monetary policy could be tightened to avert
the possibility of increasing inflationary threats.
At the end of the year, the Federal Reserve was widely expected to continue
to raise short-term rates further in 2005.
Q: WHAT WERE YOUR PRINCIPAL STRATEGIES IN THIS LOW-INTEREST RATE ENVIRONMENT?
A: We held to our commitment to high-quality money market instruments. We
started gradually to lower the Portfolio's effective duration so that we
could take advantage of higher yields available as the Federal Reserve
Board proceeded with its rate increases. At the end of the year, the
effective duration of the Fund was 45 days, down from 67 days just six
months earlier.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We anticipate that the economy will show sustained growth in 2005 and that
the Federal Reserve Board will maintain its policy of raising short-term
grates gradually. At the same time, because of budget pressures and concern
about the federal deficit, the government is likely to put new brakes on
spending. The combination of the tighter monetary policy and restrained
fiscal policy may act as a drag on the pace of economic growth and
ultimately cause a possible change in monetary policy.
If economic growth does begin to slow, the Federal Reserve may revise its
current bias toward raising short-term rates. However, until that appears
imminent, we intend to continue to keep the Portfolio's effective duration
relatively short to enable us to invest in newer, higher-yielding
securities that have the potential to raise the level of income to be
distributed to shareholders.
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 1.00 $ 1.00
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.0065 $ -- $ --
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.
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.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL
RETURNS
(As of December 31, 2004)
- -----------------------
NET ASSET VALUE
- -----------------------
Life-of-Class 3.59%
(3/1/95)
5 Years 2.68%
1 Year 0.46%
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Returns and principal values
fluctuate so that your investment, when redeemed, may be worth more or less than
its original cost. The performance table does not reflect the deduction of taxes
that a shareowner would pay on distributions or the redemption of shares.
ANY INFORMATION IN THIS 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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
3
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.3%
BANKS - 2.3%
THRIFTS & MORTGAGE FINANCE - 2.3%
$ 994,371 Federal Home Loan Mortgage Corp.
Multifamily VRD Certificate,
Floating rate, 1/15/42 $ 994,371
------------
TOTAL BANKS $ 994,371
------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $994,371) $ 994,371
------------
CORPORATE BONDS - 43.8%
CAPITAL GOODS - 5.3%
INDUSTRIAL CONGLOMERATES - 3.0%
500,000 General Electric Capital Corp.,
Floating Rate, 12/16/05 $ 500,000
800,000 General Electric Capital Corp.,
Floating Rate, 1/9/06 800,760
------------
$ 1,300,760
------------
INDUSTRIAL MACHINERY - 2.3%
1,000,000 Caterpillar Financial Service Corp.,
Floating Rate, 4/25/05 $ 1,000,956
------------
TOTAL CAPITAL GOODS $ 1,000,956
------------
FOOD & DRUG RETAILING - 4.7%
HYPERMARKETS & SUPERCENTERS - 4.7%
2,000,000 Wal-Mart Stores, Inc.,
Floating Rate, 2/22/05 $ 1,999,932
------------
TOTAL FOOD & DRUG RETAILING $ 1,999,932
------------
BANKS - 7.8%
DIVERSIFIED BANKS - 7.8%
750,000 Bank of America Corp.,
Floating Rate, 1/31/05 $ 750,226
750,000 Bank of America Corp.,
Floating Rate, 4/28/05 750,535
1,000,000 Wells Fargo Financial, 6.75%, 6/1/05 1,018,429
800,000 Wells Fargo Financial, 7.6%, 5/3/05 813,625
------------
$ 3,332,815
------------
TOTAL BANKS $ 3,332,815
------------
DIVERSIFIED FINANCIALS - 23.7%
ASSET MANAGEMENT & CUSTODY BANKS - 2.2%
910,000 Mellon Funding Corp., 7.5%, 6/15/05 $ 930,828
------------
CONSUMER FINANCE - 8.6%
450,000 American Express Credit,
Floating Rate, 10/14/05 450,377
$ 1,200,000 American Express,
Floating Rate, 4/18/05 $ 1,200,531
1,000,000 National Rural Utilities,
6.125%, 5/15/05 1,014,686
1,000,000 National Rural Utilities,
1.76%, 3/10/05 1,000,682
------------
$ 3,666,276
------------
INVESTMENT BANKING & BROKERAGE - 3.0%
200,000 Lehman Brothers Holdings,
8.75%, 3/15/05 $ 202,621
600,000 Merrill Lynch, 4.54%, 3/08/05 602,393
500,000 Merrill Lynch, Floating Rate, 12/9/05 500,000
------------
$ 1,305,014
------------
DIVERSIFIED FINANCIAL SERVICES - 9.9%
125,000 Associates Corp., 6.10%, 1/15/05 $ 125,217
1,000,000 Associates Corp.,
Floating Rate, 6/27/05 1,000,000
1,200,000 Bank One Corp.,
Floating Rate, 8/23/05 1,201,226
175,000 Citigroup Global Markets,
6.25%, 6/15/05 178,036
750,000 Citigroup Inc., Floating Rate, 9/1/05 750,404
1,000,000 First Union Corp.,
Floating Rate, 3/31/05 1,001,598
------------
$ 4,256,481
------------
TOTAL DIVERSIFIED FINANCIALS $ 10,158,599
------------
REAL ESTATE - 2.3%
REAL ESTATE MANAGEMENT &
DEVELOPMENT - 2.3%
1,000,000 Security Capital Group, 7.8%, 1/19/05 $ 1,002,987
------------
TOTAL REAL ESTATE $ 1,002,987
------------
TOTAL CORPORATE BONDS
(Cost $18,796,049) $ 18,796,049
------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 17.5%
BANKS - 9.3%
THRIFTS & MORTGAGE FINANCE - 9.3%
1,000,000 Federal National Mortgage Association,
1.56%, 5/16/05 $ 1,000,000
1,000,000 Federal National Mortgage Association,
Floating Rate, 4/28/05 999,967
2,000,000 Freddie Mac, Floating Rate, 2/4/05 1,999,949
------------
$ 3,999,916
------------
TOTAL BANKS $ 3,999,916
------------
4 The accompanying notes are an integral part of these financial statements.
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
GOVERNMENT - 8.2%
$ 1,000,000 Federal Home Loan Mortgage Corp.,
1.28%, 4/22/05 $ 1,000,000
1,000,000 Federal Home Loan Mortgage Corp.,
1.38%, 3/28/05 1,000,000
500,000 Federal Home Loan Mortgage Corp.,
1.47%, 3/1/05 500,000
1,000,000 Federal Home Loan Mortgage Corp.,
1.7%, 5/24/05 1,000,000
------------
TOTAL GOVERNMENT $ 3,500,000
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $7,499,916) $ 7,499,916
------------
TEMPORARY CASH INVESTMENTS - 36.6%
COMMERCIAL PAPER - 21.2%
1,000,000 AIG Funding, Inc., 2.23%, 1/18/05 $ 999,053
1,000,000 Caterpillar, 2.25%, 1/20/05 998,813
1,000,000 Coca Cola Co., 2.17%, 1/24/05 998,613
1,000,000 Coca Cola Co., 2.21%, 1/12/05 999,325
1,000,000 Federal National Mortgage Association,
2.27%, 2/2/05 997,981
2,000,000 IBM Corp., 2.20%, 1/25/05 1,997,067
1,000,000 Minnesota Mining, 2.20%, 1/5/05 999,756
1,106,000 Paccar Financial, 2.28%, 1/12/05 1,105,230
------------
$ 9,095,838
------------
REPURCHASE AGREEMENT - 15.4%
$ 6,600,000 UBS Warburg, Inc., 1.00% dated
12/31/04, repurchase price of
$6,600,000 plus accrued interest on
1/3/05 collateralized by $6,277,000
U.S. Treasury Bill, 6.5%, 10/15/06 $ 6,600,000
------------
TOTAL TEMPORARY
CASH INVESTMENTS
(Cost $15,695,838) $ 15,695,838
------------
TOTAL INVESTMENTS IN SECURITIES - 100.2%
(Cost $42,986,174) $ 42,986,174
------------
OTHER ASSETS
AND LIABILITIES - (0.2)% $ (89,982)
------------
TOTAL NET ASSETS - 100.0% $ 42,896,192
============
The accompanying notes are an integral part of these financial statements. 5
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- ------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.007 $ 0.006 $ 0.01 $ 0.03 $ 0.06
-------- -------- -------- -------- --------
Distributions to shareowners:
Net investment income (0.007) (0.006) (0.01) (0.03) (0.06)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return* 0.65% 0.56% 1.19% 3.39% 5.71%
Ratio of net expenses to average net assets+ 0.74% 0.72% 0.78% 0.78% 0.76%
Ratio of net investment income to average net assets+ 0.66% 0.58% 1.11% 3.16% 5.58%
Net assets, end of period (in thousands) $ 42,896 $ 34,736 $ 59,521 $ 49,545 $ 36,979
Ratios with no waiver of fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses 0.74% 0.72% 0.78% 0.78% 0.76%
Net investment income 0.66% 0.58% 1.11% 3.16% 5.58%
Ratios with waiver of fees and assumption of expenses by
PIM and reduction for fees paid indirectly:
Net expenses 0.74% 0.72% 0.78% 0.78% 0.75%
Net investment income 0.66% 0.58% 1.11% 3.16% 5.59%
* 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.
6 The accompanying notes are an integral part of these financial statements.
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $36,386,174) $ 36,386,174
Repurchase Agreement (Cost $6,600,000) 6,600,000
------------
Total investment in securities (Cost $42,986,174) $ 42,986,174
Cash 44,755
Receivables --
Investment securities sold 65,132
Fund shares sold 567
Dividends, interest and foreign taxes withheld 122,921
Other 2,807
------------
Total assets $ 43,222,356
------------
LIABILITIES:
Payables --
Fund shares repurchased $ 259,932
Dividends 1,474
Due to affiliates 17,912
Accrued expenses 37,855
Other 8,991
------------
Total liabilities $ 326,164
------------
NET ASSETS:
Paid-in capital $ 42,897,250
Undistributed net investment income (loss) 2,001
Accumulated undistributed net realized gain (loss) (3,059)
------------
Total net assets $ 42,896,192
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 42,896,192
Shares outstanding 42,901,207
------------
Net asset value per share $ 1.00
The accompanying notes are an integral part of these financial statements. 7
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Interest $ 430,188
---------
Total investment income $ 430,188
---------
EXPENSES:
Management fees $ 153,638
Transfer agent fees and expenses 1,510
Administrative reimbursements 18,500
Custodian fees 24,343
Professional fees 25,656
Miscellaneous 1,228
---------
Total expenses $ 224,875
---------
Net expenses $ 224,875
---------
Net investment income (loss) $ 205,313
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net increase (decrease) in net assets resulting
from operations $ 205,313
=========
8 The accompanying notes are an integral part of these financial statements.
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 205,313 $ 277,950
Net realized gain (loss) on investments -- 2,354
------------- -------------
Net increase (decrease) in net assets resulting from operations $ 205,313 280,304
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (203,312) $ (277,950)
------------- -------------
Total distributions to shareowners $ (203,312) $ (277,950)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 18,483,037 $ 27,291,288
Class I shares issued in reorganization 21,976,837 --
Reinvestment of distributions 203,307 277,946
Cost of shares repurchased (32,505,228) (52,356,043)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 8,157,953 $ (24,786,809)
------------- -------------
Net increase (decrease) in net assets $ 8,159,954 $ (24,784,455)
------------- -------------
NET ASSETS:
Beginning of year $ 34,736,238 $ 59,520,693
------------- -------------
End of year $ 42,896,192 $ 34,736,238
============= =============
Undistributed net investment income (loss), end of year $ 2,001 $ --
============= =============
The accompanying notes are an integral part of these financial statements. 9
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Money Market VCT Portfolio (The Portfolio) is a portfolio of
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity
Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
The investment objective of Money Market Portfolio is to produce a high level of
current income as consistent with preservation of capital.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those 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 consistent with those
generally accepted in the investment company industry:
A. SECURITY VALUATION
Security transactions are recorded as of trade date. Securities are valued
at amortized cost, which approximates fair market value. Investments
purchased at a discount or premium are valued by amortizing the difference
between the original purchase price and maturity value of the issue over
the period to maturity. Interest income, including interest in income
bearing cash accounts is recorded on the accrual basis.
B. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Money Market Portfolio had a net capital loss
carryforward of $3,059, of which the following amounts will expire between
2010 and 2012 if not utilized: $2,813 in 2010 and $246 in 2012.
10
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
--------- ---------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 203,312 $ 277,950
Long-Term capital gain -- --
--------- ---------
$ 203,312 $ 277,950
Return of Capital -- --
--------- ---------
Total distributions $ 203,312 $ 277,950
--------- ---------
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 2,001
Undistributed long-term gain/(capital loss carryforward) (3,059)
Unrealized appreciation (depreciation) --
---------
Total $ (1,058)
=========
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales and the tax treatment of premium amortization.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
11
PIONEER MONEY MARKET VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
Portfolio. Management fees are calculated daily at the following annual rate of
0.50% 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. At December 31, 2004, $17,777 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $135 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Money Market Portfolio $ 42,986,174 $ 0 $ 0 $ 0
============ === === ===
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of U.S. Government obligations
for the year ended December 31, 2004, were $102,657,000 and $90,158,000,
respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
MONEY MARKET PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- --------------------------------------- ----------- ------------- ----------- -------------
CLASS I:
Shares sold 18,483,037 $ 18,483,037 27,291,288 $ 27,291,288
Class I shares issued in reorganization 21,976,837 21,976,837 -- --
Reinvestment of distributions 203,307 203,307 277,946 277,946
Shares repurchased (32,505,228) (32,505,228) (52,356,043) (52,356,043)
----------- ------------- ----------- -------------
Net increase 8,157,953 $ 8,157,953 (24,786,809) $ (24,786,809)
=========== ============= =========== =============
7. MERGER INFORMATION
On December 8, 2004, beneficial owners of Safeco RST Money Market Portfolio
("Money Market"), one of the six portfolios that comprised Safeco Resource
Series Trust, approved a proposed Agreement and Plan of Reorganization that
provided for the mergers listed below. These tax-free reorganizations were
accomplished on December 10, 2004 ("Closing Date"), by exchanging all of the
Safeco's net assets for Class I shares as indicated below, based on Class I
shares' ending net asset value on the Closing Date. The following charts show
the details of the reorganizations as of that closing date Closing Date:
PIONEER SAFECO RST PIONEER
MONEY MARKET MONEY MARKET MONEY MARKET
VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO
PIONEER MONEY MARKET VCT PORTFOLIO (PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION)
- ---------------------------------- -------------------- -------------------- ---------------------
Net Assets $ 23,493,648 $ 21,976,837 $ 67,613,266
Shares Outstanding 23,500,655 21,976,837 45,477,492
Class I Shares Issued 21,976,837
12
PIONEER MONEY MARKET 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 CLASS I SHAREOWNERS OF PIONEER MONEY MARKET VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Money Market VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit includes 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, 2004, by
correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
February 11, 2005
13
PIONEER MONEY MARKET VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for
the Trust's operations. The Trust's Trustees and officers are listed
CUSTODIAN below, together with their principal occupations during the past five
Brown Brothers Harriman & Co. years. Trustees who are interested persons of the Portfolio within the
meaning of the Investment Company Act of 1940 are referred to as
Interested Trustees. Trustees who are not interested persons of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Trust are referred to as Independent Trustees. Each of the Trustees
Ernst & Young LLP serves as a trustee of each of the 73 U.S. registered investment
portfolios for which Pioneer Investment Management, Inc. ("Pioneer")
serves as investment adviser (the "Trust"). The address for all
PRINCIPAL UNDERWRITER Interested Trustees and all officers of the Portfolio is 60 State
Pioneer Funds Distributor, Inc Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more
LEGAL COUNSEL detailed information regarding the Trust's Trustees and is available
Wilmer Cutler Pickering Hale and Dorr LLP upon request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available
SHAREOWNER SERVICES AND TRANSFER without charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
Board, Trustee successor retirement or removal; Deputy Chairman Company, Ltd.
and President trustee is and a Director of Pioneer Global Asset
elected or Management S.p.A. ("PGAM");
earlier Non-Executive Chairman and a Director
retirement or of Pioneer Investment Management USA
removal Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin); President
and a Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None
Executive successor PIM-USA since May 2003 (Director since
Vice President trustee is January 2001); President and Director
elected or of Pioneer since May 2003; Chairman
earlier and Director of Pioneer
retirement or Investment Management Shareholder
removal Services, Inc. ("PIMSS") since May
2003; Executive Vice President of all
of the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA, November
2000 to May 2003; Executive Vice
President, Chief Financial Officer and
Treasurer, John Hancock Advisers,
L.L.C., Boston, MA, November 1999 to
November 2000; Senior Vice President
and Chief Financial Officer, John
Hancock Advisers, L.L.C., April 1997
to November 1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
14
PIONEER MONEY MARKET VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise
3050 K. Street NW, 2005. successor Financial Officer, I-trax, Inc. Social Investment Company
Washington, DC 20007 trustee is (publicly traded health care services (privately-held affordable
elected or company) (2001 - present); Managing housing finance company);
earlier Partner, Federal City Capital Advisors Director of New York
retirement or (boutique merchant bank) (1995 - 2000; Mortgage Trust (publicly
removal 2002 to 2004); Executive Vice traded mortgage REIT)
President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage
trading company) (2000 - 2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady Corporation
3509 Woodbine Street, 2000. successor (international financial advisory (Industrial identification
Chevy Chase, MD 20815 trustee is (industrial identification and specialty coated material
elected or firm) products manufacturer),
earlier Millennium Chemicals, Inc.
retirement or (commodity chemicals),
removal Mortgage Guaranty Insurance
Reynolds Corporation, and R.
J.Tobacco Inc.Holdings,
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W.Graham (57) Trustee since Serves until Founding Director, The Winthrop Group, None
1001 Sherbrooke Street 2000. successor Inc. (consulting firm); Professor of
West, Montreal, Quebec, trustee is Management, Faculty of Management,
Canada H3A 1G5 elected or McGill University
earlier
retirement
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Officer, Director of New America High
One Boston Place, 1995. successor Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end
28th Floor, trustee is (investment banking firm) investment company)
Boston, MA 02108 elected or
earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia
125 Broad Street, 1995. successor (law firm) Fund, Inc. (closed-end
New York, NY 10004 trustee is investment company) and
elected or AMVESCAP PLC (investment
earlier managers)
retirement
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None
One North Adgers Wharf, September, successor (private investment firm)
Charleston, SC 29401 2000. trustee is
elected or
earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
15
PIONEER MONEY MARKET VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None
discretion President - Legal of Pioneer; and
of the Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J.Kelley(40) Assistant Serves at the Assistant Vice President and Senior None
Secretary discretion Counsel of Pioneer since July 2002;
of the Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to July
2000); Assistant Secretary of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Secretary discretion and Dorr LLP; Assistant Secretary of
of the Board all Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of Administration and Custody Services of
the Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer
from June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None
Treasurer discretion of 2004; Treasurer and Senior Vice
the Board President, CDC IXIS Asset Management
Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of Accounting, Administration and Custody
the Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of Accounting, Administration and Custody
the Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
16
PIONEER MONEY MARKET VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Katharine Kim Sullivan) Assistant Serves at the Fund Administration Manager - Fund None
(31) Treasurer discretion of Accounting, Administration and Custody
the Board Services since June 2003; Assistant
Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None
Compliance discretion of (Director of Compliance and Senior
Officer the Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
17
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
18
[LOGO] PIONEER
Investments(R)
[PIONEER INVESTMENTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER SMALL CAP VALUE VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 17
Trustees, Officers and Service Providers 18
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO UPDATE 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 89.9%
Exchange Traded Fund 0.8%
International Common Stocks 1.8%
Depositary Receipts for International Stocks 3.4%
Temporary Cash Investment 4.1%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[PIE CHART]
Financials 28.4%
Telecommunication Services 0.9%
Consumer Staples 4.2%
Utilities 4.6%
Energy 7.5%
Materials 8.0%
Information Technology 8.6%
Health Care 9.0%
Consumer Discretionary 10.2%
Industrials 18.6%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Insight Enterprises, Inc. 2.26%
2. Southwestern Energy Co. 2.05
3. PacifiCare Health Systems 1.83
4. Pediatrix Medical Group, Inc. 1.79
5. Wabtec Corp. 1.75
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 15.02 $ 12.50
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ - $ - $ -
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. Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[LINE GRAPH]
PIONEER SMALL CAP RUSSELL 2000
VALUE VCT PORTFOLIO VALUE INDEX
11/01 10,000 10,000
10,574 10,612
12/02 8,979 9,400
12,160 13,727
12/04 14,611 16,781
The Russell 2000 Value Index measures the performance of U.S. small-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 the Index.
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
NET ASSET VALUE
Life-of-Class 13.79%
(11/8/01) 1 Year 20.16
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 SMALL CAP 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 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 SMALL CAP VALUE VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
- --------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,112.59 $ 1,111.53
Expenses Paid During Period* $ 6.60 $ 7.90
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.49% for Class I and 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 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). 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 SMALL CAP VALUE VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
- ------------------------------------ ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.39
Expenses Paid During Period* $ 6.30 $ 7.55
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.49% for Class I and 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 SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
Successful stock selection among energy, transportation and health care
companies helped Pioneer Small Cap Value VCT Portfolio perform well over the
past 12 months. In the following discussion, portfolio manager David Adams and
assistant portfolio manager Jack McPherson review the economic background and
detail some of the steps they took to bolster Portfolio performance.
Q. HOW DID THE PORTFOLIO PERFORM OVER THIS PERIOD?
A. For the twelve-month period ended December 31, 2004, Pioneer Small Cap Value
VCT Portfolio returned 20.16% at net asset value. In comparison, the Russell
2000 Value Index, the Fund's benchmark, returned 22.25%.
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.
Q. WHAT WAS THE INVESTMENT BACKGROUND FOR SMALL-CAP VALUE STOCKS OVER THIS
PERIOD?
A. Value issues - those stocks that are selling at a significant discount to our
estimation of their intrinsic value - were leaders within the small-cap
universe for the full 12-month period despite periods of outperformance by
growth stocks. Strong job creation in the spring raised fears of rising
interest rates, driving down financial and other traditional value sectors
seen as vulnerable to rising rates. Value issues rebounded sharply over the
summer as investors positioned their portfolios more defensively during the
runup to the presidential election. With the election decided, growth sectors
and a smattering of lower quality issues moved higher in November. But the
gains recorded between June and August were enough to position value stocks
significantly ahead for the period.
Q. WHICH AREAS OF THE PORTFOLIO HAD THE GREATEST IMPACT ON RESULTS?
A. As energy prices rose, we maintained a heavily overweighted position among
energy issues compared to the benchmark. That, plus sharp gains by a number
of our selections, made the energy sector the biggest contributor to strong
returns. Southwestern Energy, an Arkansas-based exploration and production
company, capitalized on high prices by expanding production at existing
operating fields and advancing development of more recently discovered
reserves. Massey Energy, an Appalachian coal company, saw prices for the
metallurgical coal used in steel manufacturing increase sharply for the first
time in decades, driven by unprecedented demand from China and elsewhere.
Illustrating how our patient, value-focused style is designed to work, we
were rewarded this year for our purchase of Swift Energy, a longer-term
holding. Swift has stabilized its troubled New Zealand operations and
increased oil and gas production from its key Lake Washington reserves. We
took some profits in Swift, as continued good news pushed its price higher.
Increasing global oil consumption aided results at Stelmar Shipping, which
saw strong demand for its fleet of modern, doublehulled tankers. Stelmar has
also been approached by potential acquirers. Genesee and Wyoming, which
acquires short-line trackage from larger railroads, chiefly in the U.S. and
Australia, benefited from expanded shipping volumes of coal and grains.
Forward Air, a broker of shipping services for corporations, increased its
market share as economic expansion heightened demand for cost-efficient
transportation management.
Our large exposure to health care services was another positive. Pacificare
benefited from federal incentives aimed at steering Medicare patients to
managed care plans. Pacificare, the market leader, is also recovering from
operational problems, another reason its stock has moved higher. The migration
of patients to managed care programs also aided Amerigroup, a large provider
of health care programs for beneficiaries of Medicare and other public
assistance programs. Shares of Chemed rose when it acquired full ownership of
Vitas, a hospice company. Vitas is expected to gain from regulations favoring
home care for terminally ill Medicare patients, instead of costly hospital
stays. Our underweight position in real estate investment trusts and other
interest rate-sensitive financial sectors, also helped returns.
Q. WHAT AREAS HELD BACK PERFORMANCE?
A. Technology stocks suffered from spotty business conditions. Orders shrank for
Remec's telecommunication equipment, but we have retained our commitment
because the potential sale of Remec's defense business may enhance the value
of the telecom division. Advanced Energy and Applied Films, manufacturers of
semiconductor capital equipment, were hurt by uncertain demand for new
manufacturers' facilities. Insight Enterprises, a direct distributor of
information technology products and services, was an exception. Improving
fundamentals and a modest upturn in personal and corporate IT spending
boosted Insight's stock. Graftech International slumped following
disappointing third quarter earnings. Graftech may not have been aggressive
enough in negotiating 2005 contracts for its graphite electrodes, used in
steel making. We added to holdings when shares fell, because we think
investor reaction has been overblown. Rewards Network, which markets
restaurant and other discount programs to consumers, continued to disappoint
as skepticism grew over its hotel initiatives and its ability to sign up more
restaurants.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MARKETS?
A. Overall, we think the economic outlook is favorable, with slow, steady growth
and rising interest rates a likely scenario. But the stock market may already
have taken that outlook into account; the markets enjoyed a strong run over
the summer and moved higher once again in November. The rise in small-cap
value stocks has been exceptional, implying that returns could be more modest
over the next several months. This increases the challenge for investors like
us to find good long-term values in the marketplace. However, our value
methodology helps us to find reasonably priced stocks throughout the market
cycle.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
A WORD ABOUT RISK:
Investing in small companies may offer the potential for higher returns, but
these companies are also subject to greater short-term price fluctuations than
larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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 SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE
COMMON STOCKS - 90.2%
ENERGY - 6.9%
OIL & GAS DRILLING - 2.3%
1,525 Atwood Oceanics, Inc.* $ 79,453
26,736 Key Energy Services, Inc.* 315,485
14,500 Todco* 267,090
-----------
$ 662,028
-----------
OIL & GAS EQUIPMENT & SERVICES - 2.2%
14,200 Gulfmarkt Offshore, Inc.* $ 316,234
10,240 Maverick Tube Corp.* 310,272
-----------
$ 626,506
-----------
OIL & GAS EXPLORATION & PRODUCTION - 2.4%
5,900 Penn Virginia Corp. $ 239,363
5,395 Swift Energy Co.* 156,131
7,769 Unit Corp.* 296,853
-----------
$ 692,347
-----------
TOTAL ENERGY $ 1,980,881
-----------
MATERIALS - 7.2%
DIVERSIFIED METALS & MINING - 1.2%
9,914 Massey Energy Co. $ 346,494
-----------
GOLD - 1.0%
7,350 Glamis Gold, Ltd.* $ 126,126
24,300 IAMGOLD Corp. 160,623
-----------
$ 286,749
-----------
METAL & GLASS CONTAINERS - 0.8%
5,137 Jarden Corp.* $ 223,151
-----------
PAPER PRODUCTS - 1.8%
16,193 Domtar, Inc. $ 195,450
11,400 Flowserve Corp.* 313,956
-----------
$ 509,406
-----------
PRECIOUS METALS & MINERALS - 0.2%
28,125 Cambior, Inc.* $ 75,094
-----------
SPECIALTY CHEMICALS - 0.4%
3,875 Great Lakes Chemical Corp. $ 110,399
-----------
STEEL - 1.9%
3,575 Carpenter Technology $ 208,995
34,893 Graftech International, Ltd.* 330,088
-----------
$ 539,083
-----------
TOTAL MATERIALS $ 2,090,376
-----------
CAPITAL GOODS - 8.1%
AEROSPACE & DEFENSE - 0.2%
4,875 INTRADO, INC.* $ 58,988
-----------
CONSTRUCTION, FARM MACHINERY &
HEAVY TRUCKS - 1.6%
21,575 Wabtec Corp. $ 459,979
-----------
CONSTRUCTION & ENGINEERING - 1.1%
5,070 Granite Construction, Inc. $ 134,862
7,825 Insituform Technologies, Inc.* 177,393
-----------
$ 312,255
-----------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.7%
23,479 Power-One, Inc.* $ 209,433
-----------
INDUSTRIAL CONGLOMERATES - 1.5%
20,760 Cornell Co., Inc.* $ 315,137
7,796 NN, Inc. 102,985
-----------
$ 418,122
-----------
INDUSTRIAL MACHINERY - 1.9%
5,687 Joy Global, Inc. $ 246,986
3,125 Kaydon Corp. 103,188
1,894 Nacco Industries, Inc. 199,628
-----------
$ 549,802
-----------
TRADING COMPANIES & DISTRIBUTORS - 1.1%
11,830 Applied Industrial Technologies, Inc. $ 324,128
-----------
TOTAL CAPITAL GOODS $ 2,332,707
-----------
COMMERCIAL SERVICES & SUPPLIES - 5.6%
DATA PROCESSING SERVICES - 0.4%
10,000 Gartner Group, Inc.* $ 124,600
-----------
DIVERSIFIED COMMERCIAL SERVICES - 4.1%
5,878 Chemed Corp. $ 394,473
18,400 Central Parking Corp. 278,760
14,335 Profit Recovery Group International* 72,105
27,255 Rent-Way, Inc.* (a) 218,313
8,100 Watson Wyatt & Co. Holdings 218,295
-----------
$ 1,181,946
-----------
EMPLOYMENT SERVICES - 1.1%
36,400 On Assignment, Inc.* $ 188,916
5,670 Korn/Ferry International* 117,653
-----------
$ 306,569
-----------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 1,613,115
-----------
TRANSPORTATION - 3.3%
MARINE - 0.8%
2,400 Arlington Tankers, Ltd.* $ 55,080
3,677 Stelmar Shipping, Ltd. 175,430
-----------
$ 230,510
-----------
RAILROADS - 1.3%
13,043 Genesee & Wyoming, Inc.* $ 365,334
-----------
The accompanying notes are an integral part of these financial statements.
5
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
TRUCKING - 1.2%
16,775 Central Freight Lines, Inc.* $ 105,683
3,968 Dollar Thrifty Automotive Group* 119,834
2,800 Forward Air Corp.* 125,160
-----------
$ 350,677
-----------
TOTAL TRANSPORTATION $ 946,521
-----------
AUTOMOBILES & COMPONENTS - 0.6%
AUTO PARTS & EQUIPMENT - 0.6%
10,395 Federal Signal Corp. $ 183,576
-----------
TOTAL AUTOMOBILES & COMPONENTS $ 183,576
-----------
CONSUMER DURABLES & APPAREL - 1.1%
APPAREL, ACCESSORIES & LUXURY GOODS - 1.1%
18,968 Charming Shoppes, Inc.* $ 177,730
4,250 Kellwood Co. 146,625
-----------
$ 324,355
-----------
TOTAL CONSUMER DURABLES & APPAREL $ 324,355
-----------
HOTELS, RESTAURANTS & LEISURE - 0.7%
HOTELS, RESORTS & CRUISE LINES - 0.1%
11,500 Jameson Inns, Inc.* $ 22,655
-----------
RESTAURANTS - 0.6%
9,619 O'Charley's, Inc.* $ 188,051
-----------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 210,706
-----------
MEDIA - 0.5%
ADVERTISING - 0.2%
6,566 EMAK Worldwide, Inc.* $ 65,660
-----------
PUBLISHING - 0.3%
7,340 Advanced Marketing Services, Inc. $ 73,840
-----------
TOTAL MEDIA $ 139,500
-----------
RETAILING - 6.4%
APPAREL RETAIL - 0.8%
5,295 Stage Stores, Inc.* $ 219,848
-----------
CATALOG RETAIL - 2.1%
28,975 Insight Enterprises, Inc.* $ 594,567
-----------
COMPUTER & ELECTRONICS RETAIL - 0.4%
16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738
-----------
SPECIALTY STORES - 3.1%
7,075 Claire's Stores, Inc. $ 150,344
5,052 Guitar Center, Inc.* 266,190
23,407 Hancock Fabrics, Inc. 242,731
6,348 School Specialty, Inc.* 244,779
-----------
$ 904,044
-----------
TOTAL RETAILING $ 1,833,197
-----------
FOOD & DRUG RETAILING - 1.9%
FOOD DISTRIBUTORS - 0.6%
12,050 B & G Foods, Inc. $ 180,509
-----------
FOOD RETAIL - 1.3%
8,808 Fresh Del Monte Produce, Inc. $ 260,805
11,625 Wild Oats Markets, Inc.* 102,416
-----------
$ 363,221
-----------
TOTAL FOOD & DRUG RETAILING $ 543,730
-----------
FOOD, BEVERAGE & TOBACCO - 0.2%
PACKAGED FOODS & MEATS - 0.2%
1,925 American Italian Pasta Co. (a) $ 44,756
-----------
TOTAL FOOD, BEVERAGE & TOBACCO $ 44,756
-----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.7%
HOUSEHOLD PRODUCTS - 1.3%
15,279 Nu Skin Enterprises, Inc. $ 387,781
-----------
PERSONAL PRODUCTS - 0.4%
4,825 NBTY, Inc.* $ 115,848
-----------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 503,629
-----------
HEALTH CARE EQUIPMENT & SERVICES - 7.6%
HEALTH CARE DISTRIBUTORS - 2.3%
4,585 Amerigroup Corp. $ 346,901
12,125 Cross Country Healthcare, Inc.* (a) 219,220
3,475 Chattem, Inc.* 115,023
-----------
$ 681,144
-----------
HEALTH CARE EQUIPMENT - 0.5%
3,000 Analogic Corp. $ 134,370
-----------
HEALTH CARE FACILITIES - 0.9%
3,350 Sunrise Senior Living, Inc.* (a) $ 155,306
2,783 Triad Hospitals, Inc.* 103,555
-----------
$ 258,861
-----------
HEALTH CARE SERVICES - 2.2%
7,327 Pediatrix Medical Group, Inc.* $ 469,294
8,275 Providence Service Corp.* 173,527
-----------
$ 642,821
-----------
MANAGED HEALTH CARE - 1.7%
8,530 PacifiCare Health Systems* $ 482,116
-----------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 2,199,312
-----------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.5%
BIOTECHNOLOGY - 0.5%
17,655 Kendle International, Inc.* $ 155,364
-----------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 155,364
-----------
The accompanying notes are an integral part of these financial statements.
6
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE
BANKS - 8.7%
DIVERSIFIED BANKS - 3.9%
4,131 Banner Corp. $ 128,846
15,230 BankAtlantic Bancorp, Inc. 303,077
1,100 Community Bancorp* 33,660
11,050 Provident Financial Services, Inc. 214,039
20,325 Texas Capital Bancshares, Inc.* 439,427
-----------
$ 1,119,049
-----------
REGIONAL BANKS - 4.0%
7,000 Alliance Bankshares Corp.* $ 108,850
27,425 Cardinal Financial Corp.* 305,789
3,875 City National Corp. 273,769
1,775 Irwin Financial Corp. 50,392
23,150 Sterling Bancshares, Inc. 330,351
1,705 Whitney Holding Corp. 76,708
-----------
$ 1,145,859
-----------
THRIFTS & MORTGAGE FINANCE - 0.8%
3,475 BankUnited Financial Corp.* $ 111,026
9,475 First Niagara Financial Group, Inc. 132,176
-----------
$ 243,202
-----------
TOTAL BANKS $ 2,508,110
-----------
DIVERSIFIED FINANCIALS - 6.7%
CONSUMER FINANCE - 0.9%
25,856 Medallion Financial Corp. $ 250,803
-----------
CONSUMER FINANCE - 1.4%
7,025 Advanta Corp. $ 158,906
7,478 Advanta Corp. (Class B) 181,491
11,000 Rewards Network, Inc.* (a) 77,000
-----------
$ 417,397
-----------
INVESTMENT BANKING & BROKERAGE - 2.9%
7,000 A.G. Edwards, Inc. $ 302,470
23,689 Apollo Investment Corp. 357,704
4,050 Piper Jaffray Co.* 194,198
-----------
$ 854,372
-----------
SPECIALIZED FINANCE - 1.5%
10,225 Assured Guaranty, Ltd. $ 201,126
5,843 Financial Federal Corp.* 229,046
-----------
$ 430,172
-----------
TOTAL DIVERSIFIED FINANCIALS $ 1,952,744
-----------
INSURANCE - 3.7%
INSURANCE BROKERS - 0.2%
1,800 Platinum Underwriter Holdings, Ltd. $ 55,980
-----------
PROPERTY & CASUALTY INSURANCE - 2.9%
3,825 American Safety Insurance Group, Ltd.* $ 62,501
6,826 IPC Holdings, Ltd. 296,999
27,525 Quanta Capital Holdings (144A)* 253,781
2,925 RLI Corp. 121,592
2,525 Selective Insurance Group, Inc. (a) 111,706
-----------
$ 846,579
-----------
REINSURANCE - 0.6%
6,950 Odyssey Re Holdings, Corp. (a) $ 175,210
-----------
TOTAL INSURANCE $ 1,077,769
-----------
REAL ESTATE - 5.7%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.8%
3,875 Corrections Corp. of America* $ 156,744
2,626 Levitt Corp. 80,277
-----------
$ 237,021
-----------
REAL ESTATE INVESTMENT TRUSTS - 4.9%
9,913 BioMed Property Trust, Inc. $ 220,168
10,650 Capital Trust, Inc. 327,062
1,928 Entertainment Properties Trust 85,892
18,425 Feldman Mall Properties, Inc.* (a) 239,709
15,915 Provident Senior Living* 254,640
6,350 Saxon Capital, Inc. 152,337
4,271 Universal Health Realty, Inc. 137,227
-----------
$ 1,417,035
-----------
TOTAL REAL ESTATE $ 1,654,056
-----------
SOFTWARE & SERVICES - 4.2%
APPLICATION SOFTWARE - 0.8%
13,779 SPSS, Inc.* $ 215,504
-----------
DATA PROCESSING & OUTSOURCED SERVICES - 0.7%
16,142 Pegusus Systems, Inc.* $ 203,389
-----------
INTERNET SOFTWARE & SERVICES - 1.2%
7,625 Internet Security Systems, Inc.* $ 177,281
12,275 PEC Solutions, Inc.* 173,937
-----------
$ 351,218
-----------
SYSTEMS SOFTWARE - 1.5%
24,550 Borland Software Corp.* $ 286,744
7,025 Sybase, Inc.* 140,149
-----------
$ 426,893
-----------
TOTAL SOFTWARE & SERVICES $ 1,197,004
-----------
TECHNOLOGY HARDWARE & EQUIPMENT - 3.1%
COMMUNICATIONS EQUIPMENT - 1.9%
4,575 Black Box Corp. $ 219,692
47,375 Remec, Inc.* 341,574
-----------
$ 561,266
-----------
The accompanying notes are an integral part of these financial statements.
7
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
COMPUTER STORAGE & PERIPHERALS - 0.3%
4,425 Electronics For Imaging, Inc.* $ 77,039
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4%
11,425 Planar Systems, Inc.* $ 128,303
-----------
TECHNOLOGY DISTRIBUTORS - 0.5%
3,075 Tech Data Corp.* $ 139,605
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 906,213
-----------
SEMICONDUCTORS - 0.6%
SEMICONDUCTOR EQUIPMENT - 0.3%
3,593 Advanced Energy Industries, Inc.* $ 32,804
2,837 Brooks Automations, Inc.* 48,853
-----------
$ 81,657
-----------
SEMICONDUCTORS - 0.3%
9,370 HI/FN, Inc.* $ 86,391
-----------
TOTAL SEMICONDUCTORS $ 168,048
-----------
TELECOMMUNICATION SERVICES - 0.8%
WIRELESS TELECOM SERVICES - 0.8%
26,003 Boston Communications Group, Inc.* $ 240,268
-----------
TOTAL TELECOMMUNICATION SERVICES $ 240,268
-----------
UTILITIES - 4.2%
GAS UTILITIES - 3.5%
5,600 AGL Resources, Inc. $ 186,144
6,505 People's Energy Corp. 285,895
10,649 Southwestern Energy Co.* 539,787
-----------
$ 1,011,826
-----------
MULTI-UTILITIES & UNREGULATED POWER - 0.5%
2,350 Energen Corp. $ 138,533
-----------
UTILITIES - 0.2%
1,625 UGI Corp. $ 66,479
-----------
TOTAL UTILITIES $ 1,216,838
-----------
TOTAL COMMON STOCKS
(Cost $20,981,073) $26,022,775
-----------
EXCHANGE TRADED FUND - 0.8%
1,150 iShares Russell 2000 Value ETF (a) $ 221,904
-----------
TOTAL EXCHANGE TRADED FUND
(Cost $162,579) $ 221,904
-----------
TEMPORARY CASH INVESTMENT - 3.9%
SECURITY LENDING COLLATERAL - 3.9%
1,134,938 Securities Lending Investment Fund,
2.18% $ 1,134,938
-----------
TOTAL TEMPORARY
CASH INVESTMENT
(Cost $1,134,938) $ 1,134,938
-----------
TOTAL INVESTMENTS IN
SECURITIES - 94.9%
(Cost $22,278,590) $27,379,617
-----------
OTHER ASSETS AND
LIABILITIES - 5.1% $ 1,458,402
-----------
TOTAL NET ASSETS - 100.0% $28,838,019
-----------
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
1,700 American Italian Pasta Co. $ 39,525
3,735 Cross Country Healthcare, Inc.* 67,529
16,500 Feldman Mall Properties, Inc.* 214,500
1,045 iShares Russell 2000 Value (ETF) 201,643
5,320 Odyssey Re Holdings, Corp. 134,117
24,685 Rent-Way, Inc.* 197,727
4,964 Rewards Network, Inc.* 34,748
1,425 Selective Insurance Group, Inc. 63,042
3,110 Sunrise Senior Living, Inc.* 144,180
-----------
TOTAL $ 1,097,011
-----------
The accompanying notes are an integral part of these financial statements.
8
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED 11/08/01 TO
CLASS I (a) 12/31/04 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 12.50 $ 9.23 $ 10.87 $ 10.00
------- ------- -------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.03) $ -- $ (0.01) $ 0.01
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 2.55 3.27 (1.63) 0.86
------- ------- -------- -------
Net increase (decrease) from investment operations $ 2.52 $ 3.27 $ (1.64) $ 0.87
Distributions to shareowners
Net investment income -- -- (0.00)(b) 0.00
Net realized gain -- -- (0.00)(b) --
------- ------- -------- -------
Net increase (decrease) in net asset value $ 2.52 $ 3.27 $ (1.65) $ 0.87
------- ------- -------- -------
Net asset value, end of period $ 15.02 $ 12.50 $ 9.23 $ 10.87
======= ======= ======== =======
Total return* 20.16% 35.43% (15.08)% 8.70%
Ratio of net expenses to average net assets+ 1.25% 1.25% 1.25% 1.21%**
Ratio of net investment income (loss) to average net assets+ (0.21)% 0.03% (0.05)% 0.86%**
Portfolio turnover rate 36% 74% 50% 0%
Net assets, end of period (in thousands) $17,993 $12,049 $ 6,603 $ 504
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.30% 2.40% 2.76% 77.48%**
Net investment income (loss) (0.26)% (1.12)% (1.56)% (75.41)%**
Ratios with waiver of management fees and assumption of expenses
by PIM and reduction for fees paid indirectly:
Net expenses 1.25% 1.25% 1.25% 1.21%
Net investment income (loss) (0.21)% 0.03% (0.05)% 0.86%
(a) Shares of Pioneer Small Cap Value VCT Portfolio were first publicly offered
on November 8, 2001.
(b) 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.
** Annualized
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
9
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
ASSETS:
Investment in securities, at value (including securities loaned of $1,097,011) (Cost $ 27,379,617
$22,278,590)
Cash 2,653,135
Receivables --
Fund shares sold 70,286
Variation margin 1,125
Dividends, interest and foreign taxes withheld 37,933
Other 2,057
------------
Total assets $ 30,144,153
------------
LIABILITIES:
Payables --
Fund shares repurchased $ 94,176
Upon return of securities loaned 1,134,938
Due to affiliates 19,919
Accrued expenses 57,101
Other
------------
Total liabilities $ 1,306,134
------------
NET ASSETS:
Paid-in capital $ 22,990,110
Undistributed net investment income (loss) 260
Accumulated undistributed net realized gain (loss) 713,557
Net unrealized gain (loss) on:
Investments 5,101,027
Futures contracts 33,165
------------
Total net assets $ 28,838,019
------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 17,992,938
Shares outstanding 1,197,698
------------
Net asset value per share $ 15.02
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 10,845,081
Shares outstanding 725,478
------------
Net asset value per share $ 14.95
The accompanying notes are an integral part of these financial statements.
10
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $349) $ 193,923
Interest 20,839
Income on securities loaned, net 2,778
----------
Total investment income $ 217,540
----------
EXPENSES:
Management fees $ 153,423
Distribution fees (Class II) 15,087
Administrative reimbursements 18,500
Custodian fees 38,476
Professional fees 45,386
Printing expense 11,214
Miscellaneous 1,717
----------
Total expenses $ 283,803
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (9,953)
Less fees paid indirectly (815)
----------
Net expenses $ 273,035
----------
Net investment income (loss) $ (55,495)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $1,576,824
Futures contracts 167,366
----------
$1,744,190
----------
Change in net unrealized gain or (loss) from:
Investments $2,521,390
Futures contracts 10,731
----------
$2,532,121
----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $4,276,311
==========
Net increase (decrease) in net assets resulting
from operations $4,220,816
==========
The accompanying notes are an integral part of these financial statements.
11
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ (55,495) $ 2,125
Net realized gain (loss) on investments 1,744,190 (334,168)
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 2,532,121 3,353,942
------------ -------------
Net increase (decrease) in net assets
resulting from operations $ 4,220,816 $ 3,021,899
------------ -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 14,302,057 $ 15,752,093
Cost of shares repurchased (4,493,153) (10,568,904)
------------ -------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 9,808,904 $ 5,183,189
------------ -------------
Net increase (decrease) in net assets $ 14,029,720 $ 8,205,088
------------ -------------
NET ASSETS:
Beginning of year $ 14,808,299 $ 6,603,211
------------ -------------
End of year $ 28,838,019 $ 14,808,299
============ =============
Undistributed net investment income (loss),
end of year $ 260 $ 3,664
============ =============
The accompanying notes are an integral part of these financial statements.
12
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Small Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II shares only)
The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The investment objective of Small Cap Value Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust 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 Exchange. In
computing the net asset values, securities are valued at the last sale price
on the principal exchange where they are traded. Securities that have not
traded on the date of valuation, or securities for which sale prices are not
generally reported, are valued at the mean between the last bid and asked
prices. Securities for which market quotations are not readily available are
valued at their fair values as determined by, or under the direction of, the
Board of Trustees. The Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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
13
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
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.
Small capitalization stocks, while offering the potential for higher returns,
such as those in the portfolio may be subject to greater short-term price
fluctuations than securities of larger companies.
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, 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 realize a gain or loss
equal to the difference between the opening and closing value of the
contract. The use of futures contracts involves, to varying degrees, elements
of market risk which may exceed the amounts recognized by the 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, 2004, Small Company
Portfolio had the following open contracts:
NUMBER OF
CONTRACTS SETTLEMENT MARKET UNREALIZED
TYPE LONG/(SHORT) MONTH VALUE GAIN/(LOSS)
-------------- ------------ ---------- ---------- -----------
Small Cap Value Portfolio Russell 2000 5 March 2005 $1,634,875 $33,165
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent, the
net realized gains and losses on foreign currency contracts, disposition of
foreign currencies, and the difference between the amount of income accrued
and the U.S. dollar actually received. Further, the effects of changes in
foreign currency exchange rates on investments are not segregated in the
statement of operations from the effects of changes in market price of those
securities but are included with the net realized and unrealized gain or loss
on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts) for
the purchase or sale of a specific foreign currency at a fixed price on a
future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the 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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
14
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAIN PAID-IN
PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL
- ---------------------------------------- ---------------- ---------------- -------------
Pioneer Small Cap Value VCT Portfolio $52,091 $6,157 $(58,248)
======= ====== ========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
---------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
---------- ----------
$ -- $ --
Return of Capital -- --
---------- ----------
Total distributions $ -- $ --
========== ==========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(capital loss carryforward) 1,086,729
Unrealized appreciation (depreciation) 4,761,280
----------
Total $5,848,009
==========
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor, Inc.
(PFD), the principal underwriter for the Trust and a wholly owned indirect
subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano), $1,231,475 in
commissions on the sale of Trust shares for the year ended December 31, 2004.
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 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.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers or
other institutional investors, with the Portfolio's custodian acting as the
lending agent. When entering into a loan, the Portfolio receives collateral
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Portfolio also continues to receive payments in
lieu of interest or dividends on the securities loaned. Gain or loss in the
fair value of the securities loaned that may occur during the term of the
loan, will be for account of the Trust. The loans are secured by collateral
of at least 102%, at all times, of the fair value of the securities loaned.
The fair value of the collateral will be adjusted daily to reflect any price
fluctuation in the
15
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
value of the loaned securities. The Trust has the right under the lending
agreement to recover the securities on loan from the borrower on demand.
The Trust invests cash collateral in the Securities Lending Investment Fund
which is managed by Brown Brothers Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase. The
collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at least
equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolios. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets. In addition, under the
management and administration agreements, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Portfolio. At December 31, 2004, $17,466 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $268 in transfer agent fees
payable to PIMSS at December 31, 2004
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
---------- ------------ ------------ --------------
Small Cap Value Portfolio $22,618,337 $5,335,071 $ (573,791) $4,761,280
=========== ========== ========== ==========
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $16,213,181 and $6,667,416, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- -------------------------------- ------------ --------------- --------------- ---------------
CLASS II:
Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675
Reinvestment of distributions -- -- -- --
Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382)
-------- ------------ ---------- -------------
Net increase 233,763 $ 3,102,122 248,156 $ 2,649,293
======== ============ ========== =============
CLASS II:
Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418
Reinvestment of distributions -- -- -- --
Shares repurchased (61,897) (820,452) (14,089) (159,522)
-------- ------------ ---------- -------------
Net increase 504,239 $ 6,706,782 221,239 $ 2,533,896
-------- ------------ ---------- -------------
16
PIONEER SMALL CAP VALUE 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 CLASS I
SHAREOWNERS OF PIONEER SMALL CAP VALUE VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Small Cap Value VCT Portfolio, one of
the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as
of December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for the period ended December 31, 2001 were
audited by other auditors who have ceased operations and whose report, dated
February 8, 2002, expressed an unqualified opinion on those financial
highlights.
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. An audit
includes 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, 2004, by correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
17
PIONEER SMALL CAP 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The officers of the Trust are responsible for the Trust's operations. The
Trust's Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Portfolio within the meaning of the Investment Company Act of 1940 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 73 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Trust"). The address for all Interested Trustees and all officers of the
Portfolio is 60 State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneerfunds.com.
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Director of Harbor Global
Board, Trustee trustee is elected or Serves until retirement or Company, Ltd.
and President earlier retirement or removal; Deputy Chairman
removal 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;
Director of Pioneer
Alternative Investment
Management Limited
(Dublin); President and a
Director of Pioneer
Alternative Investment
Management (Bermuda)
Limited and affiliated
funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the
Pioneer Funds; and Of
Counsel (since 2000,
partner prior to 2000),
Wilmer Cutler Pickering
Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief None
Executive Vice trustee is elected or Executive Officer, PIM-USA
President earlier retirement since May 2003 (Director
or removal since January 2001);
President and Director of
Pioneer since May 2003;
Chairman and Director of
Pioneer Investment
Management Shareholder
Services, Inc. ("PIMSS")
since May 2003; Executive
Vice President of all of
the Pioneer Funds since
June 2003; Executive Vice
President and Chief
Operating Officer of
PIM-USA, November 2000 to
May 2003; Executive Vice
President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999
to November 2000; Senior
Vice President and Chief
Financial Officer, John
Hancock Advisers, L.L.C.,
April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
18
PIONEER SMALL CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
INDEPENDENT TRUSTEES
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS BY THIS TRUSTEE
David R. Bock** (61) Trustee Since 2005. Serves Senior Vice President and Director of The Enterprise
3050 K. Street NW, until a successor Chief Financial Officer, Social Investment Company
Washington, DC 20007 trustee is elected I-trax, Inc. (publicly (privately-held affordable
or earlier retirement traded health care services housing finance company);
or removal. company) (2001-present); Director of New York
Managing Partner, Federal Mortgage Trust (publicly
City Capital Advisors traded mortgage REIT)
(boutique merchant bank)
(1995-2000; 2002 to 2004);
Executive Vice President and
Chief Financial Officer,
Pedestal Inc.
(internet-based mortgage
trading company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
Mary K. Bush (56) Trustee since Serves until successor President, Bush Director of Brady
3509 Woodbine Street, 2000. trustee is elected or International Corporation (industrial
Chevy Chase, MD 20815 earlier retirement or (international financial identification and specialty
removal advisory firm) coated material products
manufacturer), Millennium
Chemicals, Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc. (tobacco)
Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The None
1001 Sherbrooke Street 2000. trustee is elected or Winthrop Group, Inc.
West, Montreal, Quebec, earlier retirement or (consulting firm);
Canada H3A 1G5 removal Professor of Management,
Faculty of Management,
McGill University
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Director of New America High
One Boston Place, 1995. trustee is elected or Executive Officer, Newbury, Income Fund, Inc.
28th Floor, earlier retirement or Piret & Company, Inc. (closed-end investment
Boston, MA 02108 removal (investment banking firm) company)
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss Helvetia
125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Fund, Inc. (closed-end
New York, NY 10004 earlier retirement investment company) and
or removal AMVESCAP PLC (investment
managers)
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & None
One North Adgers Wharf, September, 2000. trustee is elected or Co., Inc. (private
Charleston, SC 29401 earlier retirement investment firm)
or removal
19
PIONEER SMALL CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa Secretary Serves at the discretion Secretary of PIM-USA; None
(57) of the Board Senior Vice President -
Legal of Pioneer; and
Secretary/Clerk of most of
PIM-USA's subsidiaries since
October 2000; Secretary of
all of the Pioneer Funds
since September 2003
(Assistant Secretary from
November 2000 to September
2003); and Senior Counsel,
Assistant Vice President
and Director of Compliance
of PIM-USA from April 1998
through October 2000
Christopher J. Kelley Assistant Serves at the discretion Assistant Vice President None
(40) Secretary of the Board and Senior Counsel of
Pioneer since July 2002;
Vice President and Senior
Counsel of BISYS Fund
Services, Inc. (April 2001
to June 2002); Senior Vice
President and Deputy
General Counsel of Funds
Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000);
Assistant Secretary of all
Pioneer Funds since
September 2003
David C. Phelan (47) Assistant Serves at the discretion Partner, Wilmer Cutler None
Secretary of the Board Pickering Hale and Dorr
LLP; Assistant Secretary of
all Pioneer Funds since
September 2003
Vincent Nave (59) Treasurer Serves at the discretion Vice President - Fund None
of the Board Accounting, Administration
and Custody Services of
Pioneer and Treasurer of
all of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
Mark E. Bradley (45) Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and
Vice President, MFS
Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the
Pioneer Funds since
November 2004
Luis I. Presutti (39) Assistant Serves at the discretion Assistant Vice President - None
Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer and
Assistant Treasurer of all
of the Pioneer Funds since
November 2000
Gary Sullivan (46) Assistant Serves at the discretion Fund Accounting Manager - None
Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all
of the Pioneer Funds since
May 2002
20
PIONEER SMALL CAP VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Katharine Kim Sullivan Assistant Serves at the discretion Fund Administration Manager None
(31) Treasurer of the Board - Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation
from June 2002 to June 2003
(formerly Deutsche Bank
Asset Management); Pioneer
Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to
May 2002, Fund Accounting
Services Supervisor from
1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since
September 2003
Martin J. Wolin (37) Chief Compliance Serves at the discretion Chief Compliance Officer of None
Officer of the Board Pioneer (Director of
Compliance and Senior
Counsel from November 2000
to September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company)
from February 1998 to
November 2000; and Chief
Compliance Officer of all
of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
21
[PIONEER INVESTMENTS(R) LOGO]
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Cap Value II VCT Portfolio -- Class I Shares
ANNUAL REPORT
December 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
================================================================================
================================================================================
Table of Contents
- --------------------------------------------------------------------------------
Pioneer Small Cap Value II VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 7
Notes to Financial Statements 11
Report of Independent Registered Public Accounting Firm 15
Trustees, Officers and Service Providers 16
Please consider a Portfolio's investment objectives, risks, charges and expenses
carefully before investing. The prospectus contains this and other information
about a Portfolio and should be read carefully before you invest or send money.
To obtain a prospectus and for other information on any Pioneer Portfolio,
contact your adviser, call 1-800-225-6292 or visit our website at
www.pioneerfunds.com.
The Trust files a complete statement 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 Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
PORTFOLIO UPDATE 12/31/04
================================================================================
Portfolio Diversification
(As a percentage of total investment portfolio)
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
U.S. Common Stocks 92.2%
Temporary Cash Investment 5.9%
Exchange Traded Fund 1.9%
Sector Distribution
(As a percentage of equity holdings)
[DATA BELOW IS REPRESENTED BY A PIE CHART IN THE ORIGINAL REPORT]
Financials 35.1%
Consumer Discretionary 19.8%
Industrials 16.4%
Information Technology 11.2%
Energy 8.0%
Consumer Staples 3.8%
Materials 3.1%
Utilities 1.6%
Health Care 1.0%
Five Largest Holdings
(As a percentage of equity holdings)
1. World Fuel Services Corp. 3.40%
2. Champion Enterprises, Inc. 3.32
3. Cash America International, Inc. 3.12
4. Lone Star Technologies, Inc. 3.01
5. Landstar System, Inc. 2.90
Holdings will vary for other periods. This list excludes temporary cash and
derivative investments.
================================================================================
PERFORMANCE UPDATE 12/31/04
================================================================================
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 20.44 $ 17.00
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ - $ 0.3371 $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Small Cap Value II VCT Portfolio at net asset value, compared to that of the
Russell 2000 Value Index. Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[DATA BELOW IS REPRESENTED BY A LINE CHART IN THE ORIGINAL REPORT]
Russell 2000 Pioneer Small Cap
Value Index Value II VCT Portfolio
4/97 10,000 10,000
12,840 13,020
12/98 10,278 12,180
11,861 11,999
12/00 11,147 14,737
13,504 16,804
12/02 12,888 14,884
18,402 21,735
12/04 22,327 26,570
The Russell 2000 Value Index is a measure of the performance of the
value-oriented stocks in the Russell 2000 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.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Class 11.04%
(11/9/01)
5 Years 13.48%
1 Year 21.33%
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 Small Cap Value II 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 [divide] $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 II VCT
Portfolio
Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I
------------------------------------------------------------
Beginning Account Value on 7/1/04 $1,000.00
Ending Account Value on 12/31/04 $1,124.05
Expenses Paid During Period* $ 5.37
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% 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 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). 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 Small Cap Value II VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
Share Class I
------------------------------------------------------------
Beginning Account Value on 7/1/04 $1,000.00
Ending Account Value on 12/31/04 $1,020.06
Expenses Paid During Period* $ 5.08
* Expenses are equal to the Portfolio's annualized expense ratio of 1.00% 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 Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
================================================================================
David Adams, portfolio manager, and Jack McPherson, assistant portfolio manager,
have been managing Pioneer Small Cap Value II VCT Portfolio since Pioneer became
the investment manager of the former Safeco Funds on August 2, 2004. Mr. Adams
has 12 years of industry experience and has been part of Pioneer's small-cap
team since its inception in 1995. Mr. McPherson has 13 years of industry
experience.
Q: Will the management style of the Portfolio change?
A: Our primary emphasis will be on bringing the Portfolio in line with
Pioneer's more diversified investment approach. At year end, the Portfolio
held 54 stocks; over time, we expect to increase that figure to around 120.
Our portfolio building process is bottom-up, meaning that stock selection
takes precedence over sector weightings. Whether we will retain existing
holdings depends on our review of each company's finances and operations,
as well as its current and potential valuation. In the specific case of
financial companies, we intend to reduce the Portfolio's exposure to
holdings that could be vulnerable to rising rates.
Q: Please describe the investment environment for small-cap value stocks
during 2004.
A: Small-capitalization stocks recorded another year of strong performance,
outdistancing large caps for the sixth straight year. Traditional value
sectors lagged early in 2004, when economic growth seemed about to surge.
But value stocks recovered as investors grew cautious in the months
preceding the presidential election; they then rode a tide of rising equity
prices through year end. Small-cap value issues led their growth
counterparts for the fourth year in the last five, although investors were
leaning toward growth sectors late in the year. In general, small companies
benefited from greater efficiency in operations and expanded operating
margins that brought more of each dollar to the bottom line.
Q: How did the Portfolio perform during the year?
A: For the twelve months ended December 31, 2004, the Portfolio returned
21.33% at net asset value. This result was roughly in line with the
Portfolio's benchmark, the Russell 2000 Value Index, which returned 22.25%
over the same period.
Q: What factors most affected performance?
A: Stock selection was the key to overall results, with sector weightings
having a smaller impact. Building Materials Holding, a provider of
construction services and materials to builders and contractors, moved
sharply higher, thanks to continued strength in the housing market. The
improving domestic economy was good news for Landstar Systems, which
coordinates transportation needs between shippers and transportation
providers. Shares of SWS, a well regarded Texas banking and securities
firm, also moved up.
The Portfolio was hurt most by Hangar Orthopedics Group, a provider of
orthotic and prosthetic services, which was beset by operating issues and
disappointing earnings. Inventory problems pressured shares of Concord
Camera, a marketer of private label digital cameras. Other decliners
included Hypercom, which supplies credit card terminals and communications
systems for transmitting electronic payments, and Hanover Capital Mortgage,
a specialized real estate investment trust.
Q: What is your outlook for the economy and the markets?
A: We are generally optimistic. We think the economy will continue to grow
slowly and steadily, giving companies the opportunity to expand profits
further. Rising interest rates are also likely in that scenario, but we
think the Federal Reserve Board will stay committed to its program of
moderate hikes. Good long-term values can be hard to find after an extended
rise like the one we have recently seen. But the higher prices go, the more
likely some stocks may be to decline sharply on bad news. As value-focused
investors, we view those declines as moments of opportunity, because they
often produce attractive valuations that go unnoticed in the marketplace.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
- --------------------------------------------------------------------------------
A Word About Risk:
Investing in small companies may offer the potential for higher returns, but
these companies are also subject to greater short-term price fluctuations than
larger, more established companies.
Call 800-688-9915 or visit www.pioneerfunds.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 Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
SCHEDULE OF INVESTMENTS 12/31/04
================================================================================
Shares Value
COMMON STOCKS - 96.6%
Energy - 7.7%
Integrated Oil & Gas - 2.9%
49,925 LONE STAR TECH* $ 1,670,491
-----------
Oil & Gas Drilling - 1.5%
73,225 Key Energy Services, Inc.* $ 864,055
-----------
Oil & Gas Refining Marketing &
Transportation - 3.3%
37,900 World Fuel Services Corp. $ 1,887,420
-----------
Total Energy $ 4,421,966
-----------
Materials - 2.9%
Construction Materials - 1.6%
15,825 Florida Rock Industries, Inc. $ 942,062
-----------
Steel - 1.3%
22,700 Schnitzer Steel Industries, Inc.* $ 770,211
-----------
Total Materials $ 1,712,273
-----------
Capital Goods - 8.0%
Aerospace & Defense - 4.3%
21,900 Precision Castparts Corp.* $ 1,438,392
21,800 United Defense Industries, Inc.* 1,030,050
-----------
$ 2,468,442
-----------
Construction & Engineering - 3.7%
51,650 Astec Industries, Inc.* $ 888,897
37,800 URS Corp.* 1,213,380
-----------
$ 2,102,277
-----------
Total Capital Goods $ 4,570,719
-----------
Commercial Services & Supplies - 1.7%
Diversified Commercial Services - 1.7%
20,625 Regis Corp. $ 951,844
-----------
Total Commercial Services &
Supplies $ 951,844
-----------
Transportation - 6.2%
Air Freight & Couriers - 1.9%
52,625 Pacer International, Inc.* $ 1,118,808
-----------
Trucking - 4.3%
18,575 Arkansas Best Corp.* $ 833,832
21,900 Landstar System, Inc.* 1,612,716
-----------
$ 2,446,548
-----------
Total Transportation $ 3,565,356
-----------
Consumer Durables & Apparel - 6.0%
Homebuilding - 5.2%
7,625 Beazer Homes USA, Inc.* $ 1,114,851
156,025 Champion Enterprises, Inc.* 1,844,216
-----------
$ 2,959,067
-----------
Shares Value
Housewares & Specialties - 0.4%
10,100 Furniture Brands International, Inc.* $ 253,005
-----------
Photographic Products - 0.4%
94,900 Concord Camera Corp.* $ 217,321
-----------
Total Consumer Durables & Apparel $ 3,429,393
-----------
Hotels, Restaurants & Leisure - 3.7%
Casinos & Gaming - 2.6%
34,475 Ameristar Casinos, Inc.* $ 1,486,217
-----------
Restaurants - 1.1%
16,650 Jack In The Box, Inc.* $ 613,886
-----------
Total Hotels, Restaurants & Leisure $ 2,100,103
-----------
Retailing - 9.5%
Catalog Retail - 2.4%
67,125 Insight Enterprises, Inc.* $ 1,377,405
-----------
Home Improvement Retail - 2.7%
40,800 Building Materials Holding Corp. $ 1,562,232
-----------
Specialty Stores - 4.4%
52,625 Foot Locker, Inc. $ 1,417,191
84,100 Hollywood Entertainment Corp.* 1,100,869
-----------
$ 2,518,060
-----------
Total Retailing $ 5,457,697
-----------
Food, Beverage & Tobacco - 3.7%
Packaged Foods & Meats - 2.5%
9,125 Lancaster Colony Corp.* $ 391,189
42,000 Sensient Technologies Corp.* 1,007,580
-----------
$ 1,398,769
-----------
Tobacco - 1.2%
14,700 Universal Corp/VA* $ 703,248
-----------
Total, Food Beverage & Tobacco $ 2,102,017
-----------
Health Care Equipment & Services - 1.0%
Health Care Facilities - 1.0%
69,800 Hanger Orthopedic Group, Inc.* $ 565,380
-----------
Total Health Care Equipment & Services $ 565,380
-----------
Banks - 9.1%
Regional Banks - 6.2%
39,400 Central Pacific Financial Corp.* $ 1,425,098
32,100 Greater Bay Bancorp 894,948
26,110 Hanmi Financial Corp. 938,393
8,743 Provident Bankshares Corp.* 317,983
-----------
$ 3,576,422
-----------
Thrifts & Mortgage Finance - 2.9%
20,925 BankUnited Financial Corp.* $ 668,554
21,290 PFF Bancorp, Inc.* 986,366
-----------
$ 1,654,920
-----------
Total Banks $ 5,231,342
-----------
The accompanying notes are an integral part of these financial statements. 5
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
================================================================================
Shares Value
Diversified Financials - 11.2%
Consumer Finance - 5.7%
62,925 AmeriCredit Corp.* $ 1,538,516
58,300 Cash America International, Inc.* 1,733,259
-----------
$ 3,271,775
-----------
Investment Banking & Brokerage - 3.6%
56,237 Apollo Investment Corp. $ 849,179
55,200 SWS Group, Inc. 1,209,984
-----------
$ 2,059,163
-----------
Other Diversified Finance Services - 1.9%
5,800 iShares Russell 2000 Value (ETF) $ 1,119,168
-----------
Total Diversified Financials $ 6,450,106
-----------
Insurance - 6.9%
Life & Health Insurance - 1.9%
13,100 Stancorp Financial Group, Inc. $ 1,080,750
-----------
Property & Casualty Insurance - 5.0%
15,350 First American Corp. $ 539,399
50,675 Ohio Casualty Corp.* 1,176,167
27,500 RLI Corp. 1,143,175
-----------
$ 2,858,741
-----------
Total Insurance $ 3,939,491
-----------
Real Estate - 6.8%
REITs - 6.8%
16,225 Alexandria Real Estate Equities, Inc. $ 1,207,465
16,000 Camden Property Trust 816,000
31,775 First Potomac Realty Trust 724,470
51,100 Hanover Capital Mortgage Holdings, Inc. 551,880
28,025 Impac Mortgage Holdings, Inc. 635,327
-----------
$ 3,935,142
-----------
Total Real Estate $ 3,935,142
-----------
Software & Services - 0.8%
Data Processing & Outsourced Services - 0.8%
78,500 Hypercom Corp.* $ 464,720
-----------
Total Software & Services $ 464,720
-----------
Technology Hardware & Equipment - 8.9%
Communications Equipment - 2.8%
19,125 Black Box Corp. $ 918,383
16,225 Plantronics Inc. 672,851
-----------
$ 1,591,234
-----------
Computer Storage & Peripherals - 1.7%
30,600 Imation Corp. $ 973,998
-----------
Electronic Equipment & Instruments - 0.6%
8,050 Landauer, Inc. $ 367,885
-----------
Electronic Manufacturer Services - 2.0%
33,175 Benchmark Electronics, Inc.* $ 1,131,268
-----------
Shares Value
Technology Distributors - 1.8%
28,775 Anixter International, Inc.* $ 1,035,612
-----------
Total Technology Hardware &
Equipment $ 5,099,997
-----------
Semiconductors - 1.1%
Semiconductors - 1.1%
113,725 Lattice Semiconductor Corp.* $ 648,233
-----------
Total Semiconductors $ 648,233
-----------
Utilities - 1.5%
Electric Utilities - 1.5%
28,450 IDACORP, Inc.* $ 869,711
-----------
Total Utilities $ 869,711
-----------
TOTAL COMMON STOCKS
(Cost $35,972,099) $55,515,490
-----------
Principal
Amount
TEMPORARY CASH INVESTMENTS - 6.1%
Repurchase Agreement - 6.1%
$3,500,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
3,500,000 plus accrued interest on
1/3/05 collateralized by $3,329,000
U.S. Treasury Bill, 6.5%, 10/15/06 $ 3,500,000
-----------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $3,500,000) $ 3,500,000
-----------
TOTAL INVESTMENTS IN SECURITIES - 102.7%
(Cost $39,472,099) $59,015,490
-----------
OTHER ASSETS AND
LIABILITIES - (2.7)% $(1,552,314)
-----------
TOTAL NET ASSETS - 100.0% $57,463,176
===========
* Non-Income producing security
6 The accompanying notes are an integral part of these financial statements.
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
Class I 12/31/04 (a) 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 17.00 $ 12.16 $ 12.81 $ 10.68 $ 11.39
------- ------- ------- ------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.10 $ 0.09 $ 0.07 $ 0.13 $ 0.02
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3.68 5.10 ( 0.65) 2.13 ( 0.71)
------- ------- ------- ------- --------
Net increase (decrease) from investment operations $ 3.78 $ 5.19 $ (0.58) $ 2.26 $ (0.69)
Distributions to shareowners:
Net investment income -- ( 0.09) ( 0.07) ( 0.13) ( 0.02)
Net realized gain ( 0.34) ( 0.26) -- -- --
------- ------- ------- ------- --------
Net increase (decrease) in net asset value $ 3.44 $ 4.84 $ (0.65) $ 2.13 $ (0.71)
------- ------- ------- ------- --------
Net asset value, end of period $ 20.44 $ 17.00 $ 12.16 $ 12.81 $ 10.68
======= ======= ======= ======= ========
Total return* 21.33% 42.78% ( 4.56)% 21.15%+ ( 6.02)%+
Ratio of net expenses to average net assets 1.01% 1.05% 1.03% 0.96% 0.95%
Ratio of net investment income to average net assets 0.57% 0.71% 0.54% 1.26% 0.22%
Portfolio turnover rate 27% 50% 56% 97% 116%
Net assets, end of period (in thousands) $57,463 $40,405 $24,663 $21,598 $ 14,199
(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.
+ The total return would have been lower had certain expenses not been
reduced during the periods shown.
The accompanying notes are an integral part of these financial statements. 7
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
================================================================================
ASSETS:
Investment in securities, at value (cost $39,472,099) $59,015,490
Cash 33,272
Receivables --
Fund shares sold 29,557
Dividends, interest and foreign taxes withheld 78,623
-----------
Total assets $59,156,942
-----------
LIABILITIES:
Payables --
Investment securities purchased $ 1,465,475
Fund shares repurchased 160,827
Due to affiliates 24,775
Accrued expenses 42,689
-----------
Total liabilities $ 1,693,766
-----------
NET ASSETS:
Paid-in capital $37,709,695
Undistributed net investment income (loss) 271,007
Accumulated undistributed net realized gain (loss) (60,917)
Net unrealized gain (loss) on:
Investments 19,543,391
-----------
Total net assets $57,463,176
-----------
NET ASSET VALUE PER SHARE:
Class I:
(No par value, unlimited number of shares authorized)
Net assets $57,463,176
Shares outstanding 2,810,750
-----------
Net asset value per share $ 20.44
8 The accompanying notes are an integral part of these financial statements.
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
STATEMENT OF OPERATIONS
================================================================================
Year Ended
12/31/04
INVESTMENT INCOME:
Dividends $ 701,161
Interest 29,616
Income on securities loaned, net 8,093
----------
Total investment income $ 738,870
----------
EXPENSES:
Management fees $ 392,303
Transfer agent fees 125
Administrative fees 1,028
Custodian fees 11,018
Professional fees 27,599
Printing 29,749
Fees and expenses of nonaffiliated trustees 3,986
Miscellaneous 2,844
----------
Total expenses $ 468,652
Less management fees waived and expenses assumed by
Pioneer Investment Management, Inc. (837)
----------
Less fees paid indirectly
Net expenses $ 467,815
----------
Net investment income (loss) $ 271,055
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $1,150,972
----------
$1,150,972
----------
Change in net unrealized gain or loss from:
Investments $8,540,937
----------
$8,540,937
----------
Net gain (loss) on investments, futures contracts and
foreign currency transactions $9,691,909
----------
Net increase (decrease) in net assets resulting
from operations $9,962,964
==========
The accompanying notes are an integral part of these financial statements. 9
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Year Ended Year Ended
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income $ 271,055 $ 214,079
Net realized gain on investments 1,150,972 971,323
Change in net unrealized gain on investments, futures contracts and
foreign currency transactions 8,540,937 10,096,277
------------ -----------
Net increase in net assets resulting from operations $ 9,962,964 $11,281,679
------------ -----------
DISTRIBUTIONS TO SHAREOWNERS
Net investment income:
Class I $ -- $ (214,274)
Net realized gain
Class I (928,706) (599,944)
------------ -----------
Total distributions to shareowners $ (928,706) $ (814,218)
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 19,072,784 $12,609,222
Reinvestment of distributions 928,706 814,218
Cost of shares repurchased (11,977,166) (8,149,243)
------------ -----------
Net increase in net assets resulting from fund share transactions $ 8,024,324 $ 5,274,197
------------ -----------
Net increase in net assets $ 17,058,582 $15,741,658
NET ASSETS:
Beginning of year 40,404,594 24,662,936
------------ -----------
End of year $ 57,463,176 $40,404,594
------------ -----------
Undistributed net investment income, end of year $ 271,007 $ --
============ ===========
10 The accompanying notes are an integral part of these financial statements.
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS 12/31/04
================================================================================
1. Organization and Significant Accounting Policies
The Pioneer Small Cap Value II VCT Portfolio (the Portfolio) (formerly Safeco
Small-Cap Value Portfolio) a Portfolio of Pioneer Variable Contracts Trust (the
Trust) which is a Delaware business trust registered under the Investment
Company Act of 1940 as an open-end management investment company. The Trust
consists of twenty two seperate diversified portfolios, fourteen of which issue
both Class I and Class II shares (collectively, the Portfolios, individually the
Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans. As of December 31, 2004, no
Class II shares were outstanding for the Portfolio.
The Portfolio, organized on December 10, 2004, is the successor to the Safeco
RST Small Cap Value Portfolio. Safeco RST Growth Opportunities Portfolio, one of
six series of portfolios that comprised Safeco Resource Series Trust,
transferred all of the net assets of Trust shares in exchange for the
Portfolio's Class I shares in a one-to-one exchange ratio, on December 10, 2004,
pursuant to an agreement and plan of reorganization (the "reorganization" which
was approved by the shareholders of Safeco RST Small Cap Value Portfolio on
December 8, 2004). The Portfolio had no assets or liabilities prior to the
reorganization. Accordingly, the reorganization, which was a tax-free exchange,
had no effect on the portfolio's operations.
The investment objective of The Pioneer Small Cap Value II VCT Portfolio is to
seek capital appreciation.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust 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 is open, as of the close of regular trading on the Exchange. In
computing the net asset values, securities are valued at the last sale
price on the principal exchange where they are traded. Securities that have
not traded on the date of valuation, or securities for which sale prices
are not generally reported, are valued at the mean between the last bid and
asked prices. The Portfolio also may 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
11
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
================================================================================
reflects the value of the security as of the close of the exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
Small capitalization stocks, while offering the potential for higher
returns, such as those the Small Cap Value II Portfolios may be subject to
greater short-term price fluctuations than securities of larger companies.
B. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
- -----------------------------------------------------------------------------------------
Undistributed Accumulated
Net Investment Realized Paid-In
Portfolio Income (Loss) Gain (Loss) Capital
- -----------------------------------------------------------------------------------------
Pioneer Small Cap Value II VCT Portfolio $ (48) $48 $ (0)
===== === =====
=========================================================================================
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the year ended December 31, 2004 on a tax basis as of December 31,
2004. There were no distributions paid during the fiscal year ended
December 31, 2003.
- -----------------------------------------------------------------------------------------
2004 2003
- -----------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 213,236 $458,985
Long- Term capital gain 715,470 355,233
----------- --------
$ 928,706 $814,218
Return of Capital -- --
----------- --------
Total distributions $ 928,706 $814,218
=========== ========
Distributable Earnings
(Accumulated Losses):
Undistributed ordinary income $ 271,007
Undistributed long-term gain/(capital loss carryforward) 34,830
Unrealized appreciation (depreciation) 19,447,644
-----------
Total $19,753,481
===========
=========================================================================================
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, the recognition of unrealized
gains or losses on certain futures contracts, and the tax treatment of
premium amortization.
12
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
C. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004.
D. Securities Lending
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Portfolio. The loans are
secured by collateral of at least 102%, at all times, of the fair value of
the securities loaned. The fair value of the collateral will be adjusted
daily to reflect any price fluctuation in the value of the loaned
securities. The Portfolio has the right under the lending agreement to
recover the securities on loan from the borrower on demand. The Portfolio
invests cash collateral in the Securities Lending Investment Fund which is
managed by Brown Brothers Harriman & Co., the Trust's custodian.
E. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated at the following annual rate of 0.75%
of the Portfolio's average daily net assets.
Prior to the reorganization, the Portfolio was advised by Safeco Asset
Management, which received an annual fee equal to 0.85% of its average daily
net assets.
Through December 10, 2006, 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 1.01% 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. At December 31, 2004, $24,650 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. Transfer Agent
Since the reorganization, PIMSS, a wholly owned indirect subsidiary of
UniCredito Italiano provides substantially all transfer agent and shareowner
services to the Trust at negotiated rates. Included in due to affiliates is
$125 in transfer agent fees payable to PIMSS at December 31, 2004. Prior to the
reorganization Safeco Services Corporation was the transfer and shareholder
services agency.
4. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
- --------------------------------------------------------------------------------------------
Net
Gross Gross Appreciation/
Tax Cost Appreciation Depreciation (Depreciation)
- --------------------------------------------------------------------------------------------
Small Cap Value II Portfolio $39,567,846 $20,420,997 $(973,353) $19,447,644
=========== =========== ========= ===========
============================================================================================
13
Pioneer Small Cap Value II VCT Portfolio PIONEER VARIABLE CONTRACTS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
================================================================================
5. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $18,918,127 and $11,889,509, respectively.
6. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- ------------------------------------------------------------------------------------------------------
Small Cap Value II Portfolio '04 Shares '04 Amount '03 Shares '03 Amount
- ------------------------------------------------------------------------------------------------------
Safeco Trust Shares:
Shares sold -- Safeco 1,011,658 $ 18,295,281 882,446 $ 12,609,222
Reinvestment of Distributions 47,480 928,706 49,142 814,288
Shares repurchased -- Safeco (637,527) (11,437,564) (582,906) (8,149,243)
Shares transferred in reorganization (2,800,798) (55,427,794)
Class I:
Shares Sold 38,614 777,503
Shares repurchased (26,593) (539,602)
Shares issued in reorganization 2,800,798 55,427,794
---------------------------------------------------------
Net increase (decrease) 433,632 $ 8,024,324 348,722 $ 5,274,197
=========================================================
======================================================================================================
14
Pioneer Small Cap Value II 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 Class I Shareowners of Pioneer Small Cap Value II VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Small Cap Value II VCT Portfolio, one
of the portfolios constituting Pioneer Variable Contracts Trust, (the "Trust"),
(formerly Small-Cap Value Portfolio, one of the portfolios that comprised the
Safeco Resource Series Trust) as of December 31, 2004, 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. An audit includes 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, 2004, 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 II VCT Portfolio of the Pioneer Variable Contracts
Trust at December 31, 2004, 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 11, 2005
15
Pioneer Small Cap Value II VCT Portfolio
====================================================================================================================================
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
====================================================================================================================================
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for
Custodian the Trust's operations. The Trust's 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 Portfolio within the
Independent Registered Public Accounting Firm meaning of the Investment Company Act of 1940 are referred to as
Ernst & Young LLP Interested 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 73 U.S. registered investment
Pioneer Funds Distributor, Inc. portfolios for which Pioneer Investment Management, Inc. ("Pioneer")
serves as investment adviser (the "Trust"). The address for all
Legal Counsel Interested Trustees and all officers of the Portfolio is 60 State
Wilmer Cutler Pickering Hale and Dorr LLP Street, Boston, Massachusetts 02109.
Shareowner Services and Transfer The Trust's statement of additional information provides more detailed
Pioneer Investment Management Shareholder Services, Inc. information regarding the Trust's Trustees and is available upon
request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available
without charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
====================================================================================================================================
INTERESTED TRUSTEES
====================================================================================================================================
POSITIONS HELD 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. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor
Board, Trustee and successor trustee is until retirement or removal; Global Company, Ltd.
President elected or earlier Deputy Chairman and a Director
retirement or of Pioneer Global Asset
removal 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; Director
of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer
Alternative Investment
Management (Bermuda) Limited
and affiliated funds;
President and Director of
Pioneer Funds Distributor,
Inc. ("PFD"); President of all
of the Pioneer Funds; and Of
Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP
(counsel to PIM-USA and the
Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
====================================================================================================================================
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee is Officer, PIM-USA since May
President elected or earlier 2003 (Director since January
retirement or removal 2001); President and Director
of Pioneer since May 2003;
Chairman and Director of
Pioneer Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of
all of the Pioneer Funds since
June 2003; Executive Vice
President and Chief Operating
Officer of PIM-USA, November
2000 to May 2003; Executive
Vice President, Chief
Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November
2000; Senior Vice President
and Chief Financial Officer,
John Hancock Advisers, L.L.C.,
April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
====================================================================================================================================
16
Pioneer Small Cap Value II VCT Portfolio
================================================================================
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
================================================================================
====================================================================================================================================
INDEPENDENT TRUSTEES
====================================================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since 2005. Serves until a Senior Vice President and Director of The
3050 K. Street NW, successor trustee Chief Financial Officer, Enterprise Social
Washington, DC 20007 is elected or earlier I-trax, Inc. (publicly traded Investment Company
retirement or removal. health care services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank)(1995 -2000; 2002 to Mortgage Trust (publicly
2004); Executive Vice traded mortgage REIT)
President and Chief Financial
Officer, Pedestal Inc.
(internet-based mortgage
trading company) (2000-2002)
* Mr. Bock became a Trustee of the Trust on January 1, 2005
====================================================================================================================================
Mary K. Bush (56) Trustee since 2000. Serves until President, Bush International Director of Brady
3509 Woodbine Street, successor trustee (international financial Corporation (industrial
Chevy Chase, MD 20815 is elected or earlier advisory firm) identification and
retirement or removal specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
====================================================================================================================================
Margaret B.W. Graham (57) Trustee since 2000. Serves until Founding Director, The None
1001 Sherbrooke Street successor trustee Winthrop Group, Inc.
West, Montreal, Quebec, is elected or earlier (consulting firm); Professor
Canada H3A 1G5 retirement or removal of Management, Faculty of
Management, McGill University
====================================================================================================================================
Marguerite A. Piret (56) Trustee since 1995. Serves until President and Chief Executive Director of New America
One Boston Place, successor trustee Officer, Newbury, Piret & High Income Fund, Inc.
28th Floor, is elected or earlier Company, Inc. (investment (closed-end investment
Boston, MA 02108 retirement or removal banking firm) company)
====================================================================================================================================
Stephen K. West (76) Trustee since 1995. Serves until Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, successor trustee Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 is elected or earlier (closed-end investment
retirement or removal company) and AMVESCAP
PLC (investment
managers)
====================================================================================================================================
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None
One North Adgers Wharf, September, 2000. successor trustee Inc. (private investment firm)
Charleston, SC 29401 is elected or earlier
retirement or removal
====================================================================================================================================
17
Pioneer Small Cap Value II VCT Portfolio
================================================================================
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
================================================================================
====================================================================================================================================
TRUST OFFICERS
====================================================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of Vice President - Legal of
the Board Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September
2003); and Senior Counsel,
Assistant Vice President and
Director of Compliance of
PIM-USA from April 1998
through October 2000
====================================================================================================================================
Christopher J. Kelley (40) Assistant Secretary Serves at the Assistant Vice President and None
discretion of Senior Counsel of Pioneer
the Board since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
====================================================================================================================================
David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler None
discretion of Pickering Hale and Dorr LLP;
the Board Assistant Secretary of all
Pioneer Funds since September
2003
====================================================================================================================================
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of Accounting, Administration and
the Board Custody Services of Pioneer;
and Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
====================================================================================================================================
Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None
discretion of since 2004; Treasurer and
the Board Senior Vice President, CDC
IXIS Asset Management Services
from 2002 to 2003; Assistant
Treasurer and Vice President,
MFS Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the
Pioneer Funds since November
2004
====================================================================================================================================
Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - None
discretion of Fund Accounting,
the Board Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
====================================================================================================================================
Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None
discretion of Accounting, Administration and
the Board Custody Services of Pioneer;
and Assistant Treasurer of all
of the Pioneer Funds since May
2002
====================================================================================================================================
18
Pioneer Small Cap Value II VCT Portfolio
================================================================================
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
================================================================================
====================================================================================================================================
TRUST OFFICERS
====================================================================================================================================
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Sullivan (31) Assistant Treasurer Serves at the Fund Administration Manager - None
discretion of Fund Accounting,
the Board Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund
Accounting Manager from August
1999 to May 2002, Fund
Accounting Services Supervisor
from 1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since September
2003
====================================================================================================================================
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of Pioneer (Director of
the Board Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
====================================================================================================================================
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
19
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER REAL ESTATE SHARES VCT PORTFOLIO -- CLASS I SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 6
Notes to Financial Statements 10
Report of Independent Registered Public Accounting Firm 15
Trustees, Officers and Service Providers 16
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 92.1%
Temporary Cash Investment 7.9%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Office 20.3%
Apartmet 18.6%
Regional Mall 13.4%
Industrials 13.1%
Shopping Center 12.0%
Hotel 10.1%
Diversified 7.7%
Self Storage 4.0%
Manufactured Homes 0.4%
Health Care 0.4%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Simon DeBartolo Group, Inc. 6.58%
2. Boston Properties, Inc. 5.08
3. AvalonBay Communities, Inc. 4.82
4. Equity Residential Property
Trust 4.37
5. Catellus Development Corp. 4.19
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 24.30 $ 18.57
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.4466 $ 0.2128 $ 0.1166
- --------------------------------------------------------------------------------
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
Wilshire Real Estate Securities Index. Portfolio returns are based on net asset
value and do not reflect applicable insurance fees and surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Wilshire Real Estate Pioneer Real Estate
Securities Index Shares VCT Portfolio
3/95 10,000 10,000
11,322 11,696
12/96 15,497 15,875
18,565 19,235
12/98 15,330 15,629
14,841 14,977
12/00 19,403 19,397
21,431 20,911
12/02 21,983 21,440
30,133 28,890
12/04 40,622 39,215
Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index is
a market-capitalization weighted measure of the performance of real estate
investment trusts (equity and hybrid) and real estate operating companies. Index
returns are calculated monthly, assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 14.90%
(3/1/95)
5 Years 21.23%
1 Year 35.74%
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,263.87 $ 1,262.50
Expenses Paid During Period* $ 5.77 $ 7.18
* Expenses are equal to the Portfolio's annualized expense ratio 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 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). 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, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.21 $ 1,018.95
Expenses Paid During Period* $ 5.15 $ 6.41
* Expenses are equal to the Portfolio's annualized expense ratio 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 REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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, POOR PROPERTY MANAGEMENT,
ENVIRONMENTAL LIABILITIES, UNINSURED DAMAGE, INCREASED COMPETITION, OR CHANGES
IN REAL ESTATE TAX LAWS.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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.
For the fifth year in a row, real estate stocks achieved positive returns and
outperformed the broader market indices. As Matthew Troxell of AEW Capital
Management, L.P. explains in the following interview, it will fall to astute
stock selection to identify the real estate investments most likely to continue
this momentum into the New Year after such a rewarding multi-year rally.
Q: HOW DID THE PORTFOLIO PERFORM DURING FISCAL 2004?
A: Performance by property type was universally strong. For the 12 months
ended December 31, 2004, Class I shares rose 35.74% at net asset value.
This performance slightly outperformed the 34.81% return for the Wilshire
Real Estate Securities Index for the same period.
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.
Q: WHAT INVESTMENTS CONTRIBUTED TO PERFORMANCE?
A: Strong operating fundamentals at the property level and solid consumer
spending patterns boosted returns of regional mall real estate investment
trusts (REITs). One of the Portfolio's largest holdings, Simon Property
Group, performed strongly in the last quarter of the fiscal year. This REIT
announced the acquisition of Chelsea Property Group (also held by the
Portfolio) during the first half of the fiscal year. Initially, investors
reacted negatively. But we viewed the proposed merger very positively,
because Chelsea Property Group, which owns factory outlet shopping centers
in Japan as well as in the United States, would add international diversity
and a new retail avenue of growth to Simon's current portfolio. Each
company's board of directors and Chelsea's shareholders unanimously
approved the definitive merger agreement, and the company's stock rallied
nicely.
While the outlook for the office sector is improving as a result of
positive job growth, it takes longer for the improvements to manifest
themselves at the property owner level. (Tenants must first use their
existing empty space before seeking new office space.) Boston Properties,
Inc., which holds a portfolio of high-quality buildings in markets with
high barriers to entry, exemplifies the kind of resilient, well-managed
company that has weathered the office downturn better than many of its
counterparts. This office REIT returned 42.5% for 2004.
A sector of the real estate market that recovered well in 2004 was
apartments. AvalonBay Communities, Inc. was one of the Portfolio's best
performing stocks for the reporting period. Like the office sector,
multi-family housing is benefiting from positive job growth, which helps
increase demand for apartments. In addition, we're seeing tremendous demand
for the conversion of apartments to condominiums in a number of markets,
including southeast Florida and southern California, where the price of
owning a home is prohibitive for many people. This increased demand is
improving fundamentals while condo conversion demand provides support for
asset prices - a scenario that creates a natural price support.
In the lodging sector, our selection of hotels did well, but it was the
presence of Starwood Hotels and Resorts that dramatically impacted
performance with its 64.7% return for 2004. This hotel, like many in its
universe, saw great improvement in occupancy rates - resulting in a greater
number of rooms being rented in 2004 than 2003. Much of the improvement was
due to the ability of management to increase room rates, which is a more
powerful driver of profitability than occupancy rates.
Q: ANY STOCKS PROVE TO BE DISAPPOINTING?
A: Despite the positive performance of industrial stocks, the sector detracted
from performance relatively speaking, since the group underperformed the
index. The Portfolio's investments in Liberty Property Trust, an office and
industrial REIT, lagged the market due to investor concerns about
management's decision to delay construction of a new office building in
downtown Philadelphia until an anchor tenant was found. When Comcast signed
on as a tenant, the stock recovered. We remain confident that management at
Liberty has a good understanding of their business and holds strong assets.
Q: WHAT IS YOUR OUTLOOK?
A: With the underlying fundamentals improving, real estate stocks appear
poised to continue strengthening. However, after such impressive
performance during the past five years, we would not be surprised to see a
moderating of performance returns in 2005. As the proverbial tide lifts all
boats, we expect to take a more cautious approach, knowing that astute
stock picking will be challenging but all the more important in the
upcoming months.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 97.7%
HOTELS, RESTAURANTS & LEISURE - 5.4%
HOTELS, RESORTS & CRUISE LINES - 5.4%
93,500 Hilton Hotels Corp. $ 2,126,190
54,000 Starwood Hotels & Resorts 3,153,600
-------------
$ 5,279,790
-------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 5,279,790
-------------
DIVERSIFIED FINANCIALS - 3.3%
DIVERSIFIED FINANCIAL SERVICES - 3.3%
86,000 Brookfield Properties Corp. (a) $ 3,216,400
-------------
TOTAL DIVERSIFIED FINANCIALS $ 3,216,400
-------------
REAL ESTATE - 89.1%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 4.5%
131,500 Catellus Development Corp. $ 4,023,900
27,500 Kite Realty Group Trust 420,200
-------------
$ 4,444,100
-------------
REAL ESTATE INVESTMENT TRUSTS - 84.6%
38,000 Apartment Investment & Management Co. $ 1,464,520
46,200 AMB Property Corp. 1,866,018
40,000 Arden Realty Group, Inc. 1,508,800
102,000 Archstone Communities Trust 3,906,600
61,500 AvalonBay Communities, Inc. 4,630,950
20,500 BioMed Property Trust, Inc. 455,305
75,500 Boston Properties, Inc. 4,882,585
6,200 Capital Automotive 220,255
44,600 Camden Property Trust 2,274,600
19,000 Carramerica Realty Corp. 627,000
21,000 Corporate Office Properties 616,350
74,000 Developers Diversifies Realty Corp. 3,283,380
53,000 Duke Realty Investments, Inc. 1,809,420
11,300 Equity Lifestyle Properties, Inc. 403,975
86,000 Equity Office Properties Trust 2,504,320
116,000 Equity Residential Property Trust (a) 4,196,880
12,100 First Potomac Realty Trust 275,880
38,000 Federal Realty Investment Trust 1,962,700
74,500 General Growth Properties, Inc. 2,693,920
51,000 Highwoods Properties, Inc. 1,412,700
196,800 Host Marriott Corp. 3,404,640
14,500 Hospitality Properties Trust 667,000
9,000 Healthcare Realty Trust, Inc. 366,300
24,500 iStar Financial, Inc. 1,108,870
16,500 Kimco Realty Corp. 956,835
12,000 Kilroy Realty Corp. 513,000
82,000 Liberty Property Trust 3,542,400
30,900 The Macerich Co. $ 1,940,520
90,900 ProLogis Trust 3,938,697
30,800 Pan Pacific Retail Properties, Inc. 1,931,160
41,000 Prentiss Properties Trust 1,566,200
44,000 Public Storage, Inc. 2,453,000
25,000 PS Business Parks, Inc. 1,127,500
53,600 Regency Centers Corp. 2,969,440
10,800 Spirit Finance Corp.* (a) 136,620
30,500 Shurgard Storage Centers, Inc. 1,342,305
24,700 Strategic Hotel Capital, Inc. 407,550
97,800 Simon DeBartolo Group, Inc. 6,324,726
63,400 Taubman Centers, Inc. 1,898,830
70,400 Trizec Properties Inc. 1,331,968
57,000 United Dominion Realty Trust 1,413,600
36,500 Vornado Realty Trust (a) 2,778,745
-------------
$ 83,116,064
-------------
TOTAL REAL ESTATE $ 87,560,164
-------------
TOTAL COMMON STOCKS
(Cost $63,722,198) $ 96,056,354
-------------
TEMPORARY CASH INVESTMENT - 8.4%
SECURITY LENDING COLLATERAL - 8.4%
8,225,580 Securities Lending
Investment Fund, 2.18% $ 8,225,580
-------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $8,225,580) $ 8,225,580
-------------
TOTAL INVESTMENTS IN
SECURITIES - 106.1%
(Cost $71,947,778) $ 104,281,934
-------------
OTHER ASSETS
AND LIABILITIES - (6.1)% $ (6,035,766)
-------------
TOTAL NET ASSETS - 100.0% $ 98,246,168
=============
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
81,700 Brookfield Properties Corp. $ 3,055,580
58,700 Equity Residential Property Trust 2,123,766
10,260 Spirit Finance Corp.* 129,789
34,675 Vornado Realty Trust 2,639,808
-----------
TOTAL $ 7,948,943
===========
The accompanying notes are an integral part of these financial statements. 5
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS I 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.57 $ 14.47 $ 14.77 $ 14.42 $ 11.73
-------- -------- -------- -------- --------
Increase (decrease) from investment operations:
Net investment income $ 0.50 $ 0.74 $ 0.62 $ 0.68 $ 0.71
Net realized and unrealized gain (loss) on investments 6.01 4.16 (0.23) 0.40 2.67
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations $ 6.51 $ 4.90 $ 0.39 $ 1.08 $ 3.38
Distributions to shareowners:
Net investment income ( 0.45) (0.64) (0.69) (0.56) (0.59)
Net realized gain ( 0.33) -- -- -- --
Tax return of capital -- (0.16) -- (0.17) (0.10)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value $ 5.73 $ 4.10 $ (0.30) $ 0.35 $ 2.69
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.30 $ 18.57 $ 14.47 $ 14.77 $ 14.42
======== ======== ======== ======== ========
Total return* 35.74% 34.75% (2.53)% 7.80% 29.51%
Ratio of net expenses to average net assets+ 0.98% 1.03% 1.07% 1.16% 1.10%
Ratio of net investment income to average net assets+ 2.41% 4.49% 4.76% 4.71% 5.02%
Portfolio turnover rate 35% 20% 29% 34% 31%
Net assets, end of period (in thousands) $ 36,447 $ 31,891 $ 29,873 $ 33,026 $ 32,982
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction for
fees paid indirectly:
Net expenses 0.98% 1.03% 1.07% 1.16% 1.10%
Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.98% 1.03% 1.07% 1.16% 1.10%
Net investment income 2.41% 4.49% 4.76% 4.71% 5.02%
(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.
6 The accompanying notes are an integral part of these financial statements.
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $7,948,943) (Cost $71,947,778) $ 104,281,934
Cash 2,220,578
Receivables --
Fund shares sold 15,950
Dividends, interest and foreign taxes withheld 561,625
Other 3,635
-------------
Total assets $ 107,083,722
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 404,407
Fund shares repurchased 60,248
Upon return for securities loaned 8,225,580
Due to affiliates 82,031
Accrued expenses 65,288
-------------
Total liabilities $ 8,837,554
-------------
NET ASSETS:
Paid-in capital $ 62,351,060
Undistributed net investment income (loss) 286,854
Accumulated undistributed net realized gain (loss) 3,274,098
Net unrealized gain (loss) on:
Investments 32,334,156
-------------
Total net assets $ 98,246,168
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 36,447,028
Shares outstanding 1,499,747
-------------
Net asset value per share $ 24.30
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 61,799,140
Shares outstanding 2,547,790
-------------
Net asset value per share $ 24.26
The accompanying notes are an integral part of these financial statements. 7
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $3,560) $ 2,668,265
Interest 28,012
Income on securities loaned, net 1,856
------------
Total investment income $ 2,698,133
------------
EXPENSES:
Management fees $ 632,167
Transfer agent fees and expenses 3,007
Distribution fees (Class II) 117,814
Administrative reimbursements 18,500
Custodian fees 34,727
Professional fees 46,225
Printing expense 37,031
Miscellaneous 2,572
------------
Total expenses $ 892,043
Net expenses $ 892,043
------------
Net investment income (loss) $ 1,806,090
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 7,508,438
------------
$ 7,508,438
------------
Change in net unrealized gain or loss from:
Investments $ 15,633,552
------------
$ 15,633,552
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 23,141,990
============
Net increase (decrease) in net assets resulting
from operations $ 24,948,080
============
8 The accompanying notes are an integral part of these financial statements.
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 1,806,090 $ 2,666,503
Net realized gain (loss) on investments 7,508,438 (441,521)
Change in net unrealized gain or loss on investments, futures contracts and
foreign currency transactions 15,633,552 15,916,594
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 24,948,080 $ 18,141,576
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (707,216) $ (1,049,939)
Class II (916,414) (1,121,546)
Net Realized Gains
Class I (493,376) --
Class II (803,210) --
Tax return of capital
Class I -- (372,973)
Class II -- (398,048)
------------- -------------
Total distributions to shareowners $ (2,920,216) $ (2,942,506)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 20,027,996 $ 9,753,610
Reinvestment of distributions 2,920,216 2,942,506
Cost of shares repurchased (18,513,875) (17,969,003)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 4,434,337 $ (5,272,887)
------------- -------------
Net increase (decrease) in net assets $ 26,462,201 $ 9,926,183
------------- -------------
NET ASSETS:
Beginning of year $ 71,783,967 $ 61,857,784
------------- -------------
End of year $ 98,246,168 $ 71,783,967
============= =============
Undistributed net investment income (loss),
end of year $ 286,854 $ 153,315
============= =============
The accompanying notes are an integral part of these financial statements. 9
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) a Portfolio of
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio
(America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value I Portfolio) (Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Real Estate Shares Portfolio pursues long-term
capital growth, with current income as a secondary objective.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
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
10
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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.
Because Real Estate Shares 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.
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, 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Real Estate Shares had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
A portion of the dividend income recorded by Real Estate Shares Portfolio
is from distributions by publicly
11
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
traded REITs, and such distributions for tax purposes may also consist of
capital gains and return of capital. The actual return of capital and
capital gains portions of such distributions will be determined by formal
notifications from the REITs subsequent to the calendar year-end.
Distributions received from the REITs that are determined to be a return of
capital are recorded by the Trust as a reduction of the cost basis of the
securities held and those determined to be capital gains are reflected as
such on the statement of operations.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED
PORTFOLIO (LOSS) GAIN (LOSS) PAID-IN CAPITAL
- ---------------------------------------- ----------------- --------------- ---------------
Pioneer Real Estate Shares VCT Portfolio $ (48,921) $ 19,456 $ 29,465
========= ======== ========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003*
----------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,449,917 $ 2,171,485
Long-Term capital gain 470,299 --
----------- -----------
$ 2,920,216 $ 2,171,485
----------- -----------
Return of Capital -- 771,021
Total distributions $ 2,920,216 $ 2,942,506
=========== ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed long-term gain/(capital loss carryforward) $ 3,564,562
REIT Dividend Payable 286,854
Unrealized appreciation (depreciation) 32,043,692
-----------
Total $35,895,108
===========
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
* Included in the Portfolio's distributions from 2003 ordinary income is
$192,564 in excess of investment company taxable income, which, in
accordance with U.S. tax law, is taxable to shareowners as ordinary
income distributions.
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, the recognition of unrealized
gains or losses on certain futures contracts, and the tax treatment of
premium amortization.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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
12
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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. Dividends and distributions to shareowners are recorded on the
ex-dividend date.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Portfolio. Management fees are calculated daily at the following 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. At December 31, 2004, $68,694 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $270 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------ ------------ --------------
Real Estate Shares Portfolio $ 72,238,242 $ 32,121,655 $ (77,963) $ 32,043,692
============ ============ ========= ============
13
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
5. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $33,759,977 and $26,732,885, respectively.
6. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
REAL ESTATE SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------- ---------- ------------
CLASS II:
Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266
Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912
Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017)
-------- ------------- -------- ------------
Net increase (217,394) $ (4,104,806) (347,178) $ (5,232,839)
======== ============= ======== ============
CLASS II:
Shares sold 820,863 $ 16,835,509 424,038 $ 7,208,344
Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594
Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986)
-------- ------------- -------- ------------
Net increase 397,199 $ 8,539,143 (62,278) $ (40,048)
======== ============= ======== ============
14
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 CLASS I SHAREOWNERS OF PIONEER REAL ESTATE SHARES VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Real Estate Shares VCT Portfolio, one
of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"),
as of December 31, 2004, 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 three
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. The financial highlights for each of two years in the
period ended December 31, 2001 were audited by other auditors who have ceased
operations and whose report, dated February 8, 2002, expressed an unqualified
opinion on those financial highlights.
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. An audit includes 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, 2004, 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 of the Pioneer Variable Contracts
Trust at December 31, 2004, 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 three years in the
period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ ERNEST & YOUNG LLP
Boston, Massachusetts
February 11, 2005
15
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for the
Trust's operations. The Trust's 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 Portfolio within the meaning
of the Investment Company Act of 1940 are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a
Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Pioneer Funds"). The address for all Interested
PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston,
Pioneer Funds Distributor, Inc. Massachusetts 02109.
The Trust's statement of additional information provides more detailed
LEGAL COUNSEL information regarding the Trust's Trustees and is available upon
Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without
SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor Global
Board, Trustee and successor trustee is until retirement or removal; Company, Ltd.
President elected or earlier Deputy Chairman and a Director
retirement or removal 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; Director
of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer
Alternative Investment
Management (Bermuda) Limited
and affiliated funds;
President and Director of
Pioneer Funds Distributor,
Inc. ("PFD"); President of all
of the Pioneer Funds; and
Of Counsel (since 2000,
partner prior to 2000), Wilmer
Cutler Pickering Hale and Dorr
LLP (counsel to PIM-USA and
the Pioneer Funds)
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee Officer, PIM-USA since May
President is elected or earlier 2003 (Director since January
retirement 2001); President and Director
or removal of Pioneer since May 2003;
Chairman and Director of
Pioneer Investment Management
Shareholder Services, Inc
("PIMSS") since May 2003;
Executive Vice President of
all of the Pioneer Funds since
June 2003; Executive Vice
President and Chief Operating
Officer ofPIM-USA, November
2000; May 2003; Executive Vice
President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock
Advisers, L.L.C., April 1997
to November 1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
16
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Director of The Enterprise
3050 K. Street NW, 2005. successor trustee is Chief Financial Officer, Social Investment Company
Washington, DC 20007 elected or earlier I-trax, Inc.(publicly traded (privately-held affordable
retirement or health care services company) housing finance company);
removal. (2001-present); Managing Director of New York
Partner, Federal City Capital Mortgage Trust (publicly
Advisors (boutique merchant traded mortgage REIT)
bank) (1995-2000; 2002 to
2004); Executive Vice
President and Chief Financial
Officer, Pedestal Inc.
(internet-based mortgage
trading company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady
3509 Woodbine Street, 2000. successor trustee is (international financial Corporation (industrial
Chevy Chase, MD 20815 elected or earlier advisory firm) identification and
retirement or removal specialty coated material
products manufacturer),
Millennium Chemicals, Inc.
(commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc.(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since Serves until Founding Director, The None
Graham (57) 2000. successor trustee Winthrop Group, Inc.
1001 Sherbrooke Street is elected or earlier (consulting firm); Professor
West, Montreal, Quebec, retirement or removal of Management, Faculty of
Canada H3A 1G5 Management, McGill
University
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until President and Chief Executive Director of New America
One Boston Place, 1995. successor trustee Officer, Newbury, Piret & High Income Fund, Inc.
28th Floor, is elected or earlier Company, Inc. (investment (closed-end investment
Boston, MA 02108 retirement or removal banking firm) company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 is elected or earlier (closed-end investment
retirement or removal company) and AMVESCAP PLC
(investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & None
One North Adgers Wharf, September, 2000. successor trustee is Co., Inc.(private investment
Charleston, SC 29401 elected or earlier firm)
retirement or removal
- ------------------------------------------------------------------------------------------------------------------------------------
17
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary from
November 2000 to September
2003); and Senior Counsel,
Assistant Vice President and
Director of Compliance of
PIM-USA from April 1998
through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and None
Kelley (40) Secretary discretion of the Senior Counsel of Pioneer
Board since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler None
Secretary discretion of the Pickering Hale and Dorr LLP;
Board Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and
Board Senior Vice President, CDC
IXIS Asset Management Services
from 2002 to 2003; Assistant
Treasurer and Vice President,
MFS Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the
Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - None
Treasurer discretion of the Fund Accounting,
Board Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Assistant Treasurer of all
of the Pioneer Funds since May
2002
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - None
Sullivan (31) Treasurer discretion of the Fund Accounting,
Board Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund
Accounting Manager from August
1999 to May 2002, Fund
Accounting Services Supervisor
from 1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of
Board Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
19
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
21
[LOGO] PIONEER
Investments(R)
[LOGO] PIONEER
Investments (R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER AMERICA INCOME VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer America Income VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 10
Notes to Financial Statements 14
Report of Independent Registered Public Accounting Firm 18
Trustees, Officers and Service Providers 19
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Government Securities 92.3%
U.S. Government Agency Obligations 3.9%
Temporary Cash Investment 3.3%
U.S. Corporate Bonds 0.5%
MATURITY DISTRIBUTION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
0-1 years 3.0%
1-3 years 66.6%
3-4 years 4.9%
4-6 years 16.2%
6-8 years 0.9%
8+ years 8.4%
FIVE LARGEST HOLDINGS
(As a percentage of long-term holdings)
1. U.S. Treasury Notes,
6.5%, 2/15/10 11.92%
2. U.S. Treasury Notes,
6.25%, 8/15/23 4.85
3. Federal Home Loan Mortgage
Corp., 6.0%, 3/1/33 2.72
4. U.S. Treasury Notes,
6.375%, 8/15/27 2.49
5. Federal Home Loan Mortgage
Corp., 6.0%, 5/1/34 2.08
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 10.12 $ 10.37
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.5557 $ -- $ --
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
AMERICA INCOME VCT PORTFOLIO at net asset value, compared to that of the Lehman
Brothers Fixed-Rate Mortgage- Backed Securities Index and of Lehman Brothers
Government Bond Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
- ---------------------------------------------------------------
GROWTH OF $10,000
- ---------------------------------------------------------------
LEHMAN GOVERNMENT LEHMAN FIXED
DATE VALUE BOND INDEX RATE MORTGAGE INDEX
3/31/1995 $ 10,000 $ 10,000 $ 10,000
$ 10,555 $ 11,302 $ 11,098
12/31/1996 $ 10,665 $ 11,615 $ 11,693
$ 11,536 $ 12,727 $ 12,802
12/31/1998 $ 12,445 $ 13,981 $ 13,694
$ 12,092 $ 13,667 $ 13,947
12/31/2000 $ 13,480 $ 15,477 $ 15,505
$ 14,317 $ 16,598 $ 16,779
12/31/2002 $ 15,755 $ 18,506 $ 18,246
$ 16,340 $ 18,943 $ 18,802
12/31/2004 $ 16,837 $ 19,604 $ 19,687
Index comparisons begin 2/28/95. The Lehman Brothers Government Bond Index
measures the performance of the U.S. government bond market. The Lehman Brothers
Fixed Rate Mortgage Index measures the performance of the government and
mortgage securities 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 any Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class
(3/1/95) 5.43%
5 Years 6.84
1 Year 3.04
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 AMERICA 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 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 AMERICA INCOME VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,032.65 $ 1,031.22
Expenses Paid During Period* $ 4.07 $ 5.28
* Expenses are equal to the Portfolio's annualized expense ratio of 0.80% and
1.03% 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). 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 AMERICA INCOME VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.17 $ 1,019.81
Expenses Paid During Period* $ 4.05 $ 5.25
* Expenses are equal to the Portfolio's annualized expense ratio of 0.80%,
and 1.03% 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 AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
GOVERNMENT GUARANTEES APPLY TO THE UNDERLYING SECURITIES ONLY AND NOT TO THE
PRICES AND YIELDS OF THE PORTFOLIO. WHEN INTEREST RATES RISE, THE PRICES OF
FIXED INCOME SECURITIES IN THE FUND WILL GENERALLY FALL. CONVERSELY, WHEN
INTEREST RATES FALL THE PRICES OF FIXED INCOME SECURITIES IN THE FUND WILL
GENERALLY RISE. 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 THE FUND ARE SUBJECT TO POSSIBLE LOSS DUE TO THE
FINANCIAL FAILURE OF UNDERLYING SECURITIES AND THEIR INABILITY TO MEET THEIR
DEBT OBLIGATIONS.
CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END
PER FORMANCE RESULTS. CURRENT PER FORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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, PER FORMANCE 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.
Investors in U.S. Government and agency securities were rewarded with a
relatively attractive level of income during the 12-month period ended December
31, 2004. Richard Schlanger, a member of the Pioneer fixed-income team,
discusses the factors that affected the fixed-income market and the Portfolio
over the past 12 months.
Q: HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
A: For the 12-month period ended December 31, 2004, Class II shares of Pioneer
America Income VCT Portfolio produced a total return of 3.04%. The
Portfolio performed in line with its benchmark, the Lehman Brothers
Government Bond Index which returned 3.48% for the same period, but
underperformed the 4.70% return of the Lehman Brothers Fixed-Rate
Mortgage-Backed Index. At the end of the period, the 30-day SEC yield for
Class II shares was 3.34%.
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.
Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD?
A: As economic growth improved, the Federal reserve began raising short-term
interest rates. Initially, the Fed's actions caused Treasury yields to move
higher; but when it appeared that inflation was under control, the yield
curve flattened, and short-term yields moved higher and prices declined;
and longer-term yields fell or remained stable, boosting prices. The yield
curve shows the relationship between bond yields and maturity lengths. An
enormous amount of Treasury buying by overseas investors was also
instrumental in keeping Treasury yields low.
Q: HOW DID YOU MANAGE THE PORTFOLIO IN THIS ENVIRONMENT?
A: Mortgage-backed securities accounted for 68.3% of net assets, and Treasury
securities, 28.8% of net assets. There was also a 2.9% cash position. All
of the mortgages were issued by Government Sponsored Enterprises (GSEs),
with about 37.5% of the mortgage position invested in securities issued by
the Government National Mortgage Association (Ginnie Mae). (Ginnie Mae
securities are backed by the full faith and credit of the U.S. government;
however, a full faith and credit backing applies to underlying Portfolio
securities and not to Portfolio shares.) About 18.8% of the mortgages were
from the Federal National Mortgage Association (Fannie Mae,) and 11.6% from
the Federal Home Loan Mortgage Corporation (Freddie Mac).
In the Treasury portion of the Portfolio, we emphasized securities with
short to intermediate durations. We expected yields to move higher and
wanted to minimize the price volatility that would naturally occur as
yields rose. Therefore, we kept duration shorter than the benchmark.
Measured in years, duration measures a bond's price sensitivity to
interest-rate changes. A shorter duration can protect a portfolio from
price declines as yields rise. We were premature, however, in our
expectation of higher yields. As a result, our short-duration strategy
worked against the Portfolio. Long-term Treasuries outperformed.
Q: WHAT CONTRIBUTED MOST TO PERFORMANCE?
A: The significant overweight in mortgage-backed securities made the largest
positive impact, as mortgages outperformed other fixed-income assets.
Minimizing prepayment risk by selecting specific mortgage pools also helped
drive performance. The flatter yield curve, which boosted the prices of
longer-term Treasury securities, also benefited results.
Q: WHAT DETRACTED FROM PERFORMANCE?
A: The Portfolio's underweight in long-term Treasuries. We continue to
believe, however, that yields on such Treasuries are artificially low,
given the weak U.S. dollar, the growing trade imbalance and a Fed that is
likely to continue raising interest rates.
Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A: In the short term, we expect the investment environment to remain unchanged
and are unlikely to alter the Portfolio significantly during the first
quarter of 2005. We plan to remain overweight in mortgage securities. In
February, Federal Reserve Chairman Alan Greenspan will make his semi-annual
Humphrey-Hawkins testimony before Congressional committees. At that time,
we will learn what to expect in the way of Fed interest-rate policy and
what the central bank's thinking is about the prospects for accelerating
inflation. Whenever the Fed raises rates, there is a lag effect; and it can
take as long as a year for higher rates to affect the economy. Over the
next several months, we will be closely monitoring data to determine the
appropriate action to take should the economic backdrop change.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.4%
GOVERNMENT - 0.4%
$ 176,290 Freddie Mac, 5.0%, 1/15/16 $ 179,566
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $182,044) $ 179,566
------------
CORPORATE BONDS - 0.5%
MISCELLANEOUS - 0.5%
250,000 Private Export Funding, 3.375%, 2/15/09 $ 246,378
------------
TOTAL CORPORATE BONDS
(Cost $250,000) $ 246,378
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 95.8%
275,973 Fannie Mae, 5.5%, 6/1/23 $ 282,311
250,000 Fannie Mae, Floating Rate Note, 3/1/19 247,845
250,000 Federal Farm Credit Bank, 3.25%, 6/15/07 249,358
400,000 Federal Farm Credit Bank, 4.9%, 3/17/14 390,855
100,000 Federal Farm Credit Bank, 5.88%, 9/8/08 107,537
200,000 Federal Farm Credit Bank, Medium Term Note, 6.38%, 11/27/06 211,468
400,000 Federal Home Loan Bank, 4.53%, 10/30/06 409,193
850,000 Federal Home Loan Bank, 5.875%, 11/15/07 905,489
300,000 Federal Home Loan Bank, 5.89%, 6/30/08 322,649
290,891 Federal Home Loan Mortgage Corp., 5.5%, 9/1/34 295,700
251,395 Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 260,053
1,175,562 Federal Home Loan Mortgage Corp., 6.0%, 3/1/33 1,214,904
899,518 Federal Home Loan Mortgage Corp., 6.0%, 5/1/34 929,668
105,850 Federal Home Loan Mortgage Corp., 6.0%, 10/1/32 109,496
218,792 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 226,328
488,433 Federal Home Loan Mortgage Corp., 6.0%, 11/1/32 505,255
57,634 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 59,619
187,579 Federal Home Loan Mortgage Corp., 6.0%, 12/1/32 194,040
76,135 Federal Home Loan Mortgage Corp., 6.5%, 1/1/29 80,041
62,203 Federal Home Loan Mortgage Corp., 6.5%, 2/1/32 65,331
38,797 Federal Home Loan Mortgage Corp., 6.5%, 3/1/29 40,770
104,969 Federal Home Loan Mortgage Corp., 6.5%, 3/1/11 111,272
51,493 Federal Home Loan Mortgage Corp., 6.5%, 4/1/31 54,083
295,687 Federal Home Loan Mortgage Corp., 6.5%, 4/1/32 310,484
102,288 Federal Home Loan Mortgage Corp., 6.5%, 7/1/32 107,407
313,916 Federal Home Loan Mortgage Corp., 6.5%, 7/1/16 332,419
101,667 Federal Home Loan Mortgage Corp., 6.5%, 10/1/31 106,780
140,000 Federal Home Loan Mortgage Corp., 6.7%, 1/5/07 149,258
28,003 Federal Home Loan Mortgage Corp., 7.0%, 2/1/31 29,688
31,723 Federal Home Loan Mortgage Corp., 7.0%, 3/1/32 33,769
3,927 Federal Home Loan Mortgage Corp., 7.0%, 4/1/30 4,163
54,342 Federal Home Loan Mortgage Corp., 7.0%, 4/1/32 57,612
9,139 Federal Home Loan Mortgage Corp., 7.0%, 6/1/31 9,688
4,628 Federal Home Loan Mortgage Corp., 7.0%, 7/1/31 4,906
12,064 Federal Home Loan Mortgage Corp., 7.0%, 9/1/31 12,786
51,676 Federal Home Loan Mortgage Corp., 7.5%, 8/1/31 55,390
279,272 Federal National Mortgage Association, 4.5%, 4/1/19 278,559
111,964 Federal National Mortgage Association, 5.0%, 3/1/09 113,931
The accompanying notes are an integral part of these financial statements. 5
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.)
$ 251,032 Federal National Mortgage Association, 5.0%, 7/1/19 $ 255,213
268,174 Federal National Mortgage Association, 5.5%, 2/1/33 272,313
377,212 Federal National Mortgage Association, 5.5%, 3/1/18 390,263
290,566 Federal National Mortgage Association, 5.5%, 3/1/34 295,159
397,281 Federal National Mortgage Association, 5.5%, 4/1/18 412,484
458,366 Federal National Mortgage Association, 5.5%, 4/1/19 474,224
406,282 Federal National Mortgage Association, 5.5%, 9/1/33 412,816
425,363 Federal National Mortgage Association, 5.5%, 11/1/33 432,203
597,379 Federal National Mortgage Association, 6.0%, 3/1/33 618,531
157,145 Federal National Mortgage Association, 6.0%, 4/1/33 162,709
219,343 Federal National Mortgage Association, 6.0%, 5/1/33 226,908
187,628 Federal National Mortgage Association, 6.0%, 6/1/33 194,099
198,880 Federal National Mortgage Association, 6.0%, 7/1/34 205,753
227,731 Federal National Mortgage Association, 6.0%, 9/1/34 235,601
60,951 Federal National Mortgage Association, 6.0%, 10/1/32 63,109
96,547 Federal National Mortgage Association, 6.0%, 11/1/32 99,965
137,611 Federal National Mortgage Association, 6.0%, 11/1/32 142,484
314,302 Federal National Mortgage Association, 6.0%, 11/1/32 325,431
267,902 Federal National Mortgage Association, 6.0%, 12/1/11 281,400
65,962 Federal National Mortgage Association, 6.0%, 12/1/31 68,299
57,772 Federal National Mortgage Association, 6.5%, 1/1/29 60,686
46,300 Federal National Mortgage Association, 6.5%, 1/1/32 48,605
116,621 Federal National Mortgage Association, 6.5%, 1/1/32 122,426
29,107 Federal National Mortgage Association, 6.5%, 3/1/32 30,564
45,679 Federal National Mortgage Association, 6.5%, 3/1/32 47,953
48,840 Federal National Mortgage Association, 6.5%, 3/1/32 51,296
100,354 Federal National Mortgage Association, 6.5%, 3/1/32 105,334
121,433 Federal National Mortgage Association, 6.5%, 4/1/32 127,459
59,308 Federal National Mortgage Association, 6.5%, 7/1/21 62,594
106,676 Federal National Mortgage Association, 6.5%, 7/1/32 111,970
486,710 Federal National Mortgage Association, 6.5%, 7/1/34 510,579
63,447 Federal National Mortgage Association, 6.5%, 8/1/32 66,595
205,197 Federal National Mortgage Association, 6.5%, 8/1/32 215,379
101,389 Federal National Mortgage Association, 6.5%, 8/1/32 106,435
57,390 Federal National Mortgage Association, 6.5%, 9/1/32 60,238
12,729 Federal National Mortgage Association, 6.5%, 10/1/31 13,363
95,957 Federal National Mortgage Association, 6.5%, 10/1/31 100,733
93,880 Federal National Mortgage Association, 6.5%, 11/1/28 98,652
13,239 Federal National Mortgage Association, 7.0%, 1/1/29 14,046
38,406 Federal National Mortgage Association, 7.0%, 1/1/32 40,714
8,740 Federal National Mortgage Association, 7.0%, 5/1/31 9,268
26,507 Federal National Mortgage Association, 7.0%, 7/1/31 28,100
40,400 Federal National Mortgage Association, 7.0%, 8/1/19 43,079
64,486 Federal National Mortgage Association, 7.0%, 9/1/18 68,802
170,257 Federal National Mortgage Association, 7.0%, 9/1/30 180,633
26,521 Federal National Mortgage Association, 7.5%, 2/1/31 28,417
73,023 Federal National Mortgage Association, 9.0%, 4/1/33 79,055
300,000 Freddie Mac, 5.25%, 11/15/12 305,040
247,909 Government National Mortgage Association, 4.5%, 6/15/34 242,051
488,855 Government National Mortgage Association, 4.5%, 6/15/34 477,304
6 The accompanying notes are an integral part of these financial statements.
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.)
$ 438,519 Government National Mortgage Association, 4.5%, 8/15/33 $ 428,316
329,901 Government National Mortgage Association, 5.0%, 7/15/17 339,859
196,084 Government National Mortgage Association, 5.0%, 7/15/19 201,156
248,621 Government National Mortgage Association, 5.0%, 11/20/19 254,089
201,597 Government National Mortgage Association, 5.5%, 2/15/19 210,260
246,379 Government National Mortgage Association, 5.5%, 3/15/33 251,875
191,210 Government National Mortgage Association, 5.5%, 4/15/31 195,673
270,409 Government National Mortgage Association, 5.5%, 4/15/33 276,441
425,040 Government National Mortgage Association, 5.5%, 6/15/17 443,325
244,603 Government National Mortgage Association, 5.5%, 7/15/19 255,097
337,566 Government National Mortgage Association, 5.5%, 7/15/33 345,096
249,372 Government National Mortgage Association, 5.5%, 10/15/34 254,822
199,585 Government National Mortgage Association, 5.5%, 11/20/34 203,759
135,810 Government National Mortgage Association, 6.0%, 1/15/33 140,939
289,888 Government National Mortgage Association, 6.0%, 1/15/33 300,636
266,577 Government National Mortgage Association, 6.0%, 2/15/18 280,921
502,825 Government National Mortgage Association, 6.0%, 2/15/33 521,469
281,601 Government National Mortgage Association, 6.0%, 3/15/34 292,058
481,495 Government National Mortgage Association, 6.0%, 3/15/34 499,377
118,398 Government National Mortgage Association, 6.0%, 5/15/17 124,759
169,002 Government National Mortgage Association, 6.0%, 6/20/16 177,564
430,701 Government National Mortgage Association, 6.0%, 7/15/23 449,745
186,862 Government National Mortgage Association, 6.0%, 7/20/19 196,282
198,278 Government National Mortgage Association, 6.0%, 8/15/19 208,939
193,812 Government National Mortgage Association, 6.0%, 8/15/34 201,187
199,269 Government National Mortgage Association, 6.0%, 8/15/34 206,669
159,562 Government National Mortgage Association, 6.0%, 9/15/32 165,568
376,937 Government National Mortgage Association, 6.0%, 9/15/33 390,912
149,538 Government National Mortgage Association, 6.0%, 9/15/34 155,091
54,936 Government National Mortgage Association, 6.0%, 10/15/32 57,003
100,101 Government National Mortgage Association, 6.0%, 10/15/32 103,869
158,187 Government National Mortgage Association, 6.0%, 10/15/32 164,141
186,854 Government National Mortgage Association, 6.0%, 10/15/32 193,887
349,345 Government National Mortgage Association, 6.0%, 10/15/34 362,319
499,075 Government National Mortgage Association, 6.0%, 10/15/34 517,609
209,478 Government National Mortgage Association, 6.0%, 11/15/32 217,362
272,746 Government National Mortgage Association, 6.0%, 11/15/32 283,860
306,538 Government National Mortgage Association, 6.0%, 12/15/32 319,918
288,866 Government National Mortgage Association, 6.5%, 1/15/34 304,148
37,525 Government National Mortgage Association, 6.5%, 2/15/29 39,551
38,193 Government National Mortgage Association, 6.5%, 2/15/32 40,591
24,629 Government National Mortgage Association, 6.5%, 3/15/26 26,010
52,950 Government National Mortgage Association, 6.5%, 4/15/17 56,480
120,823 Government National Mortgage Association, 6.5%, 4/15/17 128,879
43,252 Government National Mortgage Association, 6.5%, 4/15/32 45,571
47,217 Government National Mortgage Association, 6.5%, 4/15/32 49,748
83,717 Government National Mortgage Association, 6.5%, 5/15/29 88,284
174,227 Government National Mortgage Association, 6.5%, 5/15/29 183,633
220,009 Government National Mortgage Association, 6.5%, 5/15/29 231,986
71,073 Government National Mortgage Association, 6.5%, 5/15/31 74,882
The accompanying notes are an integral part of these financial statements. 7
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.)
$ 35,969 Government National Mortgage Association, 6.5%, 6/15/17 $ 38,367
60,894 Government National Mortgage Association, 6.5%, 6/15/28 64,223
69,534 Government National Mortgage Association, 6.5%, 6/15/28 73,356
9,091 Government National Mortgage Association, 6.5%, 6/15/29 9,581
72,881 Government National Mortgage Association, 6.5%, 6/15/31 76,787
354,205 Government National Mortgage Association, 6.5%, 6/15/31 373,187
34,467 Government National Mortgage Association, 6.5%, 6/15/32 36,314
46,460 Government National Mortgage Association, 6.5%, 6/15/32 48,951
50,698 Government National Mortgage Association, 6.5%, 6/15/32 53,415
117,221 Government National Mortgage Association, 6.5%, 7/15/31 123,503
109,376 Government National Mortgage Association, 6.5%, 7/15/32 115,239
104,642 Government National Mortgage Association, 6.5%, 9/15/31 110,250
134,252 Government National Mortgage Association, 6.5%, 10/15/31 141,447
40,151 Government National Mortgage Association, 6.5%, 12/15/31 42,303
81,034 Government National Mortgage Association, 6.5%, 12/15/31 85,377
16,161 Government National Mortgage Association, 7.0%, 1/15/26 17,231
40,750 Government National Mortgage Association, 7.0%, 1/15/29 43,347
60,301 Government National Mortgage Association, 7.0%, 2/15/28 64,192
44,369 Government National Mortgage Association, 7.0%, 2/15/31 47,159
117,595 Government National Mortgage Association, 7.0%, 2/20/29 124,683
52,848 Government National Mortgage Association, 7.0%, 3/15/28 56,258
26,131 Government National Mortgage Association, 7.0%, 4/15/28 27,817
30,698 Government National Mortgage Association, 7.0%, 5/15/31 32,629
141,847 Government National Mortgage Association, 7.0%, 5/15/32 150,755
37,838 Government National Mortgage Association, 7.0%, 6/15/29 40,249
45,696 Government National Mortgage Association, 7.0%, 7/15/26 48,723
20,983 Government National Mortgage Association, 7.0%, 7/15/29 22,320
45,098 Government National Mortgage Association, 7.0%, 7/15/29 47,972
38,315 Government National Mortgage Association, 7.0%, 8/15/31 40,725
23,557 Government National Mortgage Association, 7.0%, 9/15/27 25,088
63,087 Government National Mortgage Association, 7.0%, 11/15/28 67,158
6,305 Government National Mortgage Association, 7.0%, 12/15/30 6,702
22,876 Government National Mortgage Association, 7.5%, 1/15/31 24,569
33,466 Government National Mortgage Association, 7.5%, 1/15/32 35,941
1,856 Government National Mortgage Association, 7.5%, 6/15/23 2,007
2,186 Government National Mortgage Association, 7.5%, 8/15/23 2,364
8 Government National Mortgage Association, 7.5%, 8/15/29 8
7,983 Government National Mortgage Association, 7.5%, 8/15/29 8,575
9,870 Government National Mortgage Association, 7.5%, 10/15/22 10,677
33,802 Government National Mortgage Association, 7.5%, 10/15/29 36,312
44,869 Government National Mortgage Association, 7.5%, 11/15/29 48,201
125,390 Government National Mortgage Association I, 6.0%, 2/15/29 130,320
75,232 Government National Mortgage Association I, 7.0%, 11/15/30 79,969
39,724 Government National Mortgage Association I, 7.0%, 12/15/30 42,226
386,916 Government National Mortgage Association II, 5.0%, 12/20/18 395,665
453,100 Government National Mortgage Association II, 5.5%, 2/20/34 462,576
477,815 Government National Mortgage Association II, 5.5%, 7/20/19 496,824
373,784 Government National Mortgage Association II, 6.0%, 6/20/34 387,198
279,628 Government National Mortgage Association II, 6.0%, 11/20/33 289,646
83,628 Government National Mortgage Association II, 6.0%, 12/20/18 87,866
8 The accompanying notes are an integral part of these financial statements.
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.)
$ 46,129 Government National Mortgage Association II, 6.5%, 9/20/31 $ 48,500
44,673 Government National Mortgage Association II, 6.5%, 8/20/28 47,030
60,358 Government National Mortgage Association II, 6.5%, 12/20/28 63,525
22,993 Government National Mortgage Association II, 7.0%, 1/20/31 24,358
57,526 Government National Mortgage Association II, 7.0%, 5/20/26 61,139
9,749 Government National Mortgage Association II, 7.5%, 8/20/27 10,451
3,516 Government National Mortgage Association II, 8.0%, 8/20/25 3,815
12,000 Tennessee Valley Authority, Variable Rate Note, 6/1/28 299,880
1,850,000 U.S. Treasury Bonds, 6.25%, 8/15/23 2,165,873
400,000 U.S. Treasury Bonds, 7.25%, 5/15/16 500,687
375,000 U.S. Treasury Notes, 4.75%, 5/15/14 390,791
925,000 U.S. Treasury Notes, 6.375%, 8/15/27 1,110,722
4,700,000 U.S. Treasury Notes, 6.5%, 2/15/10 5,321,095
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $43,313,182) $ 44,212,173
------------
TEMPORARY CASH INVESTMENT - 3.3%
REPURCHASE AGREEMENT - 3.3%
1,500,000 UBS Warburg, Inc., 1.00%, dated 12/31/04, repurchase
price of $1,500,000 plus accrued interest on 1/3/05
collateralized by $1,495,000 U.S. Treasury Bill, 6.75%, 5/15/05 $ 1,500,000
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $1,500,000) $ 1,500,000
------------
TOTAL INVESTMENTS IN SECURITIES - 100.0%
(Cost $45,245,226) $ 46,138,116
------------
OTHER ASSETS AND LIABILITIES - (0.0)% $ (5,019)
------------
TOTAL NET ASSETS - 100.0% $ 46,133,097
============
The accompanying notes are an integral part of these financial statements. 9
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO
CLASS II (A) 12/31/04 12/31/03
Net asset value, beginning of period $ 10.37 $ 10.57
-------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.41 $ 0.21
Net realized and unrealized loss on investments and foreign currency transactions (0.11) (0.15)
-------- -------
Net increase from investment operations $ 0.30 $ 0.06
Distributions to shareowners:
Net investment income (0.55) (0.26)
Net realized gain -- --
-------- -------
Net decrease in net asset value $ (0.25) $ (0.20)
-------- -------
Net asset value, end of period $ 10.12 $ 10.37
======== =======
Total return* 3.04% 2.60%
Ratio of net expenses to average net assets+ 1.06%** 1.01%**
Ratio of net investment income to average net assets+ 3.29%** 2.42%**
Portfolio turnover rate 37%** 34%
Net assets, end of period (in thousands) $ 13,791 $ 2,637
Ratios with no waiver of management fees and assumption of expenses by PIM and
no reduction for fees paid indirectly:
Net expenses 1.06%** 1.01%**
Net investment income 3.29%** 2.42%**
(a) Class II shares were first publicly offered on May 1, 2003.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
10 The accompanying notes are an integral part of these financial statements.
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $45,245,226) $ 46,138,116
Cash 20,754
Receivables--
Dividends, interest and foreign taxes withheld 368,514
Other 2,900
------------
Total assets $ 46,530,284
------------
LIABILITIES:
Payables--
Investment securities purchased $ 201,361
Fund shares repurchased 113,148
Due to affiliates 26,826
Accrued expenses 55,852
------------
Total liabilities $ 397,187
------------
NET ASSETS:
Paid-in capital $ 46,546,165
Undistributed net investment income (loss) (264,827)
Accumulated undistributed net realized gain (loss) (1,041,130)
Net unrealized gain (loss) on:
Investments 892,889
------------
Total net assets $ 46,133,097
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 32,341,802
Shares outstanding 3,199,958
------------
Net asset value per share $ 10.11
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 13,791,295
Shares outstanding 1,362,373
------------
Net asset value per share $ 10.12
The accompanying notes are an integral part of these financial statements. 11
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $0) $ 1,995,831
-----------
Total investment income $ 1,995,831
-----------
EXPENSES:
Management fees $ 243,809
Transfer agent fees and expenses 2,896
Distribution fees (Class II) 19,905
Administrative reimbursements 18,500
Custodian fees 18,454
Professional fees 52,915
Printing expense 11,737
Miscellaneous 2,020
-----------
Total expenses $ 370,236
-----------
Net expenses $ 370,236
-----------
Net investment income (loss) $ 1,625,595
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 206,989
-----------
$ 206,989
-----------
Change in net unrealized gain or (loss) from:
Investments $ (352,583)
-----------
$ (352,583)
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ (145,594)
===========
Net increase (decrease) in net assets resulting
from operations $ 1,480,001
===========
12 The accompanying notes are an integral part of these financial statements.
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 1,625,595 $ 2,011,935
Net realized gain (loss) on investments 206,989 193,917
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions (352,583) (1,192,887)
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 1,480,001 $ 1,012,965
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (2,102,796) $ (2,321,232)
Class II (401,489) (26,127)
------------- -------------
Total distributions to shareowners $ (2,504,285) $ (2,347,359)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 15,160,465 $ 10,875,454
Reinvestment of distributions 2,504,258 2,347,346
Cost of shares repurchased (17,669,980) (34,276,542)
------------- -------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ (5,257) $ (21,053,742)
------------- -------------
Net increase (decrease) in net assets $ (1,029,541) $ (22,388,141)
------------- -------------
NET ASSETS:
Beginning of year $ 47,162,638 $ 69,550,779
------------- -------------
End of year $ 46,133,097 $ 47,162,638
============= =============
Undistributed net investment income (loss),
end of year $ (264,827) $ 231,501
============= =============
The accompanying notes are an integral part of these financial statements. 13
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer America Income VCT Portfolio (The Portfolio) is a portfolio of
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity
Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio)(Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio)(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The investment objective of America Income Portfolio is to produce a high level
of current income as consistent with preservation of capital.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. 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
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
Fixed income securities are valued at prices supplied by independent
pricing services, which consider such factors as Treasury spreads, yields,
maturities and
14
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
ratings.Valuations may be supplemented by dealers and other sources, as
required. Securities for which market quotations are not readily available
are valued at their fair values as determined by, or under the direction
of, the Board of Trustees.
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. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2003, America Income Trust Portfolio had a net
capital loss carryforward of $989,590, of which the following amounts will
expire between 2008 and 2012 if not utilized: $382,424 in 2008, $435,523 in
2011 and $171,643 in 2012.
The portfolio elected to defer $47,565 in capital losses recognized between
November 1, 2004 and December 31, 2004 to its fiscal year ending December
31, 2005.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAIN PAID-IN
PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL
- -------------------- -------------- --------------- --------
Pioneer America
Income VCT Portfolio $ 382,362 $ (368,055) $ (14,307)
========= ========== =========
15
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated
losses) as of December 31, 2004 and the distributions paid during the years
ended December 31, 2004 and 2003 on a tax basis.
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,504,285 $ 2,347,359
Long-Term capital gain/capital loss carryforward -- --
----------- -----------
$ 2,504,285 $ 2,347,359
Return of Capital -- --
=========== ===========
Total distributions $ 2,504,285 $ 2,347,359
=========== ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(capital loss carryforward) (989,590)
Post-October Loss Deferred (47,565)
Unrealized appreciation (depreciation) 624,087
-----------
Total $ (413,068)
===========
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, the recognition of unrealized
gains or losses on certain futures contracts, and the tax treatment of
premium amortization.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only
16
PIONEER AMERICA INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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 UniCredito Italiano, manages the
portfolios. Management fees are calculated daily at the following annual rate of
0.55% 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. At December 31, 2004, $23,654 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
Pioneer Investment Management Shareholder Services, Inc. (PIMSS), a wholly owned
indirect subsidiary of UniCredito Italiano provides substantially all transfer
agent and shareowner services to the Trust at negotiated rates. Included in due
to affiliates is $271 in transfer agent fees payable to PIMSS at December 31,
2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$2,901 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
America Income Portfolio $ 45,514,028 $ 677,456 $ (53,369) $ 624,088
============ ========= ========= =========
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of U.S Government obligations
for the year ended December 31, 2004, were $15,946,349 and 17,221,316,
respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
AMERICA INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ------------ ------------- ------------ -------------
CLASS I:
Shares sold 245,204 $ 2,472,061 711,258 $ 8,118,733
Reinvestment of distributions 206,467 2,102,795 221,712 2,321,232
Shares repurchased (1,551,998) (15,847,044) (3,202,256) (34,132,706)
------------ ------------- ------------ -------------
Net increase (1,100,327) $ (11,272,188) (2,269,286) $ (23,692,741)
============ ============= ============ =============
CLASS II
Shares sold 1,247,751 $ 12,688,404 265,643 $ 2,756,721
Reinvestment of distributions 39,513 401,463 2,521 26,114
Shares repurchased (179,116) (1,822,936) (13,939) (143,836)
------------ ------------- ------------ -------------
Net increase 1,108,148 $ 11,266,931 254,225 $ 2,638,999
============ ============= ============ =============
17
PIONEER AMERICA 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 CLASS II SHAREOWNERS OF PIONEERAMERICA INCOME VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer America Income VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of
December 31, 2004, 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 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. An audit
includes 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, 2004, 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 America Income VCT Portfolio of the Pioneer Variable Contracts Trust at
December 31, 2004, the results of its operations for the year then ended, the
statements of changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods indicated therein, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
18
PIONEER AMERICA INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for
the Trust's operations. The Trust's Trustees and officers are
CUSTODIAN listed below, together with their principal occupations during the
Brown Brothers Harriman & Co. past five years. Trustees who are interested persons of the Portfolio
within the meaning of the Investment Company Act of 1940 are referred
to as Interested Trustees. Trustees who are not interested persons
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM of the Trust are referred to as Independent Trustees.Each of the
Ernst & Young LLP Trustees serves as a trustee of each of the 73 U.S.registered
investment portfolios for which Pioneer Investment Management, Inc.
("Pioneer") serves as investment adviser (the "Pioneer Funds").
PRINCIPAL UNDERWRITER The address for all Interested Trustees and all officers of
Pioneer Funds Distributor, Inc. the Portfolio is 60 State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
LEGAL COUNSEL information regarding the Trust's Trustees and is available upon
Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available
SHAREOWNER SERVICES AND TRANSFER without charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
(78)* Board, Trustee successor trustee retirement or removal; Deputy Chairman Company, Ltd.
and President is elected or and a Director of Pioneer Global Asset
earlier retirement Management S.p.A. ("PGAM");
or removal Non-Executive Chairman and a Director
of Pioneer Investment Management USA
Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin); President
and a Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None
Executive Vice successor trustee PIM-USA since May 2003 (Director since
President is elected or January 2001); President and Director
earlier retirement of Pioneer since May 2003; Chairman
or removal and Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive
Vice President of all of the Pioneer
Funds since June 2003; Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior
Vice President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
19
PIONEER AMERICA INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise
3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Social Investment Company
Washington, DC 20007 is elected or (publicly traded health care services (privately-held affordable
earlier retirement company) (2001-present); Managing housing finance company);
or removal. Partner, Federal City Capital Director of New York
Advisors (boutique merchant Mortgage Trust (publicly
bank)(1995-2000; 2002 to 2004); traded mortgage REIT)
Executive Vice President and Chief
Financial Officer, Pedestal Inc.
(internet-based mortgage trading
company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- -----------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady
3509 Woodbine Street, 2000. successor trustee (international financial advisory Corporation (industrial
Chevy Chase, MD 20815 is elected or firm) identification and
earlier retirement specialty coated material
or removal products manufacturer),
Millennium Chemicals, Inc.
(commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc. (tobacco)
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None
(57) 1001 Sherbrooke 2000. successor trustee Group, Inc. (consulting firm);
Street West, is elected or Professor of Management, Faculty of
Montreal, Quebec, earlier retirement Management, McGill University
Canada H3A 1G5 or removal
- -----------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New America
(56) One Boston 1995. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc.
Place, 28th Floor, is elected or Inc. (investment banking firm) (closed-end investment
Boston, MA 02108 earlier retirement company)
or removal
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia
125 Broad Street, New 1995. successor trustee (law firm) Fund, Inc. (closed-end
York, NY 10004 is elected or investment company) and
earlier retirement AMVESCAP PLC (investment
or removal managers)
- -----------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None
One North Adgers September, successor trustee (private investment firm)
Wharf, Charleston, SC 2000. is elected or
29401 earlier retirement
or removal
- -----------------------------------------------------------------------------------------------------------------------------------
20
PIONEER AMERICA INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None
(57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and Senior None
Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002;
Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to July
2000); Assistant Secretary of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Secretary discretion of the and Dorr LLP; Assistant Secretary of
Board all Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of the Administration and Custody Services of
Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer
from June 1999 to November 2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None
Treasurer discretion of the Treasurer and Senior Vice President,
Board CDC IXIS Asset Management Services
from 2002 to 2003; Assistant Treasurer
and Vice President, MFS Investment
Management from 1997 to 2002; and
Assistant Treasurer of all of the
Pioneer Funds since November 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- -----------------------------------------------------------------------------------------------------------------------------------
21
PIONEER AMERICA INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None
Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody
Board Services since June 2003; Assistant
Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None
Compliance discretion of the (Director of Compliance and Senior
Officer Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
22
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
23
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
24
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
25
[LOGO] PIONEER
Investment (R)
[LOGO]
PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
T a b l e o f C o n t e n t s
- --------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 6
Financial Statements 13
Notes to Financial Statements 17
Report of Independent Registered Public Accounting Firm 21
Trustees, Officers and Service Providers 22
Please consider a Portfolio's investment objectives, risks, charges and
expenses carefully before investing. The prospectus contains this and other
information about a Portfolio and should be read carefully before you invest or
send money. To obtain a prospectus and for other information on any Pioneer
Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at
www.pioneerfunds.com.
The Trust files a complete statement 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 Balanced VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
Portfolio Diversification
(As a percentage of total investment portfolio)
Collateralized Mortgage Obligations 0.3%
Asset Backed Securities 0.4%
U.S Government Agency Obligations 0.4%
Depositary Receipts For International Stocks 2.0%
U.S Corporate Bonds 11.7%
U.S Government Securities 22.5%
U.S Common Stocks 62.7%
Sector Distribution
(As a percentage of long-term holdings)
Utilities 0.4%
Telecommunication Services 2.4%
Materials 3.4%
Energy 6.5%
Industrials 7.1%
Health Care 9.1%
Consumer Discretionary 10.3%
Information Technology 10.9%
Financials 11.9%
Consumer Staples 15.1%
Government Obligations 22.9%
Five Largest Holdings
(As a percentage of long-term holdings)
1. Berkshire Hathaway, Inc.
(Class B) 3.37%
2. First Data Corp. 3.10
3. Microsoft Corp. 3.08
4. Northrop Grumman Corp. 3.03
5. Wm. Wrigley Jr. Co. 2.82
The portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/04 12/31/03
- --------------------------------------------------------------------------------
Net Asset Value per Share $ 14.38 $ 14.02
- --------------------------------------------------------------------------------
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.2769 $ - $ -
- --------------------------------------------------------------------------------
Performance of a $10,000 Investment
The following chart shows the change in value of an investment made in Pioneer
Balanced VCT Portfolio at net asset value, compared to that of the Standard &
Poor's (S&P) 500 Index and the Lehman Brothers Aggregate Bond Index. Portfolio
returns are based on net asset value and do not reflect any applicable
insurance fees or surrender charges.
{The following table was depicted as a line chart in the printed material.]
Pioneer Balanced VCT Portfolio
S&P 500 Index
Lehman Brothers Aggregate Bond Text
Mar-95 10000 10000 10000
11825 11279 12533
Dec-96 13412 11686 15406
15535 12817 20543
Dec-98 15474 13929 26417
15825 13812 31974
Dec-00 16647 15418 29068
16230 16720 25623
Dec-02 14527 18435 19961
17258 19192 25684
Dec-04 18050 20025 28476
Index comparison begins 2/28/95. The Standard & Poor's 500 Stock Index (the S&P
500) is a commonly used measure of the broad U.S. stock market. The Lehman
Brothers Aggregate Bond Index is a measure of the U.S. bond 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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 6.40%
(3/1/95)
5 Years 2.67
1 Year 4.59
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges.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.pioneerfunds.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 Balanced 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 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 [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 Balanced VCT Portfolio
Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,028.06 $ 1,027.51
Expenses Paid During Period* $ 4.67 $ 6.03
- --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 0.92% and
1.18% 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). 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 Balanced VCT Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
Share Class I II
- --------------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.61 $ 1,019.15
Expenses Paid During Period* $ 4.65 $ 6.00
- --------------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 0.92%, and
1.18% 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 Balanced VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
The domestic economy continued its rebound during 2004, encouraging the Federal
Reserve to begin raising short-term interest rates, which had reached the
lowest levels in 46 years. The yields of longer-term bonds showed little
movement over the year, however, despite some interim volatility in the spring.
Corporate bonds and mortgage-backed securities performed well. The equity
markets delivered positive performance over the year, with small- and mid-cap
stocks outperforming large-company equities and value stocks outpacing growth
stocks. In the following interview, Timothy Mulrenan, who is responsible for
the equity portfolio of Pioneer Balanced VCT Portfolio, and Richard Schlanger,
who is responsible for the Portfolio's fixed-income portfolio, discuss the
markets and the factors that affected performance during 2004.
Throughout the year, the Portfolio kept its allocations to equities and bonds
relatively stable, with about 64% of assets in stocks and about 36% in fixed
income investments.
Q: How did the Portfolio perform during 2004?
A: Class II shares of Pioneer Balanced VCT Portfolio shares had a total return
of 4.59% at net asset value during the 12 months ended December 31, 2004.
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.
Q: What was the investment environment like during the period?
A: The economy was healthy, growing at a moderate rate throughout 2004.
Evidence of a sustained economic recovery was clear enough that, beginning
on June 30, the Federal Reserve Board began raising the overnight interbank
lending rate, the Fed Funds Rate, in an effort to avoid any increase in
inflationary pressures. By the end of the year, the Fed Funds Rate had
risen from 1.00% to 2.25%, with the Fed indicating it intended to continue
to raise the rate at a "measured" pace.
During a year in which the value of the U.S. dollar on international
currency exchanges fell dramatically and energy prices rose significantly,
longer-term interest rates remained surprisingly stable for much of the
year. In fact, the yield of the 10-year Treasury ended 2004 at 4.22%, very
close to its level at the start of the year. As the improving economy helped
lift corporate profits, corporate bonds significantly outperformed
government bonds. Mortgage-backed securities also did better than Treasuries
in a year in which securities that paid a higher coupon tended to deliver
higher returns.
In the equity markets, stock prices did not move greatly during the first 10
months of the year. However, after the November elections and the end of
political uncertainty about control of the federal government, stocks staged
a strong rally. Small- and mid-cap stocks and value stocks outperformed
large-cap stocks and growth stocks.
Q: What were your strategies in managing the fixed-income assets of the
Portfolio during the year?
A: We emphasized the "spread" sectors - corporates and mortgages - and kept the
portfolio's duration, or sensitivity to interest rate changes, close to
that of the benchmark Lehman Brothers Aggregate Bond Index. For much of the
year, we kept our investments in high-yielding, lower-rated corporate bonds
at about 8.5% of fixed income assets, close to our limit of 10%. However,
we did lower that to about 7.6% of fixed income assets by the end of the
year, increasing our investments in mortgage-backed securities to almost
half the portfolio. This was because, after strong performance by corporate
bonds, we found that mortgage securities offered very attractive relative
value, as they provided almost as much income as corporate securities, but
with higher credit quality.
At the end of 2004, average credit quality was AA-, up from the A+ average
rating of a year earlier. Both because we were cautious in taking interest
rate risk and because we increased our investments in mortgages, the
Portfolio's duration was 3.93 years, down from 4.26 years at the end of
2003.
Both our sector selection and our decision to keep the Portfolio's
sensitivity to interest rate changes close to that of the benchmark aided
performance during the year.
A Word About Risk:
When interest rates rise, the prices of fixed income securities in the fund
will generally fall. Conversely, when interest rates fall the prices of fixed
income securities in the fund will generally rise. Investments in the fund are
subject to possible loss due to the financial failure of underlying securities
and their inability to meet their debt obligations.
Call 800-688-9915 or visit www.pioneerfunds.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 Balanced VCT Portfolio
- --------------------------------------------------------------------------------
Q: What were the principal factors affecting the performance of the equity
investments during 2004?
A: During a year in which high-quality, large-company growth stocks were not in
favor, the best performance tended to come from our investments in the
energy and consumer staples sectors. Several of our holdings in the
information technology sector also supported performance, while many of the
most notable detractors were in health care and consumer discretionary
investments.
The price of oil rose substantially in 2004, helping lift the performance of
the entire energy sector. Our best-performing energy investments included
Encana, a Canadian exploration and production company, and Varco
International, which provides oil field equipment and services to energy
companies. Varco eventually received an attractive acquisition offer from
National Oil Well.
In consumer staples, top performers included two of our five largest
holdings: Wrigley's and Gillette. In addition, CVS, the pharmacy chain, rose
substantially as its earnings outlook improved with the acquisition of many
stores formerly operated by the Eckerd chain. Chewing gum leader Wrigleys
appreciated on good earnings growth, its improving outlook with the
acquisition of the Altoids and Lifesavers brands, and inroads into the
markets in China and India. Gillette gained on successful new product
introductions and excellent cost management.
In information technology, Symantec's stock price appreciated with strong
sales of its anti-virus software. Newmont Mining, the world's largest gold
mining company, was another holding that did well.
In health care, our investments in large pharmaceutical companies detracted
from results during a difficult year for the industry. The largest
disappointment was Pfizer, a major position in the portfolio. Pfizer's stock
price plummeted late in the year amid controversies about possible side
effects of its Cox-2 pain inhibitor, Celebrex. The news came after Merck, a
smaller holding in the portfolio, withdrew its Cox-2 pain inhibitor from the
market entirely. Among consumer discretionary holdings, the most notable
drag on performance was our investment in Viacom, which declined 17% during
the year, primarily because of disappointing advertising sales in its radio
station division.
As the year progressed, we sold some of our more successful investments,
notably Symantec and Newmont Mining because of concerns about the high
valuations that they had attained. As we did so, we invested in Vodaphone,
the wireless communications company based in the U.K.; Guidant, a leading
medical device company which later received an acquisition offer from
Johnson & Johnson; and Avaya, a telecommunications equipment company that is
a leader in providing Voice Over Internet Protocol technology to
corporations.
Q: What is your investment outlook?
A: We believe the economy will continue to expand and the Federal Reserve will
maintain its policy of raising short-term interest rates. Longer-term rates
may rise more slowly. As this happens, the "yield curve" will flatten as
the difference between short-term rates and longer-term rates narrows. If
this scenario unfolds, we may take a more "bar-belled" approach to the
fixed income portfolio, investing in both short-maturity (less than two
years) and longer-maturity securities (more than 10 years) but
de-emphasizing intermediate-term issues which may be the most vulnerable to
the risk of price loss from rising rates. We may also take some profits in
mortgage investments if their prices begin to look less appealing and look
for more attractive opportunities in corporate securities.
In the equity market, we believe corporate profits will continue to improve,
but at a decelerating rate. We think stock prices will track earnings
growth, which in turn should track nominal Gross Domestic Product growth. We
intend to continue to emphasize high quality, stable-growth companies.
Historically, these companies have done relatively well as corporate profit
growth begins decelerating as the economy enters a new, slower-growth stage
in the business cycle. The consumer staples and health care sectors
typically perform well in such an environment.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
COMMON STOCKS - 63.5%
Energy - 5.5%
Integrated Oil & Gas - 0.4%
3,900 Exxon Mobil Corp. $ 199,914
-----------
Oil & Gas Drilling - 4.8%
8,700 Encana Corp. $ 496,422
33,400 ENSCO International, Inc. 1,060,116
22,000 Varco International, Inc.* 641,300
-----------
$ 2,197,838
-----------
Oil & Gas Exploration & Production - 0.3%
3,900 Pioneer Natural Resources Co. $ 136,890
-----------
Total Energy $ 2,534,642
-----------
Materials - 2.0%
Precious Metals & Minerals - 2.0%
21,800 Newmont Mining Corp. $ 968,138
-----------
Total Materials $ 968,138
-----------
Capital Goods - 2.9%
Aerospace & Defense - 3.0%
25,000 Northrop Grumman Corp. $ 1,359,000
-----------
Total Capital Goods $ 1,359,000
-----------
Commercial Services & Supplies - 0.7%
Diversified Commercial Services - 0.7%
7,400 Cintas Corp. $ 324,564
-----------
Total Commercial Services &
Supplies $ 324,564
-----------
Transportation - 2.5%
Trucking - 2.5%
13,400 United Parcel Service $ 1,145,164
-----------
Total Transportation $ 1,145,164
-----------
Media - 3.7%
Broadcasting & Cable Television - 1.4%
8,800 Clear Channel Communications, Inc. $ 294,712
10,200 Comcast Corp.* 334,968
-----------
$ 629,680
-----------
Movies & Entertainment - 2.3%
29,319 Viacom, Inc. (Class B) $ 1,066,918
-----------
Total Media $ 1,696,598
-----------
Retailing - 3.9%
Apparel Retail - 1.5%
16,400 Liz Claiborne, Inc. $ 692,244
-----------
General Merchandise Stores - 2.2%
32,000 Family Dollar Stores, Inc. $ 999,360
-----------
Shares Value
Specialty Stores - 0.2%
6,491 Blockbuster, Inc. $ 61,924
6,491 Blockbuster, Inc. (Class B) 57,186
-----------
$ 119,110
-----------
Total Retailing $ 1,810,714
-----------
Food & Drug Retailing - 5.5%
Drug Retail - 1.0%
9,900 CVS Corp. $ 446,193
-----------
Food Distributors - 0.8%
6,400 Cardinal Health, Inc. $ 372,160
-----------
Food Retail - 2.8%
18,300 Wm. Wrigley Jr. Co. $ 1,266,177
-----------
Hypermarkets & Supercenters - 0.9%
7,800 Wal-Mart Stores, Inc. $ 411,996
-----------
Total Food & Drug Retailing $ 2,496,526
-----------
Food, Beverage & Tobacco - 5.3%
Distillers & Vintners - 2.1%
19,200 Anheuser-Busch Co., Inc. $ 974,016
-----------
Soft Drinks - 3.2%
7,900 The Coca-Cola Co. $ 328,877
21,800 PepsiCo, Inc. 1,137,960
-----------
$ 1,466,837
-----------
Total Food, Beverage & Tobacco $ 2,440,853
-----------
Household & Personal Products - 3.7%
Household Products - 0.9%
9,300 Estee Lauder Co. $ 425,661
-----------
Personal Products - 2.8%
28,100 Gillette Co. $ 1,258,318
-----------
Total Household & Personal
Products $ 1,683,979
-----------
Health Care Equipment & Services - 4.5%
Health Care Distributors - 1.7%
17,800 Wyeth $ 758,102
-----------
Health Care Equipment - 2.8%
17,300 Biomet, Inc. $ 750,647
7,700 Guidant Corp. 555,170
-----------
$ 1,305,817
-----------
Total Health Care Equipment &
Services $ 2,063,919
-----------
Pharmaceuticals & Biotechnology - 3.7%
Biotechnology - 0.9%
6,516 Amgen, Inc.* $ 418,001
-----------
6 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
Shares Value
Pharmaceuticals - 2.8%
4,000 Eli Lilly & Co. $ 227,000
39,288 Pfizer, Inc. 1,056,454
-----------
$ 1,283,454
-----------
Total Pharmaceuticals &
Biotechnology $ 1,701,455
-----------
Diversified Financials - 3.0%
Asset Management & Custody Banks - 1.1%
15,700 The Bank of New York Co., Inc. $ 524,694
-----------
Consumer Finance - 1.5%
12,300 American Express Co. $ 693,351
-----------
Investment Banking & Brokerage - 0.4%
2,900 Merrill Lynch & Co., Inc. $ 173,333
-----------
Total Diversified Financials $ 1,391,378
-----------
Insurance - 4.6%
Property & Casualty Insurance - 4.6%
515 Berkshire Hathaway, Inc. (Class B)* $ 1,512,040
6,900 Progressive Corp. 585,396
-----------
$ 2,097,436
-----------
Total Insurance $ 2,097,436
-----------
Software & Services - 6.9%
Application Software - 3.9%
51,800 Microsoft Corp. $ 1,383,578
15,400 Symantec Corp.* 396,704
-----------
$ 1,780,282
-----------
Shares Value
Data Processing & Outsourced Services - 3.0%
32,700 First Data Corp. $ 1,391,058
-----------
Total Software & Services $ 3,171,340
-----------
Technology Hardware & Equipment - 2.4%
Communications Equipment - 0.3%
9,500 Avaya Inc.* $ 163,400
-----------
Computer Hardware - 1.6%
34,222 Hewlett-Packard Co. $ 717,635
-----------
Electronic Manufacture Services - 0.5%
8,500 Molex, Inc. $ 226,526
-----------
Total Technology Hardware &
Equipment $ 1,107,561
-----------
Semiconductors - 0.4%
7,800 Intel Corp. $ 182,442
-----------
Total Semiconductors $ 182,442
-----------
Telecommunication Services - 1.9%
Wireless Telecommunication Services - 1.9%
32,300 Vodafone Group Plc. (A.D.R.) $ 884,374
-----------
Total Telecommunication Services $ 884,374
-----------
TOTAL COMMON STOCKS
(Cost $24,770,144) $29,060,083
-----------
The accompanying notes are an integral part of these financial statements.
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
ASSET BACKED SECURITIES - 0.3%
Diversified Financials - 0.2%
Diversified Financial Services - 0.1%
84,728 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 84,212
-----------
Total Diversified Financials $ 84,212
-----------
Utilities - 0.1%
Electric Utilities - 0.1%
70,950 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) $ 73,167
-----------
Total Utilities $ 73,167
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $158,096) $ 157,379
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3%
Diversified Financials - 0.3%
Diversified Financial Services - 0.3%
100,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 99,814
50,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 49,750
-----------
Total Diversified Financials $ 149,564
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $150,000) $ 149,564
-----------
CORPORATE BONDS - 11.5%
Energy - 0.8%
Integrated Oil & Gas - 0.2%
30,000 BBB+/Baa1 Occidental Petroleum, 7.65%, 2/15/06 $ 31,406
40,000 BBB+/Baa1 Occidental Petroleum, 6.75%, 1/15/12 45,407
-----------
$ 76,813
-----------
Oil & Gas Exploration & Production - 0.2%
100,000 BBB-/NR Gazprom International SA, 7.201%, 2/1/20 (144A) $ 105,750
-----------
Oil & Gas Refining Marketing & Transportation - 0.4%
205,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 $ 221,688
-----------
Total Energy $ 404,251
-----------
Materials - 1.2%
Commodity Chemicals - 0.2%
100,000 BB+/Ba2 Nova Chemicals, Ltd., 6.5%, 1/15/12 $ 106,000
-----------
Diversified Metals & Mining - 0.3%
125,000 BBB-/Baa3 Inco, Ltd., 7.2%, 9/15/32 $ 145,687
-----------
Metal & Glass Containers - 0.1%
40,000 BBB/Baa2 Tenneco Packaging, 8.125%, 6/15/17 $ 49,943
-----------
Paper Packaging - 0.4%
150,000 A/A2 Bemis Co., Inc., 6.7%, 7/1/05 $ 152,563
-----------
Paper Products - 0.2%
100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.95%, 4/1/08 $ 103,000
-----------
Total Materials $ 557,193
-----------
8 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Capital Goods - 0.7%
Construction & Engineering - 0.1%
50,000 B+/Ba3 Shaw Group Inc., 10.75%, 3/15/10 $ 55,125
-----------
Electrical Components & Equipment - 0.2%
75,000 BBB-/Ba1 Thomas & Betts Corp., 7.25%, 6/1/13 $ 82,269
-----------
Industrial Conglomerates - 0.2%
55,000 AAA/Aaa General Electric Capital Corp., 6.125%, 2/22/11 $ 60,246
30,000 AAA/Aaa General Electric Capital Corp., 6.75%, 3/15/32 35,114
-----------
$ 95,360
-----------
Industrial Machinery - 0.2%
100,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) $ 105,000
-----------
Total Capital Goods $ 337,754
-----------
Commercial Services & Supplies - 0.0%
Diversified Commercial Services - 0.0%
25,000 BBB+/Baa1 Deluxe Corp., 3.5%, 10/1/07 (144A) $ 24,678
-----------
Total Commercial Services & Supplies $ 24,678
-----------
Automobiles & Components - 0.4%
Automobile Manufacturers - 0.4%
200,000 BBB-/Baa2 General Motors, 7.2%, 1/15/11 $ 205,128
-----------
Total Automobiles & Components $ 205,128
-----------
Hotels, Restaurants & Leisure - 0.5%
Hotels, Resorts & Cruise Lines - 0.5%
200,000 BBB-/Baa3 Hilton Hotels, 7.625%, 12/1/12 $ 233,885
-----------
Total Hotels, Restaurants & Leisure $ 233,885
-----------
Media - 1.2%
Broadcasting & Cable Television - 0.8%
250,000 BBB/Baa3 Comcast Cable Corp., 7.125%, 6/15/13 $ 289,636
100,000 BBB-/Baa3 Cox Communications, 7.125%, 10/1/12 112,086
-----------
$ 401,722
-----------
Publishing - 0.4%
170,000 BBB-/Baa3 News America, Inc., 7.3%, 4/30/28 $ 194,794
-----------
Total Media $ 596,516
-----------
Retailing - 0.2%
Specialty Stores - 0.2%
100,000 BB/Ba2 Toys "R" Us, 7.875%, 4/15/13 $ 99,250
-----------
Total Retailing $ 99,250
-----------
Food, Beverage & Tobacco - 0.4%
Tobacco - 0.4%
150,000 BBB/Baa2 Altria Group, Inc., 7.0%, 11/4/13 $ 162,532
-----------
Total Food, Beverage & Tobacco $ 162,532
-----------
Health Care Equipment & Services - 0.7%
Health Care Facilities - 0.5%
200,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 202,841
-----------
Health Care Supplies - 0.2%
100,000 BBB-/Ba1 Bausch & Lomb, 7.125%, 8/1/28 $ 106,550
-----------
Total Health Care Equipment & Services $ 309,391
-----------
The accompanying notes are an integral part of these financial statements.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Banks - 0.3%
Diversified Banks - 0.3%
50,000 NR/Aaa KFW - Kredit Wiederaufbau, 2.75%, 5/8/07 $ 49,209
75,000 AA-/Aa2 National Westminster, 7.375%, 10/1/09 85,383
-----------
$ 134,592
-----------
Total Banks $ 134,592
-----------
Diversified Financials - 1.3%
Consumer Finance - 0.2%
100,000 A/A2 SLM Corp., Floating Rate Note, 7/25/14 $ 99,642
-----------
Investment Banking & Brokerage - 0.2%
75,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) $ 80,625
-----------
Diversified Financial Services - 0.4%
100,000 A-/Baa3 Brascan Corp., 5.75%, 3/1/10 $ 105,806
100,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 96,748
-----------
$ 202,554
-----------
Specialized Finance - 0.5%
100,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) $ 100,250
100,000 B/B2 MDP Acquistions, 9.625%, 10/1/12 111,500
-----------
$ 211,750
-----------
Total Diversified Financials $ 594,571
-----------
Insurance - 1.2%
Life & Health Insurance - 0.2%
100,000 BB+/Ba1 Provident Co., Inc., 7.0%, 7/15/18 $ 96,625
-----------
Multi-Line Insurance - 0.1%
50,000 A/Baa1 Loew Corp., 5.25%, 3/15/16 $ 48,353
-----------
Property & Casualty Insurance - 0.7%
85,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 88,126
100,000 BBB-/Baa3 Arch Capital Group, Ltd., 7.35%, 5/1/34 106,616
150,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 161,429
-----------
$ 356,171
-----------
Reinsurance - 0.2%
100,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 110,296
-----------
Total Insurance $ 611,445
-----------
Real Estate - 0.6%
Real Estate Investment Trusts - 0.6%
150,000 BBB-/Baa3 Hospitality Properties Trust, 6.75%, 2/15/13 $ 165,629
100,000 BBB-/Baa3 Colonial Reality LP, 6.15%, 4/15/13 103,869
-----------
$ 269,498
-----------
Total Real Estate $ 269,498
-----------
Technology Hardware & Equipment - 0.9%
Communications Equipment - 0.1%
50,000 BB/Ba3 Rogers Wireless Inc., Floating Rate Note, 12/15/10 (144A) $ 52,376
-----------
Computer Hardware - 0.8%
250,000 BBB-/Baa3 NCR Corp., 7.125%, 6/15/09 $ 276,039
100,000 BB+/Ba1 Unisys Corp., 6.875%, 3/15/10 107,000
-----------
$ 383,039
-----------
Total Technology Hardware & Equipment $ 435,415
-----------
10 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
Telecommunication Services - 0.4%
Integrated Telecommunication Services - 0.4%
100,000 BBB+/Ba3 Intelsat, Ltd. 6.5%, 11/1/13 $ 91,000
100,000 BBB+/Baa2 Telecom Italia Capital, 5.25%, 11/15/13 101,074
-----------
$ 192,074
-----------
Total Telecommunication Services $ 192,074
-----------
Utilities - 0.2%
Electric Utilities - 0.2%
95,000 BBB-/Baa3 FLP Energy American Wind LLC, 6.639%, 6/20/23 (144A) $ 101,306
-----------
Total Utilities $ 101,306
-----------
TOTAL CORPORATE BONDS
(Cost $4,957,864) $ 5,269,479
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.5%
Government - 22.5%
449,572 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 1/1/34 $ 457,005
186,807 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 9/1/17 193,183
159,028 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 164,515
1,156,543 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 1,196,375
105,004 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/32 108,620
35,818 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 5/1/09 37,582
56,705 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 7/1/33 59,741
17,789 AAA/Aaa Federal Home Loan Mortgage Corp., 6.5%, 11/1/33 18,671
145,347 AAA/Aaa Federal National Mortgage Association, 5.0%, 6/1/34 144,284
203,751 AAA/Aaa Federal National Mortgage Association, 5.5%, 2/1/17 210,912
127,905 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/34 129,926
222,719 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/34 226,239
263,593 AAA/Aaa Federal National Mortgage Association, 5.5%, 9/1/34 267,760
299,126 AAA/Aaa Federal National Mortgage Association, 5.5%, 10/1/34 303,854
223,574 AAA/Aaa Federal National Mortgage Association, 5.5%, 11/1/33 227,169
136,532 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 141,241
110,000 AAA/Aaa Federal National Mortgage Association, 6.125%, 3/15/12 122,216
67,610 AAA/Aaa Federal National Mortgage Association, 6.5%, 4/1/29 71,353
143,018 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 150,115
94,578 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/32 99,286
21,208 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/13 22,509
20,623 AAA/Aaa Federal National Mortgage Association, 6.5%, 8/1/14 21,886
62,139 AAA/Aaa Federal National Mortgage Association, 6.5%, 9/1/32 65,442
50,412 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 52,914
17,685 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/32 18,562
67,948 AAA/Aaa Federal National Mortgage Association, 6.5%, 12/1/21 71,713
10,000 AAA/Aaa Federal National Mortgage Association, 7.125%, 6/15/10 11,494
36,108 AAA/Aaa Federal National Mortgage Association, 9.0%, 4/1/33 39,090
389,233 AAA/Aaa Freddie Mac, 5.0%, 4/1/34 386,788
241,158 AAA/Aaa Freddie Mac, 5.0%, 5/1/34 239,643
150,000 AAA/Aaa Freddie Mac, 5.75%, 1/15/12 163,413
45,389 AAA/Aaa Freddie Mac, 6.0%, 6/1/34 46,910
260,832 AAA/Aaa Freddie Mac, 6.0%, 11/1/33 269,561
115,459 AAA/Aaa Government National Mortgage Association, 5.0%, 4/15/34 115,601
96,149 AAA/Aaa Government National Mortgage Association, 5.5%, 4/15/33 98,294
The accompanying notes are an integral part of these financial statements.
11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Principal S&P/Moody's
Amount Ratings
USD ($) (unaudited) Value
(U.S. Government and Agency Obligations Cont.)
239,253 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/19 $ 249,518
166,589 AAA/Aaa Government National Mortgage Association, 5.5%, 8/15/33 170,305
51,297 AAA/Aaa Government National Mortgage Association, 5.5%, 9/15/33 52,490
353,413 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/32 367,116
133,507 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 140,575
53,615 AAA/Aaa Government National Mortgage Association, 6.5%, 10/15/28 56,547
262,925 AAA/Aaa Government National Mortgage Association I, 5.5%, 6/15/33 268,789
183,588 AAA/Aaa Government National Mortgage Association I, 5.5%, 7/15/33 187,683
148,787 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/32 154,387
467,764 AAA/Aaa Government National Mortgage Association I, 6.0%, 9/15/33 485,108
297,330 AAA/Aaa Government National Mortgage Association II, 6.0%, 10/20/33 308,997
181,240 AAA/Aaa Government National Mortgage Association II, 5.5%, 2/20/34 185,030
25,322 AAA/Aaa Government National Mortgage Association II, 7.5%, 9/20/29 27,092
470,000 AAA/Aaa U.S. Treasury Notes, 4.0%, 11/15/12 469,210
300,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 11/15/08 314,214
200,000 AAA/Aaa U.S. Treasury Notes, 4.75%, 5/15/14 208,422
130,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 140,573
500,000 AAA/Aaa U.S. Treasury Notes, 5.625%, 5/15/08 536,289
-----------
Total Government $10,276,212
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $10,185,772) $10,276,212
-----------
TOTAL INVESTMENTS IN SECURITIES - 98.1%
(Cost $40,221,876) $44,912,717
-----------
OTHER ASSETS AND LIABILITIES - 1.9% $ 851,493
-----------
TOTAL NET ASSETS - 100.0% $45,764,210
-----------
(A.D.R.) American Depositary Receipt
* Non-income producing 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, 2004, the value of these securities amounted to $824,112
or 1.8% of net assets.
NR Not rated by either S&P or Moody's
12 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 5/1/03 to
Class II (a) 12/31/04 12/31/03
Net asset value, beginning of period $ 14.02 $ 12.67
------- -------
Increase from investment operations:
Net investment income $ 0.22 $ 0.14
Net realized and unrealized gain on investments 0.42 1.40
------- -------
Net increase from investment operations $ 0.64 $ 1.54
Distributions to shareowners:
Net investment income ( 0.28) ( 0.19)
-------
Net increase in net asset value $ 0.36 $ 1.35
------- --------
Net asset value, end of period $ 14.38 $ 14.02
------- --------
Total return* 4.59% 12.17%
Ratio of net expenses to average net assets+ 1.19% 1.11%**
Ratio of net investment income to average net assets+ 1.81% 1.12%**
Portfolio turnover rate 30% 37%**
Net assets, end of period (in thousands) $10,452 $ 3,390
Ratios with no waiver of management fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 1.19% 1.11%**
Net investment income 1.81% 1.12%**
(a) Class II shares were first publicly offered on May 1, 2003.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $40,221,876) $ 44,912,717
Cash 770,401
Receivables --
Fund shares sold 615
Dividends, interest and foreign taxes withheld 169,693
Other 3,050
------------
Total assets $ 45,856,476
------------
LIABILITIES:
Payables --
Fund shares repurchased $ 7,826
Due to affiliates 30,009
Accrued expenses 54,431
------------
Total liabilities $ 92,266
------------
NET ASSETS:
Paid-in capital $ 46,401,274
Undistributed net investment income (loss) 14,409
Accumulated undistributed net realized gain (loss) (5,342,314)
Net unrealized gain (loss) on:
Investments 4,690,841
------------
Total net assets $ 45,764,210
------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 35,312,051
Shares outstanding 2,451,399
------------
Net asset value per share $ 14.40
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 10,452,159
Shares outstanding 726,928
------------
Net asset value per share $ 14.38
14 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $1,615) $ 452,044
Interest (net of foreign taxes withheld of $94) 825,144
----------
Total investment income $1,277,188
----------
EXPENSES:
Management fees $ 288,949
Transfer agent fees and expenses 2,987
Distribution fees (Class II) 16,887
Administrative reimbursements 18,500
Custodian fees 18,175
Professional fees 53,197
Printing expense 17,844
Miscellaneous 3,205
----------
Total expenses $ 419,744
----------
Net expenses $ 419,744
----------
Net investment income (loss) $ 857,444
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $1,099,149
----------
$1,099,149
----------
Change in net unrealized gain or (loss) from:
Investments $ 127,896
----------
$ 127,896
----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $1,157,438
----------
Net increase (decrease) in net assets resulting
from operations $2,084,489
----------
The accompanying notes are an integral part of these financial statements.
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended Year Ended
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 857,444 $ 718,572
Net realized gain (loss) on investments 1,099,149 336,352
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 127,896 5,309,842
------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 2,084,489 $ 6,364,766
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (789,468) $ (800,491)
Class II (155,092) (20,067)
------------ ------------
Total distributions to shareowners $ (944,560) $ (820,558)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 8,978,890 $ 4,068,440
Reinvestment of distributions 944,549 820,551
Cost of shares repurchased (9,461,531) (9,119,455)
------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 461,908 $ (4,230,464)
------------ ------------
Net increase (decrease) in net assets $ 1,601,837 $ 1,313,744
------------ ------------
NET ASSETS:
Beginning of year $ 44,162,373 $ 42,848,629
------------ ------------
End of year $ 45,764,210 $ 44,162,373
------------ ------------
Undistributed net investment income (loss),
end of year $ 14,409 $ 12,808
------------ ------------
16 The accompanying notes are an integral part of these
financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. Organization and Significant Accounting Policies
The Pioneer Balanced VCT Portfolio is a portfolio of the Pioneer Variable
Contracts Trust (the Trust) which is a Delaware business trust registered under
the Investment Company Act of 1940 as an open-end management investment
company. The Trust consists of twenty two separate diversified portfolios
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objectives of Balanced Portfolio are capital growth and current
income.
Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years.
Actual results could differ from those estimates. 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
generally accepted in the investment company industry:
A. Security Valuation
Security transactions are recorded as of trade date. Net asset value for
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
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 quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio 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, 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. 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, 2004, the portfolio had no open futures contracts.
C. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Balanced VCT Portfolio had a capital loss
carryforward of $5,161,356, of which will the following amounts expire
between 2010 and 2011 if not utilized: $2,571,211 in 2010, and $2,590,145,
in 2011.
The portfolio elected to defer $90,901 in capital losses recognized between
November 1, 2004 and December 31, 2004 to its fiscal year ending December
31, 2005.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
- --------------------------------------------------------------------------------
Undistributed Net Accumulated Net
Investment Income Realized Gain Paid-In
Portfolio (Loss) (Loss) Capital
- --------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio $88,717 $ (88,717) $ (0)
------- --------- ----
- --------------------------------------------------------------------------------
18
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
2004 2003
--------------- -----------
Distributions paid from:
Ordinary Income $ 944,560 $820,558
Long-Term capital gain -- --
------------ --------
$ 944,560 $820,558
Return of Capital -- --
------------ --------
Total distributions $ 944,560 $820,558
------------ --------
Distributable Earnings (Accumulated Losses):
Undistributed ordinary income $ 13,132
Undistributed long-term gain/(capital loss carryforward) (5,161,356)
Post-October loss deferred (90,901)
Unrealized appreciation (depreciation) 4,602,061
------------
Total $ (637,064)
------------
- ----------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, and the tax treatment of premium amortization.
D. Portfolio Shares
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, 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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
F. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
19
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
Portfolio. Management fees are calculated daily at the following 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. At December 31, 2004, $27,524 was payable to PIM related to
management fees, administrative fees and certain other services, and is
included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $272 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$2,213 payable to PFD at December 31, 2004.
5. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolio's aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
- -----------------------------------------------------------------------------------------
Net
Gross Gross Appreciation/
Portfolio Tax Cost Appreciation Depreciation (Depreciation)
- -----------------------------------------------------------------------------------------
Balanced Portfolio $40,310,656 $5,154,366 $ (552,305) $4,602,061
- -----------------------------------------------------------------------------------------
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $6,958,907 and $6,637,518, respectively. The cost of
purchase and the proceeds from sales in U.S. Government obligations were
$7,113,072 and $6,465,950, respectively.
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- -----------------------------------------------------------------------------------------
Balanced Portfolio '04 Shares '04 Amount '03 Shares '03 Amount
- -----------------------------------------------------------------------------------------
CLASS I:
Shares sold 78,321 $ 1,113,192 58,603 $ 777,329
Reinvestment of distributions 55,609 789,468 60,877 800,492
Shares repurchased (586,843) (8,291,593) (705,902) (9,066,098)
-------------------------------------------------------
Net increase (decrease) (452,913) (6,388,933) (586,422) $ (7,488,277)
-------------------------------------------------------
CLASS II:
Shares sold 557,386 $ 7,865,698 244,252 $ 3,291,111
Reinvestment of distributions 10,920 155,081 1,455 20,059
Shares repurchased (83,119) (1,169,938) (3,966) (53,357)
------------------------------------------------------
Net increase 485,187 $ 6,850,841 241,741 $ 3,257,813
------------------------------------------------------
- -----------------------------------------------------------------------------------------
20
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Balanced VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees of Pioneer Variable Contracts Trust and
the Class II Shareowners of Pioneer Balanced VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Balanced VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of
December 31, 2004, 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 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. An audit includes 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, 2004, by
correspondence with the custodian. 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 Balanced VCT Portfolio of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 the periods indicated therein, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 11, 2005
21
- -----------------------------------------------------------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
Custodian with their rincipal occupations during the past five years. Trustees who
Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as
Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S.
registered investment portfolios for which Pioneer Investment Management,
Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address
Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State
Street, Boston, Massachusetts 02109.
Legal Counsel The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available
upon request, without charge, by calling 1-800-225-6292.
Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number
Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc.
online at pioneerfunds.com. online at pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd.
Jr. (78)* Board, Trustee successor trustee until retirement or removal
President and is elected or or earlier retirement Deputy
removal Chairman and a Director of
Pioneer Global Asset Management
S.p.A. ("PGAM"); Non-Executive
Chairman and a Director of
Pioneer Investment Manage
("PIM-USA"); Chairman and a
Director of Pio of Pioneer
Alternative Investment Managemen
(Dublin); President and a
Director of Pione Investment
Management (Bermuda) Limited and
funds; President and Director of
Pioneer Fu Inc. ("PFD");
President of all of the Pione Of
Counsel (since 2000, partner
prior to 20 Pickering Hale and
Dorr LLP (counsel to PIM Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive None
(52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003
President elected or earlier (Director since January 2001);
retirement or removal President and Director of Pioneer
since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
22
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment
Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing
3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York
Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage
Washington, company) (2001-present); REIT)
DC 20007 Managing Partner, Federal
City Capital Advisors
(boutique merchant
bank)(1995-2000; 2002 to
2004); Executive Vice
President and Chief
Financial Officer, Pedestal
Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial
(56) 3509 2000. successor trustee is (international inancial identification and specialty coated material
Woodbine elected or earlier advisory firm) products manufacturer), Millennium
Street, retirement or removal Chemicals, Inc. (commodity chemicals),
Chevy Chase, Mortgage Guaranty Insurance Corporation,
MD 20815 and R.J. Reynolds Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Trustee since Serves until Founding Director, The None
B.W. Graham 2000. successor trustee is Winthrop Group, Inc.
(57) 1001 elected or earlier (consulting firm); Professor
Sherbrooke retirement or removal of Management, Faculty of
Street West, Management, McGill
Montreal, University
Quebec,
Canada H3A
1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite Trustee since Serves untill President, and Cheif Executive Director of New American high Income Fund,
A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company)
(56) One trustee is Company, Inc. (investment
Boston elected or banking firm)
Place, 28th earlier
Floor, retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director,The Swiss Helvetic Fund, Inc.
West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP
125 Broad is elected or earlier PLC (investment managers)
Street, New retirement or removal
York, NY
10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Trustee since Serves until President, John Winthrop & Co., None
Winthrop September, successor trustee Inc.(private investment firm)
(68) One 2000. is elected or earlier
North Adgers retirement or removal
Wharf,
Charleston,
SC 29401
- ------------------------------------------------------------------------------------------------------------------------------------
23
Pioneer Balanced VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Complianc of PIM-USA from
April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the discretion Assistant Vice President and None
Kelley (40) Secretary of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the discretion Partner, Wilmer Cutler None
Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Treasurer Serves at the discretion Vice President-Fund None
Nave (59) of the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of all
of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Bradley (45) Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of
all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the discretion Assistant Vice President - None
Presutti (39) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None
(46) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
24
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Balanced VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None
Sullivan (31) Treasurer of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration
and Custody Services (Fund
Accounting Manager from
August 1999 to May 2002, Fund
Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None
(37) Compliance of the Board Pioneer (Director of
Officer Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
25
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER MID CAP VALUE VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Mid Cap Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 18
Trustees, Officers and Service Providers 19
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 90.8%
Temporary Cash Investment 8.2%
Depositary Receipts for International Stocks 1.0%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 20.1%
Consumer Discretionary 19.7%
Information Technology 12.6%
Industrials 11.1%
Materials 8.7%
Health Care 8.5%
Consumer Staples 7.7%
Energy 6.0%
Utilities 5.5%
Telecommunication Services 0.1%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Foot Locker Inc. 2.55%
2. Mattel, Inc. 2.19%
3. Safeway, Inc. 1.81%
4. Triad Hospitals, Inc. 1.76%
5. CIGNA Corp. 1.76%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 24.44 $ 20.32
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.0598 $ -- $ 0.2095
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
MID CAP VALUE VCT PORTFOLIO at net asset value, compared to that of the Russell
Midcap Value Index. Portfolio returns are based on net asset value and do not
reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell Midcap Value Index Pioneer Mid Cap Value VCT Portfolio*
3/95 10000 10000
12263 11685
12/96 14748 13193
19812 16294
12/98 20820 14734
20799 16615
12/00 24789 19800
25369 21032
12/02 22920 18639
31643 25551
12/04 39142 31114
Index comparison begins 2/28/95. 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, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 12.12%
(3/1/95)
5 Years 13.37%
1 Year 21.77%
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 MID CAP 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 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 MID CAP VALUE VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,121.91 $ 1,120.03
Expenses Paid During Period* $ 3.88 $ 5.20
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73% and
0.98% 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). 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 MID CAP VALUE VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.26
Expenses Paid During Period* $ 3.70 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.73%,
and 0.98% 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 MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
INVESTING IN MID-SIZED COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT
THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN
LARGER, MORE ESTABLISHED COMPANIES.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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.
Domestic equity markets moved in fits and starts, both up and down, through the
first nine months of 2004 before finally staging a strong rally following the
November elections. In the final two months of the year, stock indices moved
upward, with small- and mid-cap companies outperforming large-cap corporations,
and value stocks outpacing growth stocks. In the following interview, Rod Wright
discusses the market environment and factors that affected performance during
2004. Mr. Wright is responsible for day-to-day portfolio management of Pioneer
Mid Cap Value VCT Portfolio.
Q: HOW DID THE PORTFOLIO PERFORM?
A: The Portfolio delivered strong results, despite trailing its benchmark
index. For the 12 months ended December 31, 2004, Class II shares of the
Portfolio had a total return of 21.77% at net asset value, while the
Russell Midcap Value Index returned 23.71%. 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.
Q: WHAT WERE THE PRINCIPAL FACTORS THAT AFFECTED PERFORMANCE?
A: The Portfolio participated in the final end-of-year rally that raised stock
averages. For much of the year, a variety of factors and potential problems
affected investors, who worried about the effects of rising interest rates,
increasing energy prices, instability in Iraq and the political uncertainty
resulting from a fiercely contested Presidential election.
During the year, our selections in the health care, telecommunications,
energy, financials and utilities sectors helped performance, while
investments in materials, technology, industrials and consumer staples
sectors detracted from results.
Q: WHAT WERE SOME OF THE INDIVIDUAL INVESTMENTS THAT HAD THE GREATEST IMPACT
ON PORTFOLIO RESULTS?
A: Although technology investments tended to be a drag on performance, one
technology company - NCR - had the single greatest positive impact on the
Portfolio's return. NCR, which already had established itself as a leader
in producing ATM and automatic retail scanning and check-out equipment, saw
greatly improved results from its technology that helps companies store and
manage large quantities of data. NCR's stock had been selling at a deep
discount, but the effects of a corporate reorganization and the policies of
a new management team helped lead to greatly improved earnings.
Reliant Energy, which is involved in both electric power generation and in
power distribution, was the Portfolio's second-largest contributor, as its
stock appreciated after a reorganization of company debt.
Other stocks that helped performance substantially included: Transocean,
which operates oil drilling rigs and benefited from rising oil prices; W.W.
Grainger, a national distributor of industrial parts and machinery, which
enjoyed improved earnings as a result of a restructuring; and Ball, a
packaging company which manufactures cans and bottles for beverage
companies. Two health care sector investments that helped were: Becton
Dickinson, a medical supply company; and Cigna, an HMO.
Also adding to results were three companies involved in acquisitions at
premiums to their stock valuations: Charter Bank, which was taken over by
Citizens Bank, a unit of Royal Bank of Scotland; Apogent Technology, a
producer of research equipment for medical laboratories, which was acquired
by Fisher Scientific; and Veritas Software, a developer of data management
software, which announced it was being acquired by Symantec.
Holdings that detracted from results included UTStarcom, a manufacturer of
inexpensive hand-held telephones, which was hurt by intense competition in
China. While we sold our position in UTStarcom, we retained three other
stocks that were a drag on performance: Safeway, toy company Mattel and
mortgage insurer PMI, all of which gained but still lagged the mid-cap
value market.
Portfolio results were held back by not owning three companies that were
performance leaders during 2004: TXU, a Texas utility; Apple Computer, the
developer of the popular iPod product; and Monsanto, which produces
genetically modified seeds for the agriculture industry.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We are reasonably optimistic about the economy and investment opportunities
in the stock market. After a year in which corporate earnings rose faster
than stock prices, stock valuations - as measured by price/earnings ratios
- are more reasonable than they were a year ago. At the same time, interest
rates remain low by historical standards, even though the Federal Reserve
has raised short-term rates several times, while the economy continues to
expand and support rising corporate earnings.
Investors are watching several issues very carefully. They include: oil
prices, which recently have declined; the elections and political
instability in Iraq; and general geopolitical concerns. Positive news about
any of these issues could help rally the stock market. Although we expect
to continue to de-emphasize stocks of companies that may be vulnerable to
rapid increases in interest rates, we are moderately bullish about the
overall market.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 99.8%
ENERGY - 5.9%
INTEGRATED OIL & GAS - 0.9%
7,700 BP Amoco Plc (A.D.R.) $ 449,680
129,540 Occidental Petroleum Corp. 7,559,954
-------------
$ 8,009,634
-------------
OIL & GAS DRILLING - 2.8%
175,915 ENSCO International, Inc. $ 5,583,542
111,530 Nabors Industries, Inc.* 5,720,374
30,000 Pride International, Inc* 616,200
141,630 Transocean Offshore, Inc.* 6,003,696
102,035 Weatherford International, Inc.* 5,234,396
-------------
$ 23,158,208
-------------
OIL & GAS EXPLORATION & PRODUCTION - 2.0%
14,200 Apache Corp. $ 718,094
11,700 Anadarko Petroleum Corp. 758,277
185,022 Devon Energy Corp. 7,201,056
203,585 Pioneer Natural Resources Co. 7,145,834
19,300 XTO Energy, Inc. 682,834
-------------
$ 16,506,095
-------------
OIL & GAS REFINING MARKETING &
TRANSPORTATION - 0.3%
27,385 Sun Co., Inc. $ 2,237,628
-------------
TOTAL ENERGY $ 49,911,565
-------------
MATERIALS - 8.6%
COMMODITY CHEMICALS - 1.2%
171,545 Air Products & Chemicals, Inc. $ 9,944,464
-------------
DIVERSIFIED CHEMICAL - 1.6%
7,200 Olin Corp. $ 158,544
197,420 PPG Industries, Inc. 13,456,147
-------------
$ 13,614,691
-------------
DIVERSIFIED METALS & MINING - 1.8%
141,700 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 5,417,191
100,785 Phelps Dodge Corp. 9,969,652
-------------
$ 15,386,843
-------------
METAL & GLASS CONTAINERS - 1.6%
305,720 Ball Corp. $ 13,445,566
-------------
PAPER PRODUCTS - 2.3%
278,467 Flowserve Corp.* $ 7,668,981
351,900 Meadwestvaco Corp. 11,925,891
-------------
$ 19,594,872
-------------
SPECIALTY CHEMICALS - 0.1%
16,500 Ecolab, Inc. $ 579,645
-------------
Total Materials $ 72,566,081
-------------
CAPITAL GOODS - 5.2%
AEROSPACE & DEFENSE - 1.0%
11,800 Northrop Grumman Corp. $ 641,448
166,500 United Defense Industries, Inc.* 7,867,125
-------------
$ 8,508,573
-------------
CONSTRUCTION, FARM MACHINERY &
HEAVY TRUCKS - 0.1%
13,100 Terex Corp.* $ 624,215
-------------
ELECTRICAL COMPONENT & EQUIPMENT - 1.3%
627,890 Symbol Technologies, Inc. $ 10,862,497
-------------
INDUSTRIAL CONGLOMERATES - 2.8%
259,780 American Standard Co., Inc.* $ 10,734,110
148,520 ITT Industries, Inc. 12,542,514
-------------
$ 23,276,624
-------------
TOTAL CAPITAL GOODS $ 43,271,909
-------------
COMMERCIAL SERVICES & SUPPLIES - 4.3%
COMMERCIAL PRINTING - 1.4%
344,740 R.R. Donnelly & Sons Co. $ 12,165,875
-------------
DIVERSIFIED COMMERCIAL SERVICES - 1.3%
26,700 FTI Consulting, Inc.* $ 562,569
209,010 H & R Block, Inc. 10,241,490
-------------
$ 10,804,059
-------------
ENVIRONMENTAL SERVICES - 1.6%
396,435 Republic Services, Inc. $ 13,296,430
-------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 36,266,364
-------------
TRANSPORTATION - 1.7%
AIR FREIGHT & COURIERS - 0.1%
9,600 Expeditors International of
Washington, Inc. $ 536,448
-------------
AIRLINES - 0.6%
294,810 Southwest Airlines Co. $ 4,799,507
-------------
RAILROADS - 1.0%
139,920 Canadian National Railway Co. $ 8,570,100
-------------
TOTAL TRANSPORTATION $ 13,906,055
-------------
AUTOMOBILES & COMPONENTS - 0.1%
AUTOMOBILE MANUFACTURERS - 0.1%
19,300 Monaco Coach Corp. $ 397,001
8,800 PACCAR, Inc. 708,224
-------------
$ 1,105,225
-------------
TOTAL AUTOMOBILES & COMPONENTS $ 1,105,225
-------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
CONSUMER DURABLES & APPAREL - 4.5%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.3%
99,391 The Limited Brands, Inc. $ 2,287,981
-------------
HOUSEWARES & SPECIALTIES - 0.8%
31,700 Leggett & Platt, Inc. $ 901,231
174,600 Yankee Candle Co.* 5,793,228
-------------
$ 6,694,459
-------------
LEISURE PRODUCTS - 2.2%
940,930 Mattel, Inc. $ 18,338,726
-------------
PHOTOGRAPHIC PRODUCTS - 1.2%
316,300 Eastman Kodak Co. (a) $ 10,200,675
-------------
TOTAL CONSUMER DURABLES & APPAREL $ 37,521,841
-------------
HOTELS, RESTAURANTS & LEISURE - 1.7%
HOTELS, RESORTS & CRUISE LINES - 0.1%
27,600 Ambassadors Group, Inc. $ 982,836
-------------
RESTAURANTS - 1.6%
333,400 Ruby Tuesday, Inc. $ 8,695,072
91,905 Tricon Global Restaurants, Inc. 4,336,078
-------------
$ 13,031,150
-------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 14,013,986
-------------
MEDIA - 3.7%
ADVERTISING - 1.7%
1,066,400 The Interpublic Group of Co., Inc.* $ 14,289,760
-------------
BROADCASTING & CABLE TV - 1.2%
275,200 Entercom Communications Corp.* $ 9,876,928
-------------
MOVIES & ENTERTAINMENT - 0.8%
315,360 Regal Entertainment Group (a) $ 6,543,720
16,900 Viacom, Inc. (Class B) 614,991
-------------
$ 7,158,711
-------------
TOTAL MEDIA $ 31,325,399
-------------
RETAILING - 9.6%
APPAREL RETAIL - 1.1%
221,900 Liz Claiborne, Inc. $ 9,366,399
-------------
DEPARTMENT STORES - 0.7%
150,300 J.C. Penney Co., Inc. $ 6,222,420
-------------
GENERAL MERCHANDISE STORES - 0.8%
265,100 American Greetings Corp. (a) $ 6,720,285
-------------
INTERNET RETAIL - 1.4%
418,500 InterActive Corp.* $ 11,558,970
-------------
SPECIALTY STORES - 5.6%
984,000 Blockbuster, Inc. (a) $ 9,387,360
793,230 Foot Locker, Inc. 21,361,684
210,700 Tiffany & Co. 6,736,079
471,700 Toys "R" Us, Inc.* 9,655,699
-------------
$ 47,140,822
-------------
TOTAL RETAILING $ 81,008,896
-------------
FOOD & DRUG RETAILING - 7.6%
DRUG RETAIL - 1.3%
233,170 CVS Corp. $ 10,508,972
-------------
FOOD DISTRIBUTORS - 1.3%
9,800 Amerisourcebergen Corp. $ 575,064
322,700 McKesson HBOC, Inc. 10,152,142
21,900 Performance Food Group Co.* 589,329
-------------
$ 11,316,535
-------------
FOOD RETAIL - 3.4%
284,790 ConAgra, Inc. $ 8,387,066
111,818 Dean Foods Co.* 3,684,403
62,000 Kroger Co.* 1,087,480
770,100 Safeway, Inc. 15,201,774
-------------
$ 28,360,723
-------------
HYPERMARKETS & SUPERCENTERS - 1.6%
447,870 BJ'S Wholesale Club, Inc.* (a) $ 13,046,453
13,000 Costco Wholesale Corp. 629,330
-------------
$ 13,675,783
-------------
TOTAL FOOD & DRUG RETAILING $ 63,862,013
-------------
FOOD, BEVERAGE & TOBACCO - 0.1%
SOFT DRINKS - 0.1%
13,600 PepsiCo, Inc. $ 709,920
-------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 709,920
-------------
HEALTH CARE EQUIPMENT & SERVICES - 6.5%
HEALTH CARE DISTRIBUTORS - 0.8%
147,700 Par Pharmaceutical Co., Inc.* $ 6,111,826
21,200 Wyeth 902,908
-------------
$ 7,014,734
-------------
HEALTH CARE FACILITIES - 3.0%
971,100 Tenet Healthcare Corp.* $ 10,662,678
397,360 Triad Hospitals, Inc.* 14,785,766
-------------
$ 25,448,444
-------------
HEALTH CARE SERVICES - 0.8%
17,200 Accredo Health, Inc.* $ 476,784
111,330 Laboratory Corp. of America Holdings* 5,546,461
23,200 Ims Health, Inc. 538,472
-------------
$ 6,561,717
-------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
HEALTH CARE SUPPLIES - 0.1%
11,200 Cooper Co., Inc. $ 790,608
-------------
MANAGED HEALTH CARE - 1.8%
180,400 CIGNA Corp. $ 14,715,228
-------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 54,530,731
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.0%
PHARMACEUTICALS - 2.0%
648,200 IVAX Corp.* (a) $ 10,254,524
356,100 Mylan Laboratories, Inc. (a) 6,295,848
23,900 Pfizer, Inc. 642,671
-------------
$ 17,193,043
-------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 17,193,043
-------------
BANKS - 7.1%
DIVERSIFIED BANKS - 0.0%
10,200 U.S. Bancorp $ 319,464
-------------
REGIONAL BANKS - 4.7%
120,600 City National Corp. $ 8,520,390
175,830 KeyCorp 5,960,637
184,865 Marshall & Ilsley Corp. 8,171,033
264,456 North Fork Bancorporation, Inc. 7,629,556
28,852 Washington Banking Co. 523,664
36,000 West Coast Bancorp Oregon 914,760
120,200 Zions Bancorporation 8,177,206
-------------
$ 39,897,246
-------------
THRIFTS & MORTGAGE FINANCE - 2.4%
145,098 Countrywide Financial Corp. $ 5,370,077
323,160 The PMI Group, Inc. 13,491,930
21,500 Washington Mutual, Inc. 909,020
-------------
$ 19,771,027
-------------
TOTAL BANKS $ 59,987,737
-------------
DIVERSIFIED FINANCIALS - 6.6%
CONSUMER FINANCE - 1.4%
18,414 White Mountains Insurance Group, Ltd. $ 11,895,444
-------------
ASSET MANAGEMENT & CUSTODY BANKS - 1.2%
314,990 Federated Investors, Inc. $ 9,575,696
23,600 Waddell & Reed Financial, Inc. 563,804
-------------
$ 10,139,500
-------------
CONSUMER FINANCE - 1.7%
29,000 MBNA Corp. $ 817,510
832,100 Providian Financial Corp.* 13,704,687
-------------
$ 14,522,197
-------------
INVESTMENT BANKING & BROKERAGE - 2.3%
322,000 A.G. Edwards, Inc. $ 13,913,620
248,150 Investment Technology Group, Inc.* 4,963,000
-------------
$ 18,876,620
-------------
TOTAL DIVERSIFIED FINANCIALS $ 55,433,761
-------------
INSURANCE - 6.4%
INSURANCE BROKERS - 2.3%
278,410 Platinum Underwriter Holdings, Ltd. $ 8,658,551
259,540 Willis Group Holdings, Ltd. (a) 10,685,262
-------------
$ 19,343,813
-------------
LIFE & HEALTH INSURANCE - 2.0%
111,030 Jefferson - Pilot Corp. $ 5,769,119
6,900 Stancorp Financial Group, Inc. 569,250
554,700 UNUM Corp. (a) 9,951,318
-------------
$ 16,289,687
-------------
PROPERTY & CASUALTY INSURANCE - 2.1%
64,905 Ambac Financial Group, Inc. $ 5,330,648
238,000 Safeco Corp. 12,433,120
-------------
$ 17,763,768
-------------
TOTAL INSURANCE $ 53,397,268
-------------
SOFTWARE & SERVICES - 4.4%
APPLICATION SOFTWARE - 1.6%
71,100 Captaris, Inc.* $ 366,876
14,600 Intuit, Inc.* 642,546
18,200 Microsoft Corp. 486,122
407,100 Veritas Software Corp.* 11,622,705
-------------
$ 13,118,249
-------------
DATA PROCESSING & OUTSOURCED SERVICES - 2.7%
584,730 The BISYS Group, Inc.* $ 9,618,809
14,800 Fiserv, Inc.* 594,812
437,829 SunGard Data Systems, Inc.* 12,403,696
-------------
$ 22,617,317
-------------
SYSTEMS SOFTWARE - 0.1%
19,020 Netiq Corp.* $ 232,234
36,000 WatchGuard Technologies, Inc.* 159,480
-------------
$ 391,714
-------------
TOTAL SOFTWARE & SERVICES $ 36,127,280
-------------
TECHNOLOGY, HARDWARE & EQUIPMENT - 8.0%
COMMUNICATIONS EQUIPMENT - 2.0%
356,600 Century Telephone Enterprises, Inc. $ 12,648,602
480,221 Tellabs, Inc.* 4,125,098
-------------
$ 16,773,700
-------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
COMPUTER HARDWARE - 0.6%
76,360 NCR Corp.* $ 5,286,403
-------------
COMPUTER STORAGE & PERIPHERALS - 3.1%
275,600 Imation Corp. $ 8,772,348
277,500 Sandisk Corp.* 6,929,174
333,900 Storage Technology Corp.* 10,554,579
-------------
$ 26,256,101
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.1%
123,980 W.W. Grainger, Inc. $ 8,259,548
28,000 Ingram Micro, Inc.* 582,400
-------------
$ 8,841,948
-------------
TECHNOLOGY DISTRIBUTORS - 1.2%
150,320 Fisher Scientific International, Inc.* $ 9,376,962
19,600 Tektronix, Inc. 592,115
-------------
$ 9,969,077
-------------
TOTAL TECHNOLOGY, HARDWARE &
EQUIPMENT $ 67,127,229
-------------
SEMICONDUCTORS - 0.2%
SEMICONDUCTOR EQUIPMENT - 0.0%
24,500 FEI Co.* $ 514,500
-------------
SEMICONDUCTORS - 0.2%
36,300 Intel Corp. $ 849,057
36,700 Micron Technology, Inc.* 453,245
50,400 Triquint Semiconductor, Inc.* 224,280
-------------
$ 1,526,582
-------------
TOTAL SEMICONDUCTORS $ 2,041,082
-------------
TELECOMMUNICATION SERVICES - 0.1%
INTEGRATED TELECOMMUNICATION SERVICES - 0.1%
20,600 SBC Communications, Inc. $ 530,862
14,700 Verizon Communications, Inc. 595,498
-------------
$ 1,126,360
-------------
TOTAL TELECOMMUNICATION SERVICES $ 1,126,360
-------------
UTILITIES - 5.5%
ELECTRIC UTILITIES - 4.1%
45,800 Avista Corp. $ 809,286
168,475 Constellation Energy Group 7,364,041
131,915 Entergy Corp. 8,916,137
122,500 NSTAR 6,649,300
322,500 PG&E Corp.* 10,732,800
-------------
$ 34,471,564
-------------
MULTI-UTILITIES & UNREGULATED POWER - 1.4%
836,100 Reliant Energy* (a) $ 11,412,762
-------------
TOTAL UTILITIES $ 45,884,323
-------------
TOTAL COMMON STOCKS
(Cost $694,162,506) $ 838,318,071
-------------
PRINCIPAL
AMOUNT VALUE
TEMPORARY CASH INVESTMENTS - 8.9%
REPURCHASE AGREEMENT - 0.9%
$ 7,500,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,500,000 plus accrued interest on
1/3/05 collateralized by $7,133,000
U.S. Treasury Bill, 6.5%, 10/15/2006 $ 7,500,000
-------------
SHARES
SECURITY LENDING COLLATERAL - 8.0%
67,222,325 Securities Lending
Investment Fund, 2.18% $ 67,222,325
-------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $74,722,325) $ 74,722,325
-------------
TOTAL INVESTMENTS IN
SECURITIES - 108.7%
(Cost $768,884,831) $ 913,040,396
-------------
OTHER ASSETS
AND LIABILITIES - (8.7%) $ (73,064,457)
-------------
TOTAL NET ASSETS - 100.0% $ 839,975,936
=============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
261,495 American Greetings Corp. $ 6,628,898
386,336 BJ'S Wholesale Club, Inc.* 11,253,968
775,700 Blockbuster, Inc. 7,400,178
100,000 Eastman Kodak Co. 3,225,000
122,760 IVAX Corp.* 1,942,063
338,295 Mylan Laboratories, Inc. 5,981,056
294,557 Regal Entertainment Group 6,112,058
214,400 Reliant Energy* 2,926,560
521,740 UNUM Corp. 9,360,016
245,613 Willis Group Holdings, Ltd. 10,111,886
------------
TOTAL $ 64,941,683
============
8 The accompanying notes are an integral part of these financial statements.
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 20.32 $ 14.86 $ 17.28 $ 17.75 $ 16.89
---------- ---------- -------- -------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.01 $ 0.06 $ 0.04 $ 0.14 $ 0.07
Net realized and unrealized gain (loss) on investments 4.38 5.44 (1.96) 0.94 2.01
---------- ---------- -------- -------- -------
Net increase (decrease) from investment operations $ 4.39 $ 5.50 $ (1.92) $ 1.08 $ 2.08
Distributions to shareowners:
Net investment income (0.06) (0.04) (0.04) (0.08) (0.13)
Net realized gain (0.21) -- (0.46) (1.47) (1.09)
---------- ---------- -------- -------- -------
Net increase (decrease) in net asset value $ 4.12 $ 5.46 $ (2.42) $ (0.47) $ 0.86
---------- ---------- -------- -------- -------
Net asset value, end of period $ 24.44 $ 20.32 $ 14.86 $ 17.28 $ 17.75
========== ========== ======== ======== =======
Total return* 21.77% 37.09% (11.38)% 6.22% 13.35%
Ratio of net expenses to average net assets+ 0.97% 1.00% 1.07% 1.11% 1.01%**
Ratio of net investment income to average net assets+ 0.29% 0.60% 0.24% 0.10% 0.37%**
Portfolio turnover rate 55% 52% 68% 95% 85%
Net assets, end of period (in thousands) $ 536,837 $ 211,120 $ 61,038 $ 10,195 $ 1,943
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.97% 1.00% 1.07% 1.11% 1.01%**
Net investment income 0.29% 0.60% 0.24% 0.10% 0.37%**
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 0.97% 1.00% 1.07% 1.11% 1.01%**
Net investment income 0.29% 0.60% 0.24% 0.10% 0.37%**
(a) The Per share data presented above is based upon the average shares
outstanding for the period presented.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 9
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $64,941,683) (Cost $768,884,831) $ 913,040,396
Receivables--
Investment securities sold 1,342,101
Fund shares sold 206,665
Dividends, interest and foreign taxes withheld 591,214
Other 14,869
-------------
Total assets $ 915,195,245
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 2,861,531
Fund shares repurchased 4,004,450
Upon return of securities loaned 67,222,328
Due to bank 434,663
Due to affiliates 582,759
Accrued expenses 113,578
-------------
Total liabilities $ 75,219,309
-------------
NET ASSETS:
Paid-in capital $ 647,879,874
Undistributed net investment income (loss) 2,164,900
Accumulated undistributed net realized gain (loss) 45,775,597
Net unrealized gain (loss) on:
Investments 144,155,565
-------------
Total net assets $ 839,975,936
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 303,138,450
Shares outstanding 12,289,796
-------------
Net asset value per share $ 24.67
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 536,837,486
Shares outstanding 21,966,264
-------------
Net asset value per share $ 24.44
10 The accompanying notes are an integral part of these financial statements.
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTOF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $12,629) $ 7,019,067
Interest 207,829
Income on securities loaned, net 24,175
-------------
Total investment income $ 7,251,071
-------------
EXPENSES:
Management fees $ 3,753,733
Transfer agent fees and expenses 3,195
Distribution fees (Class II) 936,681
Administrative reimbursements 117,136
Custodian fees 100,959
Professional fees 67,108
Printing expense 107,301
Fees and expenses of nonaffiliated trustees 3,413
Miscellaneous 7,185
-------------
Total expenses $ 5,096,711
Less fees paid indirectly (10,627)
-------------
Net expenses $ 5,086,084
-------------
Net investment income (loss) $ 2,164,987
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 53,898,712
-------------
$ 53,898,712
-------------
Change in net unrealized gain or (loss) from:
Investments $ 70,310,429
-------------
$ 70,310,429
-------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 124,209,141
=============
Net increase (decrease) in net assets resulting
from operations $ 126,374,128
=============
The accompanying notes are an integral part of these financial statements. 11
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 2,164,987 $ 1,803,484
Net realized gain (loss) on investments 53,898,712 6,004,760
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 70,310,429 75,230,670
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 126,374,128 $ 83,038,914
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (711,725) $ (438,494)
Class II (1,067,643) (236,135)
Net realized gain
Class I (1,863,831) --
Class II (3,740,321) --
------------- -------------
Total distributions to shareowners $ (7,383,520) $ (674,629)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 331,791,818 $ 161,143,658
Class I shares issued in reorganization 49,670,328 --
Reinvestment of distributions 7,383,520 674,611
Cost of shares repurchased (49,217,509) (44,550,616)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 339,628,157 $ 117,267,653
------------- -------------
Net increase (decrease) in net assets $ 458,618,765 $ 199,631,938
------------- -------------
NET ASSETS:
Beginning of year $ 381,357,171 $ 181,725,233
------------- -------------
End of year $ 839,975,936 $ 381,357,171
============= =============
Undistributed net investment income (loss),
end of year $ 2,164,900 $ 1,779,281
============= =============
12 The accompanying notes are an integral part of these financial statements.
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Mid Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Mid Cap Value Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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 exchange. At December 31, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
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.
13
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (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 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, 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Mid Cap Value Portfolio had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Mid Cap Value VCT Portfolio had a capital loss
carryforward of $5,981,262, of which the following amounts will expire
between 2009 and 2010 if not utilized: $3,451,474 in 2009 and $2,529,788 in
2010.
14
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated
losses) as of December 31, 2004 and the distributions paid during the years
ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- ---------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 3,095,474 $ 674,629
Long-Term capital gain 4,288,046 --
------------- ---------
$ 7,383,520 $ 674,629
Return of Capital -- --
------------- ---------
Total distributions $ 7,383,520 $ 674,629
============= =========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 6,505,614
Capital loss carryforward from merger 48,549,164
Undistributed long-term gain/ (capital loss carryforward) (5,981,262)
Unrealized appreciation (depreciation) 143,022,546
-------------
Total $ 192,096,062
=============
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, 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.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining
15
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
that the value of the collateral remains at least equal to the repurchase
price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following 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 accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $467,669 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $520 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$114,570 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------- ------------ --------------
Mid Cap Value Portfolio $ 770,017,850 $ 149,310,096 $ (6,287,550) $ 143,022,546
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $609,010,425 and $312,401,269, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
MID CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- --------------------------------------- ---------- ------------- ---------- -------------
CLASS I:
Shares sold 3,133,632 $ 68,612,090 2,677,744 $ 46,157,551
Class I shares issued in reorganization 2,087,866 49,670,328 -- --
Reinvestment of distributions 117,982 2,575,556 26,084 438,476
Shares repurchased (1,365,569) (29,591,496) (2,465,836) (40,592,863)
---------- ------------- ---------- -------------
Net increase 3,973,911 $ 91,266,478 237,992 $ 6,003,164
========== ============= ========== =============
CLASS II:
Shares sold 12,236,512 $ 263,179,728 6,515,291 $ 114,986,107
Reinvestment of distributions 221,974 4,807,964 93,450 236,135
Shares repurchased (881,455) (19,626,013) (1,080,224) (3,957,753)
---------- ------------- ---------- -------------
Net increase 11,577,031 $ 248,361,679 6,280,420 $ 111,264,489
========== ============= ========== =============
16
PIONEER MID CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
8. MERGER INFORMATION
On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio
("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco
RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that
comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan
of Reorganization that provided for the mergers listed below. These tax-free
reorganizations were accomplished on December 10, 2004 ("Closing Date"), by
exchanging all of the Safeco's net assets for Class I shares as indicated below,
based on Class I shares' ending net asset value on the Closing Date. The
following charts show the details of the reorganizations as of that closing date
Closing Date:
PIONEER MID CAP VALUE VCT PORTFOLIO
PIONEER SAFECO RST PIONEER
MID CAP VALUE MULTI-CAP CORE MID CAP VALUE
VCT PORTFOLIO PORTFOLIO VCT PORTFOLIO
(PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION)
-------------------- -------------------- ---------------------
Net Assets $ 757,206,652 $ 49,670,328 $ 858,922,877
Shares Outstanding 32,072,498 2,399,533 34,160,364
Class I Shares Issued 2,087,866
UNREALIZED REALIZED
APPRECIATION ON CLOSING GAIN (LOSS)
DATE ON CLOSING DATE
----------------------- -------------------
Safeco RST Multi-Cap Core Portfolio $ 5,550,191 $ 7,992,587
17
PIONEER MID CAP VALUE 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 CLASS II SHAREOWNERS OF PIONEER MID CAP VALUE VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Mid Cap Value VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
18
PIONEER MID CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over
the affairs of the Trust. The officers of the Trust are
CUSTODIAN responsible for the Trust's operations. The Trust's 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 Portfolio within the meaning of the
Ernst & Young LLP Investment Company Act of 1940 are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust
PRINCIPAL UNDERWRITER are referred to as Independent Trustees. Each of the Trustees
Pioneer Funds Distributor, Inc. serves as a trustee of each of the 73 U.S. registered investment
portfolios for which Pioneer Investment Management, Inc.
LEGAL COUNSEL ("Pioneer") serves as investment adviser (the "Trust"). The
Wilmer Cutler Pickering Hale and Dorr LLP address for all Interested Trustees and all officers of the
Portfolio is 60 State Street, Boston, Massachusetts 02109.
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc. The Trust's statement of additional information provides more
detailed information regarding the Trust's Trustees and is
available upon request, without charge, by calling
1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available
without charge, upon Agent request, by calling our toll free
number (1-800-225-6292). This information is also available
online at pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor
Jr. (78)* Board, Trustee and successor trustee retirement or removal; Deputy Chairman Global Company, Ltd.
President is elected or and a Director of Pioneer Global Asset
earlier retirement Management S.p.A. ("PGAM");
or removal Non-Executive Chairman and a Director
of Pioneer Investment Management USA
Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin); President
and a Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Executive Serves until President and Chief Executive Officer, None
(52)** Vice President successor trustee PIM-USA since May 2003 (Director since
is elected or January 2001); President and Director
earlier retirement of Pioneer since May 2003; Chairman
or removal and Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive
Vice President of all of the Pioneer
Funds since June 2003; Executive
Vice President and Chief Operating
Officer of PIM-USA, November 2000
to May 2003; Executive Vice President,
Chief Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to November
2000; Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
19
PIONEER MID CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
David R. Bock** Trustee since 2005. Serves until a Senior Vice President and Chief Director of The
(61) 3050 K. successor trustee Financial Officer, I-trax, Inc. Enterprise Social
Street NW, is elected or (publicly traded health care services Investment Company
Washington, DC earlier retirement company) (2001-present); Managing (privately-held
20007 or removal. Partner, Federal City Capital Advisors affordable housing
(boutique merchant bank) (1995-2000; finance company);
2002 to 2004); Executive Vice Director of New York
President and Chief Financial Officer, Mortgage Trust
Pedestal Inc. (internet-based mortgage (publicly traded
trading company) (2000-2002) mortgage REIT)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- -----------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since 2000. Serves until President, Bush International Director of Brady
(56) 3509 successor trustee (international financial advisory firm) Corporation (industrial
Woodbine Street, is elected or identification and
Chevy Chase, MD earlier retirement specialty coated
20815 or removal material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since 2000. Serves until Founding Director, The Winthrop Group, None
Graham (57) 1001 successor trustee Inc. (consulting firm); Professor of
Sherbrooke is elected or Management, Faculty of Management,
Street West, earlier retirement McGill University
Montreal, or removal
Quebec, Canada
H3A 1G5
- -----------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Trustee since 1995. Serves until President and Chief Executive Officer, Director of New America
Piret (56) One successor trustee Newbury, Piret & Company, Inc. High Income Fund, Inc.
Boston Place, is elected or (investment banking firm) (closed-end investment
28th Floor, earlier retirement company)
Boston, MA 02108 or removal
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen K. West Trustee since 1995. Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss
(76) 125 Broad successor trustee (law firm) Helvetia Fund, Inc.
Street, New is elected or (closed-end investment
York, NY 10004 earlier retirement company) and AMVESCAP
or removal PLC (investment
managers)
- -----------------------------------------------------------------------------------------------------------------------------------
John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None
(68) One North September, 2000. successor trustee (private investment firm)
Adgers Wharf, is elected or
Charleston, SC earlier retirement
29401 or removal
- -----------------------------------------------------------------------------------------------------------------------------------
20
PIONEER MID CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS OFFICERS
Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None
Bourassa (57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Secretary Serves at the Assistant Vice President and Senior None
Kelley (40) discretion of the Counsel of Pioneer since July 2002;
Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to July
2000); Assistant Secretary of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
David C. Phelan Assistant Secretary Serves at the Partner, Wilmer Cutler Pickering Hale None
(47) discretion of the and Dorr LLP; Assistant Secretary of
Board all Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of the Administration and Custody Services of
Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer
from June 1999 to November 2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley Assistant Treasurer Serves at the Deputy Treasurer of Pioneer since None
(45) discretion of the 2004; Treasurer and Senior Vice
Board President, CDC IXIS Asset Management
Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004
- -----------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti Assistant Treasurer Serves at the Assistant Vice President - Fund None
(39) discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Treasurer Serves at the Fund Accounting Manager - Fund None
(46) discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- -----------------------------------------------------------------------------------------------------------------------------------
21
PIONEER MID CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS OFFICERS
Katharine Kim Assistant Treasurer Serves at the Fund Administration Manager - Fund None
Sullivan (31) discretion of the Accounting, Administration and Custody
Board Services since June 2003; Assistant
Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Compliance Serves at the Chief Compliance Officer of Pioneer None
(37) Officer discretion of the (Director of Compliance and Senior
Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
22
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
[LOGO] PIONEER
INVESTMENTS(R)
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER EMERGING MARKETS VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 10
Notes to Financial Statements 14
Report of Independent Registered Public Accounting Firm 19
Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
International Common Stocks 55.8%
Depositary Receipts for International Stocks 29.3%
Temporary Cash Investment 7.7%
U.S. Common Stocks 5.5%
International Preferred Stocks 1.7%
GEOGRAPHICAL DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
South Korea 20.9%
Brazil 14.5%
Taiwan 7.5%
South Africa 7.1%
Russia 6.8%
Mexico 6.2%
Turkey 6.0%
India 5.5%
Malaysia 5.2%
Indonesia 2.8%
Chile 2.8%
Thailand 2.3%
Poland 2.2%
People's Republic of China 2.0%
Peru 1.4%
Singapore 1.3%
Philippines 1.3%
Czech Republic 1.1%
Hungary 1.1%
Other (individually less than 1%) 2.0%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Samsung Electronics Co. 3.67%
2. Petrobras Brasileiro SA
(A.D.R.) 3.43
3. Companhia Vale do Rio
Doce (A.D.R.) 2.47
4. Telefonos de Mexico SA 1.76
5. Lukoil Holding (A.D.R.) 1.74
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 20.33 $ 17.26
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.1286 $ -- $ --
- --------------------------------------------------------------------------------
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 Free Index.
Portfolio returns are based on net asset value and do not reflect any
applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Pioneer Emerging MSCI Emerging
Markets VCT Portfolio Markets Free Index
10/98 10,000 10,000
10,486 10,675
18,695 17,766
12/00 12,317 12,330
11,410 12,037
12/02 11,247 11,315
17,756 17,682
12/04 21,070 22,267
The Morgan Stanley Capital International (MSCI) Emerging Markets Free 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 12/31/2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 12.84%
(10/30/98)
5 Years 2.42
1 Year 18.67
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.pioneerfunds.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. Please refer to the variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 EMERGING MARKETS 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 EMERGING MARKETS VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,251.10 $ 1,249.55
Expenses Paid During Period* $ 9.82 $ 11.14
* Expenses are equal to the Portfolio's annualized expense ratio of 1.73% and
1.97% 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). 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 EMERGING MARKETS VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,016.34 $ 1,015.13
Expenses Paid During Period* $ 8.79 $ 9.98
* Expenses are equal to the Portfolio's annualized expense ratio of 1.73% and
1.97% 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 EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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.
CALL 800-688-9915 OR VISIT WWW.PIONEERFUNDS.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.
For the 12 months ended December 31, 2004, Pioneer Emerging Markets VCT
Portfolio Class II shares delivered a total return of 18.67%. Over the same time
period, the MSCI Emerging Markets Free Index had a total return of 25.95%.
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.
In the following discussion, Christopher Smart and Sam Polyak, portfolio
managers of the Portfolio, review the last 12 months and look ahead to next
year.
Q. AFTER AN EXTRAORDINARY PERFORMANCE IN 2003, HOW DID EMERGING MARKETS FARE
THIS YEAR?
A. With still strong economic growth in the United States and China, supported
by an accommodative monetary policy in most countries, emerging markets
turned in yet another outstanding year. In the 12 months ending December
31, 2004, the MSCI Emerging Markets Index outperformed the MSCI World Index
by approximately 11 percentage points and the S&P 500 Index by
approximately 14 percentage points. While global rates began to rise, the
moderate strength of the recovery made for a more gradual adjustment.
Moreover, a weakening U.S. dollar throughout the year had two distinct
effects on the emerging world. On the one hand, it helped reduce the
sovereign debt burdens of many developing countries, as a significant
portion of their debt is in U.S. dollars, while it helped cool inflationary
expectations as their currencies gained in relative value. While the
Chinese economy slowed somewhat from the excessive pace of its expansion
early in the year, it was still on track to grow near 10%, which provided
good support for global commodity prices like coal, iron ore, steel and
soybeans.
Q. HOW DID THE PORTFOLIO FARE IN THIS ENVIRONMENT?
A. The Portfolio's exposure to these favorable trends generally boosted
performance during the period. Our exposures to Turkey and India were
especially helpful as these markets benefited from strong acceleration in
domestic demand. We also benefited from the inclusion of stocks like
Yanzhou Coal Mining, which rose 41% as the rapid rise of Chinese coal
prices boosted its profits. In Brazil, Companhia Vale do Rio Doce, one of
the world's largest producers of iron ore, rose nearly 42% as the firm
posted record profits on the strength of global commodity prices. Finally,
our decision to limit our exposure to technology firms was also helpful, as
major stocks in that sector in Taiwan, Israel, and Korea underperformed the
benchmark dramatically.
Performance was hurt over the last year from our positive view of Russia
and our negative view of South Africa. The high oil price, which produced
significant inflows of money into the Russian economy and growth near 7%,
was not enough to overcome investor concerns about political developments
that appeared to threaten the course for further economic and political
reform. In South Africa, meanwhile, a surge in easy credit and domestic
spending provided an unexpected boon to many banks, retailers and
industrial companies, even as the strong currency undercut the profits of
the mining industry.
Q. HOW DO YOU CHOOSE WHAT STOCKS TO BUY?
A. Our process moves along two tracks. We look at our markets from the top
down, to find countries where the economies are growing, where interest
rates are falling and where there is a stable or improving political
climate. At the same time, from the bottom up, we screen stocks in our
universe for attractive valuations and growth prospects. We examine the
economic sector in which a company operates and attempt to assess the
management's ability to take advantage of growth opportunities. Together
with our investment colleagues in Singapore and Dublin, we model the
company's future revenue and profit streams to find stocks where the market
may be underestimating the ability to create value. If a stock meets these
criteria within a favorable environment of economic growth, it becomes a
good candidate for the Portfolio. We believe the Portfolio contains some of
the world's best growth prospects at some of the world's best valuations.
Individually, the stocks may be riskier than most, but the Portfolio
construction helps to mitigate at least some of that risk.
Q. WHAT DO YOU EXPECT IN 2005?
A. Emerging markets have outperformed developed markets significantly in the
last few years. Still, we continue to believe that valuations are
attractive and growth prospects remain good, especially when compared to
the alternatives in developed markets. Performance in 2005 will remain
vulnerable to a rapid adjustment in global currencies or a sharp decline in
global demand. Still, weak job growth in the United States, Europe and
Japan will discourage monetary authorities from moving too quickly on rate
increases, which should continue to provide ample liquidity for key
emerging markets. Barring an unforeseen adjustment, the combination could
potentially make for another year of good performance in relative and
absolute terms.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
PREFERRED STOCKS - 2.8%
MATERIALS - 0.6%
DIVERSIFIED METALS & Mining - 0.6%
274,000 Caemi Mineracao E Metalurgia SA* $ 235,211
------------
TOTAL MATERIALS $ 235,211
------------
CAPITAL GOODS - 0.1%
INDUSTRIAL CONGLOMERATES - 0.1%
3,445 LG Corp. $ 37,249
------------
TOTAL CAPITAL GOODS $ 37,249
------------
BANKS - 1.1%
DIVERSIFIED BANKS - 1.1%
2,893 Banco Itau Holding Financeira $ 434,604
------------
TOTAL BANKS $ 434,604
------------
TELECOMMUNICATION SERVICES - 1.0%
INTEGRATED TELECOMMUNICATION SERVICES - 0.5%
12,301 Tele Norte Leste Participacoes (A.D.R.) $ 207,518
------------
WIRELESS TELECOMMUNICATION SERVICES - 0.5%
6,900 Telemig Celular Participacoes (A.D.R.) $ 194,787
------------
TOTAL TELECOMMUNICATION SERVICES $ 402,305
------------
TOTAL PREFERRED STOCKS
(Cost $626,782) $ 1,109,369
------------
COMMON STOCKS - 93.1%
ENERGY - 9.7%
INTEGRATED OIL & Gas - 6.9%
225,000 CNOOC, Ltd. $ 121,671
5,480 Lukoil Holding (A.D.R.) 649,939
35,300 Petrobras Brasileiro (A.D.R.) 1,278,213
13,500 Surgutneftegaz (A.D.R.) (a) 504,900
46,000 Yukos 135,125
------------
$ 2,689,848
------------
OIL & GAS EQUIPMENT AND SERVICES - 0.5%
3,000 Samchully co., ltd. $ 188,049
------------
OIL & GAS EXPLORATION & PRODUCTION - 1.5%
431,600 China Petroleum & Chemicals $ 177,043
179,000 Panva Gas Holdings, Ltd.* 79,998
2,700 Mol Magyar Olaj 189,702
34,200 PTT Public Co., Ltd. 152,199
------------
$ 598,942
------------
OIL & GAS REFINING MARKETING &
TRANSPORTATION - 0.8%
220,000 China Aviation Oil Singapore $ 0
1,598,800 Petron Corp. 92,507
8,000 Polski Koncern Nafto (G.D.R.) 201,520
------------
$ 294,027
------------
TOTAL ENERGY $ 3,770,866
------------
MATERIALS - 15.3%
COMMODITY CHEMICALS - 1.9%
3,869 Daelim Industrial Co. $ 200,997
4,900 LG Petrochemical Co., Ltd. 122,997
7,000 Reliance Industries, Ltd. (144A) 179,340
12,010,000 Ultrapar Participacoes SA 230,614
------------
$ 733,948
------------
CONSTRUCTION MATERIALS - 1.3%
5,150 Asia Cement Co., Ltd. $ 169,070
35,006,000 Akcansa Cimento AS* 123,565
543,800 Lafarge Malayan Cement Bhd 104,451
14,400 Siam City Cement Co., Ltd. 90,384
------------
$ 487,470
------------
DIVERSIFIED CHEMICAL - 0.4%
270,234 Sinopac Holdings Co. $ 158,850
------------
DIVERSIFIED METALS & MINING - 5.1%
5,500 Anglo American Platinum Corp., Ltd.* $ 201,487
37,700 Companhia Vale do Rio Doce (A.D.R.) 919,126
4,900 Freeport-McMoRan Copper & Gold, Inc.
(Class B) 187,327
17,200 KGHM Polska Miedz SA 178,622
6,300 Norilsk Nickel 344,138
127,000 Yanzhou Coal Mining 181,077
------------
$ 2,011,777
------------
FERTILIZERS & AGRICULTURAL CHEMICALS - 0.5%
38,600 Makhteshim-Agan Industries, Ltd. $ 207,372
------------
GOLD - 0.7%
30,100 IAMGOLD Corp. $ 198,961
172,000 Zijin Mining Group Co., Ltd. 77,965
------------
$ 276,926
------------
PAPER PRODUCTS - 0.5%
5,270 Aracruz Cellulose SA (A.D.R.) $ 198,679
------------
PRECIOUS METALS & MINERALS - 3.3%
1,750 Anglogold Ashanti, Ltd. $ 63,338
16,400 Anglogold Ashanti, Ltd. (A.D.R.)(a) 596,140
23,200 Compania de Minas Buenaventura SA 531,280
507,100 PT Aneka Tambang TBK 94,184
------------
$ 1,284,942
------------
SPECIALTY CHEMICALS - 0.4%
85,501 Formosa Plastic Corp. $ 146,510
------------
STEEL - 1.2%
4,400 Pohang Iron & Steel Co., Ltd. (A.D.R.) (a) $ 195,932
16,800 Remgro, Ltd. 280,885
------------
$ 476,817
------------
TOTAL MATERIALS $ 5,983,291
------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
CAPITAL GOODS - 5.7%
BUILDING PRODUCTS - 0.8%
12,500 Daewoo Heavy Industries & Machinery, Ltd. $ 185,824
2,530 Hanil Cement Co., Ltd. 146,478
------------
$ 332,302
------------
CONSTRUCTION & ENGINEERING - 1.7%
379,435 CTCI Corp. $ 240,994
9,600 LG Construction, Ltd. 264,226
10,740 Kyeryong Construction Industrial Co., Ltd. 166,135
------------
$ 671,355
------------
ELECTRICAL COMPONENTS &
EQUIPMENT - 0.7%
14,900 Bharat Heavy Electricals (Demat Shares) $ 265,190
------------
INDUSTRIAL CONGLOMERATES - 1.8%
23,200 Copec-Compania Petroleos $ 185,767
6,825 LG Corp. 111,148
59,798,000 KOC Holding AS* 390,489
------------
$ 687,404
------------
INDUSTRIAL MACHINERY - 0.7%
19,400 Daewood Heavy Industries & Machinery, Ltd. $ 150,353
187,000 Yungtay Engineering Co., Ltd. 112,884
------------
$ 263,237
------------
TOTAL CAPITAL GOODS $ 2,219,488
------------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
DIVERSIFIED COMMERCIAL SERVICES - 0.8%
20,956 Bidvest Group, Ltd. $ 297,387
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 297,387
------------
TRANSPORTATION - 1.7%
AIR FREIGHT & COURIERS - 0.2%
153,400 Singapore Post, Ltd. $ 83,604
------------
MARINE - 1.1%
68,000 Samsung Heavy Industries Co., Ltd. $ 424,004
------------
RAILROADS - 0.4%
34,300 Malaysia International Shipping Bhd. $ 138,033
------------
TOTAL TRANSPORTATION $ 645,641
------------
AUTOMOBILES & COMPONENTS - 3.0%
AUTOMOBILE MANUFACTURERS - 3.0%
3,500 Hyundai Motor Co., Ltd. $ 187,440
10,530 Hyundai Heavy Industries 350,212
143,653 PT Astra International 148,538
178,200 Sime Darby Bhd. 281,310
17,499 Tata Motors 204,293
------------
$ 1,171,793
------------
TOTAL AUTOMOBILES & COMPONENTS $ 1,171,793
------------
CONSUMER DURABLES & APPAREL - 1.2%
HOMEBUILDING - 0.8%
563,500 Ayala Land, Inc. $ 73,325
110,200 Corporacion GEO, S.A. de CV* 220,538
------------
$ 293,863
------------
LEISURE PRODUCTS - 0.4%
6,000 Bajaj Auto, Ltd. (Demat Shares) $ 156,909
------------
TOTAL CONSUMER DURABLES & APPAREL $ 450,772
------------
HOTELS, RESTAURANTS & LEISURE - 0.4%
HOTELS, RESORTS & CRUISE LINES - 0.3%
9,200 Indian Hotels Co., Ltd. $ 116,755
------------
RESTAURANTS - 0.1%
105,000 Jollibee Foods Corp. $ 53,329
------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 170,084
------------
MEDIA - 3.0%
ADVERTISING - 0.3%
6,200 G2R, Inc. $ 106,368
------------
BROADCASTING & CABLE TELEVISION - 1.3%
306,200 ABS-CBN Broadcasting Corp. $ 101,221
3,100 Grupo Televisa SA (A.D.R.) 187,550
518,000 Media Prima Bhd* 233,097
------------
$ 521,868
------------
MOVIES & ENTERTAINMENT - 1.0%
322,800 Grammy Entertainment Plc $ 142,825
57,700 Zee Telefilms, Ltd. 228,241
------------
$ 371,066
------------
PUBLISHING - 0.4%
69,716,000 Hurriyet Gazetecilik ve Matbaacilik AS* $ 164,400
------------
TOTAL MEDIA $ 1,163,702
------------
RETAILING - 0.1%
DISTRIBUTORS - 0.1%
6,955 The Spar Group, Ltd.* $ 26,468
------------
TOTAL RETAILING $ 26,468
------------
FOOD & DRUG RETAILING - 2.7%
FOOD DISTRIBUTORS - 0.6%
7,300 Compania Cervecerias Unidas SA (a) $ 184,179
12,000 Kimberly-Clark de Mexico, S.A. de C.V. 41,461
------------
$ 225,640
------------
FOOD RETAIL - 2.1%
12,000 Brasil Distr Pao Acu (A.D.R.) $ 307,200
3,780 CJ Corp. 258,377
94,000 President Chain Store Corp. 150,760
6,955 Tiger Brands, Ltd. 119,373
------------
$ 835,710
------------
TOTAL FOOD & DRUG RETAILING $ 1,061,350
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
FOOD, BEVERAGE & TOBACCO - 7.2%
BREWERS - 0.3%
3,950 Efes Breweries International (G.D.R.)
(144A)* $ 118,500
------------
DISTILLERS & VINTNERS - 1.9%
9,966,000 Andalou efes Biracilik VE $ 201,470
12,500 Companhia de Bebidas PR (A.D.R.) 354,125
68,500 Grupo Modelo SA de CV 188,478
------------
$ 744,073
------------
PACKAGED FOODS & MEATS - 0.4%
1,390 Pulmuone Co., Ltd. $ 69,770
71,017 Rainbow Chicken, Ltd. 94,261
------------
$ 164,031
------------
SOFT DRINKS - 2.3%
9,100 Coca-Cola FEMSA, S.A. de C.V. (A.D.R.) $ 216,216
14,200 Embotelladora Andina SA (A.D.R.) 186,659
7,900 Fomento Economico Mexicano SA de C.V. 415,619
140,600 Sermsuk Public Co., Ltd. 78,840
------------
$ 897,334
------------
TOBACCO - 2.3%
17,000 British American Tabacco (Malaysia) Bhd $ 204,631
6,200 Korea Tobacco 185,442
300 Philip Morris CR AS 226,620
97,200 PT Gudang Garam Public Co., Ltd. 141,995
186,500 PT Hanjaya Mandala Sampoerna Tbk 133,739
------------
$ 892,427
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 2,816,365
------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.4%
HOUSEHOLD PRODUCTS - 0.7%
44,940,000 Arcelik AS* $ 275,188
------------
PERSONAL PRODUCTS - 0.7%
8,750 Natura Cosmeticos SA $ 255,318
------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 530,506
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.6%
PHARMACEUTICALS - 0.6%
21,500 Aurobindo Pharma, Ltd. $ 160,964
110,200 PT Tempo Scan Pacific 90,209
------------
$ 251,173
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 251,173
------------
BANKS - 9.7%
DIVERSIFIED BANKS - 9.2%
9,666 Banco Bradesco SA $ 242,230
33,800 Bangkok Bank, Ltd. 99,045
230,950 Chinatrust Financial Holding Co., Ltd. 275,222
149,000 Commerce Asset Holdings Bhd 184,232
10,300 Hana Bank 256,452
131,000 Hong Leong Bank Bhd 189,532
91,000 Kasikornbank (Class F) 131,380
12,000 Kookmin Bank (A.D.R.)*(a) 468,960
1,900 Kookmin Bank* 74,078
58,700 Malayan Banking Bhd 182,208
162,700 Metropolitan Bank & Trust Co. 76,831
407,500 PT Bank Central Asia Tbk 130,758
2,136,076 PT Lippo Bank 161,097
79,800 Siam Commercial Bank Plc (Foreign) 100,073
22,549 Standard Bank Group, LTD. 262,607
13,600 State Bank of India 205,117
35,354,000 Turkiye Is Bankasi (Isbank)* 195,369
11,400 Uniao de Bancos Brasileiros S.A.
(Unibanco) (G.D.R.) (144A) 361,608
------------
$ 3,596,799
------------
REGIONAL BANKS - 0.5%
218,000 First Financial Holdings $ 186,317
------------
TOTAL BANKS $ 3,783,116
------------
DIVERSIFIED FINANCIALS - 5.1%
DIVERSIFIED FINANCIAL SERVICES - 5.1%
732,700 Bank Mandiri $ 151,926
485,344 China Development Financial* 233,397
70,000 Citic Pacific, Ltd. 198,911
143,900 FirstRand, Ltd. 340,126
137,000 Fubon Group 139,979
102,656,000 Haci Omer Sabanci Holding AS* 399,700
109,000 MCL Ladn, Ltd. 100,790
250,900 RHB Capital Berhad 154,431
76,900 Sanlam, Ltd. 176,233
632,700 SM Prime Holdings 86,753
------------
$ 1,982,246
------------
TOTAL DIVERSIFIED FINANCIALS $ 1,982,246
------------
INSURANCE - 1.6%
LIFE & HEALTH INSURANCE - 0.4%
7,900 Cathay Financial Holding Co., Ltd. (144A) $ 158,790
------------
MULTI-LINE INSURANCE - 1.2%
47,567,000 Aksigorta AS* $ 190,550
3,600 Samsung Fire & Marine Insurance 284,036
------------
$ 474,586
------------
TOTAL INSURANCE $ 633,376
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
REAL ESTATE - 0.4%
REAL ESTATE MANAGEMENT &
DEVELOPMENT - 0.4%
98,200 Wheelock Properties (Singapore), Ltd. $ 147,092
------------
TOTAL REAL ESTATE $ 147,092
------------
SOFTWARE & SERVICES - 0.5%
APPLICATION SOFTWARE - 0.5%
4,032 Infosys Technologies, Ltd. $ 194,681
------------
TOTAL SOFTWARE & SERVICES $ 194,681
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 2.3%
SEMICONDUCTORS - 1.2%
44,269 Hon Hai Precision Industry $ 204,496
171,005 Taiwan Semiconductor Manufacturing Co. 271,274
------------
$ 475,770
------------
COMMUNICATIONS EQUIPMENT - 0.5%
8,600 Matav Rt (A.D.R.) $ 209,926
------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS - 0.6%
24,000 Elec & Eltek International Co., Ltd. $ 68,147
2,350 LG Electronics, Inc. 145,098
------------
$ 213,245
------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 898,941
------------
SEMICONDUCTORS - 4.1%
3,130 Samsung Electronics $ 1,365,942
390,870 United Microelectronics Corp., Ltd. 251,691
------------
$ 1,617,633
------------
TOTAL SEMICONDUCTORS $ 1,617,633
------------
TELECOMMUNICATION SERVICES - 13.0%
INTEGRATED TELECOMMUNICATION
SERVICES - 6.8%
4,900 Brasil Telecom Participacoes SA $ 186,935
24,800 Compania de Telephonos de Chile SA
(A.D.R.) 278,752
18,900 KT Corp. (a) 412,209
29,587 Mahanagar Telephone Nigam, Ltd. 236,104
29,900 Mahanagar Telephone (Demat) 107,028
3,100 Maroc Telecom* 35,394
11,900 SPT Telecom AS 197,306
40,000 Telekom Malaysia 122,064
17,100 Telefonos de Mexico SA (a) 655,272
68,800 Telekomunikacja Polska SA 451,545
------------
$ 2,682,609
------------
WIRELESS TELECOMMUNICATION SERVICES - 6.2%
27,200 Advanced Service Co., Ltd. $ 74,868
7,700 Alumax, Inc. 403,095
9,900 Korea Telecom Freetel Co. 236,755
1,100 Mobile Telesystems (A.D.R.) (a) 152,361
21,637 SK Telecom Co., Ltd. (a) 481,423
142,500 StarHub, Ltd.* 96,026
146,000 Taiwan Cellular Corp. 163,007
16,447 Turkcell Iletism Hizmet (A.D.R.) 297,691
42,700 Venfin, Ltd. 189,718
8,700 Vimpel-Communications (A.D.R.)* 314,418
------------
$ 2,409,362
------------
TOTAL TELECOMMUNICATION SERVICES $ 5,091,971
------------
UTILITIES - 3.6%
ELECTRIC UTILITIES - 2.3%
1,200 Cemig SA (A.D.R.) $ 29,448
1,206,235 Enersis SA* 205,109
14,600 Korea Electric Power Corp. 378,682
10,060 Unified Energy System (G.D.R.) 276,101
------------
$ 889,340
------------
GAS UTILITIES - 0.9%
5,100 Gazprom (A.D.R.)* (a) $ 180,908
5,900 Korea Gas Corp. 182,884
------------
$ 363,792
------------
MULTI-UTILITIES & UNREGULATED POWER - 0.4%
283,600 YTL Power International Bhd $ 134,320
------------
TOTAL UTILITIES $ 1,387,452
------------
TOTAL COMMON STOCKS
(Cost $26,091,813) $ 36,295,394
------------
RIGHTS/WARRANTS - 0.0%
COMMERCIAL SERVICES & SUPPLIES - 0.0%
DIVERSIFIED COMMERCIAL SERVICES - 0.0%
1,580 Bidvest Group, Ltd., Exp. 12/8/06* $ 6,714
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 6,714
------------
TOTAL RIGHTS/WARRANTS
(Cost $0) $ 6,714
------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
TEMPORARY CASH INVESTMENT - 8.3%
SECURITY LENDING COLLATERAL - 8.3%
3,125,761 Securities Lending
Investment Fund, 2.18% $ 3,125,761
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $3,125,761) $ 3,125,761
------------
TOTAL INVESTMENTS IN
SECURITIES - 104.2%
(Cost $29,844,356)(b) $ 40,537,238
------------
OTHER ASSETS AND
LIABILITIES - (4.2)% $ (1,557,033)
------------
TOTAL NET ASSETS - 100.0% $ 38,980,205
============
(A.D.R.) American Depositary Receipt
(G.D.R.) Global Depositary Receipt
* Non-income producing 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, 2004, the value of these securities amounted to $818,238
or 2.1% of net assets.
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
15,575 Anglogold Ashanti, Ltd.(A.D.R.) $ 566,151
590 Compania Cervecerias Unidas SA 14,886
155 Gazprom (A.D.R.)* 5,343
11,365 Kookmin Bank*(A.D.R.) 444,144
15,905 KT Corp. 346,888
976 Mobile Telesystems (A.D.R.) 135,186
4,105 Pohang Iron & Steel Co., Ltd. (A.D.R.) 182,796
13,090 SK Telecom Co., Ltd. 291,253
12,620 Surgutneftegaz (A.D.R.) 471,988
15,565 Telefonos de Mexico SA 596,451
-----------
TOTAL $ 3,055,085
===========
(b) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
South Korea 20.9%
Brazil 14.5
Taiwan 7.5
South Africa 7.1
Russia 6.8
Mexico 6.2
Turkey 6.0
India 5.5
Malaysia 5.2
Indonesia 2.8
Chile 2.8
Thailand 2.3
Poland 2.2
People's Republic of China 2.0
Peru 1.4
Singapore 1.3
Philippines 1.3
Czech Republic 1.1
Hungary 1.1
Other (individually less than 1%) 2.0
-----
100.0%
=====
The accompanying notes are an integral part of these financial statements. 9
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 17.26 $ 10.98 $ 11.19 $ 12.08 $ 18.02
-------- -------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.16 $ 0.12 $ 0.02 $ 0.09 $ (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 3.04 6.21 (0.17) (0.98) (5.59)
-------- -------- ------- ------- -------
Net increase (decrease) from investment operations $ 3.20 $ 6.33 $ (0.15) $ (0.89) $ (5.61)
Distributions to shareowners:
Net investment income (0.13) (0.05) (0.06) -- --
Net realized gain -- -- -- -- (0.33)
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value $ 3.07 $ 6.28 $ (0.21) $ (0.89) $ (5.94)
-------- -------- ------- ------- -------
Net asset value, end of period $ 20.33 $ 17.26 $ 10.98 $ 11.19 $ 12.08
======== ======== ======= ======= =======
Total return* 18.73% 57.87% (1.42)% (7.37)% (31.65)%
Ratio of net expenses to average net assets+ 1.99% 1.99% 1.99% 1.90% 2.11%**
Ratio of net investment income (loss) to average net assets+ 0.88% 1.04% 0.28% 1.05% (0.73)%**
Portfolio turnover rate 66% 79% 124% 175% 156%
Net assets, end of period (in thousands) $ 30,347 $ 26,537 $ 8,852 $ 7,861 $ 5,819
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 2.11% 2.65% 3.11% 4.12% 4.47%**
Net investment income (loss) 0.76% 0.38% (0.84)% (1.17)% (3.09)%**
Ratios with waiver of management fees and assumption of
expenses by PIM and reduction for fees paid indirectly:
Net expenses 1.99% 1.99% 1.99% 1.90% 2.09%**
Net investment income (loss) 0.88% 1.04% 0.28% 1.05% (0.71)%**
(a) Class 2 shares were first publicly offered on May 1, 2000.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
10 The accompanying notes are an integral part of these financial statements.
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $3,055,085)
(Cost $29,844,356) $ 40,537,238
Cash 1,524,906
Foreign currencies, at value (Cost $97,982) 116,115
Receivables --
Investment securities sold 34,194
Dividends, interest and foreign taxes withheld 161,539
Other 5,163
------------
Total assets $ 42,379,155
------------
LIABILITIES:
Payables --
Investment securities purchased $ 15,338
Fund shares repurchased 86,231
Upon return of securities loaned 3,125,761
Reserve for repatriation taxes 35,490
Due to affiliates 45,670
Accrued expenses 90,460
------------
Total liabilities $ 3,398,950
------------
NET ASSETS:
Paid-in capital $ 30,602,099
Undistributed net investment income (loss) 44,879
Accumulated undistributed net realized gain (loss) (2,331,912)
Net unrealized gain (loss) on:
Investments 10,657,392
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 7,747
------------
Total net assets $ 38,980,205
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 8,632,913
Shares outstanding 421,530
------------
Net asset value per share $ 20.48
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 30,347,292
Shares outstanding 1,493,013
------------
Net asset value per share $ 20.33
The accompanying notes are an integral part of these financial statements. 11
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $146,637) $ 972,424
Interest 6,531
Income on securities loaned, net 8,227
------------
Total investment income $ 987,182
------------
EXPENSES:
Management fees $ 395,468
Transfer agent fees and expenses 3,020
Distribution fees (Class II) 66,163
Administrative reimbursements 18,500
Custodian fees 137,409
Professional fees 55,020
Printing expense 15,712
Miscellaneous 15,036
------------
Total expenses $ 706,328
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (41,545)
Less fees paid indirectly (90)
------------
Net expenses $ 664,693
------------
Net investment income (loss) $ 322,489
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (Net of foreign capital gains taxes of $179,850) $ 5,608,134
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (34,951)
------------
$ 5,573,183
------------
Change in net unrealized gain or (loss) from:
Investments (net of decrease in reserve for repatriation taxes of $348,151) $ 17,838
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 4,855
------------
$ 22,693
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 5,595,876
============
Net increase (decrease) in net assets resulting
from operations $ 5,918,365
============
12 The accompanying notes are an integral part of these financial statements.
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 322,489 $ 262,378
Net realized gain (loss) on investments 5,573,183 1,187,664
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 22,693 10,449,480
------------- ------------
Net increase (decrease) in net assets resulting from operations $ 5,918,365 $ 11,899,522
------------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (65,091) $ (25,889)
Class II (196,317) (60,429)
------------- ------------
Total distributions to shareowners $ (261,408) $ (86,319)
------------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 9,587,268 $ 16,360,576
Reinvestment of distributions 259,912 85,767
Cost of shares repurchased (11,459,650) (8,062,148)
------------- ------------
Net increase (decrease) in net assets resulting from Fund share transactions $ (1,612,470) $ 8,384,195
------------- ------------
Net increase (decrease) in net assets $ 4,044,487 $ 20,197,398
NET ASSETS:
Beginning of year 34,935,718 14,738,320
------------- ------------
End of year $ 38,980,205 $ 34,935,718
============= ============
Undistributed net investment income (loss), end of year $ 44,879 $ 198,789
============= ============
The accompanying notes are an integral part of these financial statements. 13
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Emerging Markets Portfolio (the Portfolio) is a Portfolio of the
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value I Portfolio)(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio)(Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose
of funding variable annuity or variable life insurance contracts, and may also
be purchased by qualified pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objective of Emerging Markets VCT Portfolio is to seek long-term
capital growth.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years.
Actual results could differ from those estimates. 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
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 Portfolios determines their net asset values. Consequently, the Board
of Trustees of the Trust has determined that the use of daily fair
valuations as provided by a pricing service is appropriate for the
Portfolios. The Portfolios may also take into consideration other
significant events in determining the fair value of these securities.
At December 31, 2004, there were no fair valued securities except as
follows. All securities that trade in
14
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
foreign markets whose closing prices are as of times prior to the close of
the New York Stock Exchange ("NYSE") and that are held by Emerging Markets
Portfolio are fair valued using vendor-supplied pricing updates for each
security to the time of the close of the NYSE. At December 31, 2004, the
valuation of China Aviation Oil Singapore was determined by The Board of
Trustees of the Trust. Thus, the Portfolio's securities valuations may
differ from prices reported by the various local exchanges and markets.
Temporary cash investments and securities held by the Portfolio are valued
at amortized cost.
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, 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.
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.
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 represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
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 8)
D. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, 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, 2004, the Portfolio had $35,490 in 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
15
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Emerging Markets VCT Portfolio had a capital
loss carryforward of $2,040,887 of which the following amounts will expire
between 2009 and 2010 if not utilized: $864,104 in 2009 and $1,176,783 in
2010.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT REALIZED PAID-IN
PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL
--------------------------------------- ----------------- --------------- -------
Pioneer Emerging Markets VCT Portfolio $ (214,991) $ 214,991 $ --
========== ========= ====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------ --------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 261,408 $ 86,319
Long-Term capital gain -- --
------------ --------
$ 261,408 $ 86,319
Return of Capital -- --
------------ --------
Total distributions $ 261,408 $ 86,319
============ ========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 211,876
Undistributed long-term gain/(capital loss carryforward) (2,040,887)
Unrealized appreciation (depreciation) 10,207,117
------------
Total $ 8,378,106
============
For the fiscal year ending December 31, 2004, Emerging Markets Portfolio
has elected to pass through foreign tax credits of $325,677.The difference
between book-basis and tax-basis unrealized appreciation (depreciation) is
primarily attributable to the tax deferral of losses on wash sales and the
tax basis adjustments on Passive Foreign Investment Company (PFIC) holdings
and the mark to market on forward currency contracts.
E. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, 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.
16
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
F. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
G. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
1.15% of the Portfolio's average daily net assets.
The portion of the Portfolio's expenses attributable to Class II will be reduced
only to the extent such expenses are reduced for Class I shares (or Class II
shares).
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. At December 31, 2004, $39,145 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$6,254 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Emerging Markets Portfolio $ 30,302,378 $ 11,097,178 $ (862,318) $ 10,234,860
============ ============ ========== ============
17
PIONEER EMERGING MARKETS VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $22,233,472 and $24,663,852, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
EMERGING MARKETS PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNTS
- ----------------------------- ---------- ------------ ---------- ------------
CLASS I:
Shares sold 72,945 $ 1,305,983 143,611 $ 1,837,255
Reinvestment of distributions 3,952 63,595 2,017 25,338
Shares repurchased (138,809) (2,377,707) (195,769) (2,390,316)
-------- ------------ --------- ------------
Net increase (decrease) (61,912) $ (1,008,129) (50,141) $ (528,316)
======== ============ ========= ============
CLASS II:
Shares sold 468,119 $ 8,281,285 1,162,017 $ 14,523,321
Reinvestment of distributions 12,278 196,317 4,838 60,429
Shares repurchased (524,708) (9,081,943) (435,883) (5,671,239)
-------- ------------ --------- ------------
Net increase (decrease) (44,311) $ (604,341) 730,972 $ 8,912,511
======== ============ ========= ============
8. FORWARD FOREIGN CURRENCY CONTRACTS
During the year ended December 31, 2004, certain Portfolios had entered into
various contracts that obligate the Portfolios to deliver currencies at
specified future dates. At the maturity of a contract, the Portfolios must make
delivery of the foreign currency. Alternatively, prior to the settlement date
of a portfolio hedge, the Portfolio may close out such contracts by entering
into an offsetting hedge contract. As of December 31, 2004, the Portfolio had
no outstanding portfolio or settlement hedges.
18
PIONEER EMERGING MARKETS 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 CLASS II SHAREOWNERS OF PIONEER EMERGING MARKETS VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Emerging Markets VCT Portfolio, one of
the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as
of December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit includes 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, 2004, 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 Emerging Markets VCT Portfolio of the Pioneer Variable Contracts Trust
at December 31, 2004, 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 three years in the period
then ended, in conformity with U.S generally accepted accounting principles.
/s/ ERNEST & YOUNG LLP
Boston, Massachusetts
February 11, 2005
19
PIONEER EMERGING MARKETS VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad
supervision over the affairs of the Trust. The
CUSTODIAN officers of the Trust are responsible for the
Brown Brothers Harriman & Co. Trust's operations. The Fund's Trustees and
officers are listed below, together with their
INDEPENDENT REGISTERED PUBLIC ACCOUTING FIRM principal occupations during the past five years.
Ernst & Young LLP Trustees who are interested persons of the
Portfolio within the meaning of the Investment
PRINCIPAL UNDERWRITER Company Act of 1940 are referred to as Interested
Pioneer Funds Distributor, Inc. Trustees. Trustees who are not interested persons
of the Trust are referred to as Independent
LEGAL COUNSEL Trustees. Each of the Trustees serves as a trustee
Wilmer Cutler Pickering Hale and Dorr LLP of each of the 73 U.S. registered investment
portfolios for which Pioneer Investment Management,
SHAREOWNER SERVICES AND TRANSFER Inc. ("Pioneer") serves as investment adviser (the
Pioneer Investment Management Shareholder Services, Inc. "Pioneer Funds"). The address for all Interested
Trustees and all officers of the Portfolio is 60
State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information
provides more detailed information regarding the
Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust
are available without charge, upon Agent request,
by calling our toll free number (1-800-225-6292).
This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves Director of Harbor Global
Board, Trustee successor trustee until retirement or removal; Company, Ltd.
and President is elected or Deputy Chairman and a Director
earlier retirement of Pioneer Global Asset
or removal Chairman and a Director of
Pioneer Management S.p.A.
("PGAM"); Non-Executive
Investment Management USA Inc.
("PIM-USA"); Chairman and a
Director of Pioneer; Director
of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Pioneer Alternative Investment
Director of Management(Bermuda)
Limited and affiliated funds;
President and Director of
Pioneer Funds Distributor, Inc.
("PFD"); President of all of
the Pioneer Funds; and Of
Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP
(counsel to PIM-USA and the
Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee Officer, PIM-USA since May 2003
President is elected or (Director since January 2001);
earlier retirement President and Director of
or removal Pioneer since May 2003;
Chairman and Director of
Pioneer Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
20
PIONEER EMERGING MARKETS VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS TRUSTEE
David R. Bock **(61) Trustee since 2005. Serves until a Senior Vice President and Chief Director of The Enterprise
3050 K. Street NW, successor trustee Financial Officer, I-trax, Inc. Social Investment Company
Washington, DC 20007 is elected or (publicly traded health care (privately-held affordable
earlier retirement services company) housingfinance company);
or removal. (2001-present); Managing Director of New York
Partner, Federal City Capital Mortgage Trust (publicly
Advisors (boutique merchant traded mortgage
bank)(1995-2000; 2002 to 2004); REIT)
Executive Vice President and
Chief Financial Officer,
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since 2000. Serves until President, Bush International Director of Brady
3509 Woodbine Street, successor trustee (international financial Corporation (industrial
Chevy Chase, MD 20815 is elected or advisory firm) identification and
earlier retirement specialty coated material
or removal products manufacturer),
Millennium Chemicals, Inc.
(commodity chemicals),
Mortgage Guaranty
Insurance Corporation, and
R.J. Reynolds Tobacco
Holdings, Inc. (tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since 2000. Serves until Founding Director, The Winthrop None
1001 Sherbrooke Street successor trustee Group, Inc. (consulting firm);
West, Montreal, Quebec, is elected or Professor of Management,
Canada H3A 1G5 earlier retirement Faculty of Management, McGill
or removal University
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since 1995. Serves until President and Chief Director of New America
One Boston Place, successor trustee Executive Officer, Newbury, High Income Fund, Inc.
28th Floor, is elected or Piret & Company, Inc. (closed-end investment
Boston, MA 02108 earlier (investment banking firm) company)
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since 1995. Serves until Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, successor trustee Helvetia Fund, Inc. (closed-end
New York, NY 10004 is elected or Cromwell (law firm) investment company) and
earlier retirement AMVESCAP PLC (investment
or removal managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves President, John None
One North Adgers Wharf, September, 2000. until successor Winthrop & Co., Inc. (private
Charleston, SC 29401 trustee is elected investment firm)
or earlier
retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
21
PIONEER EMERGING MARKETS VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary
of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from
April 1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley(40) Assistant Secretary Serves at the Assistant Vice President and None
discretion of the Senior Counsel of Pioneer since
Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Secretary Serves at the Partner, Wilmer Cutler None
discretion of the Pickering Hale and Dorr LLP;
Board Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Treasurer Serves at the Deputy Treasurer of Pioneer None
discretion of the since 2004; Treasurer and
Board Senior Vice President, CDC IXIS
Asset Management Services from
2002 to 2003; Assistant
Treasurer and Vice President,
MFS Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the Pioneer
Funds since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Treasurer Serves at the Assistant Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Treasurer Serves at the Fund Accounting Manager - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Assistant Treasurer of all
of the Pioneer Funds since May
2002
- ------------------------------------------------------------------------------------------------------------------------------------
22
PIONEER EMERGING MARKETS VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS BY THIS OFFICER
Katharine Kim Sullivan Assistant Treasurer Serves at the Fund Administration Manager - None
(31) discretion of the Fund Accounting, Administration
Board and Custody Services since June
2003; Assistant Vice President
- Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund
Accounting Manager from August
1999 to May 2002, Fund
Accounting Services Supervisor
from 1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of Compliance
Board and Senior Counsel from
November 2000 to September
2004); Vice President and
Associate General Counsel of
UAM Fund Services, Inc. (mutual
fund administration company)
from February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
23
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
[LOGO] PIONEER
Investments(R)
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER EQUITY INCOME VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 16
Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 94.2%
Temporary Cash Investment 4.5%
Convertible Preferred Stocks 1.2%
Convertible Corporate Bonds 0.1%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 21.9%
Utilities 16.8%
Consumer Discretionary 12.1%
Industrials 10.0%
Energy 9.8%
Materials 7.2%
Telecommunication Services 6.5%
Consumer Staples 6.4%
Health Care 6.2%
Information Technology 3.1%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. PACCAR, Inc. 4.48%
2. Exxon Mobil Corp. 3.35
3. ChevronTexaco Corp. 3.31
4. Washington Mutual, Inc. 3.07
5. T. Rowe Price Associates, Inc. 2.61
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 20.68 $ 18.19
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.3951 $ -- $ --
- --------------------------------------------------------------------------------
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 TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell 1000 Pioneer Equity
Value Index Income VCT Portfolio
Mar-95 10,000 10,000
12,632 12,003
Dec-96 15,366 13,791
20,773 18,591
Dec-98 24,021 22,355
25,787 22,256
Dec-00 27,597 25,480
26,054 23,659
2-Dec 22,010 19,862
28,620 24,285
4-Dec 33,339 28,180
Index comparison begins 2/28/95. 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 any Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 11.41%
(3/1/95)
5 Years 4.83
1 Year 16.04
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 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 EQUITY INCOME VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,119.78 $ 1,117.81
Expenses Paid During Period* $ 3.82 $ 5.19
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and
0.98% 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). 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 EQUITY INCOME VCT PORTFOLIO
Based on a hypothetical 5% return per year return before expenses, reflecting
the period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.52 $ 1,020.21
Expenses Paid During Period* $ 3.65 $ 4.95
* Expenses are equal to the Portfolio's annualized expense ratio of 0.72% and
0.98% 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 12/31/04
- --------------------------------------------------------------------------------
CALL 800-688-9915 OR VISIT www.pioneerfunds.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.
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. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE
PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION.
In the following discussion, John Carey, portfolio manager of Pioneer Equity
Income VCT Portfolio, reviews the past year and gives an overview of the
Portfolio' performance over that period.
Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU
ATTRIBUTE THE PERFORMANCE?
A: Class II shares of Pioneer Equity Income VCT Portfolio showed a good gain
in 2004, rising by 16.04% at net asset value. That was in line with the
Russell 1000 Value Index, which rose by 16.49%.
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.
As a whole, it was, as the numbers suggest, a good year for stocks, though
most of the performance came in the second half and particularly in the
fourth quarter. During the earlier part of the year, the market largely
backed and filled as investors worried about rising interest rates, the war
in Iraq, the weak dollar, rising oil prices, terrorist threats, and the
upcoming Presidential election. Around the middle of October, however, the
market as measured by most major indexes, began to move higher, and it
continued the upward move following the election and right through to the
end of the year.
The sectors in the Russell 1000 Value Index performing above average for
the year were energy, utilities, industrials, consumer staples, and
materials, and those performing below average were telecommunications
services, financials, consumer discretionary, information technology, and
health care. Pioneer Equity Income VCT Portfolio was overweight in four of
the five top performing sectors, and underweight in three of the five
underperforming sectors. Oddly enough, though, the principal contributor to
relative positive performance for the Portfolio was our stock selection in
one of the underperforming sectors, financials, our biggest underweight
relative to the index! The performance was attributable to premium
take-over offers received by two of our banks, Charter One Financial and
SouthTrust, and significant price increases for T. Rowe Price, a
money-management company, and Simon Property Group, a real-estate
investment trust. We also did not own any shares of Citigroup, an important
index name that underperformed. At the same time, while we were
appropriately underweight in information technology, we happened to own a
very poor performer in the sector, convertible preferred shares of
Electronic Data Systems, which we did sell during the year.
Industrials and materials were bright spots for both the index and the
Portfolio. In addition to being overweight in both sectors, we enjoyed
superior performance from our holdings relative to the sector averages.
Positive stand-outs for us in those sectors were PACCAR, builder of heavy
trucks, and Roanoke Electric Steel, a small steel mill. Offsetting
negative-return contributions came from holdings in the troubled
health-care sector, where we were overweight and also suffered from
below-average results from Eli Lilly and Merck.
Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE YEAR?
A: In total, we added 18 holdings to the Portfolio and eliminated 16. With the
favorable fundamentals in energy, materials, and industrials, we looked for
additional investments in those sectors. Occidental Petroleum (oil and
natural gas), Valspar (coatings and specialty chemicals), Phelps Dodge
(copper mining), ServiceMaster (commercial and residential maintenance
services), and Vulcan Materials (construction materials) were situations we
found attractive. With our value orientation, we also looked in some of the
underperforming sectors for names we thought unaccountably cheap. In
financials, we added Comerica, U.S. Bancorp, and State Street, and we also
received shares of Wachovia in exchange for SouthTrust, which Wachovia
acquired. In consumer discretionary, we bought Tupperware and common shares
of Ford Motor in addition to our previous position in Ford convertible
preferred shares; in information technology, we added Motorola; and in
health care, we purchased Bristol-Myers Squibb and a small position in a
new issue of convertible securities from Schering-Plough. Rounding out our
additions were Clorox in consumer staples and Atmos Energy, Equitable
Resources, and Ameren in utilities.
Securities liquidated included stocks such as Biomet and Illinois Tool
Works on which we had taken significant profits and whose prices we thought
adequately reflected values, and stocks such as Pfizer and Coca-Cola about
which we became concerned in a longer-term fundamental way. Other names
sold during the year were Deere, Norfolk Southern, Tribune, Sears Roebuck,
Bank of America, Merrill Lynch, St. Paul Travelers, Equity Office
Properties, Electonic Data Systems convertible preferred, and
Hewlett-Packard.
The most meaningful effects of our trading on sector weights were in
materials and utilities, where our weightings increased versus the
portfolio weightings in the sectors at yearend 2003, and in health care,
where our weighting decreased versus a year ago, though part of the
decrease was due just to weak share-price moves for our health-care stocks
relative to large price increases in some other sectors.
Q: WHAT IS YOUR OUTLOOK FOR 2005?
A: The economic outlook appears favorable over the coming year. Interest rates
are expected to continue rising, but not so fast that they should present
impediments to further economic growth. We think earnings growth should
continue, albeit potentially at a slower pace than in 2003 and 2004.
Federal tax law, with the maximum 15% tax rate on qualified dividends and
15% rate on long-term capital gains, is likewise favorable to the stock
market. Of course there are concerns, including energy and other commodity
prices and the high trade and Federal budget deficits. We aim to mitigate
the risk from those factors by investing on the one hand in companies
benefiting from rising materials prices and, on the other hand, avoiding
companies with poor cost controls. Otherwise we are always interested in
companies that not only can do better but that also have a plan in place
and a management committed to achieve the better results. A good economy
creates more opportunities for companies to execute such turnarounds.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
CONVERTIBLE PREFERRED STOCKS - 1.2%
AUTOMOBILES & COMPONENTS - 1.1%
AUTOMOBILE MANUFACTURERS - 1.1%
2,600 General Motors, 5.25%, 3/6/32 $ 59,800
57,414 Ford Cap Trust, 6.50%, 1/15/32 3,025,718
-------------
$ 3,085,518
-------------
TOTAL AUTOMOBILES & COMPONENTS $ 3,085,518
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.1%
PHARMACEUTICALS - 0.0%
4,255 Schering-Plough Corp., 6.0%, 9/14/07 $ 247,322
-------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 247,322
-------------
PRINCIPAL
AMOUNT
USD ($)
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,000,714) $ 3,332,840
-------------
CONVERTIBLE CORPORATE BOND - 0.1%
RETAILING - 0.1%
APPAREL RETAIL - 0.1%
200,000 GAP Inc., 5.75%, 3/15/09 $ 265,250
-------------
TOTAL RETAILING $ 265,250
-------------
TOTAL CONVERTIBLE CORPORATE BOND
(Cost $200,000) $ 265,250
-------------
SHARES
COMMON STOCKS - 94.2%
ENERGY - 9.3%
INTEGRATED OIL & GAS - 9.3%
71,813 ConocoPhillips $ 6,235,523
169,714 ChevronTexaco Corp. 8,911,682
176,110 Exxon Mobil Corp. 9,027,399
36,142 Occidental Petroleum Corp. 2,109,247
-------------
$ 26,283,851
-------------
TOTAL ENERGY $ 26,283,851
-------------
MATERIALS - 6.9%
COMMODITY CHEMICALS - 1.6%
51,941 Air Products & Chemicals, Inc. $ 3,011,020
28,233 E.I. du Pont de Nemours and Co. 1,384,829
-------------
$ 4,395,849
-------------
CONSTRUCTION MATERIALS - 0.7%
36,142 Vulcan Materials Co. $ 1,973,715
-------------
DIVERSIFIED CHEMICAL - 0.9%
37,925 PPG Industries, Inc. $ 2,584,968
-------------
DIVERSIFIED METALS & MINING - 1.0%
29,700 Phelps Dodge Corp. $ 2,937,924
-------------
PAPER PRODUCTS - 0.8%
64,436 Meadwestvaco Corp. $ 2,183,736
-------------
SPECIALTY CHEMICALS - 0.8%
42,784 Valspar Corp. $ 2,139,628
-------------
STEEL - 1.1%
51,012 Nucor Corp. $ 2,669,968
20,704 Roanoke Electric Steel Corp. 427,972
-------------
$ 3,097,940
-------------
TOTAL MATERIALS $ 19,313,760
-------------
CAPITAL GOODS - 8.1%
AEROSPACE & DEFENSE - 2.7%
53,284 Boeing Co. $ 2,758,513
46,899 General Dynamics Corp. 4,905,635
-------------
$ 7,664,148
-------------
ELECTRICAL COMPONENTS & EQUIPMENT - 1.5%
60,925 Emerson Electric Co. $ 4,270,843
-------------
INDUSTRIAL CONGLOMERATES - 2.8%
66,280 Johnson Controls, Inc. $ 4,204,803
33,767 United Technologies Corp. 3,489,819
-------------
$ 7,694,622
-------------
INDUSTRIAL MACHINERY - 1.1%
28,397 Gorman-Rupp Co. $ 653,131
95,208 The Timken Co. 2,477,312
-------------
$ 3,130,443
-------------
TOTAL CAPITAL GOODS $ 22,760,056
-------------
COMMERCIAL SERVICES & SUPPLIES - 0.6%
EMPLOYMENT SERVICES - 0.6%
128,355 Servicemaster Co. $ 1,770,015
-------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 1,770,015
-------------
TRANSPORTATION - 0.9%
RAILROADS - 0.9%
52,265 Burlington Northern, Inc. $ 2,472,657
-------------
TOTAL TRANSPORTATION $ 2,472,657
-------------
AUTOMOBILES & COMPONENTS - 5.7%
AUTOMOBILE MANUFACTURERS - 5.7%
154,894 Ford Motor Corp. $ 2,267,648
46,700 General Motors Corp. 1,870,802
149,912 PACCAR, Inc. 12,064,918
-------------
$ 16,203,368
-------------
TOTAL AUTOMOBILES & COMPONENTS $ 16,203,368
-------------
CONSUMER DURABLES & APPAREL - 0.4%
HOUSEWARES & SPECIALTIES - 0.4%
47,700 Tupperware Corp. $ 988,344
-------------
TOTAL CONSUMER DURABLES & APPAREL $ 988,344
-------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
MEDIA - 3.1%
MOVIES & ENTERTAINMENT - 1.7%
149,253 Cedar Fair, L.P. $ 4,910,424
-------------
PUBLISHING - 1.4%
41,821 McGraw-Hill Co., Inc. $ 3,828,294
-------------
TOTAL MEDIA $ 8,738,718
-------------
RETAILING - 1.2%
DEPARTMENT STORES - 1.2%
111,354 May Department Stores Co. $ 3,273,808
-------------
TOTAL RETAILING $ 3,273,808
-------------
FOOD, BEVERAGE & TOBACCO - 4.7%
PACKAGED FOODS & MEATS - 4.2%
152,313 Campbell Soup Co. $ 4,552,636
62,343 General Mills, Inc. 3,099,071
76,105 H.J. Heinz Co., Inc. 2,967,334
48,430 Sara Lee Corp. 1,169,100
-------------
$ 11,788,141
-------------
SOFT DRINKS - 0.5%
29,533 PepsiCo, Inc. $ 1,541,623
-------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 13,329,764
-------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.4%
HOUSEHOLD PRODUCTS - 1.4%
40,479 Colgate-Palmolive Co. $ 2,070,906
30,353 Clorox Co. 1,788,702
-------------
$ 3,859,608
-------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 3,859,608
-------------
HEALTH CARE EQUIPMENT & SERVICES - 4.0%
HEALTH CARE DISTRIBUTORS - 3.2%
99,784 Abbott Laboratories $ 4,654,924
28,800 Bristol-Myers Squibb Co. 737,856
59,163 Johnson & Johnson 3,752,117
-------------
$ 9,144,897
HEALTH CARE EQUIPMENT - 0.8%
39,446 Becton, Dickinson & Co. $ 2,240,533
-------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 11,385,430
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 1.8%
PHARMACEUTICALS - 1.8%
59,789 Eli Lilly & Co. $ 3,393,026
53,124 Merck & Co., Inc. 1,707,405
-------------
$ 5,100,431
-------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 5,100,431
-------------
BANKS - 11.7%
DIVERSIFIED BANKS - 4.4%
25,400 Comerica, Inc. $ 1,549,908
88,909 U.S. Bancorp 2,784,630
83,196 Wachovia Corp. 4,376,110
60,514 Wells Fargo & Co. 3,760,945
-------------
$ 12,471,593
-------------
REGIONAL BANKS - 4.3%
64,229 First Horizon National Corp. $ 2,768,912
100,062 National City Corp. 3,757,328
76,456 SunTrust Banks, Inc. 5,648,569
-------------
$ 12,174,809
-------------
THRIFTS & MORTGAGE FINANCE - 3.0%
195,686 Washington Mutual, Inc. $ 8,273,604
-------------
TOTAL BANKS $ 32,920,006
-------------
DIVERSIFIED FINANCIALS - 4.8%
ASSET MANAGEMENT & CUSTODY BANKS - 4.1%
61,735 Eaton Vance Corp. $ 3,219,480
27,800 State Street Corp. 1,365,536
113,009 T. Rowe Price Associates, Inc. 7,029,160
-------------
$ 11,614,176
-------------
INVESTMENT BANKING & BROKERAGE - 0.7%
44,506 A.G. Edwards, Inc. $ 1,923,104
-------------
TOTAL DIVERSIFIED FINANCIALS $ 13,537,280
-------------
INSURANCE - 3.2%
PROPERTY & CASUALTY INSURANCE - 3.2%
57,533 Chubb Corp. $ 4,424,288
89,632 Safeco Corp. 4,682,376
-------------
$ 9,106,664
-------------
TOTAL INSURANCE $ 9,106,664
-------------
REAL ESTATE - 1.2%
REAL ESTATE INVESTMENT TRUSTS - 1.2%
53,284 Simon DeBartolo Group, Inc. $ 3,445,876
-------------
TOTAL REAL ESTATE $ 3,445,876
-------------
SOFTWARE & SERVICES - 0.9%
APPLICATION SOFTWARE - 0.3%
32,011 Microsoft Corp. $ 855,014
-------------
DATA PROCESSING & OUTSOURCED SERVICES - 0.6%
40,616 Automatic Data Processing, Inc. $ 1,801,320
-------------
TOTAL SOFTWARE & SERVICES $ 2,656,334
-------------
TECHNOLOGY HARDWARE & EQUIPMENT - 2.0%
COMMUNICATIONS EQUIPMENT - 0.6%
91,600 Motorola, Inc. $ 1,575,520
-------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
COMPUTER HARDWARE - 1.4%
62,145 Diebold, Inc. $ 3,463,341
6,402 IBM Corp. 631,109
-------------
$ 4,094,450
-------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 5,669,970
-------------
TELECOMMUNICATION SERVICES - 6.2%
INTEGRATED TELECOMMUNICATION SERVICES - 6.2%
53,541 Alltel Corp. $ 3,146,069
140,143 BellSouth Corp. 3,894,574
175,340 SBC Communications, Inc. 4,518,512
64,047 AT&T Corp. 1,220,736
113,589 Verizon Communications, Inc. 4,601,490
-------------
$ 17,381,381
-------------
TOTAL TELECOMMUNICATION SERVICES $ 17,381,381
-------------
UTILITIES - 16.1%
ELECTRIC UTILITIES - 10.2%
79,358 Ameren Corp. $ 3,979,010
66,696 American Electric Power Co., Inc. 2,290,341
121,608 Constellation Energy Group 5,315,486
76,537 Consolidated Edison, Inc. 3,348,494
34,077 FPL Group, Inc. 2,547,256
108,460 Great Plains Energy, Inc. 3,284,169
66,088 NSTAR 3,587,257
127,476 Southern Co. 4,272,996
-------------
$ 28,625,009
-------------
GAS UTILITIES - 4.2%
15,400 Atmos Energy Corp. $ 421,190
128,160 KeySpan Energy Corp. 5,055,912
124,991 Questar Corp. 6,369,541
-------------
$ 11,846,643
-------------
MULTI-UTILITIES & UNREGULATED POWER - 1.1%
50,083 Equitable Resources, Inc. $ 3,038,035
-------------
WATER UTILITIES - 0.6%
73,317 Aqua America, Inc. $ 1,802,861
-------------
TOTAL UTILITIES $ 45,312,548
-------------
TOTAL COMMON STOCKS
(Cost $200,659,301) $ 265,509,869
-------------
PRINCIPAL
AMOUNT VALUE
TEMPORARY CASH INVESTMENT - 4.5%
REPURCHASE AGREEMENT - 4.5%
$ 12,700,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$12,700,000 plus accrued interest on
1/3/05 collateralized by $12,654,000
U.S. Treasury Bill, 6.75%, 5/15/05 $ 12,700,000
-------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $12,700,000) $ 12,700,000
-------------
TOTAL INVESTMENTS IN
SECURITIES - 100.0%
(Cost $216,560,015) $ 281,807,959
-------------
OTHER ASSETS
AND LIABILITIES - 0.0% $ 117,819
-------------
TOTAL NET ASSETS - 100.0% $ 281,925,778
=============
The accompanying notes are an integral part of these financial statements. 7
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS II 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.19 $ 15.18 $ 18.49 $ 21.37 $ 20.82
-------- -------- -------- --------- -------
Incr-ease (decrease) from investment operations:
Net investment income $ 0.36 $ 0.32 $ 0.31 $ 0.34 $ 0.29
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 2.53 3.02 (3.25) (1.84) 2.45
-------- -------- -------- --------- -------
Net increase (decrease) from investment
operations $ 2.89 $ 3.34 $ (2.94) $ (1.50) $ 2.74
Distributions to shareowners:
Net investment income (0.40) (0.33) (0.37) (0.32) (0.45)
Net realized gain -- -- -- (1.06) (1.74)
-------- -------- -------- --------- -------
Net increase (decrease) in net asset value $ 2.49 $ 3.01 $ (3.31) $ (2.88) $ 0.55
-------- -------- -------- --------- -------
Net asset value, end of period $ 20.68 $ 18.19 $ 15.18 $ 18.49 $ 21.37
======== ======== ======== ========= =======
Total return* 16.04% 22.27% (16.05)% (7.15)% 14.49%
Ratio of net expenses to average net assets+ 0.98% 1.02% 1.07% 1.02% 0.96%
Ratio of net investment income to average net assets+ 2.16% 2.29% 2.25% 1.77% 1.99%
Portfolio turnover rate 19% 12% 12% 13% 13%
Net assets, end of period (in thousands) $ 93,691 $ 60,355 $ 27,084 $ 17,948 $ 8,456
Ratios with no waiver of management fees and
assumption of expenses by PIM and no reduction
for fees paid indirectly:
Net expenses 0.98% 1.02% 1.07% 1.02% 0.96%
Net investment income 2.16% 2.29% 2.25% 1.77% 1.99%
Ratios with waiver of management fees and
assumption of expenses by PIM and reduction
for fees paid indirectly:
Net expenses 0.98% 1.02% 1.07% 1.02% 0.96%
Net investment income 2.16% 2.29% 2.25% 1.77% 1.99%
* 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.
8 The accompanying notes are an integral part of these financial statements.
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $216,560,015) $ 281,807,959
Cash 154,992
Receivables--
Fund shares sold 257,005
Dividends, interest and foreign taxes withheld 725,532
Other 7,531
-------------
Total assets $ 282,953,019
-------------
LIABILITIES:
Payables--
Fund shares repurchased 758,304
Due to affiliates 181,072
Accrued expenses 87,865
-------------
Total liabilities $ 1,027,241
-------------
NET ASSETS:
Paid-in capital $ 228,847,694
Undistributed net investment income (loss) 1,228,049
Accumulated undistributed net realized gain (loss) (13,397,909)
Net unrealized gain (loss) on:
Investments 65,247,944
-------------
Total net assets $ 281,925,778
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 188,234,469
Shares outstanding 9,147,953
-------------
Net asset value per share $ 20.58
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 93,691,309
Shares outstanding 4,529,535
-------------
Net asset value per share $ 20.68
The accompanying notes are an integral part of these financial statements. 9
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends $ 7,227,744
Interest 128,972
Income on securities loaned, net 7,190
------------
Total investment income $ 7,363,906
------------
EXPENSES:
Management fees $ 1,531,353
Transfer agent fees and expenses 3,000
Distribution fees (Class II) 181,888
Administrative reimbursements 30,408
Custodian fees 43,740
Professional fees 52,063
Printing expense 41,880
Fees and expenses of nonaffiliated trustees 1,681
Miscellaneous 8,282
------------
Total expenses $ 1,894,295
Less fees paid indirectly (4,731)
------------
Net expenses $ 1,889,564
------------
Net investment income (loss) $ 5,474,342
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 2,001,864
------------
$ 2,001,864
------------
Change in net unrealized gain or (loss) from:
Investments $ 29,937,321
------------
$ 29,937,321
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 31,939,185
============
Net increase (decrease) in net assets resulting
from operations $ 37,413,527
============
10 The accompanying notes are an integral part of these financial statements.
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 5,474,342 $ 4,413,641
Net realized gain (loss) on investments 2,001,864 (634,370)
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 29,937,321 34,115,732
------------- -------------
Net increase (decrease) in net assets resulting from operations $ 37,413,527 $ 37,895,003
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (3,809,792) $ (3,313,897)
Class II (1,595,526) (860,942)
------------- -------------
Total distributions to shareowners $ (5,405,318) $ (4,174,839)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 63,295,941 $ 52,433,019
Reinvestment of distributions 5,405,317 4,174,840
Cost of shares repurchased (34,772,572) (34,680,633)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 33,928,686 $ 21,927,226
------------- -------------
Net increase (decrease) in net assets $ 65,936,895 $ 55,647,390
------------- -------------
NET ASSETS:
Beginning of year $ 215,988,883 $ 160,341,493
------------- -------------
End of year $ 281,925,778 $ 215,988,883
============= =============
Undistributed net investment income (loss), end of year $ 1,228,049 $ 1,156,984
============= =============
The accompanying notes are an integral part of these financial statements. 11
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Equity Income VCT Portfolio is a portfolio of the Pioneer Variable
Contracts Trust (the Trust) which is a Delaware business trust registered under
the Investment Company Act of 1940 as an open-end management investment company.
The Trust consists of twenty two separate diversified portfolios fourteen of
which issue both Class I and Class II shares (collectively, the Portfolios,
individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio)(Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objective of Equity Income Portfolio is to seek capital
appreciation.
Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. 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
generally accepted in the investment company industry:
A. SECURITY VALUATION
Security transactions are recorded as of trade date. Net asset value for
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
Fixed income securities are valued at prices supplied by independent
pricing services, which consider such factors as Treasury spreads, yields,
maturities and
12
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
ratings. Valuations may be supplemented by dealers and other sources, as
required. Securities for which market quotations are not readily available
are valued at their fair values as determined by, or under the direction
of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio 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, 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. 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, 2004, the portfolio had no open futures contracts.
C. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
The portfolio elected to defer $229,369 in capital losses recognized
between November 1, 2004 and December 31, 2004, to its fiscal year ending
December 31, 2005.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Equity Income VCT Portfolio had a capital loss
carryforward of $13,046,273, of which will the following amounts expire
between 2009 and 2011 if not utilized: $3,961,413 in 2009, $6,407,206 in
2010, and $2,677,654, in 2011.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAIN PAID-IN
PORTFOLIO INCOME (LOSS) CAPITAL
- ----------------------------------- -------------- --------------- ---------
Pioneer Equity Income VCT Portfolio $ 2,041 $ (44,116) $ (42,075)
13
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 5,405,318 $ 4,174,839
Long-Term capital gain -- --
------------- -----------
$ 5,405,318 $ 4,174,839
Return of Capital -- --
------------- -----------
Total distributions $ 5,405,318 $ 4,174,839
============= ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(capital loss carryforward) (13,046,273)
Unrealized appreciation (depreciation) 66,353,726
Post-October loss deferred (229,369)
-------------
Total $ 53,078,084
=============
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, and the recognition of unrealized
gains or losses on certain futures contracts.
D. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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. Dividends and distributions to shareowners are
recorded on the ex-dividend date. 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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
F. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment
14
PIONEER EQUITY INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 UniCredito Italiano, manages the
Portfolio. Management fees are calculated daily at the following annual rate of
0.65% of thePortfolio'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. At December 31, 2004, $160,961 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$19,840 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolio's aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------- ------------- ------------ ------------ --------------
Equity Income Portfolio $ 215,454,233 $ 69,454,959 $ (3,101,223) $ 66,353,726
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $72,185,977 and $44,337,103, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
EQUITY INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------- ---------- -------------
CLASS I:
Shares sold 1,757,096 $ 33,474,454 1,544,529 $ 24,668,979
Reinvestment of distributions 198,654 3,809,791 204,954 3,313,898
Shares repurchased (1,411,407) (26,451,072) (1,964,325) (30,892,038)
---------- ------------- ---------- -------------
Net increase (decrease) 544,343 $ 10,833,173 (214,842) $ (2,909,161)
========== ============= ========== =============
CLASS II:
Shares sold 1,571,139 $ 29,821,487 1,723,515 $ 27,764,040
Reinvestment of distributions 82,473 1,595,526 54,432 860,942
Shares repurchased (442,520) (8,231,500) (242,114) (3,788,595)
---------- ------------- ---------- -------------
Net increase 1,211,092 $ 23,095,513 1,533,833 $ 24,836,387
========== ============= ========== =============
15
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 CLASS II SHAREOWNERS OF PIONEER EQUITY INCOME VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Equity Income VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, by correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
16
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for the
Trust's operations. The Trust's 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 Portfolio within the meaning
of the Investment Company Act of 1940 are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a
Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Trust"). The address for all Interested
PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston,
Pioneer Funds Distributor, Inc. Massachusetts 02109.
The Trust's statement of additional information provides more detailed
LEGAL COUNSEL information regarding the Trust's Trustees and is available upon
Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without
SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until Trustee and President Serves until Director of Harbor
Board, Trustee successor trustee is retirement or removal; Deputy Global Company, Ltd.
and President elected or earlier Chairman and a Director of Pioneer
retirement or removal 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;
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD"); President
of all of the Pioneer Funds; and Of
Counsel (since 2000, partner prior to
2000), Wilmer Cutler Pickering Hale
and Dorr LLP (counsel to PIM-USA and
the Pioneer Funds)
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee is Officer, PIM-USA since May 2003
President elected or earlier (Director since January 2001);
retirement or removal President and Director of Pioneer
since May 2003; Chairman and Director
of Pioneer Investment Management
Shareholder Services, Inc. ("PIMSS")
since May 2003; Executive Vice
President of all of the Pioneer Funds
since June 2003; Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 to May
2003; Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
17
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 elected or earlier (publicly traded health care services Investment Company
retirement or company) (2001-present); Managing (privately-held
removal. Partner, Federal City Capital affordable housing
Advisors (boutique merchant finance company);
bank)(1995-2000; 2002 to 2004); Director of New York
Executive Vice President and Chief Mortgage Trust
Financial Officer, Pedestal Inc. (publicly traded
(internet-based mortgage trading mortgage REIT)
company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady
3509 Woodbine 2000. successor trustee is (international financial advisory Corporation
Street, Chevy Chase, elected or earlier firm) (industrial
MD 20815 retirement or removal identification and
specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None
(57) 2000. successor trustee is Group, Inc. (consulting firm);
1001 Sherbrooke elected or earlier Professor of Management, Faculty of
Street West, Montreal, retirement or removal Management, McGill University
Quebec, Canada H3A 1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New
(56) 1995. successor trustee is Officer, Newbury, Piret & Company, America High Income
One Boston Place, elected or earlier Inc. (investment banking firm) Fund, Inc. (closed-
28th Floor, Boston, retirement or removal end investment
MA 02108 company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss
125 Broad Street, 1995. successor trustee is (law firm) Helvetia Fund, Inc.
New York, NY 10004 elected or earlier (closed-end
retirement or removal investment company)
and AMVESCAP PLC
(investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., Inc. None
One North Adgers Wharf, September, 2000. successor trustee is (private investment firm)
Charleston, SC 29401 elected or earlier
retirement or removal
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior Vice None
discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None
(40) Secretary discretion of the Counsel of Pioneer since July 2002;
Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to
July 2000); Assistant Secretary of
all Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Secretary discretion of the and Dorr LLP; Assistant Secretary of
Board all Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of the Administration and Custody Services
Board of Pioneer; and Treasurer of all of
the Pioneer Funds (Assistant
Treasurer from June 1999 to November
2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None
Treasurer discretion of the 2004; Treasurer and Senior Vice
Board President, CDC IXIS Asset Management
Services from 2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997 to
2002; and Assistant Treasurer of all
of the Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds since November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
19
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS HELD BY THIS TRUSTEE
Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None
Sullivan (31) Treasurer discretion of the Accounting, Administration and
Board Custody Services since June 2003;
Assistant Vice President - Mutual
Fund Operations of State Street
Corporation from June 2002 to June
2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None
Officer discretion of the (Director of Compliance and Senior
Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
[LOGO] PIONEER
Investments(R)
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER FUND VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
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 14
Report of Independent Registered Public Accounting Firm 19
Trustees, Officers and Service Providers 20
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 94.6%
Depositary Receipts for International Stocks 2.5%
Temporary Cash Investments 1.8%
International Common Stocks 1.1%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
Financials 15.7%
Information Technology 15.5%
Consumer Discretionary Consumer 14.0%
Industrials 13.2%
Health Care 12.3%
Consumer Staples 10.1%
Energy 7.9%
Materials 6.5%
Services 3.1%
Telecommunication Services 3.1%
Utilities 1.7%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Exxon Mobil Corp. 2.58%
2. ChevronTexaco Corp. 2.18
3. Target Corp. 2.04
4. United Technologies Corp. 1.98
5. Microsoft Corp. 1.97
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 20.51 $ 18.66
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.1766 $ -- $ --
- --------------------------------------------------------------------------------
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.
S&P 500 Pioneer Fund VCT Portfolio
10/97 10000 10000
10643 10545
12/98 13686 13257
16565 15312
12/00 15060 15561
13275 13836
12/02 10342 11173
13306 13791
12/04 14747 15298
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, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 6.11%
(10/31/97)
5 Years -0.02
1 Year 10.93
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 FUND 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 FUND VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,090.36 $ 1,088.30
Expenses Paid During Period* $ 3.72 $ 5.02
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and
0.96% 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). 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 FUND VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.57 $ 1,020.31
Expenses Paid During Period* $ 3.60 $ 4.85
* Expenses are equal to the Portfolio's annualized expense ratio of 0.71% and
0.96% 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 FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
CALL 800-688-9915 OR VISIT www.pioneer funds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE
PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION.
In the following discussion, John Carey, portfolio manager of Pioneer Fund VCT
Portfolio, reviews the past year and gives an overview of the Portfolio's
performance over that period.
Q: HOW DID THE PORTFOLIO PERFORM VERSUS ITS BENCHMARK? TO WHAT DO YOU
ATTRIBUTE THE PERFORMANCE?
A: Pioneer Fund VCT Portfolio achieved respectable returns in 2004. Class II
shares of the Portfolio rose 10.93% at net asset value for the calendar
year. Most of the gain came in the fourth quarter, which saw the Portfolio
rise 9.11%. By comparison, the Standard & Poor's 500 Index increased by
11.04% for the year and 9.23% in the fourth quarter.
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.
For Pioneer Fund VCT Portfolio, the better than average performance was
derived both from our solid weightings in many of the old-economy stocks,
especially in energy, industrials, and materials, and from our good stock
selection in the four sectors that underperformed the S&P 500 average,
consumer staples, financials, health care, and information technology.
Among our best performing stocks were Norfolk Southern and PACCAR in
industrials and T. Rowe Price in financials, but we also benefited from
having only modest relative exposure to Pfizer and Cisco Systems (which we
sold during the year) and no holdings of Coca-Cola, all stocks that did
poorly. We did suffer from having above-market weightings in two of the
dismal semi-conductor names, Applied Materials and Texas Instruments, but
on the whole we managed to avoid most of the "disaster" stocks. We were
particularly pleased that consumer discretionary, the sector we had
highlighted in our annual report for 2003 as the major culprit in our
relative underperformance versus the S&P during that year, was a positive
contributor to fund performance in 2004. Three of our largest gains were
from stocks in that sector: McGraw-Hill, Target, and John Wiley & Sons.
Q: WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE SECOND HALF?
A: The list of 32 additions to and 10 deletions from the portfolio in the
second half of 2004 makes it look as though the period was a singularly
busy one for Pioneer Fund VCT Portfolio. Actually it was just a normally
busy time, but due to the merger of an acquired fund, the Safeco Core
Equity Fund, into Pioneer Fund VCT Portfolio during December, we ended up
with some new, transferred positions. Most of the Safeco fund, overlapped
with positions already owned in Pioneer Fund, but we inherited the others
as well. Rather than "throwing them all out with the wash," we thought that
we would take our time to study them in the expectation that some might
prove to be worthwhile longer-term holdings for Pioneer Fund VCT Portfolio.
The merger itself marked an exciting increase to the asset base of Pioneer
Fund VCT Portfolio, and also to our shareholder family. To our new,
formerly Safeco shareholders, a hearty welcome!
The total effect of the portfolio activity on sector weights was modest,
with no sector weighting going up or down by as much as 2%. Materials,
industrials, consumer discretionary, information technology, and
telecommunications services all increased as a percentage of the Fund
portfolio, and energy, consumer staples, health care, financials, and
utilities all decreased. As examples, in materials we added: BHP Billiton,
a major Australian-based mining and minerals company; Inco, the Canadian
nickel producer; and Newmont Mining, a leading gold miner. Two new
materials names came from the Safeco fund, Praxair, supplier of industrial
gases, and Ball, a packaging company. Among industrials, Northrup Grumman
and Ingersoll-Rand were both Safeco holdings, and in the case of consumer
discretionary, five of the eight new stocks came from the Safeco fund. The
two largest additions, however, were our own purchases, Nordstrom and Gap,
both of them retailing companies showing signs of meaningful operational
improvement over the past couple of years.
Information technology rose somewhat with: our purchase of Veritas
Software, which has received a merger proposal from another portfolio
company, Symantec; the receipt of shares of Freescale Semiconductor from
our holding Motorola; and the inclusion of EMC, an information storage
specialist, from the Safeco fund. Telecommunications saw one purchase by
us, Nextel Communications, and two additions attributable to the Safeco
fund, CenturyTel and Verizon. Subsequent to our purchase of Nextel, the
company entered into merger discussions with Sprint.
In regard to the sectors where the weightings decreased, the reasons in
some cases had to do with weaker relative share-price performance and in
other cases with sales from the portfolio. In energy, we realized a gain on
a large position in Smith International and replaced it with a smaller
holding of Schlumberger. With consumer staples, despite the addition of two
small positions from the Safeco portfolio, Kellogg and Kimberly Clark, the
sector declined as a percent of the Fund due to underperformance versus the
market averages. In the case of health care, it was a combination of
selling in excess of purchasing and woeful stock performance from some of
the pharmaceuticals, especially Mylan Labs, which announced an acquisition
that many investors thought ill conceived. During the six months, we
realized significant percentage gains on our sales of Biomet and Wellpoint
Health Networks, while adding two names in the health-care equipment and
supplies industry, Stryker and Medtronic, and one name in biotechnology,
Amgen. Medtronic and Amgen were both from the Safeco fund.
4
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
Financials saw SouthTrust stock exchanged for shares of Wachovia in a
merger and our shares of Charter One Financial acquired for cash by the
Royal Bank of Scotland. We sold our position in St. Paul Travelers after
discouragement over the company's need to set up additional reserves
following the merger creating the company. Finally, in utilities, we sold a
position in Vectren and received a smaller position in Exelon from the
Safeco fund.
Q: WHAT IS YOUR OUTLOOK FOR 2005?
A: The economic outlook appears favorable over the coming year. Interest rates
are expected to continue rising, but not so fast that they should present
impediments to further economic growth. Earnings growth will moderate
somewhat, which is normal as a business cycle lengthens, but should still
be adequate to fuel additional share-price advances. Federal tax law, with
the maximum 15% tax rate on qualified dividends and long-term capital
gains, is likewise favorable to the stock market. Of course there are
concerns, including energy and other commodity prices and the high trade
and Federal budget deficits. At some point, too, investors will begin
looking ahead to the next downturn in the economy and thinking about ways
to position themselves more defensively. A lot rides on the length of the
current business cycle. That is, will this be a "normal" cycle of four
years or thereabouts, or could it become another extended cycle like the
one of the 1990s, which continued for more than six years? Making the
forecasting even more difficult is the unusual circumstance that this is a
wartime cycle, with some economic activity not conforming to more
predictable business patterns.
As always, though, we are mainly interested in companies that have the
financial and management strengths to survive and do well regardless of the
economic climate, and especially companies with the potential, as well as a
plan and the management commitment, to do better than they have in the
past. A good economy creates more opportunities for such companies to
achieve improved results.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
5
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 98.9%
ENERGY - 7.8%
INTEGRATED OIL & GAS - 5.8%
20,126 BP Amoco Plc (A.D.R.) $ 1,175,358
31,052 ConocoPhillips 2,696,245
241,264 ChevronTexaco Corp. 12,668,773
292,714 Exxon Mobil Corp. 15,004,520
44,680 Occidental Petroleum Corp. 2,607,525
-------------
$ 34,152,421
-------------
OIL & GAS DRILLING - 0.7%
60,277 Schlumberger, Ltd. $ 4,035,545
-------------
OIL & GAS EXPLORATION & PRODUCTION - 1.3%
99,995 Apache Corp. $ 5,056,747
70,551 Pioneer Natural Resources Co. 2,476,340
-------------
$ 7,533,087
-------------
TOTAL ENERGY $ 45,721,053
-------------
MATERIALS - 6.5%
ALUMINUM - 0.6%
117,716 Alcoa, Inc. $ 3,698,637
-------------
COMMODITY CHEMICALS - 1.3%
27,138 Air Products & Chemicals, Inc. $ 1,573,190
46,466 E.I. du Pont de Nemours and Co. 2,279,157
88,000 Praxair, Inc. 3,885,200
-------------
$ 7,737,547
-------------
DIVERSIFIED CHEMICAL - 0.3%
21,688 PPG Industries, Inc. $ 1,478,254
-------------
DIVERSIFIED METALS & MINING - 2.7%
112,522 BHP Billiton, Ltd. (A.D.R) $ 2,702,778
81,386 Inco, Ltd.* 2,993,377
39,803 Phelps Dodge Corp. 3,937,313
200,118 Rio Tinto Plc 5,886,829
-------------
$ 15,520,297
-------------
METAL & GLASS CONTAINERS - 0.8%
104,000 Ball Corp. $ 4,573,920
-------------
PAPER PRODUCTS - 0.3%
53,073 Meadwestvaco Corp. $ 1,798,644
-------------
PRECIOUS METALS & MINERALS - 0.3%
40,047 Newmont Mining Corp. $ 1,778,487
-------------
SPECIALTY CHEMICALS - 0.2%
39,222 Ecolab, Inc. $ 1,377,869
-------------
TOTAL MATERIALS $ 37,963,655
-------------
CAPITAL GOODS - 10.3%
AEROSPACE & DEFENSE - 1.4%
48,104 General Dynamics Corp. $ 5,031,678
54,000 Northrop Grumman Corp. 2,935,440
-------------
$ 7,967,118
-------------
ELECTRICAL COMPONENTS & EQUIPMENT - 2.1%
65,964 Emerson Electric Co. $ 4,624,076
206,300 General Electric Co. 7,529,950
-------------
$ 12,154,026
-------------
INDUSTRIAL CONGLOMERATES - 4.5%
79,790 Illinois Tool Works, Inc. $ 7,394,937
120,984 Johnson Controls, Inc. 7,675,225
111,551 United Technologies Corp. 11,528,796
-------------
$ 26,598,958
-------------
INDUSTRIAL MACHINERY - 2.3%
40,569 Caterpillar, Inc. $ 3,955,883
86,222 Deere & Co. 6,414,917
40,000 Ingersoll-Rand Co. 3,212,000
-------------
$ 13,582,800
-------------
TOTAL CAPITAL GOODS $ 60,302,902
-------------
COMMERCIAL SERVICES & SUPPLIES - 0.5%
OFFICE SERVICES & SUPPLIES - 0.5%
58,698 Canon, Inc. (A.D.R.) $ 3,184,953
-------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 3,184,953
-------------
TRANSPORTATION - 2.3%
AIRLINES - 0.5%
170,807 Southwest Airlines Co. $ 2,780,738
-------------
RAILROADS - 1.5%
50,040 Burlington Northern, Inc. $ 2,367,392
180,893 Norfolk Southern Corp. 6,546,518
-------------
$ 8,913,910
-------------
TRUCKING - 0.3%
21,253 United Parcel Service (a) $ 1,816,281
-------------
TOTAL TRANSPORTATION $ 13,510,929
-------------
AUTOMOBILES & COMPONENTS - 2.1%
AUTOMOBILE MANUFACTURERS - 2.1%
253,315 Ford Motor Corp. $ 3,708,532
108,616 PACCAR, Inc. 8,741,416
-------------
$ 12,449,948
-------------
TOTAL AUTOMOBILES & COMPONENTS $ 12,449,948
-------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
CONSUMER DURABLES & APPAREL - 0.6%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.2%
65,267 Gap, Inc. $ 1,378,439
-------------
HOUSEWARES & SPECIALTIES - 0.4%
84,000 Leggett & Platt, Inc. $ 2,388,120
-------------
TOTAL CONSUMER DURABLES & APPAREL $ 3,766,559
-------------
MEDIA - 4.5%
ADVERTISING - 0.6%
43,791 Omnicom Group $ 3,692,457
-------------
MOVIES & ENTERTAINMENT - 0.2%
51,957 The Walt Disney Co. $ 1,444,405
-------------
PUBLISHING - 3.7%
48,893 Elsevier NV $ 665,764
90,111 Gannett Co. 7,362,069
149,146 John Wiley & Sons, Inc. 5,196,247
78,179 McGraw-Hill Co., Inc. 7,156,506
28,800 Tribune Co. 1,213,632
-------------
$ 21,594,218
-------------
TOTAL MEDIA $ 26,731,080
-------------
RETAILING - 6.5%
APPAREL RETAIL - 0.2%
24,633 Liz Claiborne, Inc. $ 1,039,759
-------------
COMPUTER & ELECTRONICS RETAIL - 0.6%
60,000 Best Buy Co., Inc. $ 3,565,200
11,064 Game Stop Corp. (Class B)* 247,944
-------------
$ 3,813,144
-------------
DEPARTMENT STORES - 2.0%
80,000 Kohl's Corp.* $ 3,933,600
88,332 May Department Stores Co. 2,596,961
118,523 Nordstrom, Inc. 5,538,580
-------------
$ 12,069,141
-------------
GENERAL MERCHANDISE STORES - 2.2%
34,432 Family Dollar Stores, Inc. $ 1,075,311
228,656 Target Corp. 11,874,106
-------------
$ 12,949,417
-------------
HOME IMPROVEMENT RETAIL - 1.3%
110,000 Home Depot, Inc. $ 4,701,400
48,716 Lowe's Co., Inc. 2,805,554
-------------
$ 7,506,954
-------------
SPECIALTY STORES - 0.2%
30,603 Barnes & Noble, Inc.* $ 987,559
-------------
TOTAL RETAILING $ 38,365,974
-------------
FOOD & DRUG RETAILING - 2.5%
DRUG RETAIL - 0.9%
139,003 Walgreen Co. $ 5,333,545
-------------
FOOD DISTRIBUTORS - 1.4%
83,493 Cardinal Health, Inc. $ 4,855,118
84,201 Sysco Corp. 3,213,952
-------------
$ 8,069,070
-------------
FOOD RETAIL - 0.2%
28,200 Kellogg Co. $ 1,259,412
-------------
TOTAL FOOD & DRUG RETAILING $ 14,662,027
-------------
FOOD, BEVERAGE & TOBACCO - 3.7%
PACKAGED FOODS & MEATS - 2.1%
86,457 Campbell Soup Co. $ 2,584,200
44,844 General Mills, Inc. 2,229,195
73,219 H.J. Heinz Co., Inc. 2,854,809
54,767 Hershey Foods Corp. 3,041,759
76,005 Sara Lee Corp. 1,834,761
$ 12,544,724
SOFT DRINKS - 1.6%
178,941 PepsiCo, Inc. $ 9,340,720
-------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 21,885,444
-------------
HOUSEHOLD & PERSONAL PRODUCTS - 3.8%
HOUSEHOLD PRODUCTS - 3.2%
90,211 Colgate-Palmolive Co. $ 4,615,195
15,015 Clorox Co. 884,834
80,030 Estee Lauder Co. 3,662,973
171,470 Procter & Gamble Co. 9,444,568
-------------
$ 18,607,570
-------------
PERSONAL PRODUCTS - 0.6%
58,000 Kimberly-Clark Corp. $ 3,816,980
-------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 22,424,550
-------------
HEALTH CARE EQUIPMENT & SERVICES - 6.6%
HEALTH CARE DISTRIBUTORS - 3.4%
204,554 Abbott Laboratories $ 9,542,444
163,188 Johnson & Johnson 10,349,383
-------------
$ 19,891,827
-------------
HEALTH CARE EQUIPMENT - 2.8%
73,222 Becton, Dickinson & Co. $ 4,159,010
32,057 Guidant Corp. 2,311,310
85,000 Medtronic, Inc. 4,221,950
123,159 Stryker Corp. 5,942,422
-------------
$ 16,634,692
-------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
MANAGED HEALTH CARE - 0.4%
23,937 United Healthcare Group, Inc. $ 2,107,174
-------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 38,633,693
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.6%
BIOTECHNOLOGY - 0.8%
68,200 Amgen, Inc.* $ 4,375,030
-------------
PHARMACEUTICALS - 4.8%
55,362 Barr Laboratorie, Inc. $ 2,521,185
95,302 Eli Lilly & Co. 5,408,389
236,082 Merck & Co., Inc. 7,587,675
104,212 Mylan Laboratories, Inc. (a) 1,842,468
56,907 Novartis AG 2,876,080
78,800 Pfizer, Inc. 2,118,932
18,810 Roche Holdings AG (A.D.R) 2,184,311
180,617 Schering-Plough Corp. 3,771,283
-------------
$ 28,310,323
-------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 32,685,353
-------------
BANKS - 8.1%
DIVERSIFIED BANKS - 3.7%
288,277 U.S. Bancorp $ 9,028,836
41,456 Wachovia Corp. 2,180,586
174,435 Wells Fargo & Co. 10,841,135
-------------
$ 22,050,557
-------------
REGIONAL BANKS - 3.1%
98,868 First Horizon National Corp. $ 4,262,199
59,000 Fifth Third Bancorp 2,789,520
140,351 National City Corp. 5,270,180
57,444 SunTrust Banks, Inc. 4,243,963
23,185 Zions Bancorporation 1,577,276
-------------
$ 18,143,138
-------------
THRIFTS & MORTGAGE FINANCE - 1.3%
177,481 Washington Mutual, Inc. $ 7,503,897
-------------
Total Banks $ 47,697,592
-------------
DIVERSIFIED FINANCIALS - 5.4%
ASSET MANAGEMENT & CUSTODY BANKS - 2.6%
114,875 The Bank of New York Co., Inc. $ 3,839,123
45,290 Federated Investors, Inc. 1,376,816
77,103 State Street Corp. 3,787,299
101,277 T. Rowe Price Associates, Inc. 6,299,429
-------------
$ 15,302,667
-------------
CONSUMER FINANCE - 2.2%
138,272 American Express Co. $ 7,794,393
172,000 MBNA Corp. 4,848,680
-------------
$ 12,643,073
-------------
INVESTMENT BANKING & BROKERAGE - 0.6%
60,698 Merrill Lynch & Co., Inc. $ 3,627,919
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.0%
1 Citigroup, Inc. $ 48
-------------
TOTAL DIVERSIFIED FINANCIALS $ 31,573,707
-------------
INSURANCE - 1.9%
MULTI-LINE INSURANCE - 0.9%
78,394 American International Group, Inc. $ 5,148,134
-------------
PROPERTY & CASUALTY INSURANCE - 1.0%
56,844 Chubb Corp. $ 4,371,304
33,919 Safeco Corp. 1,771,929
-------------
$ 6,143,233
-------------
TOTAL INSURANCE $ 11,291,367
-------------
SOFTWARE & SERVICES - 5.5%
APPLICATION SOFTWARE - 3.1%
44,591 Adobe Systems, Inc. $ 2,797,639
429,081 Microsoft Corp. 11,460,754
62,259 Symantec Corp.* 1,603,792
82,800 Veritas Software Corp.* 2,363,940
-------------
$ 18,226,125
-------------
DATA PROCESSING & OUTSOURCED SERVICES - 2.4%
107,497 Automatic Data Processing, Inc. $ 4,767,492
38,501 Computer Sciences Corp.* 2,170,301
26,882 DST Systems, Inc.* 1,401,090
29,998 Fiserv, Inc.* 1,205,620
158,920 SunGard Data Systems, Inc.* 4,502,204
-------------
$ 14,046,707
-------------
TOTAL SOFTWARE & SERVICES $ 32,272,832
-------------
TECHNOLOGY HARDWARE & EQUIPMENT - 6.2%
COMMUNICATIONS EQUIPMENT - 2.1%
95,000 Century Telephone Enterprises, Inc. $ 3,369,650
221,762 Motorola, Inc. 3,814,306
326,377 Nokia Corp. (A.D.R) 5,114,328
-------------
$ 12,298,284
-------------
COMPUTER HARDWARE - 3.7%
27,643 Diebold, Inc. $ 1,540,544
203,265 Dell, Inc.* 8,565,587
76,270 Hewlett-Packard Co. 1,599,382
81,063 IBM Corp. 7,991,191
403,137 Sun Microsystems, Inc.* 2,168,877
-------------
$ 21,865,581
-------------
COMPUTER STORAGE & PERIPHERALS - 0.4%
160,000 EMC Corp.* $ 2,379,200
-------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 36,543,065
-------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
SEMICONDUCTORS - 3.6%
SEMICONDUCTOR EQUIPMENT - 0.9%
308,306 Applied Materials, Inc.* $ 5,272,033
-------------
SEMICONDUCTORS - 2.7%
24,815 Freescale Semiconductors, Inc.* $ 455,602
349,426 Intel Corp. 8,173,074
294,793 Texas Instruments, Inc. 7,257,804
-------------
$ 15,886,480
-------------
TOTAL SEMICONDUCTORS $ 21,158,513
-------------
TELECOMMUNICATION SERVICES - 3.1%
INTEGRATED TELECOMMUNICATION SERVICES - 3.0%
23,765 Alltel Corp. $ 1,396,431
146,005 BellSouth Corp. 4,057,479
218,671 SBC Communications, Inc. 5,635,151
164,000 Verizon Communications, Inc. 6,643,640
-------------
$ 17,732,701
-------------
WIRELESS TELECOMMUNICATION SERVICES - 0.1%
17,897 Nextel Communications, Inc.* $ 536,910
-------------
TOTAL TELECOMMUNICATION SERVICES $ 18,269,611
-------------
UTILITIES - 1.7%
ELECTRIC UTILITIES - 1.4%
32,838 American Electric Power Co., Inc. $ 1,127,655
36,216 Consolidated Edison, Inc. 1,584,450
90,000 Exelon Corp. 3,966,300
57,799 Southern Co. 1,937,422
-------------
$ 8,615,827
-------------
GAS UTILITIES - 0.2%
27,431 KeySpan Energy Corp. $ 1,082,153
-------------
WATER UTILITIES - 0.1%
18,826 Aqua America, Inc. $ 462,931
-------------
TOTAL UTILITIES $ 10,160,911
-------------
TOTAL COMMON STOCKS
(Cost $459,723,725) $ 581,255,718
-------------
PRINCIPAL
AMOUNT VALUE
TEMPORARY CASH INVESTMENTS - 1.8%
REPURCHASE AGREEMENT - 1.2%
$ 7,300,000 UBS Warburg, Inc., 1.00%,
dated 12/31/04, repurchase price of
$7,300,000 plus accrued interest on
1/3/05 collateralized by $6,902,000
U.S. Treasury Bill, 5.625%, 5/15/08 $ 7,300,000
-------------
SHARES
SECURITY LENDING COLLATERAL - 0.6%
3,264,285 Securities Lending
Investment Fund, 2.18% $ 3,264,286
-------------
TOTAL TEMPORARY CASH
INVESTMENTS
(Cost $10,564,285) $ 10,564,286
-------------
TOTAL INVESTMENTS IN
SECURITIES - 100.7%
(Cost $470,288,010) $ 591,820,004
-------------
OTHER ASSETS
AND LIABILITIES - (0.7)% $ (4,056,175)
-------------
TOTAL NET ASSETS - 100.0% $ 587,763,829
=============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
99,001 Mylan Laboratories, Inc. $ 1,750,338
16,979 United Parcel Service 1,451,025
-----------
TOTAL $ 3,201,363
===========
The accompanying notes are an integral part of these financial statements. 9
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.66 $ 15.25 $ 19.05 $ 22.65 $ 23.28
--------- -------- -------- -------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.18 $ 0.14 $ 0.13 $ 0.14 $ 0.12
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.85 3.42 (3.78) (2.59) (0.45)
--------- -------- -------- -------- -------
Net increase (decrease) from investment operations $ 2.03 $ 3.56 $ (3.65) $ (2.45) $ (0.33)
Distributions to shareowners:
Net investment income (0.18) (0.15) (0.15) (0.13) (0.17)
Net realized gain -- -- -- (1.02) (0.13)
--------- -------- -------- -------- -------
Net increase (decrease) in net asset value $ 1.85 $ 3.41 $ (3.80) $ (3.60) $ (0.63)
--------- -------- -------- -------- -------
Net asset value, end of period $ 20.51 $ 18.66 $ 15.25 $ 19.05 $ 22.65
========= ======== ======== ======== =======
Total return* 10.93% 23.44% (19.25)% (11.09)% (1.61)%
Ratio of net expenses to average net assets+ 0.96% 1.00% 1.06% 1.04% 0.93%**
Ratio of net investment income to average net assets+ 1.00% 0.87% 0.84% 0.49% 0.47%**
Portfolio turnover rate 17% 11% 11% 7% 19%**
Net assets, end of period (in thousands) $ 133,627 $ 87,488 $ 36,218 $ 12,674 $ 2,894
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 0.96% 1.00% 1.06% 1.04% 0.93%**
Net investment income 1.00% 0.87% 0.84% 0.49% 0.47%**
(a) Class II shares were first publicly offered on May 1, 2000.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
10 The accompanying notes are an integral part of these financial statements.
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $3,201,363) (Cost $470,288,010) $ 591,820,004
Receivables -
Fund shares sold 408,198
Dividends, interest and foreign taxes withheld 1,035,978
Other 40,546
-------------
Total assets $ 593,304,726
-------------
LIABILITIES:
Payables--
Investment securities purchased $ 1,000,388
Upon return for securities loaned 3,264,284
Due to bank 848,222
Due to affiliates 307,212
Accrued expenses 120,791
-------------
Total liabilities $ 5,540,897
-------------
NET ASSETS:
Paid-in capital $ 535,852,814
Undistributed net investment income (loss) 433,753
Accumulated undistributed net realized gain (loss) (70,054,73)
Net unrealized gain (loss) on:
Investments 121,531,994
-------------
Total net assets $ 587,763,829
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 454,136,359
Shares outstanding 22,081,959
-------------
Net asset value per share $ 20.57
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 133,627,470
Shares outstanding 6,513,968
-------------
Net asset value per share $ 20.51
The accompanying notes are an integral part of these financial statements. 11
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $27,542) $ 5,255,783
Interest 158,731
Income on securities loaned, net 9,868
------------
Total investment income $ 5,424,382
------------
EXPENSES:
Management fees $ 1,790,664
Transfer agent fees and expenses 2,736
Distribution fees (Class II) 273,949
Administrative reimbursements 24,868
Custodian fees 47,602
Professional fees 59,072
Printing expense 30,024
------------
Total expenses $ 2,228,915
Less fees paid indirectly (4,581)
------------
Net expenses $ 2,224,334
------------
Net investment income (loss) $ 3,200,048
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 1,095,419
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (11,040)
------------
$ 1,084,379
------------
Change in net unrealized gain or (loss) from:
Investments $ 30,978,376
------------
$ 30,978,376
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 32,062,755
============
Net increase (decrease) in net assets resulting
from operations $ 35,262,803
============
12 The accompanying notes are an integral part of these financial statements.
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 3,200,048 $ 2,086,873
Net realized gain (loss) on investments 1,084,379 (8,525,302)
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 30,978,376 49,662,141
------------- -------------
Net increase (decrease) in net assets resulting from operations $ 35,262,803 $ 43,223,712
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (1,685,576) $ (1,580,150)
Class II (1,069,680) (520,900)
------------- -------------
Total distributions to shareowners $ (2,755,256) $ (2,101,050)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 60,072,885 $ 58,651,489
Class I shares issued in reorganization 298,220,832 --
Reinvestment of distributions 2,755,256 2,101,050
Cost of shares repurchased (48,119,744) (37,658,369)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 312,929,229 $ 23,094,170
------------- -------------
Net increase (decrease) in net assets $ 345,436,776 $ 64,216,832
NET ASSETS:
Beginning of year 242,327,053 178,110,221
------------- -------------
End of year $ 587,763,829 $ 242,327,053
============= =============
Undistributed net investment income (loss), end of year $ 433,753 $ --
============= =============
The accompanying notes are an integral part of these financial statements. 13
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Fund VCT Portfolio (the Portfolio) a Portfolio of Pioneer Variable
Contracts Trust (the Trust) which is a Delaware business trust registered under
the Investment Company Act of 1940 as an open-end management investment company.
The Trust consists of twenty two separate portfolios, fourteen of which issue
both Class I and Class II shares (collectively, the Portfolios, individually the
Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value I Portfolio) (Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Fund Portfolio is to seek capital appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
14
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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. 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Fund Portfolio had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Fund VCT Portfolio had a capital loss
carryforward of $69,351,655, of which the following amounts will expire
between 2009 and 2011 if not utilized: $20,833,698 in 2009, $35,500,430 in
2010 and $13,017,527 in 2011.
The Portfolio has elected to defer $23,515 in capital losses recognized
between November 1, 2004 and December 31, 2004 to its fiscal year ended
December 31, 2005.
15
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
At December 31, 2004, the portfolio made reclassifications as described below.
These reclassifications have no impact on the net asset value of the portfolio
and are designed to present the portfolio's capital accounts on a tax basis.
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED GAIN PAID-IN
PORTFOLIO (LOSS) (LOSS) CAPITAL
- -------------------------- ----------------- --------------- -------
Pioneer Fund VCT Portfolio $ (11,039) $ 11,039 $ (0)
========= ======== ====
The following chart shows the components of distributable earnings (accumulated
losses) as of December 31, 2004 and the distributions paid during the years
ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,755,256 $ 2,101,050
Long-Term capital gain -- --
------------- -----------
$ 2,755,256 $ 2,101,050
Return of Capital -- --
------------- -----------
Total distributions $ 2,755,256 $ 2,101,050
============= ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 433,753
Undistributed long-term gain/(Capital loss carryforward) (69,351,655)
Unrealized appreciation (depreciation) 120,852,432
Post-October loss deferred (23,515)
-------------
Total $ 51,911,015
=============
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, 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.
16
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolio. Management fees are calculated daily at the following 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 accounting, regulatory reporting and insurance premiums, are paid by
the Portfolio. At December 31, 2004, $278,054 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $269 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$28,889 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------- ------------- --------------
Fund Portfolio $ 470,964,572 $ 139,688,987 $ (18,836,555) $ 120,852,432
============= ============= ============= =============
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $102,950,656 and $46,364,816, respectively.
17
PIONEER FUND VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
FUND PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- --------------------------------------- ---------- ------------- ---------- -------------
CLASS I:
Shares sold 451,723 $ 8,690,214 519,126 $ 8,479,870
Class I shares issued in reorganization 14,822,109 298,220,832 -- --
Reinvestment of distributions 87,609 1,685,576 94,945 1,580,150
Shares repurchased (1,561,121) (29,970,569) (1,616,113) (25,664,887)
---------- - ----------- ---------- -------------
Net increase 13,800,320 $ 278,626,053 (1,002,042) $ (15,604,867)
========== ============= ========== =============
CLASS II:
Shares sold 2,721,468 $ 51,382,671 3,031,681 $ 50,171,619
Reinvestment of distribution 55,486 1,069,680 30,685 520,900
Shares repurchased (952,397) (18,149,175) (747,392) (12,093,482)
---------- ------------- ---------- -------------
Net increase 1,824,557 $ 34,303,176 2,314,974 $ 38,599,037
========== ============= ========== =============
8. MERGER INFORMATION
On December 8, 2004, beneficial owners of Safeco RST Core Equity Portfolio
("Core Equity"), Safeco RST Money Market Portfolio ("Money Market") and Safeco
RST Multi-Cap Core Portfolio ("Multi-Cap"), three of the six portfolios that
comprised Safeco Resource Series Trust, approved a proposed Agreement and Plan
of Reorganization that provided for the mergers listed below. These tax-free
reorganizations were accomplished on December 10, 2004 ("Closing Date"), by
exchanging all of the Safeco's net assets for Class I shares as indicated below,
based on Class I shares' ending net asset value on the Closing Date. The
following charts show the details of the reorganizations as of that closing date
Closing Date:
PIONEER FUND VCT SAFECO RST CORE PIONEER FUND VCT
PORTFOLIO EQUITY PORTFOLIO PORTFOLIO
(PRE-REORGANIZATION) (PRE-REORGANIZATION) (POST-REORGANIZATION)
-------------------- -------------------- ---------------------
Net Assets $ 281,591,969 $ 298,220,832 $ 879,147,352
Shares Outstanding 13,990,134 12,804,673 28,812,243
Class I Shares Issued 14,822,109
UNREALIZED
APPRECIATION ON REALIZED GAIN/(LOSS)
CLOSING DATE ON CLOSING DATE
--------------- --------------------
Safeco RST Core Equity Portfolio $ 68,714,366 $ 20,662,968
18
PIONEER FUND 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 CLASS II SHAREOWNERS OF PIONEER FUND VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Fund VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, by correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at December
31, 2004, 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 three years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
19
PIONEER FUND VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for the
Trust's operations. The Trust's 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 Portfolio within the meaning
of the Investment Company Act of 1940 are referred to as Interested
Trustees. Trustees who are not interested persons of the Trust are
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM referred to as Independent Trustees. Each of the Trustees serves as a
Ernst & Young LLP trustee of each of the 73 U.S. registered investment portfolios for
which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Trust"). The address for all Interested
PRINCIPAL UNDERWRITER Trustees and all officers of the Portfolio is 60 State Street, Boston,
Pioneer Funds Distributor, Inc. Massachusetts 02109.
The Trust's statement of additional information provides more detailed
LEGAL COUNSEL information regarding the Trust's Trustees and is available upon
Wilmer Cutler Pickering Hale and Dorr LLP request, without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without
SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292) This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS TRUSTEE
John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
(78)* Board, Trustee and successor trustee retirement or removal; Deputy Company, Ltd.
President is elected or Chairman and a Director of Pioneer
earlier retirement Global Asset Management S.p.A.
or removal ("PGAM"); Non-Executive Chairman and
a Director of Pioneer Investment
Management USA Inc. ("PIM-USA");
Chairman and a Director of Pioneer;
Director of Pioneer Alternative
Investment Management Limited
(Dublin); President and a Director
of Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD"); President
of all of the Pioneer Funds; and Of
Counsel (since 2000, partner prior
to 2000), Wilmer Cutler Pickering
Hale and Dorr LLP (counsel to
PIM-USA and the Pioneer Funds)
Director of Harbor Global Company,
Ltd.
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee Officer, PIM-USA since May 2003
President is elected or (Director since January 2001);
earlier retirement President and Director of Pioneer
or removal since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003; Executive
Vice President, Chief Financial
Officer and Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
20
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 is elected or (publicly traded health care Investment Company
earlier retirement services company) (2001-present); (privately-held
or removal. Managing Partner, Federal City affordable housing
Capital Advisors (boutique merchant finance company);
bank)(1995-2000; 2002 to 2004); Director of New York
Executive Vice President and Chief Mortgage Trust (publicly
Financial Officer, Pedestal Inc. traded mortgage REIT)
(internet-based mortgage trading
company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- -----------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) 3509 Trustee since Serves until President, Bush International Director of Brady
Woodbine Street, Chevy 2000. successor trustee (international financial advisory Corporation (industrial
Chase, MD 20815 is elected or firm) identification and
earlier retirement specialty coated material
or removal products manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee since Serves until Founding Director, The Winthrop None
(57) 1001 Sherbrooke 2000. successor trustee Group, Inc. (consulting firm);
Street West, Montreal, is elected or Professor of Management, Faculty of
Quebec, Canada H3A 1G5 earlier retirement Management, McGill University
or removal
- -----------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret Trustee since Serves until President and Chief Executive Director of New America
(56) One Boston Place, 2000. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc.
28th Floor, Boston, MA is elected or Inc. (investment banking firm) (closed-end investment
02108 earlier retirement company)
or removal
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Cromwell Director, The Swiss
125 Broad Street, New 2000. successor trustee (law firm) Helvetia Fund, Inc.
York, NY 10004 is elected or (closed-end investment
earlier retirement company) and AMVESCAP PLC
or removal (investment managers)
- -----------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) One Trustee since Serves until President, John Winthrop & Co., Inc. None
North Adgers Wharf, September, 2000. successor trustee (private investment firm)
Charleston, SC 29401 is elected or
earlier retirement
or removal
- -----------------------------------------------------------------------------------------------------------------------------------
21
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS OFFICER
Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None
(57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer
Funds since September 2003
(Assistant Secretary from November
2000 to September 2003); and Senior
Counsel, Assistant Vice President
and Director of Compliance of
PIM-USA from April 1998 through
October 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley Assistant Serves at the Assistant Vice President and Senior None
(40) Secretary discretion of the Counsel of Pioneer since July 2002;
Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April
2001 to June 2002); Senior Vice
President and Deputy General Counsel
of Funds Distributor, Inc. (July
2000 to April 2001; Vice President
and Associate General Counsel from
July 1996 to July 2000); Assistant
Secretary of all Pioneer Funds since
September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds since
September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of the Administration and Custody Services
Board of Pioneer; and Treasurer of all of
the Pioneer Funds (Assistant
Treasurer from June 1999 to November
2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since None
Treasurer discretion of the 2004; Treasurer and Senior Vice
Board President, CDC IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment Management
from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer
Funds since November 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds since November 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of the
Pioneer Funds since May 2002
- -----------------------------------------------------------------------------------------------------------------------------------
22
PIONEER EQUITY INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS BY THIS OFFICER
Katharine Kim Sullivan Assistant Serves at the Fund Administration Manager - Fund None
(31) Treasurer discretion of the Accounting, Administration and
Board Custody Services since June 2003;
Assistant Vice President - Mutual
Fund Operations of State Street
Corporation from June 2002 to June
2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration and
Custody Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July 1999);
Assistant Treasurer of all Pioneer
Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of Pioneer None
Officer discretion of the (Director of Compliance and Senior
Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM
Fund Services, Inc. (mutual fund
administration company) from
February 1998 to November 2000; and
Chief Compliance Officer of all of
the Pioneer Funds.
- -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM,the Trust's investment adviser, provides investment
management and financial services to mutual funds, institutional and other
clients.
23
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
24
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
25
[LOGO] PIONEER
INVESTMENTS(R)
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER GROWTH SHARES VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Growth Shares VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 16
Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 87.9%
Depositary Receipts for International Stocks 11.1%
Temporary Cash Investment 1.0%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Information Technology 22.9%
Health Care 21.2%
Consumer Staples 13.4%
Financials 10.9%
Industrials 10.8%
Consumer Discretionary 10.7%
Materials 4.5%
Telecommunication Services 4.1%
Energy 1.5%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Microsoft Corp. 4.97%
2. Pfizer, Inc. 4.05
3. American International
Group, Inc. 3.57
4. Sandisk Corp. 3.47
5. Amgen, Inc. 2.99
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 12.87 $ 12.10
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
GROWTH SHARES 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 TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Pioneer Growth Shares VCT Portfolio* S&P 500 Russell 1000 Index
10/97 10000 10000 10000
10222 10643 10646
12/98 13521 13686 13522
14539 16565 16351
12/00 13539 15060 15079
10934 13275 13202
12/02 7099 10342 10343
8855 13306 13436
12/04 9419 14747 14966
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, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class -0.83%
(10/31/97)
5 Years -8.32%
1 Year 6.36%
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 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 GROWTH SHARES VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,077.66 $ 1,076.08
Expenses Paid During Period* $ 5.30 $ 6.95
* Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and
1.33% 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). 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 GROWTH SHARES VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.31 $ 1,018.85
Expenses Paid During Period* $ 5.15 $ 6.76
* Expenses are equal to the Portfolio's annualized expense ratio of 1.01% and
1.33% 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 GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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.
Helped by a late-year rally, equities produced returns consistent with long-term
historical averages during 2004, but large-cap growth stocks tended to
underperform large-cap value stocks, as well as small- and mid-cap issues. In
the following interview, Christopher Galizio discusses the factors that affected
the performance of Pioneer Growth Shares VCT Portfolio during 2004. Mr. Galizio
is responsible for day-to-day investment management of the Portfolio.
Q: HOW DID THE PORTFOLIO PERFORM DURING 2004?
A: For the 12-month period ended December 31, 2004, the Portfolio's Class II
shares had a total return of 6.36%. During the same 12-month period, the
Russell 1000 Growth Index, a common benchmark for large-company growth
stocks, returned 6.30%.
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.
Q: WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE YEAR?
A: While the stock market produced good returns, large-cap growth stocks
tended to underperform the market as well as other types of stocks,
especially value stocks. The reason was predominately because the
best-performing sectors tended to have more value stocks. The
low-interest-rate environment, for example, helped the performance of
financial service companies, while fast-rising commodity prices helped lift
the valuations of companies in the energy and materials sectors. Similarly,
the economic expansion aided the industrial sector, which enjoyed
increasing sales and improved profitability. All these sectors tend to have
greater concentrations of value companies than growth companies. At the
same time, we saw underperformance by two sectors with high concentrations
of growth companies - health care and information technology. In health
care, the large pharmaceutical companies in particular underperformed both
because some successful products were losing patent protection and because
other products became embroiled in questions about possible harmful side
effects. The most notable products affected by these side-effect questions
were Pfizer's two Cox-2 pain inhibitors, Celebrex and Bextra, both of which
suffered declines in sales, and Merck's Cox-2 inhibitor Vioxx, which was
withdrawn from the market. In the case of information technology, slowing
demand and a build-up of inventories undermined the earnings growth of
several companies, especially in the semiconductor industry.
Q: WHAT WERE YOUR PRINCIPAL STRATEGIES AND HOW DID THEY AFFECT PERFORMANCE?
A: We had repositioned the Portfolio shortly before the mid-point of the year,
reducing holdings in both health care and information technology. The
adjusted portfolio performed strongly during the final six months of 2004.
We liquidated our position in Pfizer before the questions arose about
Celebrex, and our lack of exposure to that controversy was a big help to
Portfolio performance. At the same time, we retained a holding in Merck and
even added to it after its stock price fell to a very attractive level. We
also reduced investments in information technology, substantially lowering
our holdings of semiconductor companies, and we de-emphasized consumer
staples, which we believed had risen to high valuations.
As we did so, we added to our investments in basic materials, financial
services and telecommunications services. In basic materials, we increased
our investments in copper companies, notably Freeport-McMoRan and Phelps
Dodge, both of which faced very favorable demand-supply outlooks for the
foreseeable future. In financial services, we added to investments in major
companies such as Citigroup, Bank of America, credit-card issuer MBNA, and
the government-sponsored mortgage organization, Freddie Mac. We reduced our
exposure to the insurance industry, eliminating AIG before its stock
plummeted amid questions about financial arrangements with brokers. After
AIG's stock price collapsed, we reinvested in the company to take advantage
of its attractive valuation.
Q: WHAT WERE SOME OF THE INVESTMENTS THAT MOST INFLUENCED PERFORMANCE?
A: The two decisions that most helped performance were the liquidation of the
position in Pfizer and the overweighting of Phelps Dodge.
Macrovision, a software company that we overweighted in the second half of
the year, rose by 30% after we purchased it. Macrovision is a leader in
producing an anti-piracy technology designed to protect material on both
DVDs and CDs from unauthorized copying. National retailer Target was
another excellent performer, as its same-store sales improved faster than
rival Wal-Mart. We sold our position in Target after its stock had risen to
a high valuation. Altria, the former Philip Morris, also supported
performance when it rallied following a favorable court ruling in a tobacco
liability case. U.K.-based wireless phone company Vodafone was another
stock that appreciated in anticipation of the success of its investments in
the next generation of wireless technology. Nextel, which later received an
acquisition offer, and France Telecom were two other wireless investments
that performed very well In health care, a leading performer was medical
equipment company Guidant, which received a favorable takeover proposal
from Johnson & Johnson.
Several investments proved disappointing. Corinthian Colleges, which
operates several campus-based programs, ran into trouble when its
enrollment growth failed to meet expectations. When its price began to
recover, we liquidated our investment. Lexar, which manufactures flash
memory chips for cell phones, declined when it was forced to pay much
higher prices for the flash technology that is part of its chip. Other
technology holdings that detracted from results included UTStarcomm, which
we have sold, and Samsung Electronics, which we have retained because we
like the company's long-term prospects. Relative to the market, performance
was held back because we did not own any shares of several companies that
performed very well, including Johnson & Johnson, GE, United Health Group,
eBay and Qualcomm.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We base our investment decisions on our analysis of the fundamental
strengths and prospects of individual companies in relation to their stock
prices, rather than on any top-down sector decisions based on macroeconomic
analysis.
At the start of the new year, we continued to have a favorable opinion
about many materials companies and believed the long-term outlook for
copper companies was particularly favorable. We also had overweight
positions in industrials, financial services and telecommunications
services sector. Within those sectors, the companies with the largest
weightings were metals, insurance and wireless communications providers.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 99.5%
ENERGY - 1.5%
INTEGRATED OIL & GAS - 0.9%
6,100 Occidental Petroleum Corp. $ 355,996
------------
OIL & GAS REFINING MARKETING &
TRANSPORTATION - 0.6%
9,700 Repsol SA (A.D.R.) $ 253,170
------------
TOTAL ENERGY $ 609,166
------------
MATERIALS - 4.4%
DIVERSIFIED METALS & MINING - 4.4%
27,100 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 1,036,033
7,300 Phelps Dodge Corp. 722,116
------------
$ 1,758,149
------------
TOTAL MATERIALS $ 1,758,149
------------
CAPITAL GOODS - 9.0%
INDUSTRIAL CONGLOMERATES - 6.6%
12,200 American Standard Co., Inc.* $ 504,104
5,700 Illinois Tool Works, Inc. 528,276
6,400 Johnson Controls, Inc. 406,016
20,200 Tyco International, Ltd. 721,948
4,700 United Technologies Corp. 485,745
------------
$ 2,646,089
------------
INDUSTRIAL MACHINERY - 2.4%
12,800 Deere & Co. $ 952,320
------------
TOTAL CAPITAL GOODS $ 3,598,409
------------
COMMERCIAL SERVICES & SUPPLIES - 1.8%
DIVERSIFIED COMMERCIAL SERVICES - 0.8%
1,300 Apollo Group, Inc.* $ 104,923
3,300 The Dun & Bradstreet Corp.* 196,845
------------
$ 301,768
------------
OFFICE SERVICES & SUPPLIES - 1.0%
7,700 Canon, Inc. (A.D.R.) $ 417,802
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 719,570
------------
CONSUMER DURABLES & APPAREL - 1.4%
APPAREL, ACCESSORIES & LUXURY GOODS - 1.4%
22,500 TJX Companies, Inc. $ 565,425
------------
TOTAL CONSUMER DURABLES & APPAREL $ 565,425
------------
HOTELS, RESTAURANTS & LEISURE - 1.9%
RESTAURANTS - 1.9%
9,400 Ruby Tuesday, Inc. $ 245,152
10,600 Tricon Global Restaurants, Inc. 500,108
------------
$ 745,260
------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 745,260
------------
MEDIA - 3.7%
BROADCASTING & CABLE TELEVISION - 1.8%
65,800 Liberty Media Corp.* $ 722,484
------------
MOVIES & ENTERTAINMENT - 1.9%
27,000 The Walt Disney Co. $ 750,600
------------
TOTAL MEDIA $ 1,473,084
------------
RETAILING - 3.8%
APPAREL RETAIL - 0.7%
6,800 Liz Claiborne, Inc. $ 287,028
------------
COMPUTER & ELECTRONICS RETAIL - 1.1%
7,500 Best Buy Co., Inc. $ 445,650
------------
HOME IMPROVEMENT RETAIL - 2.0%
13,500 Lowe's Co., Inc. $ 777,465
------------
TOTAL RETAILING $ 1,510,143
------------
FOOD & DRUG RETAILING - 2.4%
FOOD DISTRIBUTORS - 2.4%
16,300 Cardinal Health, Inc. $ 947,845
------------
TOTAL FOOD & DRUG RETAILING $ 947,845
------------
FOOD, BEVERAGE & TOBACCO - 6.7%
SOFT DRINKS - 4.2%
9,500 Fomento Economico Mexicano SA de C.V. $ 499,795
22,800 PepsiCo, Inc. 1,190,160
------------
$ 1,689,955
------------
TOBACCO - 2.5%
16,200 Altria Group, Inc. $ 989,820
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 2,679,775
------------
HOUSEHOLD & PERSONAL PRODUCTS - 4.3%
HOUSEHOLD PRODUCTS - 2.5%
18,300 Procter & Gamble Co. $ 1,007,964
------------
PERSONAL PRODUCTS - 1.8%
18,000 Avon Products, Inc. $ 696,600
------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 1,704,564
------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
HEALTH CARE EQUIPMENT & SERVICES - 6.8%
HEALTH CARE DISTRIBUTORS - 1.9%
29,800 Bristol-Myers Squibb Co. $ 763,476
------------
HEALTH CARE EQUIPMENT - 3.1%
11,800 AstraZeneca Plc (A.D.R.) $ 429,402
11,600 Guidant Corp. 836,360
------------
$ 1,265,762
------------
HEALTH CARE FACILITIES - 0.8%
7,900 HCA, Inc. $ 315,684
------------
HEALTH CARE SUPPLIES - 1.0%
7,500 Smith & Nephew Plc (A.D.R.) $ 388,200
------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 2,733,122
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 14.1%
BIOTECHNOLOGY - 5.0%
18,558 Amgen, Inc.* $ 1,190,496
14,000 Gilead Sciences, Inc.* 489,860
6,800 ImClone Systems, Inc.* 313,344
------------
$ 1,993,700
------------
PHARMACEUTICALS - 9.1%
17,900 IVAX Corp.* $ 283,178
32,200 Merck & Co., Inc. 1,034,908
59,900 Pfizer, Inc. 1,610,711
35,100 Schering-Plough Corp. 732,888
------------
$ 3,661,685
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 5,655,385
------------
BANKS - 1.3%
DIVERSIFIED BANKS - 1.3%
5,100 Bank of America Corp. $ 239,649
5,100 Wachovia Corp. 268,260
------------
$ 507,909
------------
TOTAL BANKS $ 507,909
------------
DIVERSIFIED FINANCIALS - 3.7%
CONSUMER FINANCE - 1.2%
16,700 MBNA Corp. $ 470,773
------------
OTHER DIVERSIFIED FINANCE SERVICES - 2.5%
21,100 Citigroup, Inc. $ 1,016,598
------------
TOTAL DIVERSIFIED FINANCIALS $ 1,487,371
------------
INSURANCE - 5.9%
LIFE & Health Insurance - 1.5%
14,800 Aflac, Inc. $ 589,632
------------
MULTI-LINE INSURANCE - 3.5%
21,600 American International Group, Inc. $ 1,418,472
------------
PROPERTY & CASUALTY INSURANCE - 0.9%
7,900 ACE, Ltd. $ 337,725
------------
TOTAL INSURANCE $ 2,345,829
------------
SOFTWARE & SERVICES - 9.1%
APPLICATION SOFTWARE - 5.9%
74,000 Microsoft Corp. $ 1,976,540
15,500 Macrovision Corp.* 398,660
------------
$ 2,375,200
------------
HOME ENTERTAINMENT SOFTWARE - 1.2%
13,400 Take-Two Interactive Software, Inc.* (a) $ 466,186
------------
IT CONSULTING & OTHER SERVICES - 2.0%
29,900 Accenture, Ltd.* $ 807,300
------------
TOTAL SOFTWARE & SERVICES $ 3,648,686
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 12.1%
COMMUNICATIONS EQUIPMENT - 1.6%
37,400 Avaya, Inc.* $ 643,280
------------
COMPUTER HARDWARE - 4.1%
5,700 Diebold, Inc. $ 317,661
9,300 Dell, Inc.* 391,902
45,200 Hewlett-Packard Co. 947,844
------------
$ 1,657,407
------------
COMPUTER STORAGE & PERIPHERALS - 3.5%
55,300 Sandisk Corp.* $ 1,380,841
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.9%
5,300 Samsung Electronics $ 1,160,700
------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 4,842,228
------------
SEMICONDUCTORS - 3.1%
42,900 Taiwan Semiconductor
Manufacturing Co. (A.D.R.) $ 364,221
36,000 Texas Instruments, Inc. 886,320
------------
$ 1,250,541
------------
TOTAL SEMICONDUCTORS $ 1,250,541
------------
TELECOMMUNICATION SERVICES - 2.5%
WIRELESS TELECOMMUNICATION SERVICES - 2.5%
36,400 Vodafone Group Plc (A.D.R.) $ 996,632
------------
TOTAL TELECOMMUNICATION SERVICES $ 996,632
------------
TOTAL COMMON STOCKS
(Cost $36,802,330) $ 39,779,093
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
TEMPORARY CASH INVESTMENT - 1.0%
SECURITY LENDING COLLATERAL - 1.0%
413,820 Securities Lending Investment Fund,
2.18% $ 413,820
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $413,820) $ 413,820
------------
TOTAL INVESTMENTS IN
SECURITIES - 100.4%
(Cost $37,216,150) $ 40,192,913
------------
OTHER ASSETS
AND LIABILITIES - (0.4)% $ (143,560)
------------
TOTAL NET ASSETS - 100.0% $ 40,049,353
============
(A.D.R.) American Depositary Receipt
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
11,495 Take-Two Interactive Software,
Inc.* $ 399,911
---------
TOTAL $ 399,911
=========
The accompanying notes are an integral part of these financial statements. 7
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/1/00 TO
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 12.10 $ 9.70 $ 14.94 $ 18.50 $ 21.68
------- ------- -------- -------- -------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.06 $ (0.02) $ (0.13) $ (0.05) $ (0.03)
Net realized and unrealized gain (loss) on investments 0.71 2.42 (5.11) (3.51) (1.23)
------- ------- -------- -------- -------
Net increase (decrease) from investment operations $ 0.77 $ 2.40 $ (5.24) $ (3.56) $ (1.26)
Distributions to shareowners:
Net investment income -- -- -- -- --
Net realized gain -- -- -- -- (1.92)
------- ------- -------- -------- -------
Net increase (decrease) in net asset value $ 0.77 $ 2.40 $ (5.24) $ (3.56) $ (3.18)
------- ------- -------- -------- -------
Net asset value, end of period $ 12.87 $ 12.10 $ 9.70 $ 14.94 $ 18.50
======= ======= ======== ======== =======
Total return* 6.36% 24.74% (35.07)% (19.24)% (6.36)%
Ratio of net expenses to average net assets+ 1.25% 1.44% 1.63% 1.58% 1.03%
Ratio of net investment income (loss) to average net assets+ 0.74% (0.40)% (0.64)% (0.61)% (0.33)%
Portfolio turnover rate 206% 58% 86% 111% 95%
Net assets, end of period (in thousands) $ 7,749 $ 3,049 $ 263 $ 658 $ 203
Ratios with no waiver of management fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses 1.26% 1.44% 1.63% 1.58% 0.73%
Net investment income (loss) 0.73% (0.40)% (0.64)% (0.61)% (0.11)%
(a) Class 2 shares were first publicly offered on May 1, 2000.
* 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.
8 The accompanying notes are an integral part of these financial statements.
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $399,911) (Cost $37,216,150) $ 40,192,913
Cash 400,152
Receivables --
Investment securities sold 106,827
Fund shares sold 368
Dividends, interest and foreign taxes withheld 72,271
Other 3,207
-------------
Total assets $ 40,775,738
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 204,180
Fund shares repurchased 20,701
Upon return of securities loaned 413,820
Due to affiliates 27,526
Accrued expenses 60,198
-------------
Total liabilities $ 726,425
-------------
NET ASSETS:
Paid-in capital $ 76,637,190
Undistributed net investment income (loss) 271,723
Accumulated undistributed net realized gain (loss) (39,836,323)
Net unrealized gain (loss) on:
Investments 2,976,763
-------------
Total net assets $ 40,049,353
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 32,299,874
Shares outstanding 2,477,134
-------------
Net asset value per share $ 13.04
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 7,749,479
Shares outstanding 601,971
-------------
Net asset value per share $ 12.87
The accompanying notes are an integral part of these financial statements. 9
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR
ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $4,478) $ 644,743
Interest 6,132
Income on securities loaned, net 1,712
-----------
Total investment income $ 652,587
-----------
EXPENSES:
Management fees $ 265,832
Transfer agent fees and expenses 3,020
Distribution fees (Class II) 13,265
Administrative reimbursements 18,500
Custodian fees 30,320
Professional fees 34,166
Printing expense 14,534
Miscellaneous 2,307
-----------
Total expenses $ 381,944
Less fees paid indirectly (1,080)
-----------
Net expenses $ 380,864
-----------
Net investment income (loss) $ 271,723
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 1,562,700
-----------
$ 1,562,700
-----------
Change in net unrealized gain or (loss) from:
Investments (the change in reserve for repatriation taxes of $86,981) $ 618,844
-----------
$ 618,844
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 2,181,544
===========
Net increase (decrease) in net assets resulting
from operations $ 2,453,267
===========
10 The accompanying notes are an integral part of these financial statements.
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net Investment Income (Loss) $ 271,723 $ (20,270)
Net realized gain (loss) on investments 1,562,700 (3,697,565)
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 618,844 11,680,101
------------ ------------
Net increase (decrease) in net assets resulting from operations $ 2,453,267 $ 7,962,266
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ -- $ (4,477)
------------ ------------
Total distributions to shareowners $ -- $ (4,477)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 5,638,676 $ 4,104,812
Reinvestment of distributions -- 4,477
Cost of shares repurchased (6,840,932) (8,277,302)
------------ ------------
Net increase (decrease) in net assets resulting from Fund share transactions $ (1,202,256) $ (4,168,013)
------------ ------------
Net increase (decrease) in net assets $ 1,251,011 $ 3,789,776
------------ ------------
NET ASSETS:
Beginning of year $ 38,798,342 $ 35,008,566
------------ ------------
End of year $ 40,049,353 $ 38,798,342
------------ ------------
Undistributed net investment income (loss), end of year $ 271,723 $ --
============ ============
The accompanying notes are an integral part of these financial statements. 11
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Growth Shares VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio(Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio(High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Growth Shares Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
12
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, Growth Shares VCT Portfolio had a capital loss
carryforward of $38,789,169, of which the amounts will expire between 2008
and 2011 if not utilized: $2,404,543 in 2008, $9,820,202 in $19,245,183 in
2010 and $7,319,241 in 2011.
The portfolio elected to defer $389,332 in currency losses recognized
between November 1, 2004 and December 31, 2004 to its fiscal year ending
December 31, 2005.
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
------------- --------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ -- $ 4,477
Long-Term capital gain -- --
------------- -------
$ -- $ 4,477
Return of Capital -- --
------------- -------
Total distributions $ -- $ 4,477
============= =======
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 271,723
Undistributed long-term gain/(capital loss carryforward) (38,789,169)
Unrealized appreciation (depreciation) 2,318,941
Post-October loss deferred (389,332)
------------- -------
Total $ (36,587,837)
============= =======
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, at the same time,
and in the same amount, except that Class I and
13
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following 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. At December 31, 2004, $25,622 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$1,633 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Growth Shares Portfolio $ 37,873,972 $ 3,044,465 $ (725,524) $ 2,318,941
============ =========== ========== ===========
14
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $77,027,440 and $77,443,920, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
GROWTH SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
---------- ------------ ---------- -----------
CLASS II:
Shares sold 66,360 $ 806,587 91,892 $ 1,012,931
Reinvestment of distributions -- -- 403 4,477
Shares repurchased (515,053) (6,176,527) (731,375) (7,757,809)
-------- ------------ -------- ------------
Net increase (448,693) $ (5,369,940) (639,080) $ (6,740,401)
-------- ------------ -------- ------------
CLASS II:
Shares sold 406,516 $ 4,832,089 271,796 $ 3,091,881
Reinvestment of distributions -- -- -- --
Shares repurchased (56,565) (664,405) 46,885) (519,493)
-------- ------------ -------- ------------
Net increase 349,951 $ 4,167,684 224,911 $ 2,572,388
======== ============ ======== ============
15
PIONEER GROWTH 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 CLASS II SHAREOWNERS OF PIONEER GROWTH SHARES VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Growth Shares VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, 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 Shares VCT Portfolio of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
16
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
CUSTODIAN with their principal occupations during the past five years. Trustees
Brown Brothers Harriman & Co. who are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Trustees who are not interested persons of the Trust are referred to as
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Independent Trustees. Each of the Trustees serves as a trustee of each
Ernst & Young LLP of the 73 U.S. registered investment portfolios for which Pioneer
Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Pioneer Funds"). The address for all Interested Pioneer Funds
PRINCIPAL UNDERWRITER Distributor, Inc. Trustees and all officers of the Portfolio is 60 State
Pioneer Funds Distributor, Inc. Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
LEGAL COUNSEL information regarding the Trust's Trustees and is available upon request,
Wilmer Cutler Pickering Hale and Dorr LLP without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without
SHAREOWNER SERVICES AND TRANSFER charge, upon Agent request, by calling our toll free number
Pioneer Investment Management Shareholder Services, Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor
President earlier retirement or until retirement or removal; Global Company, Ltd.
removal 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; Director
of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer
Alternative Investment
Management (Bermuda) Limited
and affiliated funds;
President and Director of
Pioneer Funds Distributor,
Inc. ("PFD"); President of
all of the Pioneer Funds; and
Of Counsel (since 2000,
partner prior to 2000),
Wilmer Cutler Pickering Hale
and Dorr LLP (counsel to
PIM-USA and the Pioneer Funds).
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ----------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May
President earlier retirement or 2003 (Director since January
removal 2001); President and Director
of Pioneer since May 2003;
Chairman and Director of
Pioneer Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of
all of the Pioneer Funds since
June 2003; Executive Vice
President and Chief Operating
Officer of PIM-USA, November
2000 to May 2003; Executive
Vice President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ----------------------------------------------------------------------------------------------------------------------------------
17
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise
Washington, DC 20007 elected or earlier (publicly traded health care Social Investment
retirement or removal. services company) (2001-- Company (privately
present); Managing Partner, -held affordable
Federal City Capital Advisors housing finance
(boutique merchant bank)(1995 company); Director of
-2000; 2002 to 2004); Executive New York Mortgage
Vice President and Chief Trust (publicly
Financial Officer, Pedestal traded mortgage
Inc. (internet-based mortgage REIT)
trading company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ----------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, 2000. trustee is elected (international financial Corporation
Chevy Chase, MD 20815 or earlier retirement advisory firm) (industrial
or removal identification and
material products
specialty coated
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
tobacco)
- ----------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement Professor of Management, Faculty
Canada H3A 1G5 or removal of Management, McGill University
- ----------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New
One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income
28th Floor, earlier retirement Company, Inc. (investment Fund,Inc. (closed-end
Boston, MA 02108 or removal banking firm)
- ----------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. trusteeis elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement (closed-end
or removal investment company)
and AMVESCAP PLC
(investment managers)
- ----------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 or removal earlier retirement
- ----------------------------------------------------------------------------------------------------------------------------------
18
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to September
2003); and Senior Counsel,
Assistant Vice President and
Director of Compliance
of PIM-USA from April 1998
through October 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None
Secretary discretion of the Senior Counsel of Pioneer
Board since July 2002; Vice President
and Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice President
and Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ----------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds
since September 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer;
and Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
- ----------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and
Board Senior Vice President, CDC
IXIS Asset Management Services
from 2002 to 2003; Assistant
Treasurer and Vice President,
MFS Investment Management from
1997 to 2002; and Assistant
Treasurer of all of the Pioneer
Funds since November 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration
Board and Custody Services of Pioneer;
and Assistant Treasurer of
all of the Pioneer Funds since
November 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration
Board and Custody Services of Pioneer;
and Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ----------------------------------------------------------------------------------------------------------------------------------
19
PIONEER GROWTH SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None
Treasurer discretion Fund Accounting,Administration
of the Board and Custody Services since
June 2003; Assistant Vice
President - Mutual Fund
Operations of State Street
Corporation from June 2002 to
June 2003 (formerly Deutsche
Bank Asset Management); Pioneer
Fund Accounting, Administration
and Custody Services (Fund
Accounting Manager from August
1999 to May 2002, Fund
Accounting Services Supervisor
from 1997 to July 1999);
Assistant Treasurer of all
Pioneer Funds since September
2003
- ----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of Compliance
Board and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of
the Pioneer Funds.
- ----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
21
[LOGO] PIONEER
Investments(R)
[LOGO] PIONEER
INVESTMENT(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER HIGH YIELD VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31 , 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer High Yield VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 11
Notes to Financial Statements 15
Report of Independent Registered Public Accounting Firm 20
Trustees, Officers and Service Providers 21
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment in securities)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Corporate Bonds 64.6%
Convertible Corporate Bonds 30.3%
Temporary Cash Investment 2.7%
Convertible Preferred Stocks 2.4%
MATURITY DISTRIBUTION
(As a percentage of total investment in securities)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
1-3 years 16.5%
3-4 years 15.0%
4-6 years 48.8%
6-8 years 11.2%
8+ years 8.5%
FIVE LARGEST HOLDINGS
(As a percentage of long-term holdings)
1. Mueller Industries, Inc.
6.0%, 11/1/14 3.97%
2. Corning, Inc., 5.9%, 3/15/14 3.42
3. CMS Energy Corp. 7.75%,
8/1/10 3.03
4. Bowater, Inc., 6.5%,
6/15/13 3.02
5. SCI Systems, Inc., 3.0%,
3/15/07 2.68
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 11.67 $ 11.45
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.5891 $ -- $ 0.047
- --------------------------------------------------------------------------------
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 TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Pioneer High Yield ML High Yield ML Convertible Bonds
VCT Portfolio Master II Index Speculative Quality Index
May-00 10000 10000 10000
10608 9770 8424
12390 10207 7882
2-Dec 12090 10013 7744
16022 12830 10529
4-Dec 17265 14227 11861
+ 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.
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, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class
(5/1/00) 11.92%
1 Year 7.76
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.
Call 800-688-9915 or visit www.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 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 HIGH YIELD VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,077.61 $ 1,076.31
Expenses Paid During Period* $ 4.11 $ 5.50
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and
1.05% 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). 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 HIGH YIELD VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,021.22 $ 1,019.91
Expenses Paid During Period* $ 4.00 $ 5.35
* Expenses are equal to the Portfolio's annualized expense ratio of 0.79% and
1.05% 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 12/31/04
- --------------------------------------------------------------------------------
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.
WHEN CONCENTRATING ON ONE ISSUER, THE PORTFOLIO IS SENSITIVE TO CHANGES IN THE
VALUE OF THESE SECURITIES.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.
CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE
PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION.
The high-yield market generated solid returns during the 12 months ended
December 31, 2004. In the following interview, portfolio manager Margaret Patel
describes the market backdrop and why the Portfolio underperformed its benchmark
index.
Q: HOW DID THE PORTFOLIO PERFORM?
A: During the 12 months ended December 31, 2004, the Portfolio's Class II
shares had a total return based on net asset value of 7.76%. By comparison,
the Merrill Lynch High Yield Master II Index returned 10.87%.
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.
Q: WHAT WAS THE ENVIRONMENT LIKE FOR THE HIGH-YIELD MARKET DURING 2004?
A: All sectors of the high-yield market generally rallied, reflecting a
pick-up in the economy. Defaults continued to decline steadily from their
peak in 2002. Although short-term interest rates were on the rise - as the
Federal Reserve Board began to implement a tightening policy - high-yield
bonds continued to offer a substantial yield advantage over
comparable-maturity Treasuries and cash equivalents. Furthermore, the
supply of newly issued high-yield corporate bonds was not sufficient to
meet the demand for higher-yielding securities. As a result, high-yield
bond prices continued to rise.
Q. WHY DID THE PORTFOLIO'S PERFORMANCE LAG THAT OF THE MERRILL LYNCH HIGH
YIELD MASTER II INDEX?
A. Because of its investments in convertible bonds. Convertibles
underperformed conventional high-yield bonds because they tend to be more
sensitive to the changes in short-term interest rates that we experienced
than high-yield issues. In addition, the period was characterized by
underlying equity-market volatility that was lower than historical
averages, a factor that also typically leads to the underperformance of
convertible securities. Overall, the lower credit tiers of the market
performed best, at a time when we were moving the Portfolio's average
credit quality higher. The Portfolio had minimal exposure to the distressed
and lower-tier credits that led the market during the past 12 months,
particularly in such sectors as telecommunications and media.
Q: WHICH INVESTMENTS PROVED TO BE SOME OF THE TOP PERFORMERS DURING THE FISCAL
YEAR? WHICH DISAPPOINTED?
A: Tesoro Petroleum, a West Coast refiner, profited from tighter supply/demand
conditions. Millennium Chemicals, benefited from its acquisition by
Lyondell, as well as from a brighter outlook for basic chemicals. Several
biotechnology holdings also fared well, including Cubist Pharmaceuticals,
which offers a drug for soft-tissue infections; CV Therapeutics, which
sells products to treat angina; and Human Genome, which advanced due to
clinical successes and management's focus on reducing research and
development expenditures. Disappointments included Intermet, an auto-parts
manufacturer that defaulted on its debt due to raw materials pricing
pressure.Two technology holdings also lagged, Maxtor, a data storage
manufacturer, and Adaptec, which makes computer-networking products. Those
securities fell in concert with the technology sector, which struggled
through most of the year because of weaker-than-expected corporate
technology spending.
Q: WHAT IS YOUR OUTLOOK?
A: We remain optimistic that the economy should continue to grow near its
long-term historical average during the coming year. While the Fed is
likely to continue to raise short-term rates, we expect any increases to be
gradual. In addition, we anticipate that defaults should remain below
long-term averages, providing solid support for high-yield bonds. Because
the high-yield market has experienced such a run-up in the recent past, we
believe that returns in 2005 will be driven more by interest income than by
capital appreciation. We have been able to find the best value in the
higher-quality tiers of the market. They should be better insulated if
financial market volatility increases. Although convertible securities
detracted from Portfolio performance, we believe that, over time, they
offer an opportunity to participate in the future growth of the underlying
stocks, making the asset class attractive to long-term-oriented investors.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
S&P/MOODY'S
RATINGS
SHARES (UNAUDITED) VALUE
CONVERTIBLE PREFERRED STOCKS - 2.5%
MATERIALS - 2.5%
CONSTRUCTION MATERIALS - 0.1%
1,750 B-/B1 TXI Capital Trust I, 5.5%, 6/30/28 $ 88,638
-------------
DIVERSIFIED METALS & MINING - 2.4%
3,000 B-/NR Freeport-McCorp., 5.5%, 12/31/49 (144A) $ 2,932,500
-------------
TOTAL MATERIALS $ 3,021,138
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,077,338) $ 3,021,138
-------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED)
CONVERTIBLE CORPORATE BONDS - 32.0%
MATERIALS - 5.4%
COMMODITY CHEMICALS - 0.4%
200,000 B+/B1 Millenium Chemicals Inc., 4.0%, 11/15/23 (144A) $ 458,750
-------------
DIVERSIFIED METALS & MINING - 1.4%
500,000 B+/B1 Freeport McMoran Copper & Gold, Inc., 7.0%, 2/11/11 $ 750,000
500,000 B+/B1 Massey Energy Co., 4.75% 5/15/23 994,375
-------------
$ 1,744,375
-------------
GOLD - 0.9%
1,000,000 NR/NR Coeur D'Alene Mines Corp., 1.25%, 1/15/24 $ 865,000
250,000 BBB+/NR Placer Dome Inc., 2.75%, 10/15/23 306,563
-------------
$ 1,171,563
-------------
SPECIALTY CHEMICALS - 0.4%
800,000 BBB/Baa3 RPM International Inc., 1.389%, 5/13/33 $ 462,000
-------------
STEEL - 2.3%
3,000,000 B-/NR Graftech International, 1.625%, 1/15/24 (144A) $ 2,778,750
-------------
TOTAL MATERIALS $ 6,615,438
-------------
CAPITAL GOODS - 4.2%
AEROSPACE & DEFENSE - 1.8%
1,725,000 B/B2 Alliant Technology Systems, 2.75%, 2/15/24 (144A) $ 1,826,344
400,000 NR/NR EDO Corp., 5.25%, 4/15/07 436,000
-------------
$ 2,262,344
-------------
CONSTRUCTION & ENGINEERING - 1.1%
875,000 NR/NR Quanta Services, Inc., 4.0%, 7/1/07 $ 831,250
500,000 B/NR Quanta Services, 4.5%, 10/1/23 545,000
-------------
$ 1,376,250
-------------
ELECTRICAL COMPONENT & EQUIPMENT - 1.0%
2,595,000 NR/B1 Roper Industries Inc., 1.4813%, 1/15/34 $ 1,229,381
-------------
INDUSTRIAL MACHINERY - 0.3%
300,000 BB-/NR Kaydon Corp., 4.0%, 5/23/23 $ 380,625
-------------
TOTAL CAPITAL GOODS $ 5,248,600
-------------
MEDIA - 1.9%
ADVERTISING - 1.9%
1,800,000 BB+/Baa3 Interpublic Group Co., 4.5%, 3/15/23 $ 2,358,000
-------------
TOTAL MEDIA $ 2,358,000
-------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
RETAILING - 1.2%
SPECIALTY STORES - 1.2%
1,500,000 B+/B3 Sonic Automotive, Inc., 5.25%, 5/7/09 $ 1,492,500
-------------
TOTAL RETAILING $ 1,492,500
-------------
HEALTH CARE EQUIPMENT & SERVICES - 0.7%
HEALTH CARE EQUIPMENT - 0.7%
375,000 NR/NR Epix Medical, 3.0%, 6/15/24 (144A) $ 338,438
600,000 NR/NR Wilson Greatbatch Technology, 2.25%, 6/15/13 541,500
-------------
TOTAL HEALTH CARE EQUIPMENT & Services $ 879,938
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 5.7%
BIOTECHNOLOGY - 0.9%
300,000 NR/NR Cubist Pharmaceuticals, 5.5%, 11/1/08 $ 283,875
850,000 NR/NR CV Therapeutics, 4.75%, 3/7/07 875,500
-------------
$ 1,159,375
-------------
PHARMACEUTICALS - 4.8%
2,615,000 NR/NR Ivax Corp., Conv, 1.875%, 12/15/24 (144A) $ 2,696,719
2,500,000 B/NR Valeant Pharmaceuticals 3.0%, 8/16/10 2,753,125
400,000 NR/NR Vertex Pharmaceuticals Inc., 5.75%, 2/15/11 (144A) 403,500
-------------
$ 5,853,344
-------------
TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 7,012,719
-------------
REAL ESTATE - 0.6%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.6%
500,000 CCC+/Caa1 LNR Property Corp., 5.5%, 3/1/23 $ 695,625
-------------
TOTAL REAL ESTATE $ 695,625
-------------
SOFTWARE & SERVICES - 0.9%
APPLICATION SOFTWARE - 0.7%
200,000 NR/NR Mentor Graphics, 6.875%, 6/15/07 $ 210,250
500,000 NR/NR Serena Software, 1.5%, 12/15/23 586,250
-------------
$ 796,500
-------------
IT CONSULTING & OTHER SERVICES - 0.2%
400,000 NR/NR Safeguard Scientifics, 2.625%, 3/15/24 $ 294,500
-------------
TOTAL SOFTWARE & SERVICES $ 1,091,000
-------------
TECHNOLOGY HARDWARE & EQUIPMENT - 6.1%
COMMUNICATIONS EQUIPMENT - 1.2%
1,500,000 B-/NR Adaptec Inc., 0.75%, 12/22/23 $ 1,428,750
-------------
COMPUTER STORAGE & PERIPHERALS - 0.6%
700,000 NR/B2 Maxtor Corp., 6.8%, 4/30/10 $ 713,125
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2%
300,000 B+/NR Flir Systems, Inc., 3.0%, 6/1/23 $ 487,500
1,000,000 NR/NR Veeco Instruments, 4.125%, 12/21/08 987,500
-------------
$ 1,475,000
-------------
ELECTRONIC MANUFACTURING SERVICES - 2.7%
3,500,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 3,377,500
-------------
TECHNOLOGY DISTRIBUTORS - 0.4%
400,000 NR/R Bell Microproducts, Inc., 3.75%, 3/5/24 $ 456,500
-------------
Total Technology Hardware & Equipment $ 7,450,875
-------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
SEMICONDUCTORS - 5.2%
SEMICONDUCTOR EQUIPMENT - 3.9%
700,000 B-/NR Advanced Energy Industries, Inc., 5.25%, 11/15/06 $ 675,500
200,000 NR/NR Axcelis Technologies, 4.25%, 1/15/07 198,500
700,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 681,624
500,000 B-/NR Cymer, Inc., 3.5%, 2/15/09 497,500
2,700,000 B-/NR FEI Co., 5.5%, 8/15/08 2,727,000
-------------
$ 4,780,124
-------------
SEMICONDUCTORS - 1.3%
1,300,000 CCC/NR Conexant Systems, Inc., 4.0%, 2/1/07 (a) $ 1,176,500
500,000 B/NR LSI Logic Corp., 4.0%, 5/15/10 469,375
-------------
$ 1,645,875
-------------
TOTAL SEMICONDUCTORS $ 6,425,999
-------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $38,069,020) $ 39,270,694
-------------
CORPORATE BONDS - 68.1%
ENERGY - 3.6%
OIL & GAS EQUIPMENT AND SERVICES - 0.2%
200,000 BB-/Ba3 Grant Prideco Escrow, 9.0%, 12/15/09 $ 221,500
-------------
OIL & GAS REFINING MARKETING & TRANSPORTATION - 3.4%
300,000 B+/B1 Frontier Oil Corp., 6.625%, 10/1/11 (144A) $ 306,000
1,555,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 11/1/08 1,694,950
1,900,000 BB-/B2 Tesoro Petroleum Corp., 9.625%, 4/1/12 2,185,000
-------------
$ 4,185,950
-------------
TOTAL ENERGY $ 4,407,450
-------------
MATERIALS - 16.4%
COMMODITY CHEMICALS - 4.7%
1,800,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 2,052,000
2,500,000 BB+/Ba2 Nova Chemicals Corp., 7.875%, 9/15/25 2,587,500
1,000,000 BB+/Ba2 Nova Chemicals Corp., 7.4%, 4/1/09 1,092,500
-------------
$ 5,732,000
-------------
DIVERSIFIED METALS & MINING - 1.1%
1,375,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 $ 1,366,406
-------------
METAL & GLASS CONTAINERS - 2.1%
1,500,000 B/B3 Crown Cork & Seal Co., Inc., 7.375%, 12/15/26 $ 1,410,000
1,000,000 B+/B1 Crown Holdings, 9.5%, 3/1/11 1,140,000
-------------
$ 2,550,000
-------------
PAPER PRODUCTS - 5.8%
2,250,000 BB-/Ba3 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 $ 2,438,438
885,000 BB/Ba3 Bowater Canada Finance, 7.95%, 11/15/11 953,652
3,800,000 BB/Ba3 Bowater, Inc., 6.5%, 6/15/13 3,800,540
-------------
$ 7,192,630
-------------
SPECIALTY CHEMICALS - 2.7%
2,200,000 B+/B1 Millenium America, Inc., 7.625%, 11/15/26 $ 2,167,000
1,000,000 B+/B1 Millenium America, Inc., 9.25%, 6/15/08 1,137,500
-------------
$ 3,304,500
-------------
TOTAL MATERIALS $ 20,145,536
-------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
CAPITAL GOODS - 11.3%
AEROSPACE & DEFENSE - 5.6%
2,500,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 $ 2,612,500
700,000 B/B2 DRS Technologies, Inc., 6.875%, 11/1/13 (144A) 731,500
1,525,000 B+/B1 Esterline Technology, 7.75%, 6/15/13 1,666,063
850,000 BB-/Ba3 L-3 Communications Corp., 5.875%, 1/15/15 (144A) 847,875
1,000,000 BB-/Ba3 L-3 Communications Corp., 6.125%, 1/15/14 1,030,000
-------------
$ 6,887,938
-------------
INDUSTRIAL MACHINERY - 5.7%
800,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 $ 856,000
800,000 B+/B1 Manitowoc Co., Inc., 7.125%, 11/1/13 866,000
5,100,000 NR/NR Mueller Industries, Inc. 6.0%, 11/1/14 4,998,000
300,000 BB+/Ba3 SPX Corp., 7.5%, 1/1/13 325,500
-------------
$ 7,045,500
-------------
TOTAL CAPITAL GOODS $ 13,933,438
-------------
TRANSPORTATION - 0.4%
AIR FREIGHT & COURIERS - 0.4%
500,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 547,500
-------------
TOTAL TRANSPORTATION $ 547,500
-------------
AUTOMOBILES & COMPONENTS - 0.2%
TIRES & RUBBER - 0.2%
300,000 B-/B3 Goodyear Tire & Rubber, 7.857%, 8/15/11 (a) $ 304,500
-------------
TOTAL AUTOMOBILES & COMPONENTS $ 304,500
-------------
MEDIA - 1.8%
ADVERTISING - 1.8%
2,000,000 BB+/Baa3 Interpublic Group, Inc., 7.25%, 8/15/11 $ 2,171,242
-------------
TOTAL MEDIA $ 2,171,242
-------------
RETAILING - 2.3%
DEPARTMENT STORES - 0.8%
1,000,000 BB+/Ba2 J.C. Penney Co., Inc., 7.625%, 3/1/97 $ 1,065,000
-------------
SPECIALTY STORES - 1.5%
1,790,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 $ 1,814,613
-------------
TOTAL RETAILING $ 2,879,613
-------------
HEALTH CARE EQUIPMENT & SERVICES - 1.9%
HEALTH CARE FACILITIES - 0.4%
500,000 BB+/Ba2 HCA, Inc., 6.25%, 2/15/13 $ 504,384
-------------
HEALTH CARE SUPPLIES - 1.5%
1,700,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 1,776,500
-------------
TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 2,280,884
-------------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.3%
PHARMACEUTICALS - 2.3%
2,700,000 BB-/B1 Valeant Pharmaceuticals, 7.0%, 12/15/11 $ 2,808,000
-------------
TOTAL PHARMACEUTICALS & BIOTECHNOLOGY $ 2,808,000
-------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
REAL ESTATE - 9.6%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.4%
2,635,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 2,793,100
2,300,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 2,590,375
1,100,000 CCC+/Caa1 LNR Property Co., 7.625%, 7/15/13 1,248,500
-------------
$ 6,631,975
-------------
REAL ESTATE INVESTMENT TRUSTS - 4.2%
500,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 515,000
2,300,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 2,518,500
2,000,000 CCC+/B2 Meristar Hospitality Corp., 9.125%, 1/15/11 2,160,000
-------------
$ 5,193,500
-------------
TOTAL REAL ESTATE $ 11,825,475
-------------
TECHNOLOGY HARDWARE & EQUIPMENT - 9.1%
COMMUNICATIONS EQUIPMENT - 4.1%
4,300,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 4,309,536
700,000 BB+/Ba2 Corning, Inc., 6.2%, 3/15/16 701,770
-------------
$ 5,011,306
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.7%
1,835,000 B/B2 General Cable Corp., 9.5%, 11/15/10 $ 2,073,550
-------------
TECHNOLOGY DISTRIBUTORS - 3.3%
2,550,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 6/1/18 $ 2,724,145
1,200,000 BBB-/Baa3 Arrow Electronic, Inc., 6.875%, 7/1/13 1,317,504
-------------
$ 4,041,649
-------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 11,126,505
-------------
UTILITIES - 9.2%
ELECTRIC UTILITIES - 6.1%
3,000,000 B-/B3 Allegheny Energy Supply, 7.8%, 3/15/11 (a) $ 3,270,000
1,750,000 B-/B3 Allegheny Energy Supply, 8.25%, 4/15/12 (144A) 1,955,624
1,000,000 B+/B1 CMS Energy Corp., 7.5%, 1/15/09 1,065,000
1,000,000 B+/B1 CMS Energy Corp., 8.5%, 4/15/11 1,136,250
-------------
$ 7,426,874
-------------
MULTI-UTILITIES & UNREGULATED POWER - 3.1%
3,490,000 B+/B1 CMS Energy Corp., 7.75%, 8/1/10 $ 3,817,187
-------------
TOTAL UTILITIES $ 11,244,061
-------------
TOTAL CORPORATE BONDS
(Cost $79,489,329) $ 83,674,204
-------------
The accompanying notes are an integral part of these financial statements. 9
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
S&P/MOODY'S
RATINGS
SHARES (UNAUDITED) VALUE
TEMPORARY CASH INVESTMENT - 2.9%
SECURITY LENDING COLLATERAL - 2.9%
3,541,345 Securities Lending Investment Fund, 2.18% $ 3,541,345
-------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $3,541,345) $ 3,541,345
-------------
TOTAL INVESTMENTS IN SECURITIES - 105.5%
(Cost $124,177,032) $ 129,507,381
-------------
OTHER ASSETS AND LIABILITIES - (5.5)% $ (6,705,919)
-------------
TOTAL NET ASSETS - 100.0% $ 122,801,462
=============
N/R. Not rated by either S&P or Moody's
* Non-income producing 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, 2004, the
value of these securities amounted to $15,276,000 or 12.4% of net assets.
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
1,899,750 Allegheny Energy Supply, 7.8%, 03/15/11 $ 2,070,728
1,136,000 Conexant Systems Inc., 4.0%, 2/1/07 1,028,080
285,000 Goodyear Tire & Rubber, 7.857%, 8/15/11 289,275
-----------
TOTAL $ 3,388,083
===========
10 The accompanying notes are an integral part of these financial statements.
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED 5/1/01 TO
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 11.46 $ 9.28 $ 10.33 $ 10.51
-------- -------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ 0.58 $ 0.76 $ 0.80 $ 0.60
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.27 2.17 (1.05) (0.07)
-------- -------- ------- -------
Net increase (decrease) from investment operations $ 0.85 $ 2.93 $ (0.25) $ 0.53
Distributions to shareowners:
Net investment income (0.59) (0.75) (0.80) (0.60)
Net realized gain (0.05) -- -- (0.11)
-------- -------- ------- -------
Net increase (decrease) in net asset value $ 0.21 $ 2.18 $ (1.05) $ (0.18)
-------- -------- ------- -------
Net asset value, end of period $ 11.67 $ 11.46 $ 9.28 $ 10.33
======== ======== ======= =======
Total return* 7.76% 32.64% (2.42)% 5.39%
Ratio of net expenses to average net assets+ 1.04% 1.09% 1.82% 1.39%**
Ratio of net investment income to average net assets+ 5.12% 6.33% 8.67% 8.94%**
Portfolio turnover rate 42% 48% 42% 36%
Net assets, end of period (in thousands) $ 51,912 $ 17,601 $ 228 $ 28
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.04% 1.09% 1.82% 1.50%**
Net investment income 5.12% 6.33% 8.67% 8.83%**
Ratios with waiver of management fees and assumption of expenses
by PIM and reduction for fees paid indirectly:
Net expenses 1.04% 1.09% 0.97% 0.85%**
Net investment income 5.12% 6.33% 0.01% 0.07%**
(a) Class II shares were first publicly offered on May 1, 2001.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 11
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $3,388,083) (Cost $124,177,032) $ 129,507,381
Cash 392,872
Receivables--
Fund shares sold 100,052
Dividends, interest and foreign taxes withheld 1,768,626
Other 4,893
-------------
Total assets $ 131,773,824
-------------
LIABILITIES:
Payables--
Investment securities purchased $ 333,848
Fund shares repurchased 4,952,077
Upon return for securities loaned 3,541,345
Due to affiliates 83,826
Accrued expenses 61,266
-------------
Total liabilities $ 8,972,362
-------------
NET ASSETS:
Paid-in capital $ 113,693,485
Undistributed net investment income (loss) 42,906
Accumulated undistributed net realized gain (loss) 3,734,722
Net unrealized gain (loss) on:
Investments 5,330,349
-------------
Total net assets $ 122,801,462
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 70,889,843
Shares outstanding 6,073,809
-------------
Net asset value per share $ 11.67
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 51,911,619
Shares outstanding 4,447,914
-------------
Net asset value per share $ 11.67
12 The accompanying notes are an integral part of these financial statements.
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends $ 28,052
Interest 6,314,255
Income on securities loaned, net 15,124
------------
Total investment income $ 6,357,431
------------
EXPENSES:
Management fees $ 669,359
Transfer agent fees and expenses 1,806
Distribution fees (Class II) 85,911
Administrative reimbursements 19,997
Custodian fees 21,500
Professional fees 56,459
Printing expense 30,056
Miscellaneous 4,539
------------
Total expenses $ 889,627
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (6)
------------
Net expenses $ 889,621
------------
Net investment income (loss) $ 5,467,810
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 3,746,873
------------
$ 3,746,873
------------
Change in net unrealized gain or (loss) from:
Investments $ (1,480,061)
------------
$ (1,480,061)
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 2,266,812
============
Net increase (decrease) in net assets resulting
from operations $ 7,734,622
============
The accompanying notes are an integral part of these financial statements. 13
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 5,467,810 $ 4,106,902
Net realized gain (loss) on investments 3,746,873 1,124,588
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions (1,480,061) 10,301,474
------------- ------------
Net increase (decrease) in net assets
resulting from operations $ 7,734,622 $ 15,532,964
------------- ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (3,715,003) $ (3,817,405)
Class II (1,764,209) (279,944)
Net realized gain
Class I (265,040) --
Class II (135,300) --
------------- ------------
Total distributions to shareowners $ (5,879,552) $ (4,097,349)
------------- ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 75,619,514 $ 45,609,360
Reinvestment of distributions 5,846,576 4,059,022
Cost of shares repurchased (44,707,455) (18,254,761)
------------- ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 36,758,635 $ 31,413,621
------------- ------------
Net increase (decrease) in net assets $ 38,613,705 $ 42,849,236
NET ASSETS:
Beginning of year 84,187,757 41,338,521
------------- ------------
End of year $ 122,801,462 $ 84,187,757
============= ============
Undistributed net investment income (loss),
end of year $ 42,906 $ 42,283
============= ============
14 The accompanying notes are an integral part of these financial statements.
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer High Yield VCT Portfolio (The Portfolio) is a portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity
Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of High Yield Portfolio is to maximize total return
through a combination of income and capital appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
Generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. 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
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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
15
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
market quotations are not readily available are valued at their fair values
as determined by, or under the direction of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio 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, 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.
The High Yield Portfolio invests in below investment grade (high yield)
debt securities and preferred 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.
The Portfolio is not diversified, which means that it can invest a higher
percentage of its asset in any one issuer than a diversified fund. Being
non-diversified may magnify the fund's losses from adverse events affecting
a particular issuer.
In addition, the non-diversified Portfolios have concentrations in certain
asset types, which may subject the Portfolios to additional risks. Further
description of these risks is included in the Trust's Prospectus.
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 represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
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.
D. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, the 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 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.
16
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED GAIN PAID-IN
PORTFOLIO (LOSS) (LOSS) CAPITAL
- -------------------------------- ----------------- --------------- -------
Pioneer High Yield VCT Portfolio $ 12,025 $ (12,025) $ (0)
======== ========= ====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 5,479,212 $ 4,097,349
Long-Term capital gain $ 400,340 $ --
----------- -----------
$ 5,879,552 $ 4,097,349
=========== ===========
Return of Capital $ -- $ --
----------- -----------
Total distributions $ 5,879,552 $ 4,097,349
=========== ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 613,388
Undistributed long-term gain/(capital loss carryforward) $ 3,164,280
Unrealized appreciation (depreciation) $ 5,330,309
-----------
Total $ 9,107,977
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, the recognition of unrealized
gains or losses on certain futures contracts, and the tax treatment of
premium amortization.
E. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 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. Dividends
and distributions to shareowners are recorded on the ex-dividend date.
17
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
F. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
G. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.65% of the Portfolio's average daily net assets. calculated daily at the
following annual rate of 0.65% of the Portfolio's average daily net assets.
The portion of the Portfolios' expenses attributable to Class II (or Class I for
shares in the case of High Yield Portfolios) will be reduced only to the extent
such expenses are reduced for Class I shares (or Class II shares). Each class
will reimburse PIM no more than the amount by which that class' expenses were
reduced.
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. At December 31, 2004, $72,671 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $267 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$10,888 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------ ------------- --------------
High Yield Portfolio $ 124,177,071 $ 6,347,617 $ (1,017,307) $ 5,330,310
============= =========== ============ ===========
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $83,647,941 and $42,692,245, respectively.
18
PIONEER HIGH YIELD VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
HIGH YIELD PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------- ----------- ------------
CLASS I:
Shares sold 2,699,382 $ 30,852,667 2,515,726 $ 26,817,319
Reinvestment of distributions 346,267 3,947,046 357,809 3,779,086
Shares repurchased (2,787,689) (31,727,505) (1,491,103) (15,895,254)
---------- ------------- --------- ------------
Net increase (decrease) 257,960 $ 3,072,208 1,382,432 $ 14,701,151
========== ============= ========= ============
CLASS II:
Shares sold 3,916,481 $ 44,766,847 1,708,526 $ 18,792,041
Reinvestment of distributions 166,648 1,899,530 25,089 279,836
Shares repurchased (1,171,662) (12,979,950) (221,726) (2,359,726)
---------- ------------- --------- ------------
Net increase 2,911,467 $ 33,686,427 1,511,889 $ 16,712,470
========== ============= ========= ============
19
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 CLASS II SHAREOWNERS OF PIONEER HIGH YIELD VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer High Yield VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. An audit
includes 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, 2004, 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
20
PIONEER HIGH YIELD VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for
CUSTODIAN the Trust's operations. The Trust's Trustees and officers are
Brown Brothers Harriman & Co. listed below, together with their principal occupations during the
past five years. Trustees who are interested persons of the Portfolio
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM within the meaning of the Investment Company Act of 1940 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 73 U.S.registered
Pioneer Funds Distributor, Inc. investment portfolios for which Pioneer Investment Management, Inc.
("Pioneer") serves as investment adviser (the "Pioneer Funds").
The address for all Interested Trustees and all officers of
LEGAL COUNSEL the Portfolio is 60 State Street, Boston, Massachusetts 02109.
Wilmer Cutler Pickering Hale and Dorr LLP
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon
SHAREOWNER SERVICES AND TRANSFER request, without charge, by calling 1-800-225-6292.
Pioneer Investment Management Shareholder Services, Inc.
Proxy Voting Policies and Procedures of the Trust are available
without charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
(78)* Board, Trustee successor trustee retirement or removal; Deputy Chairman Company, Ltd.
and President is elected or and a Director of Pioneer Global Asset
earlier retirement Management S.p.A. ("PGAM");
or removal Non-Executive Chairman and a Director
of Pioneer Investment Management USA
Inc. ("PIM-USA"); Chairman and a
Director of Pioneer; Director of
Pioneer Alternative Investment
Management Limited (Dublin); President
and a Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated funds;
President and Director of Pioneer
Funds Distributor, Inc. ("PFD");
President of all of the Pioneer Funds;
and Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel
to PIM-USA and the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive Officer, None
Executive Vice successor trustee PIM-USA since May 2003 (Director since
President is elected or January 2001); President and Director
earlier retirement of Pioneer since May 2003; Chairman
or removal and Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive
Vice President of all of the Pioneer
Funds since June 2003; Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior
Vice President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- -----------------------------------------------------------------------------------------------------------------------------------
21
PIONEER HIGH YIELD VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock** (61) Trustee since Serves until a Senior Vice President and Chief Director of The Enterprise
3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Social Investment Company
Washington, DC 20007 is elected or (publicly traded health care services (privately-held affordable
earlier retirement company) (2001-present); Managing housing finance company);
or removal. Partner, Federal City Capital Director of New York
Advisors (boutique merchant Mortgage Trust (publicly
bank)(1995-2000; 2002 to 2004); traded mortgage REIT)
Executive Vice President and Chief
Financial Officer, Pedestal Inc.
(internet-based mortgage trading
company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- -----------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until a President, Bush International Director of Brady
3509 Woodbine Street, 2000. successor trustee (international financial advisory Corporation (industrial
Chevy Chase, MD 20815 is elected or firm) identification and
earlier retirement specialty coated material
or removal. products manufacturer),
Millennium Chemicals, Inc.
(commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc. (tobacco)
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham Trustee since Serves until a Founding Director, The Winthrop None
(57) 2000. successor trustee Group, Inc. (consulting firm);
1001 Sherbrooke is elected or Professor of Management, Faculty of
Street West, earlier retirement Management, McGill University
Montreal, Quebec, or removal.
Canada H3A 1G5
- -----------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret Trustee since Serves until a President and Chief Executive Director of New America
(56) 1995. successor trustee Officer, Newbury, Piret & Company, High Income Fund, Inc.
One Boston Place, is elected or Inc. (investment banking firm) (closed-end investment
28th Floor, earlier retirement company)
Boston, MA 02108 or removal.
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until a Senior Counsel, Sullivan & Cromwell Director, The Swiss Helvetia
125 Broad Street, New 1995. successor trustee (law firm) Fund, Inc. (closed-end
York, NY 10004 is elected or investment company) and
earlier retirement AMVESCAP PLC (investment
or removal. managers)
- -----------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until a President, John Winthrop & Co., Inc. None
One North Adgers September, successor trustee (private investment firm)
Wharf, Charleston, SC 2000. is elected or
29401 earlier retirement
or removal.
- -----------------------------------------------------------------------------------------------------------------------------------
22
PIONEER HIGH YIELD VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior Vice None
(57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director
of Compliance of PIM-USA from April
1998 through October 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and Senior None
Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002;
Board Vice President and Senior Counsel of
BISYS Fund Services, Inc. (April 2001
to June 2002); Senior Vice President
and Deputy General Counsel of Funds
Distributor, Inc. (July 2000 to April
2001; Vice President and Associate
General Counsel from July 1996 to July
2000); Assistant Secretary of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Secretary discretion of the and Dorr LLP; Assistant Secretary of
Board all Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund Accounting, None
discretion of the Administration and Custody Services of
Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer
from June 1999 to November 2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None
Treasurer discretion of the Treasurer and Senior Vice President,
Board CDC IXIS Asset Management Services
from 2002 to 2003; Assistant Treasurer
and Vice President, MFS Investment
Management from 1997 to 2002; and
Assistant Treasurer of all of the
Pioneer Funds since November 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- -----------------------------------------------------------------------------------------------------------------------------------
23
PIONEER HIGH YIELD VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None
Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody
Board Services since June 2003; Assistant
Vice President - Mutual Fund
Operations of State Street Corporation
from June 2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody Services
(Fund Accounting Manager from August
1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of Pioneer None
Compliance discretion of the (Director of Compliance and Senior
Officer Board Counsel from November 2000 to
September 2004); Vice President and
Associate General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from February
1998 to November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- -----------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
24
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
[LOGO] PIONEER
Investment(R)
[LOGO]
PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio -- Class II Shares
ANNUAL REPORT
December 31, 2004
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 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 18
Trustees, Officers and Service Providers 19
Please consider a Portfolio's investment objectives, risks, charges and
expenses carefully before investing. The prospectus contains this and other
information about a Portfolio and should be read carefully before you invest or
send money. To obtain a prospectus and for other information on any Pioneer
Portfolio, contact your adviser, call 1-800-225-6292 or visit our website at
www.pioneerfunds.com.
The Trust files a complete statement 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 International Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
Sector Distribution
(As a percentage of total investment portfolio)
[THE FOLLOWING DATA WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 1.5%
Temporary Cash Investments 3.4%
Depositary Receipts for International Stocks 3.9%
International Common Stocks 91.2%
Geographical Distribution Sector
(As a percentage of equity holdings)
Other(individually less then 1%) 3.8%
Hungary 1.1%
Australia 1.0%
Belgium 1.0%
Brazil 1.0%
Turkey 1.3%
Ireland 1.5%
South Korea 1.5%
Netherlands 3.6%
Italy 4.2%
Spain 4.9%
Germany 5.4%
Switzerland 7.9%
United Kingdom 15.9%
France 16.3%
Japan 30.6
Five Largest Holdings
(As a percentage of equity holdings)
1. BP Amoco Plc 3.17%
2. Vodafone Group Plc 2.76
3. Total SA 2.33
4. Mitsubishi Tokyo Financial
Group, Inc. 2.26
5. Toyota Motor Co. 2.23
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
Prices and Distributions
12/31/04 12/31/03
Net Asset Value per Share $ 11.84 $ 10.04
Distributions per Share Short-Term Long-Term
(1/1/04 - 12/31/04) Dividends Capital Gains Capital Gains
$ 0.0431 $ - $ -
- --------------------------------------------------------------------------------
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) All Country World Free (ACWF) ex.
U.S. 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 International Value VCT Portfolio
MSCI AC WId Fr USA
Mar-95 10000 10000
10945 10960
Dec-96 11819 11691
12227 11929
Dec-98 11012 13655
15859 17877
Dec-00 12260 15177
9326 12218
Dec-02 8064 10425
10675 14740
Dec-04 12641 17891
Index comparison begins on 2/28/95. The Morgan Stanley Capital International
(MSCI) All Country World Free 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
the Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
Net Asset Value
Life-of-Class 2.40%
(3/1/95)
5 Years -4.43%
1 Year 18.42%
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.pioneerfunds.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. Please refer to the variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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.
2
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International 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 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 International Value VCT
Portfolio
Based on actual returns from July 1, 2004 through December 31, 2004.
Share Class I II
- ---------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,146.73 $ 1,146.15
Expenses Paid During Period* $ 9.74 $ 11.58
- ---------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.80% and
2.15% 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). 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 International Value VCT
Portfolio
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
Share Class I II
- ---------------------------------------------------------------------------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,016.34 $ 1,014.43
Expenses Paid During Period* $ 9.14 $ 10.87
- ---------------------------------------------------------------------------
* Expenses are equal to the Portfolio's annualized expense ratio of 1.80% and
2.15% 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 International Value VCT Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
International stocks appreciated strongly during 2004, despite higher interest
rates and rising oil prices. As Portfolio Manager Christopher Smart explains,
investments in economically sensitive industries across Japan, Europe and
emerging markets were strong contributors to performance.
Q: How did the Portfolio perform?
A: For the 12 months ended December 31, 2004, Class II shares rose 18.42% at
net asset value. However, with the disappointing performance of a few
stocks, it lagged the Morgan Stanley Capital International (MSCI) All
Country World Free Index, which rose 21.36% for the same period.
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.
We've been underweighting technology stocks for some time out of concern for
their valuations and weak demand in developed countries. Nevertheless, their
limited presence in the Portfolio still detracted from performance. Nokia
(Finland) and Ericsson (Sweden) suffered from inadequate product lines in an
increasingly competitive market for mobile telephones. We saw opportunity in
Hitachi Chemical (Japan), which we viewed as a promising, yet undervalued,
manufacturer of electronic component materials. Unfortunately, concerns
about the semiconductor cycle and weak personal computer sales drove the
stock price down during the second half of the fiscal year.
Outside the technology sector, two holdings domiciled in Switzerland were
disappointing. Nestle S.A., the Swiss food giant, declined as the company's
sales growth and profitability came in below expectations. We continue to
believe that the stock will recover, as Nestle delivers on its promises to
cut operating costs and improve its overall margins. Astra Zeneca's failure
to secure approval for its anti-clotting medicine Exanta hurt expectations
for future results, but we remain optimistic that its pipeline retains
value.
Q: What investments contributed to performance?
A: Japanese stocks, helped by a recovery in the property market, proved very
advantageous despite a retreat in the final months of the fiscal year.
Investments in prefabricated housing and construction materials
manufacturer Sekisui Chemical Company and Daiwa House rose considerably
during the reporting period. Also, quality retail chains like Ryohin
Keikaku Co. and clothing chain Fast Retailing enjoyed strong growth in
operating profits.
Investments in European cyclical stocks, which had lagged the market earlier
this year, also posted gains. Electric utility E.on AG (Germany) appreciated
sharply, as investors gained confidence in management's ability to sell
non-core assets in real estate and the chemicals industry and boost its
dividend pay-out ratio. The construction and engineering firm ACS benefited
from strong growth in revenues from road, infrastructure and building
contracts mainly in Spain, where economic expansion and European Union
financing have supported a construction boom. Belgacom, which posted
lackluster performance following its initial listing in March, recovered
handsomely in the fall. High global oil prices have given management at
Total SA (France) and ENI S.p.A (Italy) the opportunity to broaden its
ambitions for new exploration and expansion of downstream businesses.
Q: What can you tell us about the Portfolio's investments in emerging markets?
A: Some limited but key investments in emerging markets helped performance
considerably. Last spring, emerging markets were negatively affected by
fears of global inflation and the Federal Reserve Board's (the Fed) tighter
monetary policy. We thought that the Fed's interest rate increases would be
gradual and that the ensuing fall in stock prices in these markets was
overblown.
Three new holdings exemplify our strategy in emerging markets. For the first
time in more than a decade, real wages in Brazil are rising after weathering
the effects of currency devaluation and inflation. Brazil's third largest
bank, Unibanco, is a new holding that should profit from a continued
acceleration of consumer spending and its growth in its credit card business
and consumer lending. In Turkey, Koc Holdings rose nearly 30% during the
recent quarter, as Turkey's accession into the European union took one small
step closer to reality. Mobile operator Turkcell has increased its customer
base by more than 22% over the last year, and minutes of usage by
subscribers continues to climb.
Q: What is your outlook?
A: Barring any unforeseen events that could severely hamper the European
recovery, the valuations of most stocks remain extremely attractive
compared to the United States, and the earnings growth potential is good.
We are also optimistic about prospects for a Japanese recovery, as land
prices appreciate and consumers begin to spend again. In key emerging
markets, like Turkey and Brazil, we think we'll continue to find investment
opportunities, where falling inflation and interest rates have released
powerful forces of domestic demand.
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. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
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.
Call 800-688-9915 or visit www.pioneerfunds.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 International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
Shares Value
PREFERRED STOCK - 0.5%
Telecommunication Services - 0.5%
Integrated Telecommunication
Services - 0.5%
8,400 Tele Norte Leste Participacoes (A.D.R.) $ 141,708
-----------
TOTAL PREFERRED STOCK
(Cost $101,323) $ 141,708
-----------
COMMON STOCKS - 98.7%
Energy - 6.3%
Integrated Oil & Gas - 2.7%
30,110 BP Amoco Plc $ 293,457
17,400 Eni S.p.A. 436,278
-----------
$ 729,735
-----------
Oil & Gas Refining Marketing &
Transportation - 3.6%
12,600 Repsol SA $ 327,551
2,960 Total SA 647,924
-----------
$ 975,475
-----------
Total Energy $ 1,705,210
-----------
Materials - 8.1%
Commodity Chemicals - 1.3%
4,700 BASF India, Ltd. $ 337,955
-----------
Construction Materials - 2.9%
9,600 CRH Plc $ 256,586
6,200 Italcementi S.p.A. 99,690
1,600 Lafarge Br 154,175
1,980 Vinci SA (a) 265,469
-----------
$ 775,920
-----------
Diversified Metals & Mining - 1.6%
3,850 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 147,186
2,100 Norilsk Nickel 114,713
5,390 Rio Tinto Plc 158,384
-----------
$ 420,283
-----------
Industrial Gases - 1.3%
62,000 Taiyo Nippon Sanso Corp. $ 364,928
-----------
Steel - 1.0%
23,102 Broken Hill Proprietary Co., Ltd. $ 277,355
-----------
Total Materials $ 2,176,441
-----------
Capital Goods - 9.1%
Aerospace & Defense - 0.3%
2,700 European Aeronautic Defence $ 78,322
-----------
Shares Value
Construction & Engineering - 4.4%
11,649 ACS, Actividades de Construccion y
Servicios, SA $ 265,916
4,000 Compagnie de Saint Gobain 240,262
119,200 Kajima Corp. 514,067
940 Technip 173,459
-----------
$ 1,193,704
-----------
Electrical Components & Equipment - 1.6%
55,800 Mitsubishi Electric Corp. $ 274,245
2,400 Schneider Electric SA 166,700
-----------
$ 440,945
-----------
Industrial Conglomerates - 0.5%
20,892,000 KOC Holding AS* $ 136,428
-----------
Industrial Machinery - 2.3%
3,800 Atlas Copco AB $ 171,478
36,600 OSG Corp. (a) 443,151
-----------
$ 614,629
-----------
Total Capital Goods $ 2,464,028
-----------
Commercial Services & Supplies - 0.8%
Diversified Commercial Services - 0.8%
8,100 TNT Post Group NV $ 219,979
-----------
Total Commercial Services &
Supplies $ 219,979
-----------
Transportation - 1.8%
Railroads - 1.8%
88 East Japan Railway Co. $ 490,631
-----------
Total Transportation $ 490,631
-----------
Automobiles & Components - 3.1%
Auto Parts & Equipment - 0.4%
1,500 Compagnie Generale des Etablissements
Michelin $ 96,033
-----------
Automobile Manufacturers - 2.7%
2,500 Bayerische Motoren Werke AG $ 112,628
15,300 Toyota Motor Co. 625,414
-----------
$ 738,042
-----------
Total Automobiles & Components $ 834,075
-----------
Consumer Durables & Apparel - 0.6%
Apparel, Accessories & Luxury Goods - 0.6%
1,000 Adidas-Salomon AG $ 161,016
-----------
Total Consumer Durables & Apparel $ 161,016
-----------
Hotels, Restaurants & Leisure - 3.1%
Casinos & Gaming - 1.7%
8,200 Sega Sammy Holdings, Inc.* $ 450,679
-----------
The accompanying notes are an integral part of these financial statements.
5
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
Shares Value
Restaurants - 1.4%
37,200 Compass Group Plc $ 175,549
12,000 GUS plc 216,315
-----------
$ 391,864
-----------
Total Hotels, Restaurants & Leisure $ 842,543
-----------
Media - 1.7%
Advertising - 0.3%
3,000 Publicis SA $ 97,030
-----------
Publishing - 1.4%
11,200 Reed Elsevier Plc $ 102,875
8,400 Vivendi Universal* 269,088
-----------
$ 371,963
-----------
Total Media $ 468,993
-----------
Retailing - 4.2%
Distributors - 1.6%
34,000 Mitsubishi Corp. $ 439,416
-----------
General Merchandise Stores - 2.6%
6,900 Ito Yokado, Ltd. $ 290,671
7,900 Ryohin Keikaku Co., Ltd. 397,075
-----------
$ 687,746
-----------
Total Retailing $ 1,127,162
-----------
Food & Drug Retailing - 3.8%
Drug Retail - 0.6%
13,500 Boots Co., Plc $ 169,621
-----------
Food Retail - 3.2%
7,266 Koninklijke Ahold NV (144A)* $ 56,227
1,700 Nestle SA (Registered Shares) 444,812
55,700 Tesco Plc 344,340
-----------
$ 845,379
-----------
Total Food & Drug Retailing $ 1,015,000
-----------
Food, Beverage & Tobacco - 3.1%
Tobacco - 3.1%
16,020 British American Tobacco Plc $ 275,853
50 Japan Tobacco, Inc. 570,938
-----------
$ 846,791
-----------
Total Food, Beverage & Tobacco $ 846,791
-----------
Household & Personal Products - 1.5%
Household Products - 1.5%
28,300 Shiseido Co., Ltd. $ 410,008
-----------
Total Household & Personal
Products $ 410,008
-----------
Shares Value
Health Care Equipment & Services - 0.5%
Health Care Supplies - 0.5%
800 Nobel Biocare Holding AG $ 144,687
-----------
Total Health Care Equipment &
Services $ 144,687
-----------
Pharmaceuticals & Biotechnology - 5.7%
Pharmaceuticals - 5.7%
9,332 AstraZeneca Plc $ 339,115
8,590 GlaxoSmithKline Plc 202,082
3,200 Novartis 160,026
3,138 Roche Holdings AG 358,390
4,280 Sanofi-Aventis 342,093
1,670 Schering AG 124,482
-----------
$ 1,526,188
-----------
Total Pharmaceuticals &
Biotechnology $ 1,526,188
-----------
Banks - 11.5%
Diversified Banks - 11.5%
7,400 Allied Irish Banks Plc $ 152,745
16,225 Barclays Plc 182,278
18,200 Banco Bilbao Vizcaya Argentaria SA 322,105
50,800 Banca Intesa S.p.A. 243,983
5,000 BNP Paribas SA 361,801
9,645 Credit Agricole SA 290,387
7,930 CS Group* 334,083
18,000 Development Bank of Singapore, Ltd. 177,261
17,200 HSBC Holding Plc 289,924
4,100 Kookmin Bank (A.D.R.)* (a) 160,228
12,520 Royal Bank of Scotland Group Plc 420,264
5,100 Uniao de Bancos Brasileiros S.A.
(Unibanco) (G.D.R.) (144A) 161,772
-----------
$ 3,096,831
-----------
Total Banks $ 3,096,831
-----------
Diversified Financials - 9.3%
Consumer Finance - 1.8%
13,600 Credit Saison Co., Ltd. $ 497,009
-----------
Diversified Financial Services - 6.7%
12,400 ING Groep NV $ 374,947
2,800 Lagardere S.C.A. 201,682
3,319 Societe Generale 335,463
50,000 Sumitomo Trust Bank 361,633
6,350 UBS AG 529,152
-----------
$ 1,802,877
-----------
Specialized Finance - 0.8%
3,400 Deutsche Boerse AG $ 204,294
-----------
Total Diversified Financials $ 2,504,180
-----------
6 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
Insurance - 2.4%
Life & Health Insurance - 0.7%
5,300 Assicurazioni Generali $ 179,543
-----------
Multi-Line Insurance - 1.7%
11,600 AXA $ 287,272
1,080 Zurich Financial Services* 179,517
-----------
$ 466,789
-----------
Total Insurance $ 646,332
-----------
Real Estate - 1.5%
Real Estate Management & Development - 1.5%
34,000 Mitsui Fudosan Co. $ 414,847
-----------
Total Real Estate $ 414,847
-----------
Software & Services - 0.5%
IT Consulting & Other Services - 0.5%
2,100 Atos Origin* $ 142,448
-----------
Total Software & Services $ 142,448
-----------
Technology Hardware & Equipment - 5.5%
Semiconductors - 0.9%
9,500 Philips Electronics NV $ 251,307
-----------
Computer Hardware - 0.4%
35,300 Dixons Group Plc $ 103,036
-----------
Electronic Equipment & Instruments - 2.6%
3,900 Nidec Corp. $ 476,798
2,490 Siemens 210,719
-----------
$ 687,517
-----------
Office Electronics - 1.6%
32,500 Konica Minolta Holdings, Inc.* $ 432,715
-----------
Total Technology Hardware &
Equipment $ 1,474,575
-----------
Semiconductors - 2.5%
Semiconductor Equipment - 1.6%
7,100 Tokyo Electron, Ltd. $ 439,022
-----------
Semiconductors - 0.9%
250 Samsung Electronics $ 109,101
15,900 Taiwan Semiconductor Manufacturing Co.
(A.D.R.) 134,991
-----------
$ 244,092
-----------
Total Semiconductors $ 683,114
-----------
Telecommunication Services - 9.8%
Alternate Carriers - 1.3%
11,000 France Telecom $ 363,354
-----------
Shares Value
Integrated Telecommunication Services - 4.2%
6,500 Belgacom SA* $ 280,528
16,200 British Sky Broadcasting Plc 174,818
17,500 Mahanagar Telephone Nigam, Ltd. 139,650
18,730 Telefonica SA 352,014
46,486 Telecom Italia S.p.A. 189,794
-----------
$ 1,136,804
-----------
Wireless Telecommunciation Services - 4.3%
1,000 Mobile Telesystems (A.D.R.) (a) $ 138,510
6,500 SK Telecom Co., Ltd. (a) 144,625
12,091 Turk ell Iletism Hizmet (A.D.R.) 218,847
243,611 Vodafone Group Plc 659,444
-----------
$ 1,161,426
-----------
Total Telecommunication Services $ 2,661,584
-----------
Utilities - 2.3%
Electric Utilities - 2.3%
3,533 E.On AG $ 321,530
2,700 Iberdrola SA* 68,502
23,300 National Grid Transco Plc 221,864
-----------
$ 611,896
-----------
Total Utilities $ 611,896
-----------
TOTAL COMMON STOCKS
(Cost $20,557,882) $26,668,559
-----------
TEMPORARY CASH INVESTMENT - 3.5%
Security Lending Collateral - 3.5%
946,907 Securities Lending
Investment Fund, 2.18% $ 946,907
-----------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $946,907) $ 946,907
-----------
TOTAL INVESTMENTS IN
SECURITIES - 102.7%
(Cost $21,606,112)(b) $27,757,174
-----------
OTHER ASSETS
AND LIABILITIES - (2.7)% $ (764,844)
-----------
TOTAL NET ASSETS - 100.0% $26,992,333
===========
The accompanying notes are an integral part of these financial statements.
7
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
(A.D.R.) American Depositary Receipt
(G.D.R.) Global Depository 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, 2004, the value of these securities amounted to $217,999
or 0.8% of net assets.
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
Shares Security Market Value
3,895 Kookmin Bank (A.D.R.) * $ 152,217
950 Mobile Telesystems (A.D.R.) 131,585
30,700 OSG Corp. 371,776
570 SK Telecom Co., Ltd. 12,683
1,800 Vinci SA 241,344
---------
Total $ 909,605
=========
(b) Distributions of investments by country of issue, as a percentage of
total equity holdings (excluding temporary cash investments) is as
follows:
Japan 30.6%
France 16.3
United Kingdom 15.9
Switzerland 7.9
Germany 5.4
Spain 4.9
Italy 4.2
Netherlands 3.6
South Korea 1.5
Ireland 1.5
Turkey 1.3
Brazil 1.1
Belgium 1.0
Austrialia 1.0
Other (individually less than 1%) 3.8
-----
100.0%
=====
8 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Year Ended 5/1/03 to
Class II (a) 12/31/04 12/31/03
Net asset value, beginning of period $ 10.04 $ 7.76
======== =========
Increase (decrease) from investment operations:
Net investment income (loss) $ (0.02) $ 0.05
Net realized and unrealized gain on investments and foreign currency transactions 1.86 2.29
-------- --------
Net increase from investment operations 1.84 2.34
-------- --------
Distributions to shareholders:
Net investment income $ (0.04) $ (0.06)
Net increase (decrease) in net asset value $ 1.80 $ 2.28
-------- ---------
Net asset value, end of period $ 11.84 $ 10.04
-------- ---------
Total return* 18.42% 30.31%**
Ratio of net expenses to average net assets+ 2.13% 2.02%**
Ratio of net investment loss to average net assets+ ( 0.11)% ( 0.81)%**
Portfolio turnover rate 129% 99%
Net assets, end of period (in thousands) $ 4,133 $ 1,081
Ratios with no waiver of management fees and assumption of expenses by PIM and no
reduction for
fees paid indirectly:
Net expenses 2.13% 2.02%**
Net investment loss ( 0.11)% ( 0.81)%
(a) Class 2 shares were first publicly offered on May 1, 2003.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
9
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $909,605) (Cost $ 27,757,174
$21,606,112)
Cash 678,505
Receivables --
Investment securities sold 432,458
Dividends, interest and foreign taxes withheld 43,107
Forward foreign currency settlement contracts, net 4,089
Other 1,841
-------------
Total assets $ 28,917,174
-------------
LIABILITIES:
Payables --
Investment securities purchased $ 867,838
Fund shares repurchased 11,283
Upon return of securities loaned 946,907
Due to affiliates 25,455
Accrued expenses 73,358
-------------
Total liabilities $ 1,924,841
-------------
NET ASSETS:
Paid-in capital $ 34,920,512
Undistributed net investment income (loss) 30,080
Accumulated undistributed net realized gain (loss) (14,107,986)
Net unrealized gain (loss) on:
Investments 6,151,062
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (1,335)
-------------
Total net assets $ 26,992,333
-------------
NET ASSET VALUE PER SHARE:
Class I:
No par value (unlimited number of shares authorized)
Net assets $ 22,859,452
Shares outstanding 1,923,744
-------------
Net asset value per share $ 11.88
Class II:
No par value (unlimited number of shares authorized)
Net assets $ 4,132,881
Shares outstanding 349,111
-------------
Net asset value per share $ 11.84
10 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $53,248) $ 499,250
Interest 4,330
Income on securities loaned, net 14,304
----------
Total investment income $ 517,884
----------
EXPENSES:
Management fees $ 237,439
Transfer agent fees and expenses 2,971
Distribution fees (Class II) 5,526
Administrative reimbursements 18,500
Custodian fees 70,086
Professional fees 62,141
Printing expense 13,358
Miscellaneous 14,409
----------
Total expenses $ 424,430
----------
Net expenses $ 424,430
----------
Net investment income (loss) $ 93,454
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $2,873,604
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (63,278)
----------
$2,810,326
----------
Change in net unrealized gain or (loss) from:
Investments (the change in reserve for repatriation taxes of $86,981) $1,321,708
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (11,522)
----------
$1,310,186
----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $4,120,512
==========
Net increase (decrease) in net assets resulting
from operations $4,213,966
==========
The accompanying notes are an integral part of these financial statements.
11
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended Year Ended
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 93,454 $ 136,624
Net realized gain (loss) on investments 2,810,326 (857,791)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 1,310,186 6,236,488
------------ -----------
Net increase (decrease) in net assets
resulting from operations $ 4,213,966 $ 5,515,321
------------ -----------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (113,573) $ (146,246)
Class II (8,890) (4)
------------ ------------
Total distributions to shareowners $ (122,463) $ (146,250)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 4,380,480 $ 2,253,340
Reinvestment of distributions 122,460 146,246
Cost of shares repurchased (5,189,620) (5,452,468)
------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ (686,680) $(3,052,882)
------------ ------------
Net increase (decrease) in net assets $ 3,404,823 $ 2,316,189
------------ ------------
NET ASSETS:
Beginning of year $ 23,587,510 $21,271,321
------------ ------------
End of year $ 26,992,333 $23,587,510
------------ ------------
Undistributed net investment income (loss),
end of year $ 30,080 $ 122,367
============ ============
12 The accompanying notes are an integral part of these financial statements.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
The Pioneer International Value Portfolio (the Portfolio) is a Portfolio of the
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
Portfolios:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value I Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The investment objective of International Value VCT Portfolio is to seek
long-term capital growth.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years.
Actual results could differ from those estimates. 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
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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, are determined as of such times. 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
13
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
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.
At December 31, 2004, there were no fair valued securities except as
follows. 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
International Value Portfolio are fair valued using vendor-supplied pricing
updates for each security to the time of the close of the NYSE. Temporary
cash investments and securities held by the Portfolio are valued at
amortized cost.
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, net of unrecoverable foreign taxes withheld at the
applicable country rates.
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.
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 represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
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 8)
D. Taxes
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, 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, 2004, 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
14
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, International Value VCT Portfolio had a
capital loss carryforward of $14,094,402 of which the following amounts
will expire between 2009 and 2011 if not utilized: $6,653,888 in 2009,
$5,309,516 in 2010 and $2,130,998 in 2011.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
Portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
- -------------------------------------------------------------------------------
Undistributed Accumulated Net
Net Investment Realized Gain Paid-In
Portfolio Income (Loss) (Loss) Capital
- --------------------------------------------------------------------------------------
Pioneer International Value VCT Portfolio $(63,278) $63,278 $--
========= ======= ====
- --------------------------------------------------------------------------------------
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
- --------------------------------------------------------------------------------
2004 2003
- ------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary Income $ 122,463 $146,250
Long-Term capital gain -- --
----------- --------
$ 122,463 $146,250
Return of Capital -- --
----------- --------
Total distributions $ 122,463 $146,250
=========== ========
Distributable Earnings (Accumulated Losses):
Undistributed ordinary income $ 34,169
Undistributed long-term gain/(capital loss carryforward) (14,094,402)
Unrealized appreciation (depreciation) 6,132,054
-----------
Total $(7,928,179)
============
- ------------------------------------------------------------------------------------------
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily 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 portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. Distribution fees for Class I 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, at the same time, and in the same amount, except that Class I and
Class II
15
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
- --------------------------------------------------------------------------------
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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
G. Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. Management Agreement
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
1.00% 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. At December 31, 2004, $24,357 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. Transfer Agent
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $270 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. Distribution Plans
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$828 payable to PFD at December 31, 2004.
5. Aggregate Unrealized Appreciation and Depreciation
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
- --------------------------------------------------------------------------------
Net
Gross Gross Appreciation/
Tax Cost Appreciation Depreciation (Depreciation)
- ---------------------------------------------------------------------------------------------------
International Value Portfolio $21,619,696 $6,175,716 $ (38,238) $6,137,478
=========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------
16
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
6. Portfolio Transactions
The cost of purchases and the proceeds from sales of investments other than
U.S. Government obligations and temporary cash investments for the year ended
December 31, 2004, were $30,362,933 and $30,703,827, respectively.
7. Capital Shares
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- --------------------------------------------------------------------------------
International Value Portfolio '04 Shares '04 Amount '03 Shares '03 Amount
- ---------------------------------------------------------------------------------------------------
CLASS I:
Shares sold 125,954 $ 1,319,269 148,266 $ 1,260,116
Reinvestment of distributions 10,994 113,572 17,452 146,246
Shares repurchased (449,994) (4,643,483) (658,580) (5,442,461)
-------- ------------ -------- ------------
Net increase (decrease) (313,046) $ (3,210,642) (492,862) $ (4,036,099)
========= ============= ========= =============
CLASS II:
Shares sold 294,244 $ 3,061,211 108,723 $ 993,224
Reinvestment of distributions 862 8,888 -- --
Shares repurchased (53,626) (546,137) (1,092) (10,077)
-------- ------------ -------- ------------
Net increase (decrease) 241,480 $ 2,523,962 107,631 $ 983,217
======== ============= ========= =============
- ---------------------------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts
During the year ended December 31, 2004, certain Portfolios had entered into
various contracts that obligate the Portfolios to deliver currencies at
specified future dates. At the maturity of a contract, the Portfolios must make
delivery of the foreign currency. Alternatively, prior to the settlement date
of a portfolio hedge, the Portfolio may close out such contracts by entering
into an offsetting hedge contract. As of December 31, 2004, the Portfolio had
no outstanding portfolio hedges.
Outstanding forward currency settlement contracts were as follows:
- --------------------------------------------------------------------------------
Net
Gross Settlement Gross Receivable/
Portfolio Receivable Date Payable (Payable)
- ---------------------------------------------------------------------------------------------------
International Value Portfolio $ (432,458) 1/3/05 $ (429,646) $ (2,812)
International Value Portfolio $ 867,839 1/3/05 $ 860,938 $ 6,901
- ---------------------------------------------------------------------------------------------------
17
PIONEER VARIABLE CONTRACTS TRUST
Pioneer International Value VCT Portfolio
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Pioneer Variable Contracts Trust and
the Class II Shareowners of Pioneer International Value VCT Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer International Value VCT Portfolio, one
of the portfolios constituting Pioneer Variable Contracts Trust (the "Trust")
as of December 31, 2004, 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 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. An audit includes 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, 2004, 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 of the Pioneer Variable Contracts
Trust at December 31, 2004, 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 the periods indicated therein, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young
Boston, Massachusetts
February 11, 2005
18
Pioneer International Value VCT Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Adviser Trustees and Officers
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
operations. The Trust's Trustees and officers are listed below, together
Custodian with their rincipal occupations during the past five years. Trustees who
Brown Brothers Harriman & Co are interested persons of the Portfolio within the meaning of the
Investment Company Act of 1940 are referred to as Interested Trustees.
Independent Registered Public Accounting Firm Trustees who are not interested persons of the Trust are referred to as
Ernst & Young LLP Trustees. Each of the Trustees serves as a trustee of each of the 73 U.S.
registered investment portfolios for which Pioneer Investment Management,
Principal Underwriter Inc. ("Pioneer") serves as investment adviser (the "Trust"). The address
Pioneer Funds Distributor, Inc. for all Interested Trustees and all officers of the Portfolio is 60 State
Street, Boston, Massachusetts 02109.
Legal Counsel The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available
upon request, without charge, by calling 1-800-225-6292.
Shareowner Services and Transfer Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, charge, upon Agent request, by calling our toll free number
Inc. (1-800-225-6292). This information is also available online at
pioneerfunds.com. Pioneer Investment Management Shareholder Services, Inc.
online at pioneerfunds.com. online at pioneerfunds.com.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves Director of Harbor Global Company, Ltd.
Jr. (78)* Board, Trustee successor trustee until retirement or removal
President and is elected or or earlier retirement Deputy
removal Chairman and a Director of
Pioneer Global Asset Management
S.p.A. ("PGAM"); Non-Executive
Chairman and a Director of
Pioneer Investment Manage
("PIM-USA"); Chairman and a
Director of Pio of Pioneer
Alternative Investment Managemen
(Dublin); President and a
Director of Pione Investment
Management (Bermuda) Limited and
funds; President and Director of
Pioneer Fu Inc. ("PFD");
President of all of the Pione Of
Counsel (since 2000, partner
prior to 20 Pickering Hale and
Dorr LLP (counsel to PIM Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive None
(52)** Executive Vice successor trustee is Officer, PIM-USA since May 2003
President elected or earlier (Director since January 2001);
retirement or removal President and Director of Pioneer
since May 2003; Chairman and
Director of Pioneer Investment
Management Shareholder Services,
Inc. ("PIMSS") since May 2003;
Executive Vice President of all of
the Pioneer Funds since June 2003;
Executive Vice President and Chief
Operating Officer of PIM-USA,
November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer,
John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
19
Pioneer International Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS THIS TRUSTEE
David R. Trustee since Serves until a Senior Vice President and Director of The Enterprise Social Investment
Bock** (61) 2005 successor trustee is Chief Financial Officer, Company (privately-held affordable housing
3050 K. elected or earlier I-trax, Inc (publicly traded finance company); Director of New York
Street NW, retirement or removal.health care services Mortgage Trust (publicly traded mortgage
Washington, company) (2001-present); REIT)
DC 20007 Managing Partner, Federal
City Capital Advisors
(boutique merchant
bank)(1995-2000; 2002 to
2004); Executive Vice
President and Chief
Financial Officer, Pedestal
Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation (industrial
(56) 3509 2000. successor trustee is (international inancial identification and specialty coated material
Woodbine elected or earlier advisory firm) products manufacturer), Millennium
Street, retirement or removal Chemicals, Inc. (commodity chemicals),
Chevy Chase, Mortgage Guaranty Insurance Corporation,
MD 20815 and R.J. Reynolds Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Trustee since Serves until Founding Director, The None
B.W. Graham 2000. successor trustee is Winthrop Group, Inc.
(57) 1001 elected or earlier (consulting firm); Professor
Sherbrooke retirement or removal of Management, Faculty of
Street West, Management, McGill
Montreal, University
Quebec,
Canada H3A
1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite Trustee since Serves untill President, and Chief Executive Director of New American High Income Fund,
A. Piret 1995. successor Officer, Newbury, Piret & Inc.(closed-end investment company)
(56) One trustee is Company, Inc. (investment
Boston elected or banking firm)
Place, 28th earlier
Floor, retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss Helvetic Fund, Inc.
West (76) 1995. successor trustee Cromwell (law firm) (closed-end investment company) and AMVESCAP
125 Broad is elected or earlier PLC (investment managers)
Street, New retirement or removal
York, NY
10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Trustee since Serves until President, John Winthrop & CO., None
Winthrop September, successor trustee Inc.(private investment firm)
(68) One 2000. is elected or earlier
North Adgers retirement or removal
Wharf,
Charleston,
SC 29401
- ------------------------------------------------------------------------------------------------------------------------------------
20
Pioneer International Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE PAST FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Secretary Serves at the discretion Secretary of PIM-USA; Senior None
Bourassa (57) of the Board Vice President - Legal of
Pioneer; and Secretary/Clerk
of most of PIM-USA's
subsidiaries since October
2000; Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Complianc of PIM-USA from
April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the discretion Assistant Vice President and None
Kelley (40) Secretary of the Board Senior Counsel of Pioneer
since July 2002; Vice
President and Senior Counsel
of BISYS Fund Services, Inc.
(April 2001 to June 2002);
Senior Vice President and
Deputy General Counsel of
Funds Distributor, Inc. (July
2000 to April 2001; Vice
President and Associate
General Counsel from July
1996 to July 2000); Assistant
Secretary of all Pioneer
Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the discretion Partner, Wilmer Cutler None
Phelan (47) Secretary of the Board Pickering Hale and Dorr LLP;
Assistant Secretary of all
Pioneer Funds since September
2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Treasurer Serves at the discretion Vice President-Fund None
Nave (59) of the Board Accounting, Administration
and Custody Services of
Pioneer; and Treasurer of all
of the Pioneer Funds
(Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the discretion Deputy Treasurer of Pioneer None
Bradley (45) Treasurer of the Board since 2004; Treasurer and
Senior Vice President, CDC
IXIS Asset Management
Services from 2002 to 2003;
Assistant Treasurer and Vice
President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of
all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the discretion Assistant Vice President - None
Presutti (39) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since
November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the discretion Fund Accounting Manager - None
(46) Treasurer of the Board Fund Accounting,
Administration and Custody
Services of Pioneer; and
Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
21
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer International Value VCT Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
TRUST OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION
NAME AND AGE WITH THE TRUST TERM OF OFFICE DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS OFFICER
Katharine Kim Assistant Serves at the discretion Fund Administration Manager - None
Sullivan (31) Treasurer of the Board Fund Accounting,
Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer Fund
Accounting, Administration
and Custody Services (Fund
Accounting Manager from
August 1999 to May 2002, Fund
Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Serves at the discretion Chief Compliance Officer of None
(37) Compliance of the Board Pioneer (Director of
Officer Compliance and Senior Counsel
from November 2000 to
September 2004); Vice
President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November
2000; and Chief Compliance
Officer of all of the Pioneer
Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
22
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
This page for your notes.
- --------------------------------------------------------------------------------
This page for your notes.
[LOGO] PIONEER
Investments(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 7
Notes to Financial Statements 11
Report of Independent Registered Public Accounting Firm 15
Trustees, Officers and Service Providers 16
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 93.3%
Depositary Receipts for International Stocks 6.7%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Information Technology 22.9%
Consumer Discretionary 16.8%
Industrials 16.6%
Health Care 16.3%
Financials 14.5%
Energy 8.0%
Consumer Staples 4.9%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. eBAY, Inc. 3.78%
2. XTO Energy, Inc. 3.53
3. Qualcomm, Inc. 3.31
4. Danaher Corp. 3.31
5. Popular, Inc. 3.28
The Portfolio is actively managed and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 3/15/04
Net Asset Value per Share $ 11.09 $ 10.00
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(3/15/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
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. Portfolio returns are based on net asset value
and do not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell 1000 Growth Index Pioneer Oak Ridge Large Cap Growth VCT Portfolio* Growth Index
4-Mar 10000 10000
4-Dec 10548 10851
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 any Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 10.90%
(3/15/04)
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges. 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.pioneerfunds.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 fund 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 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 OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004
SHARE CLASS II
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,069.43
Expenses Paid During Period* $ 6.91
* Expenses are equal to the Portfolio's annualized expense ratio of 1.33% 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 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). 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, 2004 through December 31, 2004
SHARE CLASS II
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.36
Expenses Paid During Period* $ 6.75
* Expenses are equal to the Portfolio's annualized expense ratio of 1.33% 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 OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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 PORTFOLIOS
HOLDING MORE SECURITIES.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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, David Klaskin, Pioneer Oak Ridge Large Cap Growth
VCT Portfolio's Lead Portfolio Manager, discusses the factors that influenced
performance for the period from the Portfolio's inception on March 15, 2004
through December 31, 2004.
Q: HOW DID THE U.S. STOCK MARKET PERFORM DURING THE PAST YEAR?
A: Stocks performed very well during the past year, as continued global
growth, favorable earnings results and improving corporate balance sheets
combined to form a solid foundation for the market. While stocks provided a
reasonable return, their upward path was very choppy due to weakness in the
second and third quarters. During this time, the market was pressured by a
number of concerns, including geopolitical tensions, soaring oil prices and
rising U.S. interest rates. Investors, therefore, began to rotate into
higher-quality stocks with solid fundamentals, and away from the riskier
stocks that had been top performers during 2003 and the first quarter of
this year. This shift was a positive for the Portfolio, given our focus on
higher quality, fundamentally sound companies.
Q: HOW DID PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO PERFORM?
A: Class II shares of the Portfolio produced a total return of 10.90% at net
asset value for the period from the Portfolio's inception on March 15,
2004, through December 31, 2004, outpacing the 7.58% return of the Russell
1000 Growth Index over the same period.
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.
We are pleased that the Portfolio has performed well both on an absolute
basis and relative to its benchmark. While past performance is no guarantee
of future results, of course, we believe the Portfolio's strong showing is
the result of our disciplined investment style. Like all growth managers,
we look for companies with accelerating earnings. However, we also require
that two other important factors be in place. First, our research must
indicate to us that an issue's earnings growth is sustainable. And second,
the stocks we purchase must be reasonably valued in our view, since even
fast-growing stocks can be very risky if they are purchased at too rich of
a price. We believe this approach is the best way to find companies that
are poised to perform well over a three- to five-year time horizon.
Q: HOW IS THE PORTFOLIO POSITIONED IN THE TWO LARGEST INDUSTRY SECTORS IN THE
RUSSELL 1000 GROWTH INDEX: TECHNOLOGY AND HEALTH CARE?
A: We added significant relative value through our approach to the technology
sector, which underperformed the general market due to the prospect of
slowing sales growth in 2005. In this environment, our relatively
conservative positioning - i.e., our focus on reasonably valued, blue chip
companies within the sector - paid off. In addition, performance was helped
by the fact that technology is the Portfolio's largest sector underweight
(a weighting below that of the benchmark). Two of the Portfolio's top
performers in technology were Qualcomm, whose business model of earning
royalties for its wireless communications technology has enabled the stock
to perform well amid broader tech weakness; and Dell Computer, which
continues to gain market share from its competitors. The Portfolio also was
helped by being underweight in the more cyclical areas within technology,
such as semiconductors. In particular, our decision to avoid Intel - which
underperformed by a wide margin during the period - proved to be a distinct
positive for performance.
Turning to health care, we added significant value through our decision to
avoid the large-cap pharmaceuticals sector. Although these stocks are now
as inexpensive as they were following President Clinton's attempt at
sweeping health care reform in 1993, we believe there are not enough new
drugs in the pipeline to make up for the lost revenues from drugs that are
coming off patent protection. We looked instead for opportunities among
service providers and equipment companies, such as Zimmer Holdings - a
leading manufacturer of orthopedic products. Zimmer declined in the third
quarter on weaker than expected earnings, prompting us to trim the
position, but the stock was a strong contributor for the full year. On the
negative side, the generic drug maker Teva Pharmaceuticals was one of the
Portfolio's leading detractors. We continue to hold the stock, however, as
we remain confident in its longer term prospects.
Q: WHAT OTHER ELEMENTS OF THE PORTFOLIOS'S POSITIONING AFFECTED PERFORMANCE?
A: Energy stocks performed very well during the period, as the rising prices
of oil and gas boosted profits for companies in the sector. The Portfolio
was helped by both an overweight position and strong stock selection within
the group. We received strong performance from XTO Energy, which has
demonstrated the ability to manage its business effectively even during
difficult times. Apache, an exploration and production company that
reported record production and 57% earnings growth during the third
quarter, also performed very well.
In the consumer discretionary area, the online auction company eBay
provided stellar performance. eBay has emerged as a true "category killer,"
meaning that there is no other company that has come close to being able to
establish a stronghold in its market space. While the company's
fundamentals remain strong, we have begun to trim the position on the basis
of its valuation. Specialty retailers such as Staples and Best Buy also
contributed positively to performance. A key detractor within the consumer
discretionary group was IAC/InteractiveCorp, which integrates a variety of
online businesses. While we believed this would allow the company to
benefit from increased online activity, the stock fell following the
release of disappointing second quarter results.
In the financial sector, we have gradually reduced the presence of
companies that are sensitive to interest rate movements - such as
traditional banks - given that the Federal Reserve is likely to continue
raising rates. At the same time, we have maintained a position in stocks
with more diversified business lines that have the potential to benefit
from continued strength in the economy, such as Sallie Mae and American
Express. A top performer among financials was Popular, which holds a strong
market position within Latin America and the fast-growing Hispanic
population in the United States.
Q: WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET?
A: A number of factors continue to work in the market's favor, including
steady worldwide growth, the improvement in corporate balance sheets, and
companies' growing focus on dividends and share buybacks. However, the
risks to market performance, which include rising interest rates and the
potential for geopolitical disruptions, remain firmly in place. As a
result, we think the post-bubble rally in lower-quality, higher-risk
companies has likely run its course, and that should translate into a
continued investor preference for higher quality companies with strong
fundamentals. In this environment, we believe we can continue to add value
through our disciplined, selective approach to investing.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 94.4%
ENERGY - 7.5%
OIL & GAS DRILLING - 1.7%
1,640 BJ Services Co. $ 76,326
---------
OIL & GAS EXPLORATION & PRODUCTION - 5.8%
2,145 Apache Corp. $ 108,473
4,139 XTO Energy, Inc. 146,438
---------
$ 254,911
---------
TOTAL ENERGY $ 331,237
---------
CAPITAL GOODS - 12.7%
AEROSPACE & DEFENSE - 2.1%
1,270 L-3 Communications Holdings, Inc. $ 93,015
---------
ELECTRICAL COMPONENT & EQUIPMENT - 2.9%
3,515 General Electric Co. $ 128,298
---------
INDUSTRIAL CONGLOMERATES - 5.6%
2,395 Danaher Corp. $ 137,496
3,080 Tyco International, Ltd. 110,079
---------
$ 247,575
---------
INDUSTRIAL MACHINERY - 2.1%
1,124 Ingersoll-Rand Co. $ 90,256
---------
TOTAL CAPITAL GOODS $ 559,144
---------
TRANSPORTATION - 3.0%
AIR FREIGHT & COURIERS - 3.0%
1,340 FedEx Corp. $ 131,977
---------
TOTAL TRANSPORTATION $ 131,977
---------
HOTELS, RESTAURANTS & LEISURE - 1.6%
CASINOS & GAMING - 1.6%
2,085 International Game Technology $ 71,682
---------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 71,682
---------
MEDIA - 1.8%
BROADCASTING & CABLE TELEVISION - 1.8%
2,710 Univision Communications, Inc.* $ 79,322
---------
TOTAL MEDIA $ 79,322
---------
RETAILING - 12.4%
COMPUTER & ELECTRONICS RETAIL - 1.9%
1,415 Best Buy Co., Inc. $ 84,079
---------
GENERAL MERCHANDISE STORES - 1.9%
1,635 Target Corp. $ 84,906
---------
HOME IMPROVEMENT RETAIL - 2.1%
1,565 Lowe's Co., Inc. $ 90,128
---------
INTERNET RETAIL - 3.6%
1,350 eBAY, Inc.* $ 156,978
---------
SPECIALTY STORES - 2.9%
3,825 Staples, Inc. $ 128,941
---------
TOTAL RETAILING $ 545,032
---------
FOOD & DRUG RETAILING - 2.2%
HYPERMARKETS & SUPERCENTERS - 2.2%
1,850 Wal-Mart Stores, Inc. $ 97,717
---------
TOTAL FOOD & DRUG RETAILING $ 97,717
---------
HOUSEHOLD & PERSONAL PRODUCTS - 2.4%
HOUSEHOLD PRODUCTS - 2.4%
1,950 Procter & Gamble Co. $ 107,406
---------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 107,406
---------
HEALTH CARE EQUIPMENT & SERVICES - 10.5%
HEALTH CARE DISTRIBUTORS - 1.7%
2,450 Teva Pharmaceutical Industries, Ltd. $ 73,157
---------
HEALTH CARE EQUIPMENT - 2.2%
1,205 Zimmer Holdings, Inc.* $ 96,545
---------
HEALTH CARE SERVICES - 4.4%
2,660 Caremark Rx, Inc.* $ 104,884
935 Quest Diagnostics, Inc. 89,339
---------
$ 194,223
---------
HEALTH CARE SUPPLIES - 2.2%
1,225 Alcon, Inc. $ 98,735
---------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 462,660
---------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.8%
BIOTECHNOLOGY - 4.8%
1,395 Amgen, Inc.* $ 89,489
2,255 Genentech, Inc.* 122,762
---------
$ 212,251
---------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 212,251
---------
BANKS - 5.6%
DIVERSIFIED BANKS - 5.6%
4,720 Popular, Inc. $ 136,078
3,495 U.S. Bancorp 109,463
---------
$ 245,541
---------
TOTAL BANKS $ 245,541
---------
DIVERSIFIED FINANCIALS - 6.3%
CONSUMER FINANCE - 4.7%
1,585 American Express Co. $ 89,346
2,205 SLM Corp. 117,725
---------
$ 207,071
---------
DIVERSIFIED FINANCIAL SERVICES - 1.6%
1,421 Citigroup, Inc. $ 68,464
---------
TOTAL DIVERSIFIED FINANCIALS $ 275,535
---------
The accompanying notes are an integral part of these financial statements. 5
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
INSURANCE - 1.9%
LIFE & HEALTH INSURANCE - 1.9%
2,045 Aflac, Inc. $ 81,473
-----------
TOTAL INSURANCE $ 81,473
-----------
SOFTWARE & SERVICES - 7.1%
APPLICATION SOFTWARE - 2.6%
4,280 Microsoft Corp. $ 114,319
-----------
DATA PROCESSING & OUTSOURCED SERVICES - 4.5%
1,835 Affiliated Computer Services, Inc.* $ 110,449
2,045 First Data Corp. 86,994
-----------
$ 197,443
-----------
TOTAL SOFTWARE & SERVICES $ 311,762
-----------
TECHNOLOGY HARDWARE & EQUIPMENT - 10.3%
COMMUNICATIONS EQUIPMENT - 3.1%
3,245 Qualcomm, Inc. $ 137,588
-----------
COMPUTER HARDWARE - 4.7%
3,095 Dell, Inc.* $ 130,423
775 IBM Corp. 76,400
-----------
$ 206,823
-----------
TECHNOLOGY DISTRIBUTORS - 2.5%
1,755 Fisher Scientific International,Inc.* $ 109,477
-----------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 453,888
-----------
SEMICONDUCTORS - 4.2%
2,967 Marvell Technology Group, Ltd.* $ 105,239
3,275 Texas Instruments, Inc. 80,631
-----------
$ 185,870
-----------
TOTAL SEMICONDUCTORS $ 185,870
-----------
TOTAL COMMON STOCKS
(Cost $3,805,081) $ 4,152,497
-----------
TOTAL INVESTMENTS
IN SECURITIES - 94.4%
(Cost $3,805,081) $ 4,152,497
-----------
OTHER ASSETS AND
LIABILITIES - 5.6% $ 244,178
-----------
TOTAL NET ASSETS - 100.0% $ 4,396,675
===========
* Non-income producing security.
6 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
- --------------------------------------------------------------------------------
3/15/04
TO
CLASS II 12/31/04
Net asset value, beginning of period $ 10.00
-------
Increase from investment operations:
Net investment income $ 0.03
Net realized and unrealized gain on investments and foreign currency transactions 1.06
-------
Net increase from investment operations $ 1.09
-------
Net increase in net asset value $ 1.09
-------
Net asset value, end of period $ 11.09
=======
Total return* 10.90%
Ratio of net expenses to average net assets+ 0.95%**
Ratio of net investment income to average net assets+ 0.79%**
Portfolio turnover rate 21%
Net assets, end of period (in thousands) $ 4,397
Ratios with no waiver of management fees and assumption of expenses by PIM
and no reduction for fees paid indirectly:
Net expenses 6.22%**
Net investment loss (4.48)%**
Ratios with waiver of management fees and assumption of expenses by PIM and
reduction for fees paid indirectly
Net expenses 0.95%**
Net investment income 0.79%**
* 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. Total return
rate is not annualized.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 7
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $3,805,081) $ 4,152,497
Cash 431,488
Futures collateral
Receivables--
Fund shares sold 78,147
Dividends, interest and foreign taxes withheld 3,766
Due from Pioneer Investment Management, Inc. 5,936
Other 486
-----------
Total assets $ 4,672,320
-----------
LIABILITIES:
Payables--
Investment securities purchased $ 235,345
Fund shares repurchased 971
Due to affiliates 2,529
Accrued expenses 36,800
-----------
Total liabilities $ 275,645
-----------
NET ASSETS:
Paid-in capital $ 4,087,874
Undistributed net investment income (loss) 10,654
Accumulated undistributed net realized gain (loss) (49,269)
Net unrealized gain (loss) on:
Investments 347,416
-----------
Total net assets $ 4,396,675
-----------
NET ASSET VALUE PER SHARE:
CLASS II:
(No par value, unlimited number of shares authorized)
Net assets $ 4,396,675
Shares outstanding 396,294
-----------
Net asset value per share $ 11.09
-----------
8 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 PERIOD
FROM 3/15/04
(COMMENCEMENT OF
OPERATIONS) TO
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $82) $ 21,407
Interest 1,652
---------
Total investment income $ 23,059
---------
EXPENSES:
Management fees $ 9,922
Transfer agent fees 1,261
Distribution fees 3,308
Administrative fees 13,875
Custodian fees 18,027
Professional fees 25,896
Printing 9,641
Fees and expenses of nonaffiliated trustees 99
Miscellaneous 238
---------
Total expenses $ 82,267
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (69,698)
Less fees paid indirectly
---------
Net expenses $ 12,569
---------
Net investment income (loss) $ 10,490
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments $ (49,269)
---------
$ (49,269)
---------
Change in net unrealized gain or loss from:
Investments $ 347,416
---------
$ 347,416
---------
Net gain (loss) on investments contracts $ 298,147
=========
Net increase (decrease) in net assets resulting
from operations $ 308,637
=========
The accompanying notes are an integral part of these financial statements. 9
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGESIN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FROM 3/15/04
(COMMENCEMENT OF
OPERATIONS) TO
12/31/04
FROM OPERATIONS:
Net investment income $ 10,490
Net realized gain (loss) on investments (49,269)
Change in net unrealized gain or loss on
investments, futures contracts and
foreign currency transactions 347,416
-----------
Net increase (decrease) in net assets
resulting from operations $ 308,637
-----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 4,148,102
Cost of shares repurchased (60,064)
-----------
Net increase in net assets resulting from
Fund share transactions $ 4,088,038
-----------
Net increase in net assets $ 4,396,675
NET ASSETS:
End of period $ 4,396,675
===========
Undistributed net investment income (loss),
end of period $ 10,654
===========
10 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 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Oak Ridge Large Cap Growth VCT Portfolio (the Portfolio) a Portfolio
of Pioneer Variable Contracts Trust (the Trust) which is a Delaware statutory
trust registered under the Investment Company Act of 1940 as an open-end
management investment company. The Trust consists of twenty two separate
diversified portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak
Ridge Large Cap Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
The Oak Ridge Large Cap Growth VCT Portfolio commenced operations on March 15,
2004.
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Oak Ridge Large Cap Growth Portfolio is capital
appreciation.
The financial statements and financial highlights of all other portfolios are
presented in separate books.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. The Portfolio also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
11
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (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 on capital gains at
the applicable country rates.
B. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
The portfolio elected to defer $27,697 in capital losses recognized between
November 1, 2004 and December 31, 2004 to its fiscal year ending December
31, 2005.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Oak Ridge Large Cap Growth VCT Portfolio had a
capital loss carryforward of $29,924, which will expire in 2012 if not
utilized.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED PAID-IN
PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL
- ------------------------------------------------ -------------- ----------- -------
Pioneer Oak Ridge Large Cap Growth VCT Portfolio $ (164) $ (0) $ (164)
====== ==== ======
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, on a tax basis. There were no
distributions paid during the fiscal year ended December 31, 2004.
2004
---------
DISTRIBUTABLE EARNINGS
(ACCUMULATED LOSSES):
Undistributed ordinary income $ 10,654
Undistributed long-term gain/
(capital loss carryforward) (16,924)
Post-October loss deferred (27,697)
Unrealized appreciation (depreciation) 342,768
---------
Total $ 308,801
=========
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the period ended
December 31, 2004. Distribution fees for Class II shares are calculated
based on the average daily net asset values attributable to Class II shares
of the Portfolio.
12
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
D. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
E. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to
PIM related to management fees, administrative fees and certain other services,
and is included in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $135 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$852 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ------------ ------------ --------------
Oak Ridge Large Cap Growth Portfolio $ 3,809,729 $ 357,009 $ (14,241) $ 342,768
=========== ========= ========== =========
13
PIONEER OAK RIDGE LARGE CAP GROWTH VCT
PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the period ended
December 31, 2004, were $4,202,207 and $347,858, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
OAK RIDGE LARGE CAP GROWTH PORTFOLIO '04 SHARES '04 AMOUNT
- ------------------------------------ ---------- -----------
CLASS II:
Shares sold 402,048 $ 4,148,102
Reinvestment of distributions -- --
Shares repurchased (5,754) (60,064)
-------- -----------
Net increase 396,294 $ 4,088,038
======== ===========
14
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 CLASS II
SHAREOWNERS OF PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Oak Ridge Large Cap Growth VCT
Portfolio, one of the portfolios constituting the Pioneer Variable Contracts
Trust (the "Trust"), as of December 31, 2004, and the related statements of
operations and changes in net assets, and the finan-cial highlights, for the
period from March 15, 2004 (commencement of operations) to December 31, 2004.
These finan-cial 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 audit.
We conducted our audit 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. An audit
includes 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, 2004, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. We
believe that our audit provides 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 of the Pioneer Variable
Contracts Trust at December 31, 2004, the results of its operations, changes in
its net assets, and the financial highlights, for the period from March 15, 2004
(commencement of operations) to December 31, 2004 in conformity with U.S.
generally accepted accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
15
PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment The Trust's Board of Trustees provides broad supervision over the
Management, Inc. affairs of the Trust. The officers of the Trust are responsible for
the Trust's operations. The Trust's Trustees and officers are listed
below, together with their principal occupations during the past five
CUSTODIAN years. Trustees who are interested persons of the Portfolio within the
Brown Brothers Harriman & Co. meaning of the Investment Company Act of 1940 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
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM serves as a trustee of each of the 73 U.S. registered investment
Ernst & Young LLP portfolios for which Pioneer Investment Management, Inc. ("Pioneer")
serves as investment adviser (the "Trust"). The address for all
Interested Trustees and all officers of the Portfolio is 60 State
PRINCIPAL UNDERWRITER Street, Boston, Massachusetts 02109.
Pioneer Funds Distributor, Inc.
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon
LEGAL COUNSEL request, without charge, by calling 1-800-225-6292.
Hale and Dorr LLP
Proxy Voting Policies and Procedures of the Trust are available
without charge, upon Agent request, by calling our toll free number
SHAREOWNER SERVICES AND TRANSFER (1-800-225-6292). This information is also available online at
Pioneer Investment Management Shareholder Services, Inc. pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
FIVE YEARS BY THIS TRUSTEE
John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves Director of Harbor
(78)* Board, Trustee successor trustee until retirement or removal; Global Company, Ltd.
and is elected or Deputy Chairman and a Director
President earlier retirement of Pioneer Global Asset
or removal 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; Director
of Pioneer Alternative
Investment Management Limited
(Dublin); President and a
Director of Pioneer Alternative
Investment Management (Bermuda)
Limited and affiliated
funds; President and Director of
Pioneer Funds Distributor,
Inc. ("PFD"); President of all
of the Pioneer Funds; and
Of Counsel (since 2000, partner
prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP
(counsel to PIM-USA and the
Pioneer Funds).
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- --------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive None
(52)** Executive successor trustee Officer, PIM-USA since May
Vice President is elected or 2003 (Director since January
earlier retirement 2001); President and Director
or removal of Pioneer since May 2003;
Chairman and Director of
Pioneer Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to
May 2003; Executive Vice
President, Chief Financial
Officer and Treasurer, John
Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to
November 2000; Senior Vice
President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November
1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- --------------------------------------------------------------------------------------------------------------------------
16
PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
FIVE YEARS BY THIS TRUSTEE
David R. Bock Trustee since Serves until a Senior Vice President and Chief Director of The
**(61) 2005. successor Financial Officer, I-trax, Inc. Enterprise Social
3050 K. Street NW, trustee is elected (publicly traded health care Investment Company
Washington, DC or earlier services company) (privately-held
20007 retirement or (2001-present); Managing affordable housing
removal. Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank)(1995 -2000; 2002 to Mortgage Trust (publicly
2004); Executive Vice President traded mortgage REIT)
and Chief Financial Officer,
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- --------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady
3509 Woodbine 2000. successor trustee (international financial Corporation (industrial
Street, is elected or advisory firm) identification and
Chevy Chase, MD earlier retirement specialty coated material
20815 or removal products manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc. (tobacco)
- --------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since Serves until Founding Director, The Winthrop None
Graham (57) 2000. successor trustee Group, Inc. (consulting firm);
1001 Sherbrooke is elected or Professor of Management, Faculty
Street earlier retirement of Management, McGill
West, Montreal, or removal University
Quebec,
Canada H3A 1G5
- --------------------------------------------------------------------------------------------------------------------------
Marguerite A. Trustee since Serves until President and Chief Executive Director of New America
Piret (56) 1995. successor trustee Officer, Newbury, Piret & High Income Fund,
One Boston Place, is elected or Company, Inc. (investment Inc. (closed-end
28th Floor, earlier retirement banking firm) investment company)
Boston, MA 02108 or removal
- --------------------------------------------------------------------------------------------------------------------------
Stephen K. West Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss
(76) 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc.
125 Broad Street, is elected or (closed-end investment
New York, NY 10004 earlier retirement company) and
or removal AMVESCAP PLC (investment
managers)
- --------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None
One North Adgers September, 2000. successor trustee Inc. (private investment firm)
Wharf, is elected or
Charleston, SC earlier retirement
29401 or removal
- --------------------------------------------------------------------------------------------------------------------------
17
PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
FIVE YEARS BY THIS OFFICER
Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior None
Bourassa (57) discretion Vice President - Legal of
of the Board Pioneer; and Secretary/Clerk of
most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the
Pioneer Funds since September
2003 (Assistant Secretary
from November 2000 to September
2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance
of PIM-USA from April 1998
through October 2000
- --------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and None
Kelley (40) Secretary discretion Senior Counsel of Pioneer since
of the Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- --------------------------------------------------------------------------------------------------------------------------
David C. Phelan Assistant Serves at the Partner, Wilmer Cutler Pickering None
(47) Secretary discretion Hale and Dorr LLP; Assistant
of the Board Secretary of all Pioneer Funds
since September 2003
- --------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion Accounting, Administration and
of the Board Custody Services of Pioneer; and
Treasurer of all of the
Pioneer Funds (Assistant
Treasurer from June 1999 to
November 2000)
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley Assistant Serves at the Deputy Treasurer of Pioneer None
(45) Treasurer discretion since 2004; Treasurer and Senior
of the Board Vice President, CDC IXIS Asset
Management Services from
2002 to 2003; Assistant
Treasurer and Vice President, MFS
Investment Management from 1997
to 2002; and Assistant
Treasurer of all of the Pioneer
Funds since November 2004
- --------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti Assistant Serves at the Assistant Vice President - Fund None
(39) Treasurer discretion Accounting, Administration
of the Board and Custody Services of Pioneer;
and Assistant Treasurer of
all of the Pioneer Funds since
November 2000
- --------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion Accounting, Administration
of the Board and Custody Services of Pioneer;
and Assistant Treasurer of
all of the Pioneer Funds since
May 2002
- --------------------------------------------------------------------------------------------------------------------------
18
PIONEER OAK RIDGE LARGE CAP GROWTH VCT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS HELD
FIVE YEARS BY THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - None
Sullivan (31) Treasurer discretion Fund Accounting,
of the Board Administration and Custody
Services since June 2003;
Assistant Vice President -
Mutual Fund Operations of
State Street Corporation from
June 2002 to June 2003
(formerly Deutsche Bank Asset
Management); Pioneer
Fund Accounting, Administration
and Custody Services
(Fund Accounting Manager from
August 1999 to May 2002,
Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- --------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Chief Compliance Serves at the Chief Compliance Officer of None
(37) Officer discretion Pioneer (Director of Compliance
of the Board and Senior Counsel from November
2000 to September 2004);
Vice President and Associate
General Counsel of UAM Fund
Services, Inc. (mutual fund
administration company) from
February 1998 to November 2000;
and Chief Compliance Officer of
all of the Pioneer Funds.
- --------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PIM, Pioneer and PIMSS is indirectly wholly
owned by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
19
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
21
[LOGO] PIONEER
Investments(R)
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Papp America-Pacific Rim VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 6
Notes to Financial Statements 10
Report of Independent Registered Public Accounting Firm 13
Trustees, Officers and Service Providers 14
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 95.4%
Depositary Receipts for International Stocks 4.6%
SECTOR DISTRIBUTION PORTFOLIO
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Information Technology 30.3%
Health Care 20.5%
Industrials 13.9%
Consumer Staples 13.3%
Financials 11.7%
Consumer Discretionary 7.9%
Energy 2.4%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Medtronic, Inc. 4.79%
2. Johnson & Johnson 4.76
3. General Electric Co. 4.70
4. Expeditors International of
Washington, Inc. 4.65
5. Estee Lauder Co. 4.58
The Portfolios is actively managed and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 3/15/04
Net Asset Value per Share $ 10.14 $ 10.00
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(3/15/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
PAPP AMERICA-PACIFIC RIM 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 TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Russell 1000 Growth Index Pioneer Papp America-Pacific Rim VCT Portfolio*
3/31/2004 10000 10000
12/4/2004 10548 10020
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 any Index.
- --------------------------------------------------------------------------------
Average Annual Total Returns
(As of December 31, 2004)
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Life-of-Fund 1.40%
(3/15/04)
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.pioneerfunds.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. Please refer to the variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 PAPP AMERICA-PACIFIC RIM 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 PAPP AMERICA-PACIFIC RIM FUND
VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS II
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 991.20
Expenses Paid During Period* $ 6.65
* Expenses are equal to the Portfolio's annualized expense ratio of 1.33% 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 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). 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 PAPP AMERICA-PACIFIC RIM FUND
VCT PORTFOLIO
Based on a hypothetical 5% per year return before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS II
--------------------------------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.36
Expenses Paid During Period* $ 6.75
* Expenses are equal to the Portfolio's annualized expense ratio of 1.33% for
Class II, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period).
3
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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 A LIMITED NUMBER OF SECURITIES AND, AS A RESULT, THE
PORTFOLIO'S PERFORMANCE MAY BE MORE VOLATILE THAN THE PERFORMANCE OF PORTFOLIO'S
HOLDING MORE SECURITIES. INVESTING IN THE SECURITIES OF U.S. ISSUERS WITH
SUBSTANTIAL FOREIGN ACTIVITIES INVOLVES MANY OF THE SAME RISKS AS INVESTING IN
THE SECURITIES OF FOREIGN ISSUERS.
CALL 800-688-9915 OR VISIT WWW.PIONEERFUNDS.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.
With stocks of small or lesser quality companies very much in favor in 2004,
large-company growth stocks sat out the market's rally for much of the year.
However, as Rosellen Papp, a member of the Portfolio's management team,
discusses in the following interview, these out-of-favor, large-capitalization
stocks have become quite attractive and may be poised for a turnaround in 2005.
Q: HOW DID THE PORTFOLIO PERFORM FOR THE FISCAL YEAR?
A: Despite the positive fundamentals underlying the sound, well managed,
large-company stocks in your Portfolio, this sector of the equity market
posted lackluster returns for the abbreviated fiscal year under review.
From the Portfolio's inception on March 15, 2004 through December 31, 2004,
the Portfolio's Class II shares returned 1.40% at net asset value. In
comparison, the Russell 1000 Growth Index climbed 7.58% for the same
period.
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.
Q: COULD YOU TALK MORE SPECIFICALLY ABOUT WHICH COMPANIES HURT PERFORMANCE FOR
THE FISCAL YEAR?
A: Certainly. With the exception of Internet companies, technology stocks as a
group were out of favor during the fiscal year. Investments in Intel did
poorly in 2004 after doubling in price in 2003. Microsoft's stock price
ended the year down a bit for the year. However, this growth company paid a
special one-time income dividend of $3 per share last fall, which, when
factored in, translated into a positive return for the stock for the year.
This, in turn, caused the Portfolio to pay an income dividend to our
shareowners - the first time since 1997.
With the world's population aging, we think the health care sector will be
a natural beneficiary. However, pharmaceutical stocks took a hit last fall
when Merck (not held by the Portfolio) pulled Vioxx from the market as a
result of safety concerns about this blockbuster painkiller. The Portfolio
holds Pfizer, which produces a drug called Celebrex in the same Cox-2
inhibitor family, but the FDA has not requested the removal of this
painkiller from the market. We will continue to monitor this holding.
With the "baby boomers" in their peak saving years, preparing for college
costs and retirement, we expect financial services stocks to perform well
over time. However, the trend to higher interest rates took a toll on this
group during the reporting period, depressing stock prices of financial
services companies. We think the Portfolio's financial holdings were
unjustly targeted, especially State Street Corp., which rallied strongly
during the fourth quarter of 2004.
Q: COULD YOU MENTION A COUPLE OF INVESTMENTS THAT HELPED PERFORMANCE?
A: Expeditors International of Washington, Inc. is an international airfreight
forwarding company that is profiting from increased trade volume between
Asia and the rest of the globe. This company experienced strong revenue
growth in 2004 due in large part to its China-to-Europe and China-to-United
States trade routes.
Chevron is one of the largest crude oil and liquified natural gas (LNG)
producers in the Asian Rim, and its stock appreciated nicely. We think
Chevron offers a low risk approach to investing in the energy sector
through its historic partnership with China National Offshore Oil Corp to
drill off Mainland China.
Q: WHAT IS YOUR OUTLOOK FOR 2005?
A: Small-capitalization companies completed their sixth straight year of
strong returns in 2004. Likewise, value stocks have enjoyed robust
performance for the past few years. After such strong performance, many
market observers believe that the overlooked, large-capitalization growth
companies may be poised for a rally. Large-company technology and
pharmaceutical stocks, which floundered in 2004, may offer some of the most
compelling investment opportunities in 2005. It'll be critical to be
invested in such underappreciated stocks when the market finally turns in
their favor, and a recovery begins in earnest.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 98.2%
ENERGY - 2.4%
INTEGRATED OIL & GAS - 2.4%
640 ChevronTexaco Corp. $ 33,606
-----------
TOTAL ENERGY $ 33,606
-----------
CAPITAL GOODS - 9.0%
ELECTRICAL COMPONENT & EQUIPMENT - 9.0%
900 Emerson Electric Co. $ 63,090
1,800 General Electric Co. 65,700
-----------
$ 128,790
-----------
TOTAL CAPITAL GOODS $ 128,790
-----------
TRANSPORTATION - 4.6%
AIR FREIGHT & COURIERS - 4.6%
1,165 Expeditors International of Washington, Inc. $ 65,100
-----------
TOTAL TRANSPORTATION $ 65,100
-----------
MEDIA - 4.5%
ADVERTISING - 4.5%
1,170 WPP Group Plc (A.D.R.) $ 63,941
-----------
TOTAL MEDIA $ 63,941
-----------
RETAILING - 3.3%
SPECIALTY STORES - 3.3%
1,450 Tiffany & Co. $ 46,357
-----------
TOTAL RETAILING $ 46,357
-----------
FOOD & DRUG RETAILING - 4.4%
FOOD RETAIL - 4.4%
900 Wm. Wrigley Jr. Co. $ 62,271
-----------
TOTAL FOOD & DRUG RETAILING $ 62,271
-----------
HOUSEHOLD & PERSONAL PRODUCTS - 8.7%
HOUSEHOLD PRODUCTS - 8.7%
1,170 Colgate-Palmolive Co. $ 59,857
1,400 Estee Lauder Co. 64,078
-----------
$ 123,935
-----------
TOTAL HOUSEHOLD & PERSONAL PRODUCTS $ 123,935
-----------
HEALTH CARE EQUIPMENT & SERVICES - 17.7%
HEALTH CARE DISTRIBUTORS - 4.7%
1,050 Johnson & Johnson $ 66,591
-----------
HEALTH CARE EQUIPMENT - 9.1%
1,350 Medtronic, Inc. $ 67,055
1,300 Stryker Corp. 62,725
-----------
$ 129,780
-----------
HEALTH CARE SERVICES - 3.9%
2,400 IMS Health, Inc. $ 55,704
-----------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 252,075
-----------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.5%
PHARMACEUTICALS - 2.5%
1,300 Pfizer, Inc. $ 34,957
-----------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 34,957
-----------
DIVERSIFIED FINANCIALS - 8.0%
ASSET MANAGEMENT & CUSTODY BANKS - 8.0%
1,200 State Street Corp. $ 58,944
880 T. Rowe Price Associates, Inc. 54,736
-----------
$ 113,680
-----------
TOTAL DIVERSIFIED FINANCIALS $ 113,680
-----------
INSURANCE - 3.5%
MULTI-LINE INSURANCE - 3.5%
770 American International Group, Inc. $ 50,566
-----------
TOTAL INSURANCE $ 50,566
-----------
SOFTWARE & SERVICES - 3.9%
APPLICATION SOFTWARE - 3.9%
2,100 Microsoft Corp. $ 56,091
-----------
TOTAL SOFTWARE & SERVICES $ 56,091
-----------
TECHNOLOGY HARDWARE & EQUIPMENT - 14.9%
COMMUNICATIONS EQUIPMENT - 2.6%
1,900 Cisco Systems, Inc. * $ 36,670
-----------
COMPUTER HARDWARE - 4.8%
442 Hewlett-Packard Co. $ 9,269
600 IBM Corp. 59,148
-----------
$ 68,417
-----------
COMPUTER STORAGE & PERIPHERALS - 2.0%
1,900 EMC Corp.* $ 28,253
-----------
ELECTRONIC MANUFACTURING SERVICES - 5.5%
2,200 Molex, Inc. $ 58,630
729 National Instruments Corp. 19,865
-----------
$ 78,495
-----------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 211,835
-----------
SEMICONDUCTORS - 10.9%
SEMICONDUCTOR EQUIPMENT - 1.2%
1,000 Applied Materials, Inc. * $ 17,100
-----------
SEMICONDUCTORS - 9.7%
2,500 Intel Corp. $ 58,475
1,100 Linear Technology Corp. 42,635
1,400 Microchip Technology 37,324
-----------
$ 138,434
-----------
TOTAL SEMICONDUCTORS $ 155,534
-----------
TOTAL INVESTMENTS
IN SECURITIES - 98.2%
(Cost $1,336,778) $ 1,398,738
-----------
OTHER ASSETS AND
LIABILITIES - 1.8% $ 25,718
-----------
TOTAL NET ASSETS - 100.0% $ 1,424,456
===========
(A.D.R.) American Depositary Receipt
* Non-Income producing security
The accompanying notes are an integral part of these financial statements. 5
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
3/15/04
TO
CLASS II 12/31/04
Net asset value, beginning of period $ 10.00
-------
Increase from investment operations:
Net investment income $ 0.05
Net realized and unrealized gain on investments 0.09
-------
Net increase from investment operations $ 0.14
-------
Net increase in net asset value $ 0.14
-------
Net asset value, end of period $ 10.14
-------
Total return* 1.40%
Ratio of net expenses to average net assets+ 0.95%**
Ratio of net investment income to average net assets+ 1.40%**
Portfolio turnover rate 7%
Net assets, end of period (in thousands) 1,424
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 15.01%**
Net investment loss (12.68)%**
Ratios with waives of management fees and assumptions of expenses
by PIM and reduction for fees paid indirectly
Net expenses 0.95%**
Net investment income 1.40%**
* 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. Portfolio
turnover rate is not annualized.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
6 The accompanying notes are an integral part of these financial statements.
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (Cost $1,336,778) $ 1,398,738
Cash 88,296
Receivables--
Dividends, interest and foreign taxes withheld 1,102
Due from Pioneer Investment Management, Inc. 6,431
-----------
Total assets $ 1,494,567
-----------
LIABILITIES:
Payables--
Investment securities purchased $ 24,330
Fund shares repurchased 573
Due to affiliates 1,967
Accrued expenses 43,241
-----------
Total liabilities $ 70,111
-----------
NET ASSETS:
Paid-in capital $ 1,363,484
Undistributed net investment income (loss) 7,000
Accumulated undistributed net realized gain (loss) (7,988)
Net unrealized gain (loss) on:
Investments 61,960
-----------
Total net assets $ 1,424,456
-----------
NET ASSET VALUE PER SHARE:
CLASS II:
(No par value, unlimited number of shares authorized)
Net assets $ 1,424,456
Shares outstanding 140,432
-----------
Net asset value per share $ 10.14
The accompanying notes are an integral part of these financial statements. 7
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FROM 3/15/04
(COMMENCEMENT
OF OPERATIONS)
TO 12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $29) $ 11,041
Interest 555
---------
Total investment income $ 11,596
---------
EXPENSES:
Management fees $ 3,700
Transfer agent fees 1,260
Distribution fees 1,233
Administrative fees 13,875
Custodian fees 10,533
Professional fees 33,930
Printing 9,715
Fees and expenses of nonaffiliated trustees 99
Miscellaneous 165
---------
Total expenses $ 74,510
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (69,824)
---------
Net expenses $ 4,686
---------
Net investment income (loss) $ 6,910
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investments $ (7,988)
---------
$ (7,988)
---------
Change in net unrealized gain or loss from:
Investments $ 61,960
---------
$ 61,960
---------
Net gain (loss) on investments $ 53,972
=========
Net increase (decrease) in net assets resulting
from operations $ 60,882
=========
8 The accompanying notes are an integral part of these financial statements.
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FROM 3/15/04
(COMMENCEMENT
OF OPERATIONS)
TO 12/31/04
FROM OPERATIONS:
Net investment income $ 6,910
Net realized gain (loss) on investments (7,988)
Change in net unrealized gain or loss on investments,
futures contracts and foreign currency transactions 61,960
-----------
Net increase (decrease) in net assets resulting from operations $ 60,882
-----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 1,395,044
Cost of shares repurchased (31,470)
-----------
Net increase in net assets resulting from
Fund share transactions $ 1,363,574
-----------
Net increase in net assets $ 1,424,456
NET ASSETS:
End of period $ 1,424,456
===========
Undistributed net investment income (loss),
end of period $ 7,000
===========
The accompanying notes are an integral part of these financial statements. 9
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Papp America-Pacific Rim VCT Portfolio (the Portfolio), a Portfolio
of Pioneer Variable Contracts Trust (the Trust), which is a Delaware statutory
trust registered under the Investment Company Act of 1940 as an open-end
management investment company. The Trust consists of twenty two separate
diversified portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio)(Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class
II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
The Papp America-Pacific Rim VCT Portfolio commenced operations on March 15,
2004.
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Papp America-Pacific Rim Portfolio is to seek
capital appreciation.
The financial statements and financial highlights of all other portfolios are
presented in separate books.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. The Portfolio also may 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 exchange. At
December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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.
10
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
Capital loss carryforwards are available to offset future realized capital
gains. At December 31, 2004, Papp America Pacific Rim VCT Portfolio had a
capital loss carryforward of $7,988, which will expire in 2012 if not
utilized.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED
INVESTMENT INCOME REALIZED GAIN
PORTFOLIO (LOSS) (LOSS) PAID-IN CAPITAL
- ----------------------------------------- ----------------- ------------- ---------------
Pioneer America-Pacific Rim VCT Portfolio $ 90 $ (0) $ (90)
==== ==== =====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 on a tax basis. There were no
distributions paid during the fiscal year ended December 31, 2004.
2004
- -------------------------------------- --------
DISTRIBUTABLE EARNINGS
(ACCUMULATED LOSSES):
Undistributed ordinary income $ 7,000
Undistributed long-term gain/
(capital loss carryforward) (7,998)
Unrealized appreciation (depreciation) 61,960
--------
Total $ 60,972
========
C. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the period ended
December 31, 2004. Distribution fees are calculated based on the average
daily net asset values attributable to Class I and Class II shares of the
Portfolio, respectively.
D. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or 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 UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to
PIM related to management fees, administrative fees and certain other services,
and is included in due to affiliates.
11
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $135 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$290 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---------------------------------- ----------- ------------ ------------ --------------
Papp America-Pacific Rim Portfolio $ 1,336,778 $ 80,723 $ (18,763) $ 61,960
=========== ======== ========= ========
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the period ended
December 31, 2004, were $1,389,018 and $44,253, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
PAPP AMERICA-PACIFIC RIM PORTFOLIO '04 SHARES '04 AMOUNT
- ---------------------------------- ---------- -----------
CLASS II:
Shares sold 143,712 $ 1,395,044
Reinvestment of distributions -- --
Shares repurchased (3,280) (31,470)
------- -----------
Net increase 140,432 $ 1,363,574
======= ===========
12
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES OF THE PIONEER VARIABLE CONTRACTS TRUST AND THE CLASS
II SHAREOWNERS OF PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Papp America-Pacific Rim VCT Portfolio,
one of the portfolios constituting the Pioneer Variable Contracts Trust (the
"Trust"), as of December 31, 2004, and the related statements of operations and
changes in net assets, and the financial highlights, for the period from March
15, 2004 (commencement of operations) to December 31, 2004. 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 audit.
We conducted our audit 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. An audit
includes 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, 2004, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. We
believe that our audit provides 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 Papp America-Pacific Rim VCT Portfolio of the Pioneer Variable Contracts
Trust at December 31, 2004, the results of its operations, changes in its net
assets, and the financial highlights, for the period from March 15, 2004
(commencement of operations) to December 31, 2004 in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
13
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
CUSTODIAN operations. The Trust's Trustees and officers are listed below, together
Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees
who are interested persons of the Portfolio within the meaning of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees.
Ernst & Young LLP 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
PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer
Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the
"Trusts"). The address for all Interested Trustees and all officers of
the Portfolio is 60 State Street, Boston, Massachusetts 02109.
LEGAL COUNSEL The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. Chairman of the Serves until Trustee and President Serves Director of Harbor
(78)* Board, Trustee successor trustee until retirement or removal; Global Company, Ltd.
and President is elected or Deputy Chairman and a Director
earlier retirement of Pioneer Global Asset
or removal 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;
Director of Pioneer Alternative
Investment Management Limited (Dublin)
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated
funds; President and Director of
Pioneer Funds Distributor, Inc.
("PFD"); President of all of the
Pioneer Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until President and Chief Executive None
Executive Vice successor trustee Officer, PIM-USA since May 2003
President is elected or (Director since January 2001);
earlier retirement President and Director of
or removal Pioneer since May 2003; Chairman
and Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive
Vice President of all of the Pioneer
Funds since June 2003; Executive Vice
President and Chief Operating Officer
of PIM-USA, November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior
Vice President and Chief Financial
Officer, John Hancock Advisers,
L.L.C., April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
14
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 is elected or (publicly traded health care Investment Company
earlier retirement services company) (privately-held
or removal. (2001-present); Managing Partner, affordable housing
Federal City Capital Advisors finance company);
(boutique merchant bank) (1995-2000; Director of New York
2002 to 2004); Executive Vice Mortgage Trust
President and Chief Financial Officer, (publicly traded
mortgage REIT) Pedestal Inc.
(internet-based mortgage trading
company) 2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until President, Bush International Director of Brady
3509 Woodbine Street, 2000. successor trustee (international financial Corporation (industrial
Chevy Chase, MD 20815 is elected or advisory firm) identification and
earlier retirement specialty coated
or removal material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since Serves until Founding Director, The Winthrop None
Graham (57) 2000. successor trustee Group, Inc. (consulting firm);
1001 Sherbrooke is elected or Professor of Management, Faculty
Street West, earlier retirement of Management, McGill University
Montreal, Quebec, or removal
Canada H3A 1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Trustee since Serves until President and Chief Executive Director of New
Piret (56) 1995. successor trustee Officer, Newbury, Piret & Company, America High Income
One Boston Place, is elected or Inc. (investment banking firm) Fund, Inc. (closed-end
28th Floor, earlier retirement investment company)
Boston, MA 02108 or removal
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. successor trustee Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 is elected or (closed-end investment
earlier retirement company) and AMVESCAP
or removal PLC (investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until President, John Winthrop & Co., None
One North Adgers September 2000. successor trustee Inc. (private investment firm)
Wharf, is elected or
Charleston, SC 29401 earlier retirement
or removal
- ------------------------------------------------------------------------------------------------------------------------------------
15
Pioneer Papp America-Pacific Rim VCT Portfolio
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa Secretary Serves at the Secretary of PIM-USA; Senior None
(57) discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and None
Kelley (40) Secretary discretion of the Senior Counsel of Pioneer since
Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and Senior
Board Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
16
PIONEER PAPP AMERICA-PACIFIC RIM VCT PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
Katharine Kim Assistant Serves at the Fund Administration Manager - None
Sullivan (31) Treasurer discretion of the Fund Accounting, Administration
Board and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Serves at the Chief Compliance Officer of None
Compliance discretion of the Pioneer (Director of Compliance
Officer Board and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
17
[LOGO] PIONEER
INVESTMENTS(R)
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER SMALL CAP VALUE VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 17
Trustees, Officers and Service Providers 18
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 89.9%
Temporary Cash Investment 4.1%
Depositary Receipts for International Stocks 3.4%
International Common Stocks 1.8%
Exchange Traded Fund 0.8%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 28.4%
Industrials 18.6%
Consumer Discretionary 10.2%
Health Care 9.0%
Information Technology 8.6%
Materials 8.0%
Energy 7.5%
Utilities 4.6%
Consumer Staples 4.2%
Telecommunication Services 0.9%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Insight Enterprises, Inc. 2.26%
2. Southwestern Energy Co. 2.05
3. PacifiCare Health Systems 1.83
4. Pediatrix Medical Group, Inc. 1.79
5. Wabtec Corp. 1.75
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 14.95 $ 12.47
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
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. Portfolio returns are based on net asset value and do
not reflect any applicable insurance fees or surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Pioneer Small Cap Value VCT Portfolio Russell 2000 Value Index
11/01 10000 10000
10572 10612
12/02 8980 9400
12132 13727
12/04 14545 16781
Index comparison begins 11/30/01. The Russell 2000 Value Index measures the
performance of U.S. small-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 the
Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 13.62%
(11/8/01)
1 Year 19.89
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charges.
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.pioneerfunds.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 SMALL CAP 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 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 SMALL CAP VALUE VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,112.59 $ 1,111.53
Expenses Paid During Period* $ 6.60 $ 7.90
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.49% 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). 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 SMALL CAP VALUE VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.39
Expenses Paid During Period* $ 6.30 $ 7.55
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.49% 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 SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT
THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN
LARGER, MORE ESTABLISHED COMPANIES.
CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE
PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION.
Successful stock selection among energy, transportation and health care
companies helped Pioneer Small Cap Value VCT Portfolio perform well over the
past 12 months. In the following discussion, portfolio manager David Adams and
assistant portfolio manager Jack McPherson review the economic background and
detail some of the steps they took to bolster Portfolio performance.
Q: HOW DID THE PORTFOLIO PERFORM OVER THIS PERIOD?
A. For the twelve-month period ended December 31, 2004, Class II shares of
Pioneer Small Cap Value VCT Portfolio returned 19.89% at net asset value.
In comparison, the Russell 2000 Value Index, the Fund's benchmark, returned
22.25%.
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.
Q: WHAT WAS THE INVESTMENT BACKGROUND FOR SMALL-CAP VALUE STOCKS OVER THIS
PERIOD?
A. Value issues - those stocks that are selling at a significant discount to
our estimation of their intrinsic value - were leaders within this
small-cap universe for the full 12-month period despite periods of
outperformance by growth stocks. Strong job creation in the spring raised
fears of rising interest rates, driving down financial and other
traditional value sectors seen as vulnerable to rising rates. Value issues
rebounded sharply over the summer as investors positioned their portfolios
more defensively during the runup to the presidential election. With the
election decided, growth sectors and a smattering of lower quality issues
moved higher in November. But the gains recorded between June and August
were enough to position value stocks significantly ahead for the period.
Q: WHICH AREAS OF THE PORTFOLIO HAD THE GREATEST IMPACT ON RESULTS?
A. As energy prices rose, we maintained a heavily overweighted position among
energy issues compared to the benchmark. That, plus sharp gains by a number
of our selections, made the energy sector the biggest contributor to strong
returns. Southwestern Energy, an Arkansas-based exploration and production
company, capitalized on high prices by expanding production at existing
operating fields and advancing development of more recently discovered
reserves. Massey Energy, an Appalachian coal company, saw prices for the
metallurgical coal used in steel manufacturing increase sharply for the
first time in decades, driven by unprecedented demand from China and
elsewhere.
Illustrating how our patient, value-focused style is designed to work, we
were rewarded this year for our purchase of Swift Energy, a longer-term
holding. Swift has stabilized its troubled New Zealand operations and
increased oil and gas production from its key Lake Washington reserves. We
took some profits in Swift, as continued good news pushed its price higher.
Increasing global oil consumption aided results at Stelmar Shipping, which
saw strong demand for its fleet of modern, doublehulled tankers. Stelmar
has also been approached by potential acquirers. Genesee and Wyoming, which
acquires short-line trackage from larger railroads, chiefly in the U.S. and
Australia, benefited from expanded shipping volumes of coal and grains.
Forward Air, a broker of shipping services for corporations, increased its
market share as economic expansion heightened demand for cost-efficient
transportation management.
Our large exposure to health care services was another positive. Pacificare
benefited from federal incentives aimed at steering Medicare patients to
managed care plans. Pacificare, the market leader, is also recovering from
operational problems, another reason its stock has moved higher. The
migration of patients to managed care programs also aided Amerigroup, a
large provider of health care programs for beneficiaries of Medicare and
other public assistance programs. Shares of Chemed rose when it acquired
full ownership of Vitas, a hospice company. Vitas is expected to gain from
regulations favoring home care for terminally ill Medicare patients,
instead of costly hospital stays. Our underweight position in real estate
investment trusts and other interest rate-sensitive financial sectors, also
helped returns.
Q: WHAT AREAS HELD BACK PERFORMANCE?
A. Technology stocks suffered from spotty business conditions. Orders shrank
for Remec's telecommunication equipment, but we have retained our
commitment because the potential sale of Remec's defense business may
enhance the value of the telecom division. Advanced Energy and Applied
Films, manufacturers of semiconductor capital equipment, were hurt by
uncertain demand for new manufacturers' facilities. Insight Enterprises, a
direct distributor of information technology products and services, was an
exception. Improving fundamentals and a modest upturn in personal and
corporate IT spending boosted Insight's stock. Graftech International
slumped following disappointing third quarter earnings. Graftech may not
have been aggressive enough in negotiating 2005 contracts for its graphite
electrodes, used in steel making. We added to holdings when shares fell,
because we think investor reaction has been overblown. Rewards Network,
which markets restaurant and other discount programs to consumers,
continued to disappoint as skepticism grew over its hotel initiatives and
its ability to sign up more restaurants.
Q: WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE MARKETS?
A. Overall, we think the economic outlook is favorable, with slow, steady
growth and rising interest rates a likely scenario. But the stock market
may already have taken that outlook into account; the markets enjoyed a
strong run over the summer and moved higher once again in November. The
rise in small-cap value stocks has been exceptional, implying that returns
could be more modest over the next several months. This increases the
challenge for investors like us to find good long-term values in the
marketplace. However, our value methodology helps us to find reasonably
priced stocks throughout the market cycle.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 90.2%
ENERGY - 6.9%
OIL & GAS DRILLING - 2.3%
1,525 Atwood Oceanics, Inc.* $ 79,453
26,736 Key Energy Services, Inc.* 315,485
14,500 Todco* $ 267,090
------------
$ 662,028
------------
OIL & GAS EQUIPMENT & SERVICES - 2.2%
14,200 Gulfmarkt Offshore, Inc.* $ 316,234
10,240 Maverick Tube Corp.* 310,272
------------
$ 626,506
------------
OIL & GAS EXPLORATION & PRODUCTION - 2.4%
5,900 Penn Virginia Corp. $ 239,363
5,395 Swift Energy Co.* 156,131
7,769 Unit Corp.* 296,853
------------
$ 692,347
------------
TOTAL ENERGY $ 1,980,881
------------
MATERIALS - 7.2%
DIVERSIFIED METALS & MINING - 1.2%
9,914 Massey Energy Co. $ 346,494
------------
GOLD - 1.0%
7,350 Glamis Gold, Ltd.* $ 126,126
24,300 IAMGOLD Corp. 160,623
------------
$ 286,749
------------
METAL & GLASS CONTAINERS - 0.8%
5,137 Jarden Corp.* $ 223,151
------------
PAPER PRODUCTS - 1.8%
16,193 Domtar, Inc. $ 195,450
11,400 Flowserve Corp.* 313,956
------------
$ 509,406
------------
PRECIOUS METALS & MINERALS - 0.2%
28,125 Cambior, Inc.* $ 75,094
------------
SPECIALTY CHEMICALS - 0.4%
3,875 Great Lakes Chemical Corp. $ 110,399
------------
STEEL - 1.9%
3,575 Carpenter Technology $ 208,995
34,893 Graftech International, Ltd.* 330,088
------------
$ 539,083
------------
TOTAL MATERIALS $ 2,090,376
------------
CAPITAL GOODS - 8.1%
AEROSPACE & DEFENSE - 0.2%
4,875 Intrado, Inc.* $ 58,988
------------
CONSTRUCTION, FARM MACHINERY &
HEAVY TRUCKS - 1.6%
21,575 Wabtec Corp. $ 459,979
------------
CONSTRUCTION & ENGINEERING - 1.1%
5,070 Granite Construction, Inc. $ 134,862
7,825 Insituform Technologies, Inc.* 177,393
------------
$ 312,255
------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.7%
23,479 Power-One, Inc.* $ 209,433
------------
INDUSTRIAL CONGLOMERATES - 1.5%
20,760 Cornell Co., Inc.* $ 315,137
7,796 NN, Inc. 102,985
------------
$ 418,122
------------
INDUSTRIAL MACHINERY - 1.9%
5,687 Joy Global, Inc. $ 246,986
3,125 Kaydon Corp. 103,188
1,894 Nacco Industries, Inc. 199,628
------------
$ 549,802
------------
TRADING COMPANIES & DISTRIBUTORS - 1.1%
11,830 Applied Industrial Technologies, Inc. $ 324,128
------------
TOTAL CAPITAL GOODS $ 2,332,707
------------
COMMERCIAL SERVICES & SUPPLIES - 5.6%
DATA PROCESSING SERVICES - 0.4%
10,000 Gartner Group, Inc.* $ 124,600
------------
DIVERSIFIED COMMERCIAL SERVICES - 4.1%
5,878 Chemed Corp. $ 394,473
18,400 Central Parking Corp. 278,760
14,335 Profit Recovery Group International* 72,105
27,255 Rent-Way, Inc.* (a) 218,313
8,100 Watson Wyatt & Co. Holdings 218,295
------------
$ 1,181,946
------------
EMPLOYMENT SERVICES - 1.1%
36,400 On Assignment, Inc.* $ 188,916
5,670 Korn/Ferry International* 117,653
------------
$ 306,569
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 1,613,115
------------
TRANSPORTATION - 3.3%
MARINE - 0.8%
2,400 Arlington Tankers, Ltd.* $ 55,080
3,677 Stelmar Shipping, Ltd. 175,430
------------
$ 230,510
------------
RAILROADS - 1.3%
13,043 Genesee & Wyoming, Inc.* $ 365,334
The accompanying notes are an integral part of these financial statements. 5
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
TRUCKING - 1.2%
16,775 Central Freight Lines, Inc.* $ 105,683
3,968 Dollar Thrifty Automotive Group* 119,834
2,800 Forward Air Corp.* 125,160
------------
$ 350,677
------------
TOTAL TRANSPORTATION $ 946,521
------------
AUTOMOBILES & COMPONENTS - 0.6%
AUTO PARTS & EQUIPMENT - 0.6%
10,395 Federal Signal Corp. $ 183,576
------------
TOTAL AUTOMOBILES & COMPONENTS $ 183,576
------------
CONSUMER DURABLES & APPAREL - 1.1%
APPAREL, ACCESSORIES & LUXURY GOODS - 1.1%
18,968 Charming Shoppes, Inc.* $ 177,730
4,250 Kellwood Co. 146,625
------------
$ 324,355
------------
TOTAL CONSUMER DURABLES & APPAREL $ 324,355
------------
HOTELS, RESTAURANTS & LEISURE - 0.7%
HOTELS, RESORTS & CRUISE LINES - 0.1%
11,500 Jameson Inns, Inc.* $ 22,655
------------
RESTAURANTS - 0.6%
9,619 O'Charley's, Inc.* $ 188,051
------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 210,706
------------
MEDIA - 0.5%
ADVERTISING - 0.2%
6,566 EMAK Worldwide, Inc.* $ 65,660
------------
PUBLISHING - 0.3%
7,340 Advanced Marketing Services, Inc. $ 73,840
------------
TOTAL MEDIA $ 139,500
------------
RETAILING - 6.4%
APPAREL RETAIL - 0.8%
5,295 Stage Stores, Inc.* $ 219,848
------------
CATALOG RETAIL - 2.1%
28,975 Insight Enterprises, Inc.* $ 594,567
------------
COMPUTER & ELECTRONICS RETAIL - 0.4%
16,750 Tweeter Home Entertainment Group, Inc.* $ 114,738
------------
SPECIALTY STORES - 3.1%
7,075 Claire's Stores, Inc. $ 150,344
5,052 Guitar Center, Inc.* 266,190
23,407 Hancock Fabrics, Inc. 242,731
6,348 School Specialty, Inc.* 244,779
------------
$ 904,044
------------
TOTAL RETAILING $ 1,833,197
------------
FOOD & DRUG RETAILING - 1.9%
FOOD DISTRIBUTORS - 0.6%
12,050 B & G Foods, Inc. $ 180,509
------------
FOOD RETAIL - 1.3%
8,808 Fresh Del Monte Produce, Inc. $ 260,805
11,625 Wild Oats Markets, Inc.* 102,416
------------
$ 363,221
------------
TOTAL FOOD & DRUG RETAILING $ 543,730
------------
FOOD, BEVERAGE & TOBACCO - 0.2%
PACKAGED FOODS & MEATS - 0.2%
1,925 American Italian Pasta Co. (a) $ 44,756
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 44,756
------------
HOUSEHOLD & PERSONAL PRODUCTS - 1.7%
HOUSEHOLD PRODUCTS - 1.3%
15,279 Nu Skin Enterprises, Inc. $ 387,781
------------
PERSONAL PRODUCTS - 0.4%
4,825 NBTY, Inc.* $ 115,848
------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 503,629
------------
HEALTH CARE EQUIPMENT & SERVICES - 7.6%
HEALTH CARE DISTRIBUTORS - 2.3%
4,585 Amerigroup Corp. $ 346,901
12,125 Cross Country Healthcare, Inc.* (a) 219,220
3,475 Chattem, Inc.* 115,023
------------
$ 681,144
------------
HEALTH CARE EQUIPMENT - 0.5%
3,000 Analogic Corp. $ 134,370
------------
HEALTH CARE FACILITIES - 0.9%
3,350 Sunrise Senior Living, Inc.* (a) $ 155,306
2,783 Triad Hospitals, Inc.* 103,555
------------
$ 258,861
------------
HEALTH CARE SERVICES - 2.2%
7,327 Pediatrix Medical Group, Inc.* $ 469,294
8,275 Providence Service Corp.* 173,527
------------
$ 642,821
------------
MANAGED HEALTH CARE - 1.7%
8,530 PacifiCare Health Systems* $ 482,116
------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 2,199,312
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 0.5%
BIOTECHNOLOGY - 0.5%
17,655 Kendle International, Inc.* $ 155,364
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 155,364
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
BANKS - 8.7%
DIVERSIFIED BANKS - 3.9%
4,131 Banner Corp. $ 128,846
15,230 BankAtlantic Bancorp, Inc. 303,077
1,100 Community Bancorp* 33,660
11,050 Provident Financial Services, Inc. 214,039
20,325 Texas Capital Bancshares, Inc.* 439,427
------------
$ 1,119,049
------------
REGIONAL BANKS - 4.0%
7,000 Alliance Bankshares Corp.* $ 108,850
27,425 Cardinal Financial Corp.* 305,789
3,875 City National Corp. 273,769
1,775 Irwin Financial Corp. 50,392
23,150 Sterling Bancshares, Inc. 330,351
1,705 Whitney Holding Corp. 76,708
------------
$ 1,145,859
------------
THRIFTS & MORTGAGE FINANCE - 0.8%
3,475 BankUnited Financial Corp.* $ 111,026
9,475 First Niagara Financial Group, Inc. 132,176
------------
$ 243,202
------------
TOTAL BANKS $ 2,508,110
------------
DIVERSIFIED FINANCIALS - 6.7%
CONSUMER FINANCE - 0.9%
25,856 Medallion Financial Corp. $ 250,803
------------
CONSUMER FINANCE - 1.4%
7,025 Advanta Corp. $ 158,906
7,478 Advanta Corp. (Class B) 181,491
11,000 Rewards Network, Inc.* (a) 77,000
------------
$ 417,397
------------
INVESTMENT BANKING & BROKERAGE - 2.9%
7,000 A.G. Edwards, Inc. $ 302,470
23,689 Apollo Investment Corp. 357,704
4,050 Piper Jaffray Co.* 194,198
------------
$ 854,372
------------
SPECIALIZED FINANCE - 1.5%
10,225 Assured Guaranty, Ltd. $ 201,126
5,843 Financial Federal Corp.* 229,046
------------
$ 430,172
------------
TOTAL DIVERSIFIED FINANCIALS $ 1,952,744
------------
INSURANCE - 3.7%
INSURANCE BROKERS - 0.2%
1,800 Platinum Underwriter Holdings, Ltd. $ 55,980
------------
PROPERTY & CASUALTY INSURANCE - 2.9%
3,825 American Safety Insurance Group, Ltd.* $ 62,501
6,826 IPC Holdings, Ltd. 296,999
27,525 Quanta Capital Holdings (144A)* 253,781
2,925 RLI Corp. 121,592
2,525 Selective Insurance Group, Inc. (a) 111,706
------------
$ 846,579
------------
REINSURANCE - 0.6%
6,950 Odyssey Re Holdings, Corp. (a) $ 175,210
------------
TOTAL INSURANCE $ 1,077,769
------------
REAL ESTATE - 5.7%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.8%
3,875 Corrections Corp. of America* $ 156,744
2,626 Levitt Corp. 80,277
------------
$ 237,021
------------
REAL ESTATE INVESTMENT TRUSTS - 4.9%
9,913 BioMed Property Trust, Inc. $ 220,168
10,650 Capital Trust, Inc. 327,062
1,928 Entertainment Properties Trust 85,892
18,425 Feldman Mall Properties, Inc.* (a) 239,709
15,915 Provident Senior Living* 254,640
6,350 Saxon Capital, Inc. 152,337
4,271 Universal Health Realty, Inc. 137,227
------------
$ 1,417,035
------------
TOTAL REAL ESTATE $ 1,654,056
------------
SOFTWARE & SERVICES - 4.2%
APPLICATION SOFTWARE - 0.8%
13,779 SPSS, Inc.* $ 215,504
------------
DATA PROCESSING & OUTSOURCED SERVICES - 0.7%
16,142 Pegusus Systems, Inc.* $ 203,389
------------
INTERNET SOFTWARE & SERVICES - 1.2%
7,625 Internet Security Systems, Inc.* $ 177,281
12,275 PEC Solutions, Inc.* 173,937
------------
$ 351,218
------------
SYSTEMS SOFTWARE - 1.5%
24,550 Borland Software Corp.* $ 286,744
7,025 Sybase, Inc.* 140,149
------------
$ 426,893
------------
TOTAL SOFTWARE & SERVICES $ 1,197,004
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 3.1%
COMMUNICATIONS EQUIPMENT - 1.9%
4,575 Black Box Corp. $ 219,692
47,375 Remec, Inc.* 341,574
------------
$ 561,266
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
COMPUTER STORAGE & PERIPHERALS - 0.3%
4,425 Electronics For Imaging, Inc.* $ 77,039
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4%
11,425 Planar Systems, Inc.* $ 128,303
------------
TECHNOLOGY DISTRIBUTORS - 0.5%
3,075 Tech Data Corp.* $ 139,605
------------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 906,213
------------
SEMICONDUCTORS - 0.6%
SEMICONDUCTOR EQUIPMENT - 0.3%
3,593 Advanced Energy Industries, Inc.* $ 32,804
2,837 Brooks Automations, Inc.* 48,853
------------
$ 81,657
------------
SEMICONDUCTORS - 0.3%
9,370 HI/FN, Inc.* $ 86,391
------------
TOTAL SEMICONDUCTORS $ 168,048
------------
TELECOMMUNICATION SERVICES - 0.8%
WIRELESS TELECOM SERVICES - 0.8%
26,003 Boston Communications Group, Inc.* $ 240,268
------------
TOTAL TELECOMMUNICATION SERVICES $ 240,268
------------
UTILITIES - 4.2%
GAS UTILITIES - 3.5%
5,600 AGL Resources, Inc. $ 186,144
6,505 People's Energy Corp. 285,895
10,649 Southwestern Energy Co.* 539,787
------------
$ 1,011,826
------------
MULTI-UTILITIES & UNREGULATED POWER - 0.5%
2,350 Energen Corp. $ 138,533
------------
UTILITIES - 0.2%
1,625 UGI Corp. $ 66,479
------------
TOTAL UTILITIES $ 1,216,838
------------
TOTAL COMMON STOCKS
(Cost $20,981,073) $ 26,022,775
------------
EXCHANGE TRADED FUND - 0.8%
1,150 iShares Russell 2000 Value ETF (a) $ 221,904
------------
TOTAL EXCHANGE TRADED FUND
(Cost $162,579) $ 221,904
------------
TEMPORARY CASH INVESTMENT - 3.9%
SECURITY LENDING COLLATERAL - 3.9%
1,134,938 Securities Lending Investment Fund,
2.18% $ 1,134,938
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $1,134,938) $ 1,134,938
------------
TOTAL INVESTMENTS IN
SECURITIES - 94.9%
(Cost $22,278,590) $ 27,379,617
------------
OTHER ASSETS AND
LIABILITIES - 5.1% $ 1,458,402
------------
TOTAL NET ASSETS - 100.0% $ 28,838,019
============
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
1,700 American Italian Pasta Co. $ 39,525
3,735 Cross Country Healthcare, Inc.* 67,529
16,500 Feldman Mall Properties, Inc.* 214,500
1,045 iShares Russell 2000 Value (ETF) 201,643
5,320 Odyssey Re Holdings, Corp. 134,117
24,685 Rent-Way, Inc.* 197,727
4,964 Rewards Network, Inc.* 34,748
1,425 Selective Insurance Group, Inc. 63,042
3,110 Sunrise Senior Living, Inc.* 144,180
-----------
TOTAL $ 1,097,011
===========
8 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO
CLASS II (A) 12/31/04 12/31/03
Net asset value, beginning of period $ 12.47 $ 9.11
-------- -------
Increase (decrease) from investment operations:
Net investment loss $ (0.03) $ (0.00)
Net realized and unrealized gain on investments and foreign currency transactions 2.51 3.37
-------- -------
Net increase from investment operations $ 2.48 $ 3.36
Distributions to shareowners:
Net investment income -- --
Net realized gain -- --
-------- -------
Net increase in net asset value $ 2.48 $ 3.36
------- -------
Net asset value, end of period $ 14.95 $ 12.47
======== =======
Total return* 19.89% 36.88%
Ratio of net expenses to average net assets+ 1.54% 1.58%**
Ratio of net investment loss to average net assets+ (0.41)% (0.15)%**
Portfolio turnover rate 36% 74%
Net assets, end of period (in thousands) $ 10,845 $ 2,760
Ratios with no waiver of management fees and assumption of expenses by PIM and
no reduction for fees paid indirectly:
Net expenses 1.59% 2.65%**
Net investment loss (0.46)% (1.22)%**
Ratios with waiver of management fees and assumption of expenses by PIM and
no reduction for fees paid indirectly:
Net expenses 1.54% 1.58%**
Net investment loss (0.41)% (0.15)%**
(a) Class II shares were first publicly offered May 1, 2003.
* 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.
** Annualized
+ Ratios with no reduction for fee paid indirectly
The accompanying notes are an integral part of these financial statements. 9
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $1,097,011) (Cost $22,278,590) $ 27,379,617
Cash 2,653,135
Receivables--
Fund shares sold 70,286
Variation margin 1,125
Dividends, interest and foreign taxes withheld 37,933
Other 2,057
------------
Total assets $ 30,144,153
------------
LIABILITIES:
Payables--
Fund shares repurchased $ 94,176
Upon return of securities loaned 1,134,938
Due to affiliates 19,919
Accrued expenses 57,101
------------
Total liabilities $ 1,306,134
------------
NET ASSETS:
Paid-in capital $ 22,990,010
Undistributed net investment income (loss) 260
Accumulated undistributed net realized gain (loss) 713,557
Net unrealized gain (loss) on:
Investments 5,101,027
Futures contracts 33,165
------------
Total net assets $ 28,838,019
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 17,992,938
Shares outstanding 1,197,698
------------
Net asset value per share $ 15.02
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 10,845,081
Shares outstanding 725,478
------------
Net asset value per share $ 14.95
10 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $349) $ 193,923
Interest 20,839
Income on securities loaned, net 2,778
-----------
Total investment income $ 217,540
-----------
EXPENSES:
Management fees $ 153,423
Distribution fees (Class II) 15,087
Administrative reimbursements 18,500
Custodian fees 38,476
Professional fees 45,386
Printing expense 11,214
Miscellaneous 1,717
-----------
Total expenses $ 283,803
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (9,953)
Less fees paid indirectly (815)
-----------
Net expenses $ 273,035
-----------
Net investment income (loss) $ (55,495)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 1,576,824
Futures contracts 167,366
-----------
$ 1,744,190
-----------
Change in net unrealized gain or (loss) from:
Investments $ 2,521,390
Futures contracts 10,731
-----------
$ 2,532,121
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 4,276,311
===========
Net increase (decrease) in net assets resulting
from operations $ 4,220,816
===========
The accompanying notes are an integral part of these financial statements. 11
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ (55,495) $ 2,125
Net realized gain (loss) on investments 1,744,190 (334,168)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions 2,532,121 3,353,942
------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 4,220,816 $ 3,021,899
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 14,302,057 $ 15,752,093
Cost of shares repurchased (4,493,153) (10,568,904)
------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 9,808,904 $ 5,183,189
------------ ------------
Net increase (decrease) in net assets $ 14,029,720 $ 8,205,088
NET ASSETS:
Beginning of year $ 14,808,299 $ 6,603,211
------------ ------------
End of year $ 28,838,019 $ 14,808,299
============ ============
Undistributed net investment income (loss),
end of year $ 260 $ 3,664
============ ============
12 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Small Cap Value VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company
Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value
Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares
Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income
Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America Income
Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II
shares only)
The Portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The investment objective of Small Cap Value Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
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
13
PIONEER VARIABLE CONTRACTS TRUST
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
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.
Small capitalization stocks, while offering the potential for higher
returns, such as those in the portfolio may be subject to greater
short-term price fluctuations than securities of larger companies.
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, 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Small Company Portfolio had the following open
contracts:
NUMBER OF
CONTRACTS SETTLEMENT MARKET UNREALIZED
FUTURE CONTRACTS TYPE LONG/(SHORT) MONTH VALUE GAIN/(LOSS)
- ------------------------- ------------ ------------ ---------- ----------- -----------
SMALL CAP VALUE PORTFOLIO RUSSELL 2000 5 MARCH 2005 $ 1,634,875 $ 33,165
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
14
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED PAID-IN
PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL
- ------------------------------------- -------------- --------------- ---------
Pioneer Small Cap Value VCT Portfolio $ 52,091 $ 6,157 $ (58,248)
======== ======= =========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004. There were no distributions
paid during the years ended December 31, 2004 and December 31, 2003.
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
----------- ----
$ -- $ --
Return of Capital -- --
----------- ----
Total distributions $ -- $ --
=========== ====
DISTRIBUTABLE EARNINGS
(ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(Capital loss carryforward) 1,086,729
Unrealized appreciation (depreciation) 4,761,280
----------- ----
Total $ 5,848,009
=========== ====
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 LEADING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the
15
PIONEER SMALL CAP VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
value of the loaned securities. The Trust has the right under the lending
agreement to recover the securities on loan from the borrower on demand.
The Trust invests cash collateral in the Securities Lending Investment Fund
which is managed by Brown Brothers Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolios. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets. In addition, under the
management and administration agreements, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Portfolio. At December 31, 2004, $17,466 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano, provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $268 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$2,185 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Small Cap Value Portfolio $ 22,618,337 $ 5,335,071 $ (573,791) $ 4,761,280
============ =========== ========== ===========
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations temporary cash investments for the year ended December
31, 2004, were $16,213,181 and $6,667,416, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in and capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------ ---------- -------------
CLASS II:
Shares sold 510,952 $ 6,774,823 1,276,588 $ 13,058,675
Reinvestment of distributions -- -- -- --
Shares repurchased (277,189) (3,672,701) (1,028,432) (10,409,382)
-------- ------------ ---------- -------------
Net increase 233,763 $ 3,102,122 248,156 $ 2,649,293
======== ============ ========== =============
CLASS II:
Shares sold 566,136 $ 7,527,234 235,328 $ 2,693,418
Reinvestment of distributions -- -- -- --
Shares repurchased (61,897) (820,452) (14,089) (159,522)
-------- ------------ ---------- -------------
Net increase 504,239 $ 6,706,782 221,239 $ 2,533,896
======== ============ ========== =============
16
PIONEER SMALL CAP VALUE 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 CLASS II SHAREOWNERS OF PIONEER SMALL CAP VALUE VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Small Cap Value Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of
December 31, 2004 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 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. An audit
includes 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, 2004, by correspondence with the custodian. 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 of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 the periods indicated therein, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
17
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
CUSTODIAN operations. The Trust's Trustees and officers are listed below, together
Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees who
are interested persons of the Portfolio within the meaning of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees.
Ernst & Young LLP 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
PRINCIPAL UNDERWRITER the 73 U.S. registered investment portfolios for which Pioneer Investment
Pioneer Funds Distributor, Inc. Management, Inc. ("Pioneer") serves as investment adviser (the "Trust").
The address for all Interested Trustees and all officers of the Portfolio
LEGAL COUNSEL is 60 State Street, Boston, Massachusetts 02109.
Wilmer Cutler Pickering Hale and Dorr LLP
The Trust's statement of additional information provides more detailed
information regarding the Trust's Trustees and is available upon request,
SHAREOWNER SERVICES AND TRANSFER without charge, by calling 1-800-225-6292.
Pioneer Investment Management Shareholder Services, Inc.
Proxy Voting Policies and Procedures of the Trust are available without
charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
Jr. (78)* Board, Trustee and successor trustee retirement or removal; Deputy Chairman Company, Ltd.
President is elected or and a Director of Pioneer Global Asset
earlier retirement Management S.p.A. ("PGAM");
or removal Non-Executive Chairman and a Director of
Pioneer Investment Management USA Inc.
("PIM-USA"); Chairman and a Director of
Pioneer; Director of Pioneer Alternative
Investment Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated funds;
President and Director of Pioneer Funds
Distributor, Inc. ("PFD"); President of
all of the Pioneer Funds; and Of Counsel
(since 2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and Dorr
LLP (counsel to PIM-USA and the Pioneer
Funds).
* Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive Officer, None
(52)** Executive successor trustee PIM-USA since May 2003 (Director since
Vice President is elected or January 2001); President and Director of
earlier retirement Pioneer since May 2003; Chairman and
or removal Director of Pioneer Investment
Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive Vice
President of all of the Pioneer Funds
since June 2003; Executive Vice
President and Chief Operating Officer of
PIM-USA, November 2000 to May 2003;
Executive Vice President, Chief
Financial Officer and Treasurer, John
Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior
Vice President and Chief Financial
Officer, John Hancock Advisers, L.L.C.,
April 1997 to November 1999.
** Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock Trustee since 2005. Serves until a Senior Vice President and Chief Director of The Enterprise
**(61) successor trustee Financial Officer, I-trax, Inc. Social Investment Company
3050 K. Street is elected or (publicly traded health care services (privately-held affordable
NW, earlier retirement company) (2001-present); Managing housing finance company);
Washington, or removal. Partner, Federal City Capital Advisors Director of New York Mortgage
DC 20007 (boutique merchant bank) (1995-2000; Trust (publicly traded
2002 to 2004); Executive Vice President mortgage REIT)
and Chief Financial Officer, Pedestal
Inc. (internet-based mortgage trading
company) (2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation
(56) 3509 2000. successor trustee (international financial advisory firm) (industrial identification and
Woodbine is elected or specialty coated material
Street, Chevy earlier retirement products manufacturer),
Chase, MD or removal Millennium Chemicals, Inc.
20815 (commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J. Reynolds
Tobacco Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since Serves until Founding Director, The Winthrop Group, None
Graham (57) 2000. successor trustee Inc. (consulting firm); Professor of
1001 is elected or Management, Faculty of Management,
Sherbrooke earlier retirement McGill University
Street West, or removal
Montreal,
Quebec, Canada
H3A 1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Trustee since Serves until President and Chief Executive Officer, Director of New America High
Piret (56) 1995. successor trustee Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end
One Boston is elected or (investment banking firm) investment company)
Place, earlier retirement
28th Floor or removal
Boston, MA
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Cromwell (law Director, The Swiss Helvetia
West (76) 1995. successor trustee firm) Fund, Inc. (closed-end
125 Broad is elected or investment company) and
Street, earlier retirement AMVESCAP PLC (investment
New York, or removal managers)
NY 10004
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None
(68) One North September, 2000. successor trustee (private investment firm)
Adgers Wharf, is elected or
Charleston, earlier retirement
SC 29401 or removal
- ------------------------------------------------------------------------------------------------------------------------------------
19
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES,OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None
Bourassa (57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior Counsel,
Assistant Vice President and Director of
Compliance of PIM-USA from April 1998
through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and Senior None
Kelley (40) Secretary discretion Counsel of Pioneer since July 2002; Vice
of the Board President and Senior Counsel of BISYS
Fund Services, Inc. (April 2001 to June
2002); Senior Vice President and Deputy
General Counsel of Funds Distributor,
Inc. (July 2000 to April 2001; Vice
President and Associate General Counsel
from July 1996 to July 2000); Assistant
Secretary of all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the Partner, Wilmer Cutler Pickering Hale None
Phelan (47) Secretary discretion and Dorr LLP; Assistant Secretary of all
of the Board Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave Treasurer Serves at the Vice President - Fund Accounting, None
(59) discretion of the Administration and Custody Services of
Board Pioneer and Treasurer of all of the
Pioneer Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None
Bradley (45) Treasurer discretion of the Treasurer and Senior Vice President, CDC
Board IXIS Asset Management Services from 2002
to 2003; Assistant Treasurer and Vice
President, MFS Investment Management
from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer Funds
since November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the Assistant Vice President - Fund None
Presutti (39) Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the Fund Accounting Manager - Fund None
(46) Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
20
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None
Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody
Board Services since June 2003; Assistant Vice
President - Mutual Fund Operations of
State Street Corporation from June 2002
to June 2003 (formerly Deutsche Bank
Asset Management); Pioneer Fund
Accounting, Administration and Custody
Services (Fund Accounting Manager from
August 1999 to May 2002, Fund Accounting
Services Supervisor from 1997 to July
1999); Assistant Treasurer of all
Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Chief Compliance Serves at the Chief Compliance Officer of Pioneer None
Wolin (37) Officer discretion of the (Director of Compliance and Senior
Board Counsel from November 2000 to September
2004); Vice President and Associate
General Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to November
2000; and Chief Compliance Officer of
all of the Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
21
[LOGO] PIONEER
INVESTMENTS(R)
[LOGO] PIONEER
INVESTMENTS (R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER SMALL COMPANY VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Pioneer Small Company VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 9
Notes to Financial Statements 13
Report of Independent Registered Public Accounting Firm 17
Trustees, Officers and Service Providers 18
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 94.8%
Temporary Cash Investment 4.1%
Depositary Receipts for International Stocks 0.7%
International Common Stocks 0.4%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 23.3%
Industrials 15.5%
Information Technology 15.0%
Health Care 13.9%
Consumer Discretionary 13.7%
Materials 7.9%
Energy 3.5%
Consumer Staples 3.4%
Telecommunication Services 1.9%
Utilities 1.9%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Swift Transportation Co., Inc. 1.43%
2. Ruby Tuesday, Inc. 1.11
3. Provident Senior Living 0.96
4. Wind River Systems 0.90
5. People's Energy Corp. 0.88
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 12.85 $ 11.35
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ -- $ -- $ --
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
SMALL COMPANY VCT PORTFOLIO at net asset value, compared to that of 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 WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
- ---------------------------------
GROWTH OF $10,000
- ---------------------------------
RUSSELL
DATE VALUE 2000
1/31/2001 $ 10,000 $ 10,000
$ 10,479 $ 9,741
12/31/2002 $ 8,683 $ 7,747
$ 10,865 $ 11,407
12/31/2004 $ 12,301 $ 13,497
The Russell 2000 Index measures U.S. small-cap 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, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class
(1/19/01) 6.56%
1 Year 13.22%
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fee and charges. 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.pioneerfunds.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 porfolios. 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 SMALL COMPANY 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 SMALL COMPANY VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
------------------------------------ ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,067.51 $ 1,067.31
Expenses Paid During Period* $ 6.46 $ 7.63
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.47% 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). 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 SMALL COMPANY VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
------------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,018.85 $ 1,017.70
Expenses Paid During Period* $ 6.30 $ 7.45
* Expenses are equal to the Portfolio's annualized expense ratio of 1.24% and
1.47% 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 SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
A WORD ABOUT RISK:
INVESTING IN SMALL COMPANIES MAY OFFER THE POTENTIAL FOR HIGHER RETURNS, BUT
THESE COMPANIES ARE ALSO SUBJECT TO GREATER SHORT-TERM PRICE FLUCTUATIONS THAN
LARGER, MORE ESTABLISHED COMPANIES.
CALL 800-688-9915 OR VISIT www.pioneerfunds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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. OTHER WISE, FEE WAIVERS CAN BE RESCINDED AT ANY TIME. SEE THE
PROSPECTUS AND FINANCIAL STATEMENTS FOR MORE INFORMATION.
In the following discussion, co-managers Diego Franzin and Michael Rega review
the performance of Pioneer Small Company VCT Portfolio over the year ended
December 31, 2004. Diego and Michael assumed day-to-day investment
responsibility for the Portfolio on November 1, 2004.
Q: HOW DID PIONEER SMALL COMPANY VCT PORTFOLIO PERFORM OVER THIS PERIOD?
A: For the twelve months ended December 31, 2004, Class II shares of the
Portfolio returned 13.22% at net asset value. The result trailed the
Portfolio's benchmark, the Russell 2000 Index, which returned 18.33% over
the same period.
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.
Q: PLEASE DESCRIBE THE BACKGROUND FOR SMALL-COMPANY STOCKS OVER THIS PERIOD.
A: Stocks, including small-caps, treaded water for several months in 2004,
held back by concern over the economy, election uncertainty and
international tensions. With renewed evidence of continued economic growth,
and with the election firmly decided, investors returned to equities in the
latter months of the year.
Driven by profit growth, small-capitalization stocks outperformed large
caps for the sixth consecutive year in 2004, marking the longest stretch of
small-cap outperformance since the Russell 2000 Index was launched in 1979.
Smaller companies increased operating efficiencies and expanded margins,
allowing more of each revenue dollar to reach the bottom line. For four of
the last five years, value-oriented smaller stocks were dominant, but
growth stocks began catching up late in the year.
Q: WHICH STOCKS OR SECTORS INFLUENCED PERFORMANCE FAVORABLY?
A: One-time coalmine operator Brink's rose as it continued to work down
long-standing pension obligations owed to former employees and their
families. Canada-based Alliance Atlantis, whose management team is highly
regarded in the industry, enjoyed good results from its various Crime Scene
Investigation (CSI) television series. Sales targets in China for Nu Skin's
health and beauty products fell behind by a few months; after a brief
decline, shares rebounded and added to results for the year. We took
profits in Chattem, manufacturers of Gold Bond products, in favor of other
opportunities. We also took advantage of higher prices to cut real estate
investment trust holdings, adding commercial banks, including Irwin
Financial and City National, that appear better positioned to profit as a
flattening yield curve squeezes profit margins. Corn Products
International, a leading producer of corn syrup, benefited from increased
operating efficiencies and the probability of greater access to the large
Mexican market.
Q: WHICH HOLDINGS HAD A NEGATIVE IMPACT OVER THE PERIOD?
A: Unsuccessful stock selection nullified an overweight position in the strong
energy sector. Being underweight in technology was beneficial, but choices
among industrial, materials and technology issues hurt results. Together,
those factors account for much of the Portfolio's underperformance compared
with its benchmark. Unifi, a maker of synthetic yarns for apparel and home
goods, missed earnings targets due to weak pricing and saw some of its
customers move production overseas. Rewards Network, which continues to
retool its hotel and restaurant discount programs, fell sharply. Cuts in
state and federal educational programs combined with a revamping of the SAT
test undercut shares of Princeton Review, a test preparation company. And
Plato Learning, which offers computer-based job training, fell after
ratcheting back revenue expectations.
Q: WHAT IS YOUR CURRENT OUTLOOK, AND HOW ARE YOU POSITIONING THE PORTFOLIO?
A: We believe the economic expansion will carry over into 2005 even if
interest rates rise further. In addition, energy prices may moderate in the
face of adequate supplies.
In late 2004, growth stocks appeared exceptionally cheap by some
traditional measures, and we believe that growth prospects will eventually
be reflected in stock prices. In addition, the best performing growth
issues had no earnings at all, a sign that investors were attracted to the
notion of growth, independent of other factors. With that scenario in mind,
we are tightening the Portfolio's growth focus, broadening sector
diversification and increasing the Portfolio's roster of stocks. Attractive
sectors include health care, as well as deepwater drilling, where drilling
rig utilization rates have moved higher. In technology, software companies
may benefit as companies look for productivity-enhancing ways to invest
sizeable cash holdings accumulated over recent years.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 98.4%
ENERGY - 3.4%
OIL & GAS DRILLING - 0.7%
2,100 Stone Energy Corp.* $ 94,689
------------
OIL & GAS EQUIPMENT & SERVICES - 0.7%
3,100 Maverick Tube Corp.* $ 93,930
------------
OIL & GAS EXPLORATION & PRODUCTION - 2.0%
2,925 Forest Oil Corp.* (a) $ 92,781
1,600 Houston Exploration Co.* 90,096
2,703 Spinnaker Exploration Co.* 94,794
------------
$ 277,671
------------
TOTAL ENERGY $ 466,290
------------
MATERIALS - 7.7%
ALUMINUM - 0.7%
3,900 Century Aluminum Co.* $ 102,414
------------
GOLD - 0.5%
11,125 IAMGOLD Corp. $ 73,536
------------
MATERIALS - 0.4%
625 Mega Blocks* $ 9,928
2,950 Mega Blocks, Inc. (144A)* 46,861
------------
$ 56,789
------------
METAL & GLASS CONTAINERS - 0.6%
1,775 Kennametal, Inc. $ 88,342
------------
PAPER PRODUCTS - 1.4%
3,600 Flowserve Corp.* $ 99,144
5,250 Wausau-Mosinee Paper Corp. 93,765
------------
$ 192,909
------------
PRECIOUS METALS & MINERALS - 0.7%
8,500 Stillwater Mining Co.* $ 95,710
------------
SPECIALTY CHEMICALS - 2.7%
3,700 Cambrex Corp. $ 100,270
3,300 H.B. Fuller Co. 94,083
9,700 PolyOne Corp.* 87,882
8,775 Wellman, Inc. 93,805
------------
$ 376,040
------------
STEEL - 0.7%
3,200 NS Group, Inc.* $ 88,960
------------
TOTAL MATERIALS $ 1,074,700
------------
CAPITAL GOODS - 6.5%
AEROSPACE & DEFENSE - 1.2%
5,600 Hexcel Corp.* $ 81,200
7,300 Orbital Sciences Corp.* (a) 86,359
------------
$ 167,559
------------
BUILDING PRODUCTS - 0.7%
5,000 Lennox International, Inc. $ 101,750
------------
CONSTRUCTION, FARM MACHINERY &
HEAVY TRUCKS - 0.7%
1,200 The Toro Co. $ 97,620
------------
CONSTRUCTION & ENGINEERING - 0.7%
5,500 Perini Corp.* $ 91,795
------------
ELECTRICAL COMPONENTS & EQUIPMENT - 1.2%
2,900 Acuity Brands, Inc. $ 92,220
2,500 Thomas & Betts Corp.* 76,875
------------
$ 169,095
------------
INDUSTRIAL CONGLOMERATES - 1.3%
4,900 Brush Engineered Materials, Inc.* $ 90,650
4,700 Tredegar Corp. 94,987
------------
$ 185,637
------------
INDUSTRIAL MACHINERY - 0.7%
2,600 Albany International Corp. $ 91,416
------------
TOTAL CAPITAL GOODS $ 904,872
COMMERCIAL SERVICES & SUPPLIES - 5.3%
DATA PROCESSING SERVICES - 0.7%
7,450 Gartner Group, Inc.* $ 92,827
------------
COMMERCIAL PRINTING - 0.4%
1,675 John H. Harland Co. $ 60,468
------------
DIVERSIFIED COMMERCIAL SERVICES - 3.1%
2,301 The Brinks Co. $ 90,936
3,650 Central Parking Corp. 55,298
4,394 FTI Consulting, Inc.* 92,582
2,000 Regis Corp. 92,300
5,900 Tetra Tech, Inc* 98,766
------------
$ 429,882
------------
EMPLOYMENT SERVICES - 0.6%
14,700 The Princeton Review, Inc.* $ 90,405
------------
ENVIRONMENTAL SERVICES - 0.5%
12,275 Newpark Resources, Inc.* $ 63,216
------------
TOTAL COMMERCIAL SERVICES &
SUPPLIES $ 736,798
------------
TRANSPORTATION - 3.5%
AIRLINES - 1.4%
2,800 Alaska Air Group, Inc.* $ 93,772
7,600 ExpressJet Holdings, Inc.* 97,888
------------
$ 191,660
------------
TRUCKING - 2.1%
2,600 Overnite Corp. $ 96,824
9,100 Swift Transportation Co., Inc.* 195,468
------------
$ 292,292
------------
TOTAL TRANSPORTATION $ 483,952
------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
AUTOMOBILES & COMPONENTS - 1.3%
AUTO PARTS & EQUIPMENT - 0.6%
5,400 Aftermarket Technology Corp.* $ 86,940
------------
AUTOMOBILE MANUFACTURERS - 0.7%
2,300 Winnebago Industries, Inc.* $ 89,838
------------
TOTAL AUTOMOBILES & COMPONENTS $ 176,778
------------
CONSUMER DURABLES & APPAREL - 2.7%
APPAREL, ACCESSORIES & LUXURY GOODS - 0.7%
10,100 Charming Shoppes, Inc.* $ 94,637
------------
FOOTWEAR - 0.7%
3,100 Wolverine World Wide, Inc. $ 97,402
------------
HOUSEWARES & SPECIALTIES - 0.7%
2,775 Yankee Candle Co. $ 92,075
------------
LEISURE PRODUCTS - 0.6%
3,900 JAKKS Pacific, Inc.* $ 86,229
------------
TOTAL CONSUMER DURABLES & APPAREL $ 370,343
------------
HOTELS, RESTAURANTS & LEISURE - 2.4%
LEISURE FACILITIES - 0.6%
4,000 Vail Resorts, Inc.* $ 89,680
------------
RESTAURANTS - 1.8%
5,800 Ruby Tuesday, Inc. $ 151,264
4,900 The Steak n Shake Co.* 98,392
------------
$ 249,656
------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 339,336
------------
MEDIA - 2.7%
ADVERTISING - 0.7%
1,600 R.H. Donnelley Corp.* $ 94,480
------------
BROADCASTING & CABLE TELEVISION - 0.6%
6,000 Gray Television, Inc. $ 93,000
------------
MOVIES & ENTERTAINMENT - 0.7%
3,550 Alliance Atlantis Communications, Inc.* $ 97,554
------------
PUBLISHING - 0.7%
4,875 Journal Register Co.* $ 94,234
------------
TOTAL MEDIA $ 379,268
------------
RETAILING - 5.1%
APPAREL RETAIL - 1.9%
3,100 Aeropostale, Inc.* $ 91,233
7,500 Guess?, Inc.* 94,125
6,500 Skechers U.S.A.* 84,240
------------
$ 269,598
------------
DISTRIBUTORS - 1.2%
3,200 Beacon Roofing Supply, Inc.* $ 63,552
3,500 Wesco International, Inc.* 103,740
------------
$ 167,292
------------
GENERAL MERCHANDISE STORES - 0.6%
3,000 American Greetings Corp. $ 76,050
------------
INTERNET RETAIL - 0.7%
8,000 Netflix, Inc.* $ 98,640
------------
SPECIALTY STORES - 0.7%
7,400 Payless ShoeSource, Inc.* $ 91,020
------------
TOTAL RETAILING $ 702,600
------------
FOOD & DRUG RETAILING - 1.4%
FOOD DISTRIBUTORS - 0.7%
1,939 The J.M. Smucker Co. $ 91,269
------------
FOOD RETAIL - 0.7%
2,300 Sanderson Farms, Inc. $ 99,544
------------
TOTAL FOOD & DRUG RETAILING $ 190,813
------------
FOOD, BEVERAGE & TOBACCO - 0.6%
AGRICULTURAL PRODUCTS - 0.6%
1,670 Corn Products International, Inc. $ 89,445
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 89,445
------------
HOUSEHOLD & PERSONAL PRODUCTS - 0.7%
HOUSEHOLD PRODUCTS - 0.7%
3,850 Nu Skin Enterprises, Inc. $ 97,713
------------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 97,713
------------
HEALTH CARE EQUIPMENT & SERVICES - 9.3%
HEALTH CARE DISTRIBUTORS - 0.8%
2,300 United Therapeutics Corp.* $ 103,845
------------
HEALTH CARE EQUIPMENT - 2.0%
2,475 Haemonetics Corp.* $ 89,620
2,575 PolyMedica Corp. 96,022
3,900 Steris Corp.* 92,508
------------
$ 278,150
------------
HEALTH CARE FACILITIES - 1.9%
2,600 Lifepoint Hospitals, Inc.* $ 90,532
2,002 Sunrise Senior Living, Inc.* (a) 92,813
1,900 Universal Health Services, Inc. (Class B) 84,550
------------
$ 267,895
------------
HEALTH CARE SERVICES - 3.3%
1,700 Cerner Corp.* (a) $ 90,389
3,300 Lifeline Systems, Inc.* 85,008
1,425 Pediatrix Medical Group, Inc.* 91,271
5,025 Providence Service Corp.* 105,374
4,496 Parexel International Corp.* 91,269
------------
$ 463,311
------------
HEALTH CARE SUPPLIES - 0.6%
5,800 Merit Medical Systems, Inc.* $ 88,624
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SHARES VALUE
MANAGED HEALTH CARE - 0.7%
5,050 First Health Group Corp.* $ 94,486
------------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 1,296,311
------------
PHARMACEUTICALS & BIOTECHNOLOGY - 4.4%
BIOTECHNOLOGY - 3.0%
4,925 Cubist Pharmaceuticals, Inc.* $ 58,263
4,200 Connetics Corp.* 102,018
12,500 Indevus Pharmaceuticals, Inc.* (a) 74,500
7,300 InterMune, Inc.* 96,798
8,600 Regeneron Pharmaceuticals, Inc.* 79,206
------------
$ 410,785
------------
PHARMACEUTICALS - 1.4%
4,100 Able Laboratories, Inc.* $ 93,275
3,600 Bone Care International, Inc.* 100,260
------------
$ 193,535
------------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 604,320
------------
BANKS - 10.6%
DIVERSIFIED BANKS - 1.4%
4,800 Provident Financial Services, Inc. $ 92,976
3,100 Trustmark Corp. 96,317
------------
$ 189,293
------------
REGIONAL BANKS - 7.3%
3,700 BancorpSouth, Inc. $ 90,169
3,300 Community Bank System, Inc. 93,225
2,200 Chemical Financial Corp. 94,424
2,600 Central Pacific Financial Corp.* 94,042
1,325 City National Corp. 93,611
2,200 First Community Bancorp 93,940
5,300 First Financial Bancorp 92,750
2,900 Greater Bay Bancorp 80,852
3,500 Irwin Financial Corp. 99,365
3,300 Oriental Financial Group, Inc. 93,423
3,600 Susquehanna Bancshares, Inc. 89,820
------------
$ 1,015,621
------------
THRIFTS & MORTGAGE FINANCE - 1.9%
2,300 BankUnited Financial Corp.* $ 73,485
3,025 Commercial Federal Corp. 89,873
2,125 Webster Financial Corp. 107,610
------------
$ 270,968
------------
TOTAL BANKS $ 1,475,882
------------
DIVERSIFIED FINANCIALS - 2.8%
CONSUMER FINANCE - 0.7%
3,800 Charter Municipal Mortgage
Acceptance Co. $ 92,872
------------
CONSUMER FINANCE - 1.4%
4,078 Advanta Corp. (Class B) $ 98,973
13,997 Rewards Network, Inc.* (a) 97,979
------------
$ 196,952
------------
INVESTMENT BANKING & BROKERAGE - 0.7%
6,078 Apollo Investment Corp. $ 91,778
------------
TOTAL DIVERSIFIED FINANCIALS $ 381,602
------------
INSURANCE - 2.6%
LIFE & HEALTH INSURANCE - 0.7%
2,100 AmerUs Group Co. $ 95,130
------------
PROPERTY & CASUALTY INSURANCE - 1.9%
4,600 Bristol West Holdings, Inc. $ 92,000
2,500 Infinity Property & Casualty Corp. 88,000
2,020 Selective Insurance Group, Inc. 89,365
------------
$ 269,365
------------
TOTAL INSURANCE $ 364,495
------------
REAL ESTATE - 6.9%
REAL ESTATE INVESTMENT TRUSTS - 6.9%
8,500 Anworth Mortgage Asset Corp. $ 91,035
3,100 Brandywine Realty Trust 91,109
4,577 BioMed Property Trust, Inc. 101,655
2,850 Capital Trust, Inc. 87,524
2,900 Cousins Properties, Inc. 87,783
2,800 Heritage Property Investment Trust 89,852
10,000 MFA Mortgage Investments, Inc. 88,200
2,800 Newcastle Investment Corp. 88,984
8,195 Provident Senior Living* 131,120
1,600 Redwood Trust, Inc. 99,344
------------
$ 956,606
------------
TOTAL REAL ESTATE $ 956,606
------------
SOFTWARE & SERVICES - 6.1%
APPLICATION SOFTWARE - 3.4%
3,700 Advent Software, Inc.* $ 75,776
3,500 Macrovision Corp.* 90,020
14,500 Parametric Technology Co.* 85,405
7,100 Valueclick, Inc.* 94,643
9,100 Wind River Systems* 345,844
------------
$ 691,688
------------
DATA PROCESSING & OUTSOURCED SERVICES - 0.7%
5,700 The BISYS Group, Inc.* $ 93,765
------------
HOME ENTERTAINMENT SOFTWARE - 0.7%
12,375 Plato Learning, Inc.* $ 92,194
------------
INTERNET SOFTWARE & SERVICES - 0.6%
7,000 Earthlink, Inc.* $ 80,640
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
SHARES VALUE
SYSTEMS SOFTWARE - 0.7%
8,875 Borland Software Corp.* $ 103,660
------------
TOTAL SOFTWARE & SERVICES $ 1,061,947
------------
TECHNOLOGY, HARDWARE & EQUIPMENT - 5.9%
NETWORKING EQUIPMENT - 0.6%
13,900 Extreme Networks, Inc.* $ 91,045
------------
COMMUNICATIONS EQUIPMENT - 2.7%
15,100 Arris Group, Inc.* $ 106,304
4,800 CommScope, Inc.* 90,720
5,200 SeaChange International, Inc.* (a) 90,688
8,500 Symmetricom, Inc.* 82,535
------------
$ 370,247
------------
COMPUTER STORAGE & PERIPHERALS - 1.2%
3,500 Intergraph Corp.* $ 94,255
4,000 Novatel Wireless, Inc.* (a) 77,520
------------
$ 171,775
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7%
12,400 Identix, Inc.* $ 91,512
------------
ELECTRONIC MANUFACTURING SERVICES - 0.7%
7,800 TTM Technologies, Inc.* $ 92,040
------------
TOTAL TECHNOLOGY, HARDWARE &
EQUIPMENT $ 816,619
------------
SEMICONDUCTORS - 2.8%
SEMICONDUCTOR EQUIPMENT - 1.4%
11,900 Axcelis Technologies, Inc.* $ 96,747
5,246 Photronics, Inc.* 86,559
500 PortalPlayer, Inc.* 12,340
------------
$ 195,646
------------
SEMICONDUCTORS - 1.4%
10,100 MIPS Technologies, Inc.* $ 99,485
20,800 SGC Holding Corp.* 94,432
------------
$ 193,917
------------
TOTAL SEMICONDUCTORS $ 389,563
------------
TELECOMMUNICATION SERVICES - 1.9%
INTEGRATED TELECOMMUNICATION SERVICES - 1.3%
7,575 Aeroflex, Inc.* $ 91,809
6,959 CT Communications, Inc. 85,596
------------
$ 177,405
------------
WIRELESS TELECOM SERVICES - 0.6%
9,375 Boston Communications Group, Inc.* $ 86,625
------------
TOTAL TELECOMMUNICATION SERVICES $ 264,030
------------
UTILITIES - 1.8%
ELECTRIC UTILITIES - 0.5%
1,400 CH Energy Group, Inc. $ 67,270
------------
GAS UTILITIES - 1.3%
2,500 Atmos Energy Corp. $ 68,375
2,750 People's Energy Corp. 120,857
------------
$ 189,232
------------
TOTAL UTILITIES $ 256,502
------------
TOTAL COMMON STOCKS
(Cost $12,760,997) $ 13,658,246
------------
WARRANTS - 0.0%
ENERGY - 0.0%
OIL & GAS EXPLORATION & PRODUCTION - 0.0%
1,850 Arena Resources Warrants EXP 8/9/08* $ 5,411
------------
TOTAL WARRANTS
(Cost $1,885) $ 5,411
------------
TEMPORARY CASH INVESTMENT - 4.2%
SECURITY LENDING COLLATERAL - 4.2%
579,352 Securities Lending Investment Fund,
2.18% $ 579,352
------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $579,352) $ 579,352
------------
TOTAL INVESTMENTS IN
SECURITIES - 102.6%
(Cost $13,342,234) $ 14,243,009
------------
OTHER ASSETS
AND LIABILITIES - (2.6)% $ (372,893)
------------
TOTAL NET ASSETS - 100.0% $ 13,870,116
============
* Non-income producing 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, 2004, the
value of these securities amounted to $46,861 or 0.3% of net assets.
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
1,615 Cerner Corp.* $ 85,870
2,779 Forest Oil Corp.* 88,150
11,875 Indevus Pharmaceuticals, Inc.* 70,775
3,800 Novatel Wireless, Inc.* 73,644
6,935 Orbital Sciences Corp.* 82,041
791 Rewards Network, Inc.* 5,537
3,990 SeaChange International, Inc.* 69,586
1,759 Sunrise Senior Living, Inc.* 81,546
---------
TOTAL $ 557,149
=========
8 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED 8/1/01 TO
CLASS II (A) 12/31/04 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 11.35 $ 9.07 $ 10.95 $ 11.18
-------- ------- ------- -------
Increase (decrease) from investment operations:
Net investment income $ (0.05) $ (0.01) $ (0.01) $ --
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.55 2.29 (1.87) (0.23)
-------- ------- ------- -------
Net increase (decrease) from investment operations $ 1.50 $ 2.28 $ (1.88) $ (0.23)
Distributions to shareowners:
Net investment income -- -- -- --
Net realized gain -- -- -- --
-------- ------- ------- -------
Net increase (decrease) in net asset value $ 1.50 $ 2.28 $ (1.88) $ (0.23)
-------- ------- ------- -------
Net asset value, end of period $ 12.85 $ 11.35 $ 9.07 $ 10.95
======== ======= ======= =======
Total return* 13.22% 25.14% (17.14)% (2.06)%
Ratio of net expenses to average net assets+ 1.48% 1.52% 1.58% 1.68%**
Ratio of net investment income (loss) to average net assets+ (0.44)% (0.23)% (0.18)% 0.01%**
Portfolio turnover rate 114% 38% 53% 72%
Net assets, end of period (in thousands) $ 10,086 $ 7,095 $ 3,419 $ 938
Ratios with no waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.76% 2.67% 2.98% 6.71%**
Net investment income (loss) (0.72)% (1.38)% (1.58)% 5.02%**
(a) Class 2 shares were first publicly offered on August 1, 2001.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 9
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $557,149) (Cost $13,342,234) $ 14,243,009
Cash 182,717
Receivables--
Investment securities sold 101,557
Fund shares sold 57,675
Dividends, interest and foreign taxes withheld 25,451
Other 1,556
------------
Total assets $ 14,611,965
------------
LIABILITIES:
Payables--
Investment securities purchased $ 100,703
Fund shares repurchased 788
Upon return of securities loaned 579,352
Due to affiliates 10,103
Accrued expenses 50,903
------------
Total liabilities $ 741,849
------------
NET ASSETS:
Paid-in capital $ 11,654,699
Accumulated undistributed net realized gain (loss) 1,314,643
Net unrealized gain (loss) on:
Investments 900,774
------------
Total net assets $ 13,870,116
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 3,784,302
Shares outstanding 291,770
------------
Net asset value per share $ 12.97
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 10,085,814
Shares outstanding 784,728
------------
Net asset value per share $ 12.85
10 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $149) $ 116,978
Interest 5,203
Income on securities loaned, net 2,321
-----------
Total investment income $ 124,502
-----------
EXPENSES:
Management fees $ 90,872
Transfer agent fees and expenses 2,009
Distribution fees (Class II) 21,149
Administrative reimbursements 18,500
Custodian fees 26,887
Professional fees 32,556
Printing expense 11,676
Miscellaneous 1,442
-----------
Total expenses $ 205,091
Less management fees waived and expenses assumed
by Pioneer Investment Management, Inc. (33,905)
-----------
Net expenses $ 171,186
-----------
Net investment income (loss) $ (46,684)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 2,004,714
Futures contracts 13,667
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (3,021)
-----------
$ 2,015,360
-----------
Change in net unrealized gain or (loss) from:
Investments (the change in reserve for repatriation taxes of $86,981) $ (373,588)
Futures contracts (11,218)
-----------
$ (384,806)
-----------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 1,628,554
===========
Net increase (decrease) in net assets resulting
from operations $ 1,583,870
===========
The accompanying notes are an integral part of these financial statements. 11
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ (46,684) $ (9,162)
Net realized gain (loss) on investments 2,015,360 (296,269)
Change in net unrealized gain or (loss) on
investments, futures contracts and
foreign currency transactions (384,806) 2,171,849
------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 1,583,870 $ 1,866,418
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 4,450,765 $ 6,156,243
Cost of shares repurchased (3,135,048) (3,911,566)
------------ ------------
Net increase (decrease) in net assets
resulting from Fund share transactions $ 1,315,717 $ 2,244,677
------------ ------------
Net increase (decrease) in net assets $ 2,899,587 $ 4,111,095
------------ ------------
NET ASSETS:
Beginning of year $ 10,970,529 $ 6,859,434
------------ ------------
End of year $ 13,870,116 $ 10,970,529
============ ============
Undistributed net investment income (loss),
end of year $ -- $ 1,986
============ ============
12 The accompanying notes are an integral part of these financial statements.
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Small Company VCT Portfolio (the Portfolio) a Portfolio of Pioneer
Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio
(Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II
shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class II
shares only)
The investment objective of Small Company Portfolio is to seek capital
appreciation.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting periods.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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 exchange. At December 31, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
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
13
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
applicable, are reported net of foreign taxes withheld on capital gains at
the applicable country rates.
Small capitalization stocks, while offering the potential for higher
returns, such as those in the portfolio may be subject to greater
short-term price fluctuations than securities of larger companies.
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, 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Small Company Portfolio had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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 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, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED PAID-IN
PORTFOLIO INCOME (LOSS) GAIN (LOSS) CAPITAL
- ----------------------------------- -------------- --------------- ----------
Pioneer Small Company VCT Portfolio $ 44,698 $ 15,753 $ (60,451)
======== ======== =========
14
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
The following chart shows the components of distributable earnings (accumulated
losses) as of December 31, 2004 on a tax basis. There were no distributions paid
during the years ended December 31, 2004 and 2003.
2004 2003
----------- -----
DISTRIBUTIONS PAID FROM:
Ordinary Income $ -- $ --
Long-Term capital gain -- --
----------- -----
$ -- $ --
Return of Capital -- --
----------- -----
Total distributions $ -- $ --
=========== =====
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ --
Undistributed long-term gain/(capital loss carryforward) 1,364,989
Unrealized appreciation (depreciation) 850,428
-----------
Total $ 2,215,417
===========
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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 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.
G. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining
15
PIONEER SMALL COMPANY VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
that the value of the collateral remains at least equal to the repurchase
price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano, manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets. In addition, under the
management and administration agreements, certain other services and costs,
including accounting, regulatory reporting and insurance premiums, are paid by
the Portfolio. At December 31, 2004, $7,619 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $268 in transfer agent fees
payable to PIMSS at December 31, 2004
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$2,216 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Small Company Portfolio $ 13,392,581 $ 1,098,063 $ (247,635) $ 850,428
============ =========== ========== =========
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $15,556,752 and $13,097,177, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
SMALL CAP VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------ ---------- ------------
CLASS II:
Shares sold 56,890 $ 670,369 286,397 $ 2,774,242
Reinvestment of distributions -- -- -- --
Shares repurchased (103,931) (1,215,329) (324,514) (3,132,628)
--------- ------------ --------- ------------
Net increase (47,041) $ (544,960) (38,117) $ (358,386)
========= ============ ========= ============
CLASS II:
Shares sold 320,212 $ 3,780,396 328,726 $ 3,382,001
Reinvestment of distributions -- -- -- --
Shares repurchased (160,864) (1,919,719) (80,215) (778,938)
--------- ------------ --------- ------------
Net increase 159,348 $ 1,860,677 248,511 $ 2,603,063
========= ============ ========= ============
16
PIONEER SMALL COMPANY 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 CLASS II SHAREOWNERS OF PIONEER SMALL COMPANY VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Small Company VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as of
December 31, 2004, 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 financial highlights for each of the three 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. The financial highlights for the period ended December 31, 2001 were
audited by other auditors who have ceased operations and whose report, dated
February 8, 2002, expressed an unqualified opinion on those financial
highlights.
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. An audit
includes 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, 2004, 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 Company VCT Portfolio of the Pioneer Variable Contracts Trust at
December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/S/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
17
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust's are responsible for the Trust's
CUSTODIAN operations. The Trust's Trustees and officers are listed below, together
Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees
who are interested persons of the Portfolio within the meaning of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees.
Ernst & Young LLP 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
PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer
Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the
"Trusts"). The address for all Interested Trustees and all officers of
the Portfolio is 60 State Street, Boston, Massachusetts 02109.
LEGAL COUNSEL The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor
Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd.
President earlier retirement Deputy Chairman and a Director
or removal 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; Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May 2003
President earlier retirement or (Director since January 2001);
removal President and Director of
Pioneer since May 2003; Chairman
and Director of Pioneer
Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 elected or earlier (publicly traded health care Investment Company
retirement or removal. services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank) (1995-2000; 2002 to 2004); Mortgage Trust
Executive Vice President and (publicly traded
Chief Financial Officer, mortgage REIT)
Pedestal Inc. (Internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, 2000. trustee is elected or (International financial Corporation
Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial
removal identification and
specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty
Canada H3A 1G5 removal of Management, McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New
One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income
28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc.
Boston, MA 02108 removal bankin.g firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end
removal investment company)
and AMVESCAP PLC
(investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, September, trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 2000. earlier retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
19
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None
Secretary discretion of the Senior Counsel of Pioneer since
Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and Senior
Board Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
20
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER
Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None
Treasurer discretion of the Fund Accounting, Administration
Board and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of Compliance
Board and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
21
[LOGO] PIONEER
INVESTMENTS(R)
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER STRATEGIC INCOME VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 15
Notes to Financial Statements 19
Report of Independent Registered Public Accounting Firm 24
Trustees, Officers and Service Providers 25
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO UPDATE 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE IS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Corporate Bonds 54.3%
U.S. Government Securities 24.5%
Foreign Government Bonds 12.6%
Temporary Cash Investment 2.6%
Asset Backed Securities 2.4%
Municipal Bonds 1.9%
Collateralized Mortgage Obligations 1.0%
Convertible Corporate Bonds 0.7%
MATURITY DISTRIBUTION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE IS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
0-1 years 6.5%
1-3 years 31.5%
3-4 years 11.9%
4-6 years 28.5%
6-8 years 14.3%
8+ years 7.3%
FIVE LARGEST HOLDINGS
(As a percentage of long-term holdings)
1. Federal Home Loan Mortgage
Corp., 6.0%, 8/1/34 2.22%
2. Government National
Mortgage Association,
6.0%, 8/15/16 1.69
3. Federal National Mortgage
Association, 6.375%,
8/15/07 1.44
4. Norwegian Government,
6.75%, 1/15/07 1.38
5. Canadian Government,
4.25%, 9/1/09 1.27
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 11.26 $ 11.01
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.6261 $ -- $ 0.1616
- --------------------------------------------------------------------------------
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
Lehman Brothers 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 TABLE IS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL.]
Lehman U.S. Universal Index Pioneer Strategic Income VCT Portfolio
Jul-99 10000 10000
10136 10060
Dec-00 11234 10488
12144 11184
2-Dec 13338 12352
14117 15073
4-Dec 14817 16573
Index comparison begins July 31, 1999. The Lehman Brothers 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.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life-of-Class 9.75%
(7/29/99)
5 Year 10.50
1 Year 9.95
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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 STRATEGIC 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 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 STRATEGIC INCOME VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,098.98 $ 1,097.41
Expenses Paid During Period* $ 5.15 $ 6.08
* Expenses are equal to the Portfolio's annualized expense ratio of 0.98% and
1.15% 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). 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 STRATEGIC INCOME VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,019.96 $ 1,018.65
Expenses Paid During Period* $ 4.95 $ 5.85
* Expenses are equal to the Portfolio's annualized expense ratio of 0.98% and
1.15% 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 STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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.
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. THE SECURITIES ISSUED BY U.S. GOVERNMENT SPONSORED ENTITIES (I.E.,
FNMA, FREDDIE MAC) IS NEITHER GUARANTEED NOR ISSUED BY THE U.S. GOVERNMENT.
CALL 800-688-9915 OR VISIT www.pioneerfunds.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 economies throughout the world grew steadily during 2004, the values of both
corporate bonds and emerging market debt tended to rise. At the same time, many
non-U.S. currencies gained in value relative to the dollar. In the following
discussion, Kenneth J. Taubes discusses the factors that influenced the
performance of Strategic Income VCT Portfolio during 2004. Mr. Taubes, Director
of Pioneer's Fixed Income Group, oversees the team responsible for daily
management of the Portfolio.
Q: HOW DID THE PORTFOLIO PERFORM DURING 2004?
A: Strategic Income VCT Portfolio performed very well, outpacing its benchmark
by a wide margin. For the 12 months ended December 31, 2004, the
Portfolio's Class II shares had a total return of 9.95%, while the Lehman
U.S. Universal Bond Index returned 4.97%. On December 31, 2004, the
Standardized 30-day SEC Yield for Class II shares was 5.40%.
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.
Q: WHAT FACTORS AFFECTED PORTFOLIO PERFORMANCE?
A: With strong economic growth throughout the globe during 2004, corporate
cash flows and profits rose, improving overall credit quality in the United
States and abroad. The best-performing sectors in the fixed-income markets
tended to be those areas that normally carry the highest credit risk -
high-yield, corporate bonds and emerging market debt - as strengthening
economies improved overall credit quality. The year 2004 also was a period
in which the U.S. dollar continued to lose value against major foreign
currencies.
Taking advantage of the Portfolio's ability to diversify across several
different fixed-income sectors, we overweighted the two best-performing
sectors - domestic high-yield bonds and emerging market bonds. This
strategy substantially contributed to performance, as did our allocations
to investment-grade foreign debt that appreciated in value as the dollar
fell. Outside the United States, we invested in countries such as Australia
and Canada, whose economies benefited from rising commodity prices and
tighter monetary policies. In Europe, we invested in Sweden and Norway,
both of which also benefited from these factors. Within the emerging
markets, we emphasized Brazil and Russia, where economic growth was strong,
while adding to commodity-linked bonds in China and India.
At the end of the year, U.S. high yield bonds constituted 29.3l% of the
Portfolio's assets, while emerging market and international high-yield
investments accounted for another 20% of assets. We also emphasized other
sectors that offered yield advantages over Treasuries. International
investment-grade debt accounted for 17.2% of Portfolio assets, while U.S.
mortgage-backed securities constituted 23.5% of Portfolio assets and
domestic investment-grade corporate debt accounted for 8.4%.
Q: WHAT WERE SOME OF THE INDIVIDUAL HOLDINGS THAT MOST INFLUENCED PORTFOLIO
PERFORMANCE?
A: Within the emerging markets, the bonds of several Brazilian companies were
standout performers, including: brewer AMBEV; steel company CSN; and
Telemar, a telecommunications service company.
Russian investments that supported performance included bonds of Gazprom,
the government-controlled energy company, and Mobil Telesystems, a mobile
phone service provider. In India, Vedanta, a mining company with operations
in zinc and other materials, performed well. Among European high-yield
bonds that performed well were cable companies NTL of the United Kingdom
and Kabel of Germany.
Domestically, top performers included materials companies Celanese and ICI
Huntsman, as well as chemical companies Lyondell and Methanex.
Detracting from results were: insurance company Unum Provident, whose bond
prices slipped amid controversy over the New York attorney general's
investigation of industry practices; and Toys 'R Us, whose restructuring
plans remained uncertain.
Q: WHAT IS YOUR INVESTMENT OUTLOOK?
A: We anticipate continued global economic growth and expect to maintain an
emphasis on corporate securities. However, we believe high-yield corporate
bonds do not offer as compelling relative values as they did a year ago. We
have reduced our high-yield positions somewhat, while increasing our
commitment to mortgage-backed securities.
In the United States, we anticipate that the Federal Reserve will continue
to raise the Fed funds rate at a measured pace during 2005. We believe the
market rates for longer-term securities already are close to being fairly
valued. As a result, we anticipate that the yield curve - which measures
the relationship between short-term and longer-term interest rates - likely
will flatten during the year as short-term rates move up.
Overall, we believe that wide diversification among different types of
fixed-income investments should continue to be a sound strategy.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
CONVERTIBLE CORPORATE BONDS - 0.7%
TECHNOLOGY HARDWARE & EQUIPMENT - 0.3%
ELECTRONIC MANUFACTURING SERVICES - 0.3%
150,000 B+/Ba3 SCI Systems, Inc., 3.0%, 3/15/07 $ 144,750
------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 144,750
------------
SEMICONDUCTORS - 0.4%
SEMICONDUCTOR EQUIPMENT - 0.4%
170,000 NR/NR Brooks Automation, Inc., 4.75%, 6/1/08 $ 165,538
------------
TOTAL SEMICONDUCTORS $ 165,538
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $277,820) $ 310,288
------------
ASSET BACKED SECURITIES - 2.4%
DIVERSIFIED FINANCIALS - 0.9%
CONSUMER FINANCE - 0.0%
DKK 69,512 AA+/Aa1 Realkredit Danmark, 7.0%, 10/1/32 $ 13,387
------------
DIVERSIFIED FINANCIAL SERVICES - 0.8%
216,055 BBB-/Baa2 PF Export Receivable Master Trust, 6.436%, 6/1/15 (144A) $ 214,739
167,399 BBB/Baa2 Power Receivables Finance, 6.29%, 1/1/12 (144A) 176,179
------------
$ 390,918
------------
TOTAL DIVERSIFIED FINANCIALS $ 404,305
------------
UTILITIES - 1.5%
ELECTRIC UTILITIES - 1.5%
233,750 BBB-/Baa3 Empresa Electric Guacolda, 8.625%, 4/30/13 (144A) $ 266,943
425,700 BB-/Ba2 FPL Energy Wind Funding, 6.876%, 6/27/17 (144A) 439,003
------------
TOTAL UTILITIES $ 705,946
------------
TOTAL ASSET BACKED SECURITIES
(Cost $1,085,047) $ 1,110,251
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.9%
DIVERSIFIED FINANCIALS - 0.9%
DIVERSIFIED FINANCIAL SERVICES - 0.9%
160,000 BBB-/Baa3 Tower 2004-1A E, 5.395%, 1/15/34 $ 159,703
265,000 BB/NR Tower 2004-2A F, 6.376%, 12/15/14 263,675
------------
TOTAL DIVERSIFIED FINANCIALS $ 423,378
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $425,000) $ 423,378
------------
CORPORATE BONDS - 53.8%
ENERGY - 5.2%
OIL & GAS DRILLING - 0.9%
ITL 275,000,000 BBB-/Baa2 Petroleos Mexicanos, 7.375%, 8/13/07 $ 211,697
215,000 BB-/Ba3 Stena AB, 7.0%, 12/1/16 (144A) 212,850
------------
$ 424,547
------------
OIL & GAS EQUIPMENT & SERVICES - 0.7%
240,000 BB-/Ba3 Hornbeck Offshore Service , 6.125%, 12/1/14 (144A) $ 241,200
76,000 B+/B3 Transmontaigne, Inc., 9.125%, 6/1/10 82,460
------------
$ 323,660
------------
The accompanying notes are an integral part of these financial statements. 5
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
OIL & GAS EXPLORATION & PRODUCTION - 2.7%
300,000 B-/B3 Baytex Energy, Ltd., 9.625%, 7/15/10 $ 321,000
60,000 BB-/Ba3 Chesapeake Energy Corp., 6.375%, 6/15/15 (144A) 61,650
55,000 B/B2 Comstock Resources, Inc., 6.875%, 3/1/12 56,788
300,000 BB-/Ba2 Gaz Capital SA, 8.625%, 4/28/34 (144A) 351,000
250,000 BBB-/NR Gazprom International SA., 7.201%, 2/1/20 (144A) 264,375
160,000 B+/B2 Stone Energy Corp., 6.75%, 12/15/14 (144A) 159,600
------------
$ 1,214,413
------------
OIL & GAS REFINING MARKETING & TRANSPORTATION - 0.9%
50,000 BB/Ba2 Citgo Petroleum Corp., 6.0%, 10/15/11 (144A) $ 49,750
350,000 BBB/Ba1 Magellan Midstream Partners, L.P., 6.45%, 6/1/14 378,492
------------
$ 428,242
------------
TOTAL ENERGY $ 2,390,862
------------
MATERIALS - 12.2%
ALUMINUM - 0.3%
135,000 B-/B3 Imco Recycling Escrow, 9.0%, 11/15/14 144A $ 140,400
------------
COMMODITY CHEMICALS - 1.1%
110,000 B+/B1 Arco Chemical Co., 9.8%, 2/1/20 $ 125,400
13,000 B+/B1 Lyondell Petrochemical Co., 9.875%, 5/1/07 13,618
300,000 BBB-/Ba1 Methanex Corp., 8.75%, 8/15/12 350,250
------------
$ 489,268
------------
CONSTRUCTION MATERIALS - 1.0%
NOK 3,200,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 $ 423,158
60,000 NR/NR Kvaerner A.S., 0.0%, 10/30/11 48,150
------------
$ 471,308
------------
DIVERSIFIED CHEMICAL - 0.3%
EUR 79,000 CCC+/Caa1 Huntsman ICI Chemicals LLC, 10.125%, 7/1/09 $ 112,881
------------
DIVERSIFIED METALS & MINING - 2.8%
140,000 B+/B1 Freeport-McMoran Copper & Gold, 10.125%, 2/1/10 $ 159,950
250,000 B+/B1 Freeport-McMoran Copper & Gold, 6.875%, 2/1/09 248,438
100,000 BBB/Ba1 Kennametal, Inc., 7.2%, 6/15/12 111,124
400,000 NR/Ba2 Vale Overseas, Ltd., 8.25%, 1/17/34 421,000
340,000 BB/Ba2 Vedenta Resources Plc, 6.625%, 2/22/10 (144A) 344,050
------------
$ 1,284,562
------------
FOREST PRODUCTS - 1.2%
225,000 B+/B1 Ainsworth Lumber, 6.75%, 3/15/14 $ 220,219
300,000 BB-/Ba2 Sino Forest Corp., 9.125%, 8/17/11 (144A) 327,750
------------
$ 547,969
------------
METAL & GLASS CONTAINERS - 0.9%
EUR 100,000 B+/NR Crown Holdings, 10.25%, 3/1/11 $ 157,482
130,000 B+/B1 Greif Brothers Corp., 8.875%, 8/1/12 144,625
100,000 B+/B2 Vitro Envases Norteamerica, 10.75%, 7/23/11 (144A) 103,750
------------
$ 405,857
------------
PAPER PRODUCTS - 0.2%
100,000 BB-/Ba3 Abitibi-Consolidated, Inc., 6.0%, 6/20/13 $ 95,375
------------
6 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
SPECIALTY CHEMICALS - 2.9%
43,000 B+/B1 Arco Chemical Co., 9.375%, 12/15/05 $ 44,935
340,000 BBB-/Baa3 Basell Finance Co., 8.1%, 3/15/27 (144A) 312,800
300,000 BB+/Baa3 Ferro Corp., 7.125%, 4/1/28 297,432
25,000 BB+/Baa3 Ferro Corp., 7.625%, 5/1/13 25,858
170,000 B-/Caa1 OM Group, Inc., 9.25%, 12/15/11 181,050
EUR 140,000 CCC+/B3 Rhodia SA, 8.0%, 6/1/10 196,717
EUR 45,000 CCC+/Caa1 Rhodia SA, 9.25%, 6/1/11 62,161
50,000 B-/B3 Rockwood Specialties Group, 7.625%, 11/15/14 (144A) 69,832
135,000 B-/B3 United Industries Co., 9.875%, 4/1/09 141,244
------------
$ 1,332,029
------------
STEEL - 1.5%
100,000 BB-/B1 CSN Islands IX Corp., 10.0%, 1/15/15 (144A) $ 107,375
225,000 BB-/B1 CSN Islands VIII Corp., 9.75%, 12/16/13 (144A) 240,750
325,000 BBB/B3 Ispat Inland ULC, Floating Rate, 4/1/10 (b) 353,438
------------
$ 701,563
------------
TOTAL MATERIALS $ 5,581,212
------------
CAPITAL GOODS - 4.5%
BUILDING PRODUCTS - 1.0%
215,000 BB/Ba3 Asia Aluminum Holdings, 8.0%, 12/23/11 (144A) $ 217,150
195,000 B/B2 Resolution Performance Products, 8.0%, 12/15/09 209,625
50,000 B-/B3 US Concrete, Inc., 8.375%, 4/1/14 53,875
------------
$ 480,650
------------
CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS - 0.3%
140,000 B-/B3 American Rock Salt Co., LLC, 9.5%, 3/15/14 $ 146,300
------------
CONSTRUCTION & ENGINEERING - 1.3%
225,000 CCC+/Caa1 J Ray McDermott SA, 11.0%, 12/15/13 (144A) $ 250,875
315,000 B+/Ba3 Shaw Group, Inc., 10.75%, 3/15/10 (a) 347,288
------------
$ 598,163
------------
HEAVY ELECTRICAL EQUIPMENT - 0.9%
398,923 NR/NR Ormat Funding Corp., 8.25%, 12/30/20 $ 398,923
------------
INDUSTRIAL MACHINERY - 1.0%
175,000 B/B3 JLG Industries, Inc., 8.375%, 6/15/12 (a) $ 187,250
250,000 B+/Ba2 Sun Sage BV, 8.25%, 3/26/09 (144A) 262,500
------------
$ 449,750
------------
TOTAL CAPITAL GOODS $ 2,073,786
------------
COMMERCIAL SERVICES & SUPPLIES - 1.9%
DIVERSIFIED COMMERCIAL SERVICES - 1.2%
115,000 B-/B3 Cornell Co's., Inc., 10.75%, 7/1/12 $ 122,906
215,000 CCC+/Caa1 Park-Ohio Industries, Inc., 8.375%, 11/15/14 (144A) 215,000
215,000 B+/B2 United Rentals NA, Inc., 7.75%, 11/15/13 (a) 210,700
------------
$ 548,606
------------
ENVIRONMENTAL SERVICES - 0.7%
200,000 B/B3 Clean Harbors, Inc., 11.25%, 7/15/12 (144A) $ 224,000
75,000 B+/B3 IESI Corp., 10.25%, 6/15/12 87,750
------------
$ 311,750
------------
TOTAL COMMERCIAL SERVICES & SUPPLIES $ 860,356
------------
The accompanying notes are an integral part of these financial statements. 7
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
TRANSPORTATION - 3.3%
AIR FREIGHT & COURIERS - 0.3%
130,000 BB-/B1 Petroleum Helicopters, 9.375%, 5/1/09 $ 142,350
------------
AIRLINES - 0.9%
35,000 CCC/Caa2 AMR Corp., 9.0%, 8/1/12 (a) $ 28,175
50,000 CCC/Caa2 AMR Corp., 9.0%, 9/15/16 39,000
85,000 CCC/Caa2 AMR Corp., 9.8%, 10/1/21 61,625
150,000 B/B3 Continental Air, Inc., 7.568%, 12/1/06 123,100
25,000 CCC+/Caa1 Northwest Airlines, Inc., 8.7%, 3/15/07 22,125
150,000 CCC+/Caa1 Northwest Airlines, Inc., 9.875%, 3/15/07 (a) 135,375
------------
$ 409,400
------------
MARINE - 1.0%
100,000 CCC+/B3 Horizon Lines LLC., 9.0%, 11/1/12 (144A) $ 107,500
325,000 B/B2 Ship Finance International, Ltd., 8.5%, 12/15/13 334,750
------------
$ 442,250
------------
RAILROADS - 0.5%
210,000 CCC+/B3 Atlantic Express Transport, 12.0%, 4/15/08 $ 205,013
------------
TRANSPORTATION - 0.3%
150,000 B/B2 TFM SA De CV, 11.75%, 6/15/09 $ 152,813
------------
TRUCKING - 0.3%
145,000 B-/B3 Trailer Bridge, Inc. 9.25%, 11/15/11 (144A) $ 148,988
------------
TOTAL TRANSPORTATION $ 1,500,814
------------
AUTOMOBILES & COMPONENTS - 0.4%
AUTO PARTS & EQUIPMENT - 0.3%
135,000 B-/B3 Tenneco Automotive, Inc., 8.625%, 11/15/14 (144A) $ 140,400
------------
AUTOMOBILE MANUFACTURERS - 0.1%
35,000 BBB-/A3 Ford Motor Credit Co., 5.8%, 1/12/09 $ 35,775
------------
TOTAL AUTOMOBILES & COMPONENTS $ 176,175
------------
CONSUMER DURABLES & APPAREL - 0.6%
TEXTILES - 0.6%
240,000 B+/B1 Invista, 9.25%, 5/1/12 (144A) $ 267,600
------------
TOTAL CONSUMER DURABLES & APPAREL $ 267,600
------------
MEDIA - 0.7%
BROADCASTING & CABLE TELEVISION - 0.7%
150,000 B-/B2 Kabel Deutschland GMBH, 10.625%, 7/1/14 $ 172,500
100,000 B-/B2 Kabel Deutschland, 10.75%, 7/1/14 (144A) 159,518
------------
$ 332,018
------------
TOTAL MEDIA $ 332,018
------------
RETAILING - 0.6%
SPECIALTY STORES - 0.6%
145,000 B/B3 Asbury Automotive Group, 8.0%, 3/15/14 $ 143,550
35,000 B/B3 Pep Boys-Manny Moe Jack, 7.5%, 12/15/14 35,481
100,000 BB/Ba2 Toys "R" Us, 7.375%, 10/15/18 92,500
------------
$ 271,531
------------
TOTAL RETAILING $ 271,531
------------
8 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
FOOD & DRUG RETAILING - 0.5%
DRUG RETAIL - 0.5%
170,000 CCC/Caa1 Duane Reade, Inc., 9.75%, 8/1/11 (144A) $ 154,700
60,000 B-/B2 Duane Reade, Inc., Floating Rate, 12/15/10 (144A) (b) 60,900
------------
$ 215,600
------------
TOTAL FOOD & DRUG RETAILING $ 215,600
------------
FOOD, BEVERAGE & TOBACCO - 0.8%
BREWERS - 0.6%
220,000 BBB/Baa3 Cia Brasileira de Bebida, 8.75%, 9/15/13 $ 256,300
------------
SOFT DRINKS - 0.2%
80,000 BBB/Baa3 Cia Brasileira de Bebida, 10.5%, 12/15/11 $ 100,400
------------
TOTAL FOOD, BEVERAGE & TOBACCO $ 356,700
------------
HEALTH CARE EQUIPMENT & SERVICES - 1.7%
HEALTH CARE DISTRIBUTORS - 0.1%
60,000 BB+/Ba2 Omnicare, Inc., 6.125%, 6/1/13 $ 60,300
------------
HEALTH CARE FACILITIES - 1.3%
350,000 BB+/Ba2 HCA, Inc., 6.3%, 10/1/12 $ 354,972
210,000 BB/Ba1 Mayne Group, Ltd., 5.875%, 12/1/11 (144A) 213,938
------------
$ 568,910
------------
HEALTH CARE SUPPLIES - 0.3%
125,000 B-/Caa1 Inverness Medical Innovation, 8.75%, 2/15/12 $ 130,625
------------
TOTAL HEALTH CARE EQUIPMENT & SERVICES $ 759,835
------------
BANKS - 0.5%
DIVERSIFIED BANKS - 0.5%
200,000 B+/Baa2 Halyk Savings Bank Kazaktn, 8.125%, 10/7/09 (144A) $ 207,500
15,000 BBB+/A1 Skandinaviska Enskilda Bank, 8.125%, 9/6/49 (144A) 16,086
------------
$ 223,586
------------
TOTAL BANKS $ 223,586
------------
DIVERSIFIED FINANCIALS - 7.1%
CONSUMER FINANCE - 0.6%
265,000 A/A2 SLM Corp., Floating Rate, 7/25/14 (b) $ 264,051
------------
INVESTMENT BANKING & BROKERAGE - 2.1%
EUR 200,000 B-/B3 BCP Caylux Holdings Lux SCA, 10.375%, 6/15/14 (144A) $ 316,321
EUR 50,000 B-/B3 BCP Caylux Holdings Lux SCA, 9.625%, 6/15/14 (144A) 56,375
325,000 B+/B1 E*Trade Financial Corp., 8.0%, 6/15/11 (144A) 349,375
250,000 B/B3 Refco Finance Holdings, 9.0%, 8/1/12 (144A) 273,750
------------
$ 995,821
------------
DIVERSIFIED FINANCIAL SERVICES - 2.9%
157,000 CCC/Caa1 Alamosa Delaware, Inc., 0.0%, 7/31/09 $ 170,345
250,000 BB+/Ba2 Aries Vermogensverwaltng, 9.6%, 10/25/14 (144A) 307,500
210,000 B/B3 Dollar Financial Group, 9.75%, 11/15/11 227,850
425,000 BBB-/Baa3 Glencore Funding LLC, 6.0%, 4/15/14 (144A) 411,178
200,000 B/B1 Sheridan Acquisition Corp., 10.25%, 8/15/11 218,750
------------
$ 1,335,623
------------
The accompanying notes are an integral part of these financial statements. 9
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
SPECIALIZED FINANCE - 1.4%
95,000 CCC+/B3 Aventine Renewable Energy, Floating Rate, 12/15/11 (144A) (b) $ 95,950
55,000 B-/Caa1 K&F Acquisition, Inc., 7.75%, 11/15/14 (144A) 56,788
145,000 B+/Ba3 Magnachip Semiconductor, Floating Rate, 12/15/11 (b) 148,988
225,000 NR/Baa3 Tengizchevroil LLP, 6.124%, 11/15/14 (144A) 225,563
100,000 B-/B3 UGS Corp., 10.0%, 6/1/12 (144A) 113,750
------------
$ 641,039
------------
TOTAL DIVERSIFIED FINANCIALS $ 3,236,534
------------
INSURANCE - 3.8%
LIFE & HEALTH INSURANCE - 1.4%
365,000 B+/B2 Presidential Life Corp., 7.875%, 2/15/09 $ 365,000
300,000 BB+/Ba1 Provident Companies, Inc., 7.0%, 7/15/18 (a) 289,875
------------
$ 654,875
------------
MULTI-LINE INSURANCE - 0.5%
210,000 BB/Ba1 Allmerica Financial Corp., 7.625%, 10/15/25 $ 213,929
------------
PROPERTY & CASUALTY INSURANCE - 1.4%
285,000 BBB-/NR Kingsway America, Inc., 7.5%, 2/1/14 $ 295,480
350,000 BB/Baa3 Ohio Casualty Corp., 7.3%, 6/15/14 376,669
------------
$ 672,149
------------
REINSURANCE - 0.5%
200,000 BBB-/Baa3 Odyssey Re Holdings, 7.65%, 11/1/13 $ 220,592
------------
TOTAL INSURANCE $ 1,761,545
------------
REAL ESTATE - 1.3%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.7%
185,000 BB-/Ba3 Forest City Enterprises, 7.625%, 6/1/15 $ 196,100
100,000 CCC+/Caa1 LNR Property Co., 7.25%, 10/15/13 112,624
------------
$ 308,724
------------
REAL ESTATE INVESTMENT TRUSTS - 0.6%
120,000 B+/B3 BF Saul Real Estate Investment Trust, 7.5%, 3/1/14 $ 123,600
155,000 B/B1 Crescent Real Estate, 9.25%, 4/15/09 169,723
------------
$ 293,323
------------
TOTAL REAL ESTATE $ 602,047
------------
SOFTWARE & SERVICES - 0.3%
APPLICATION SOFTWARE - 0.3%
100,000 B-/B3 Riverdeep Group, Ltd., 9.25%, 4/15/11 $ 145,263
------------
TOTAL SOFTWARE & SERVICES $ 145,263
------------
TECHNOLOGY HARDWARE & EQUIPMENT - 0.8%
COMMUNICATIONS EQUIPMENT - 0.8%
50,000 BB+/Ba2 Corning, Inc., 5.9%, 3/15/14 $ 50,111
150,000 BB+/Ba2 Corning, Inc., 6.3%, 3/1/09 157,320
200,000 BB/Ba3 Rogers Wireless, Inc., 7.625%, 12/15/11 (144A) 173,358
------------
$ 380,789
------------
TOTAL TECHNOLOGY HARDWARE & EQUIPMENT $ 380,789
------------
10 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
TELECOMMUNICATION SERVICES - 5.4%
INTEGRATED TELECOMMUNICATION SERVICES - 2.5%
325,000 B+/B2 GCI Inc., 7.25%, 2/15/14 $ 325,000
145,000 B+/B2 Innova S De R.L., 9.375%, 9/19/13 164,938
180,000 B-/B3 NTL Cable Plc., 8.75%, 4/15/14 (144A) 272,470
375,000 NR/Baa3 Tele Norte Leste Participacoes, 8.0%, 12/18/13 386,250
------------
$ 1,148,658
------------
WIRELESS TELECOMMUNICATION SERVICES - 2.9%
200,000 B-/B2 Inmarsat Finance Plc., 7.625%, 6/3/12 $ 208,000
130,000 CCC+/B3 Iwo Escrow Co., Floating Rate, 1/15/12 (144A) (b) 130,975
170,000 CCC+/B3 MetroPCS, Inc., 10.75%, 10/1/11 (144A) 181,900
150,000 B-/B3 Mobifon Holdings, 12.5%, 7/31/10 (144A) 177,937
115,000 BB-/Ba3 Mobile Telesystems Finance, 8.375%, 10/14/10 (144A) 117,300
CAD 240,000 BB/Ba3 Rogers Cantel, Inc., 10.5%, 6/1/06 214,886
275,000 CCC/Caa1 Ubiquitel Operating Co., 9.875%, 3/1/11 308,688
------------
$ 1,339,686
------------
TOTAL TELECOMMUNICATION SERVICES $ 2,488,344
------------
UTILITIES - 2.2% $ 2,488,344
ELECTRIC UTILITIES - 2.2%
150,000 CCC/Caa1 Alamosa Delaware, 8.5%, 1/31/12 $ 163,875
350,000 NR/NR Juniper Generation, 6.79%, 12/31/14 (144A) 349,992
250,000 BBB-/Baa3 Kiowa Power Partners LLC, 5.737%, 3/30/21 (144A) 251,000
250,000 BB-/Ba2 MSW Energy Holdings, 7.375%, 9/1/10 262,500
------------
$ 1,027,367
------------
TOTAL UTILITIES $ 1,027,367
------------
TOTAL CORPORATE BONDS
(Cost $22,963,833) $ 24,651,964
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 24.3%
49,633 AAA/Aaa Federal Home Loan Mortgage Corp., 5.0%, 5/1/34 $ 49,321
79,514 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 10/1/16 82,257
199,797 AAA/Aaa Federal Home Loan Mortgage Corp., 5.5%, 11/1/34 203,100
358,609 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 6/1/17 375,630
20,671 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/33 21,383
86,944 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 11/1/33 89,854
450,000 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 1/1/34 465,083
15,278 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 2/1/33 15,804
951,792 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0%, 8/1/34 983,694
298,548 AAA/Aaa Federal Home Loan Mortgage Corp., 6.0% 11/1/33 308,540
118,338 AAA/Aaa Federal National Mortgage Association, 5.5%, 12/1/18 122,403
67,990 AAA/Aaa Federal National Mortgage Association, 5.5%, 3/1/18 70,325
128,343 AAA/Aaa Federal National Mortgage Association, 5.5%, 4/1/19 132,783
198,134 AAA/Aaa Federal National Mortgage Association, 5.5%, 5/1/34 201,266
166,061 AAA/Aaa Federal National Mortgage Association, 6.0%, 1/1/34 171,799
13,994 AAA/Aaa Federal National Mortgage Association, 6.0%, 2/1/32 14,490
134,097 AAA/Aaa Federal National Mortgage Association, 6.0%, 7/1/17 140,597
14,754 AAA/Aaa Federal National Mortgage Association, 6.0% 11/1/32 15,276
449,455 AAA/Aaa Federal National Mortgage Association, 6.0%, 11/1/33 464,956
9,894 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/31 10,245
145,157 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 150,163
The accompanying notes are an integral part of these financial statements. 11
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (CONT.)
177,250 AAA/Aaa Federal National Mortgage Association, 6.0%, 12/1/33 $ 183,363
AUD 800,000 AAA/Aaa Federal National Mortgage Association, 6.375%, 8/15/07 638,810
11,958 AAA/Aaa Federal National Mortgage Association, 6.5%, 2/1/32 12,554
2,108 AAA/Aaa Federal National Mortgage Association, 6.5%, 7/1/31 2,214
7,397 AAA/Aaa Federal National Mortgage Association, 6.5%, 10/1/31 7,765
1,736 AAA/Aaa Federal National Mortgage Association, 7.0%, 9/1/29 1,842
460 AAA/Aaa Federal National Mortgage Association, 7.5%, 6/1/30 492
188,900 AAA/Aaa Government National Mortgage Association, 4.5%, 5/15/34 184,437
187,405 AAA/Aaa Government National Mortgage Association, 5.5%, 4/20/34 191,324
71,532 AAA/Aaa Government National Mortgage Association, 5.5%, 7/15/34 73,096
496,112 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/19 517,398
497,067 AAA/Aaa Government National Mortgage Association, 5.5%, 10/15/34 507,930
361,022 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/18 380,447
51,042 AAA/Aaa Government National Mortgage Association, 6.0%, 2/15/33 52,935
37,103 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 38,478
110,588 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 114,688
72,794 AAA/Aaa Government National Mortgage Association, 6.0%, 3/15/33 75,546
37,990 AAA/Aaa Government National Mortgage Association, 6.0%, 5/15/17 40,031
35,885 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 37,813
277,895 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/17 292,826
93,191 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 96,646
74,872 AAA/Aaa Government National Mortgage Association, 6.0%, 6/15/33 77,648
62,068 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 64,370
132,790 AAA/Aaa Government National Mortgage Association, 6.0%, 7/15/33 137,713
707,891 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/16 745,964
225,479 AAA/Aaa Government National Mortgage Association, 6.0%, 8/15/19 237,603
150,775 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 156,365
59,656 AAA/Aaa Government National Mortgage Association, 6.0%, 9/15/33 61,867
101,283 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/33 105,039
499,075 AAA/Aaa Government National Mortgage Association, 6.0%, 10/15/34 517,609
13,740 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/30 14,477
43,755 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/33 46,072
192,578 AAA/Aaa Government National Mortgage Association, 6.5%, 1/15/34 202,766
35,569 AAA/Aaa Government National Mortgage Association, 6.5%, 2/15/32 37,476
52,338 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/29 55,163
39,310 AAA/Aaa Government National Mortgage Association, 6.5%, 3/15/32 41,418
81,978 AAA/Aaa Government National Mortgage Association, 6.5%, 5/15/33 86,318
4,190 AAA/Aaa Government National Mortgage Association, 6.5%, 6/15/31 4,415
50,371 AAA/Aaa Government National Mortgage Association, 6.5%, 11/15/32 53,071
2,005 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 2,131
4,892 AAA/Aaa Government National Mortgage Association, 7.0%, 3/15/31 5,200
25,219 AAA/Aaa Government National Mortgage Association, 7.5%, 5/15/23 26,943
182,274 AAA/Aaa Government National Mortgage Association II, 5.5%, 3/20/34 186,087
387,393 AAA/Aaa Government National Mortgage Association II, 6.0%, 11/20/33 401,272
175,000 AAA/Aaa U.S. Treasury Notes, 5.25%, 2/15/29 183,572
120,000 AAA/Aaa U.S. Treasury Notes, 5.375%, 2/15/31 129,759
------------
$ 11,119,922
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(Cost $10,991,307) $ 11,119,922
------------
12 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
FOREIGN GOVERNMENT BONDS - 11.9%
ITL 530,000,000 B+/B1 Banco Nac De Desen Econo, 8.0%, 4/28/10 $ 397,631
CAD 27,000 AAA/Aaa Government of Canada, 4.25%, 9/1/08 23,139
CAD 659,000 AAA/Aaa Government of Canada, 4.25%, 9/1/09 562,973
CAD 315,000 AAA/Aaa Government of Canada, 5.25%, 6/1/12 281,542
EUR 343,000 AAA/Aaa Government of France, 3.0%, 7/25/09 556,888
SEK 1,665,000 TSY/Aaa Government of Sweden, 5.25%, 3/15/11 274,070
SEK 2,955,000 TSY/Aaa Government of Sweden, 5.5%, 10/8/12 496,200
SEK 2,150,000 TSY/Aaa Government of Sweden, 8.0%, 8/15/07 365,979
JPY 10,000,000 TSY/Tsy Government of Japan, 1.5%, 1/20/05 97,729
NOK 1,320,000 TSY/Aaa Norwegian Government, 6.0%, 5/16/11 246,852
NOK 3,410,000 TSY/Aaa Norwegian Government, 6.75%, 1/15/07 609,083
AUD 532,000 AA/Aa2 Ontario Province, 5.5%, 4/23/13 409,458
AUD 207,000 NR/Aaa Queensland Treasury, 6.0%, 8/14/13 167,600
315,605 BB+/Ba2 Republic of Columbia, 9.75%, 4/9/11 362,946
250,000 BB/Ba1 Republic of Panama, 7.25%, 3/15/15 260,000
185,000 BB-/Ba3 Republic of Peru, 8.375%, 5/3/16 207,200
DEM 180,000 BBB-/Baa3 United Mexican States, 8.25%, 2/24/09 146,377
------------
$ 5,465,667
------------
TOTAL FOREIGN GOVERNMENT BONDS
(Cost $4,501,809) $ 5,465,667
------------
SOVEREIGN ISSUES - 0.6%
75,000 CC/B3 Domincan Republic, 9.04%, 1/23/13 (144A) $ 62,063
100,000 BB-/Ba3 Republic of Peru, 9.875%, 2/06/15 122,500
75,000 BB-/Ba3 Republic of Peru, 9.125%, 2/21/12 87,375
------------
TOTAL SOVEREIGN ISSUES
(Cost $266,679) $ 271,938
------------
MUNICIPAL BONDS - 1.9%
GOVERNMENT - 1.0%
90,000 BBB/Baa3 Golden State Tobacco Securitization, 6.75%, 6/1/39 $ 90,050
175,000 B/Caa2 New Jersey Economic Development Authority Special Facility Revenue,
7.0%, 11/15/30 154,257
105,000 BBB/Baa3 Tobacco Settlement Authority Washington, 6.625%, 6/1/32 103,106
60,000 BBB/Baa3 Tobacco Settlement Financing Corp., 7.0%, 6/1/41 60,602
100,000 NR/NR Wayne Charter County SPL, 6.75%, 12/1/15 87,404
------------
$ 495,419
------------
MUNI AIRPORT - 0.1%
50,000 B/Caa2 New Jersey Economic Development Authority, 6.25%, 9/15/29 $ 40,630
------------
MUNI TOBACCO - 0.7%
300,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/43 $ 279,105
50,000 BBB/Baa3 Tobacco Settlement Financing Corp., NJ, 6.25%, 6/1/42 46,411
------------
$ 325,516
------------
TOTAL GOVERNMENT $ 861,565
------------
TOTAL MUNICIPAL BONDS ------------
(Cost $773,830) $ 861,565
------------
The accompanying notes are an integral part of these financial statements. 13
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL S&P/MOODY'S
AMOUNT RATINGS
USD ($) (UNAUDITED) VALUE
TEMPORARY CASH INVESTMENT - 2.6%
SECURITY LENDING COLLATERAL - 2.6%
1,191,203 Securities Lending Investment Fund, 2.18% $ 1,191,203
------------
TOTAL TEMPORARY CASH INVESTMENT
(Cost $1,191,203) $ 1,191,203
------------
TOTAL INVESTMENTS IN SECURITIES - 99.9%
(Cost $42,476,528)(b) $ 45,406,176
------------
OTHER ASSETS AND LIABILITIES - 0.1% $ 434,717
------------
TOTAL NET ASSETS - 100.0% $ 45,840,892
------------
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, 2004, the
value of these securities amounted to $10,546,821 or 24.1% of net assets.
N/R Not rated by either S&P or Moody's
TSY Treasury Security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
33,250 AMR Corp., 9.0%, 8/1/12 $ 26,766
166,250 JLG Industries, Inc., 8.375%, 6/15/12 177,888
142,250 Northwest Airlines, Inc., 9.875%, 3/15/07 128,381
285,000 Provident Companies, Inc., 7.0%, 7/15/18 276,450
299,250 Shaw Group, Inc., 10.75%, 3/15/10 329,174
204,250 United Rentals NA, Inc., 7.75%, 11/15/13 200,165
-----------
TOTAL $ 1,138,824
===========
(b) Debt obligation initially issued at one coupon which converts to a higher
coupon at a specified date. The rate shown is the rate at period end.
NOTE:Principal amounts are denominated in U.S. dollars unless otherwise noted.
DEM Deutsche Marks.
EURO Euro
SEK Swedish Krona.
NOK Norwegian Kroner.
ITL Italian Lira.
CAD Canadian Dollar.
AUD Australian Dollar.
JPY Japanese Yen.
DKK Danish Kroner
14 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED 5/1/03 TO
CLASS II (a) 12/31/04 12/31/03
Net asset value, beginning of period $ 11.01 $ 10.41
--------- -------
Increase from investment operations:
Net investment income $ 0.55 $ 0.41
Net realized and unrealized gain on investments and foreign currency transactions 0.49 0.62
--------- -------
Net increase from investment operations $ 1.04 $ 1.03
Distributions to shareowners:
Net investment income (0.63) (0.43)
Tax return of capital (0.16) --
---------- -------
Net increase in net asset value $ 0.25 $ 0.60
---------- -------
Net asset value, end of period $ 11.26 $ 11.01
========= =======
Total return* 9.95% 10.90%
Ratio of net expenses to average net assets+ 1.29% 1.49%**
Ratio of net investment income to average net assets+ 5.49% 5.08%**
Portfolio turnover rate 53% 68%
Net assets, end of period (in thousands) $ 25,027 $ 3,663
Ratios with no waiver of management fees and assumption of expenses by
PIM and no reduction for fees paid indirectly:
Net expenses 1.29% 1.49%**
Net investment income 5.49% 5.08%**
(a) Class 2 shares were first publicly offered on May 1, 2003.
* 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 and no sales
charges. Total return would be reduced if sales charges were taken into
account.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements. 15
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $1,138,824) (Cost $42,476,528) $ 45,406,176
Cash 529,987
Foreign currencies, at value (Cost $452,063) 590,712
Receivables--
Investment securities sold 79,688
Fund shares sold 132,751
Dividends, interest and foreign taxes withheld 678,848
Other 2,899
------------
Total assets $ 47,419,061
------------
LIABILITIES:
Payables--
Investment securities purchased $ 181,909
Fund shares repurchased 3,445
Dividends 2,797
Upon return for securities loaned 1,191,203
Forward foreign currency settlement contracts, net 115,451
Due to affiliates 32,524
Accrued expenses 50,840
------------
Total liabilities $ 1,578,169
------------
NET ASSETS:
Paid-in capital $ 41,872,240
Undistributed net investment income (loss) 311,542
Accumulated undistributed net realized gain (loss) 794,850
Net unrealized gain (loss) on:
Investments 2,929,648
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (67,388)
------------
Total net assets $ 45,840,892
------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 20,813,544
Shares outstanding 1,848,427
------------
Net asset value per share $ 11.26
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 25,027,348
Shares outstanding 2,222,576
------------
Net asset value per share $ 11.26
16 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $3,344) $ 2,185,006
Income on securities loaned, net 3,989
-----------
Total investment income $ 2,188,995
-----------
EXPENSES:
Management fees $ 214,069
Transfer agent fees and expenses 2,896
Distribution fees (Class II) 31,944
Administrative reimbursements 18,500
Custodian fees 21,476
Professional fees 59,577
Printing expense 21,159
Miscellaneous 2,272
-----------
Total expenses $ 371,893
-----------
Net expenses $ 371,893
-----------
Net investment income (loss) $ 1,817,102
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 1,126,982
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (45,775)
-----------
$ 1,081,207
-----------
Change in net unrealized gain or (loss) from:
Investments $ 817,291
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies (49,594)
-----------
$ 767,697
-----------
Net gain (loss) on investments, futures contracts and foreign currency transactions $ 1,848,904
===========
Net increase (decrease) in net assets resulting from operations $ 3,666,006
===========
The accompanying notes are an integral part of these financial statements. 17
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 1,817,102 $ 1,068,721
Net realized gain (loss) on investments 1,081,207 713,901
Change in net unrealized gain or (loss) on investments, futures contracts and
foreign currency transactions 767,697 1,695,515
------------ ------------
Net increase (decrease) in net assets resulting from operations $ 3,666,006 $ 3,478,137
------------ ------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (1,210,066) $ (1,087,224)
Class II (733,628) (52,386)
Net realized gain
Class I (294,736) --
Class II (171,204) --
------------ ------------
Total distributions to shareowners $ (2,409,634) $ (1,139,610)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 25,764,732 $ 11,160,025
Reinvestment of distributions 2,367,418 1,105,582
Cost of shares repurchased (6,523,479) (6,320,659)
------------ ------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 21,608,671 $ 5,944,948
------------ ------------
Net increase (decrease) in net assets $ 22,865,043 $ 8,283,475
------------ ------------
NET ASSETS:
Beginning of year $ 22,975,849 $ 14,692,374
------------ ------------
End of year $ 45,840,892 $ 22,975,849
============ ============
Undistributed net investment income (loss), end of year $ 311,542 $ 152,569
============ ============
18 The accompanying notes are an integral part of these financial statements.
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Strategic Income VCT Portfolio (The Portfolio) is a portfolio of
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate diversified
portfolios, fourteen of which issue both Class I and Class II shares
(collectively, the Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity
Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value II Portfolio) (Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
The portfolio commenced operations on May 1, 2003. Portfolio shares may only be
purchased by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts, and may also be purchased by qualified
pension and retirement plans.
The investment objective of Strategic Income Portfolio is to produce a high
level of current income.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with U.S.
generally accepted accounting principles that require the management of the
Trust to, among other things, make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of income, expenses, gains and losses during the reporting years. Actual
results could differ from those estimates. 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
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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. 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 also may 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 exchange.
At December 31, 2004, there were no fair valued securities. Temporary cash
investments are valued at amortized cost.
19
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
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
securities are reported net of unrecoverable foreign taxes withheld at the
applicable country rates.
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 quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Portfolio 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, 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. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
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.
D. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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, 2004, 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 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.
20
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED NET
INVESTMENT INCOME REALIZED
PORTFOLIO (LOSS) GAIN (LOSS) PAID-IN CAPITAL
- -------------------------------------- ----------------- --------------- ---------------
Pioneer Strategic Income VCT Portfolio $ 285,565 $ (285,565) $ (0)
========= ========== ====
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,196,847 $ 1,139,610
Long-Term capital gain 212,787 --
----------- -----------
$ 2,409,634 $ 1,139,610
Return of Capital -- --
----------- -----------
Total distributions $ 2,409,634 $ 1,139,610
=========== ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed ordinary income $ 218,814
Undistributed long-term gain/(capital loss carryforward) 773,272
Unrealized appreciation (depreciation) 2,976,566
-----------
Total $ 3,968,652
===========
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales and the mark to market of foreign currency contracts.
E. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (UniCredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral
21
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
which is maintained by the custodian and earns income in the form of
negotiated lenders' fees. The Portfolio also continues to receive payments
in lieu of interest or dividends on the securities loaned. Gain or loss in
the fair value of the securities loaned that may occur during the term of
the loan, will be for account of the Trust. The loans are secured by
collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
G. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.65% of the Portfolio's average daily net assets.
The portion of the Portfolios' expenses attributable to Class II will be reduced
only to the extent such expenses are reduced for Class I shares (or Class II
shares).
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. At December 31, 2004, $27,040 was payable
to PIM related to management fees, administrative fees and certain other
services, and is included in due to affiliates.
3. TRANSFER AGENT
(PIMSS), a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $271 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$5,213 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Strategic Income Portfolio $ 42,477,674 $ 3,004,383 $ (75,881) $ 2,928,502
============ =========== ========== ============
22
PIONEER STRATEGIC INCOME VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $25,999,621 and $12,441,146, respectively. The cost of
purchases and the proceeds from sales of U.S. Government obligations were
$10,658,816 and $4,517,261, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
STRATEGIC INCOME PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------ ---------- -----------
CLASS I:
Shares sold 453,590 $ 4,955,590 712,653 $ 7,385,764
Reinvestment of distributions 134,927 1,462,624 100,561 1,053,192
Shares repurchased (494,192) (5,414,640) (579,108) (6,045,569)
--------- ------------ ---------- -----------
Net increase 94,325 $ 1,002,986 234,106 $ 2,393,387
========= ============ ========== ===========
CLASS II:
Shares sold 1,907,997 $ 20,809,730 353,538 $ 3,774,292
Reinvestment of distributions 83,281 904,794 4,862 52,365
Shares repurchased (101,494) (1,108,839) (25,608) (275,096)
--------- ------------ ---------- -----------
Net increase 1,889,784 $ 20,605,685 332,792 $ 3,551,561
========= ============ ========== ===========
8. FORWARD FOREIGN CURRENCY CONTRACTS
During the year ended December 31, 2004, certain Portfolios had entered into
various contracts that obligate the Portfolios to deliver currencies at
specified future dates. At the maturity of a contract, the Portfolios must make
delivery of the foreign currency. Alternatively, prior to the settlement date of
a portfolio hedge, the Portfolio may close out such contracts by entering into
an offsetting hedge contract. As of December 31, 2004, the Portfolio had no
outstanding settlement hedges.
Outstanding forward portfolio hedge contracts were as follows:
NET
UNREALIZED
CONTRACTS TO IN EXCHANGE SETTLEMENT GAIN
PORTFOLIO DELIVER FOR DATE VALUE (LOSS)
- -------------------------- --------------- ----------- ---------- ------------ ----------
Strategic Income Portfolio AUD (200,000) $ 151,140 2/8/05 $ (156,097) $ (4,957)
Strategic Income Portfolio EURO (1,551,000) $ 1,995,676 1/26/05 $ (2,106,170) $ (110,494)
23
PIONEER STRATEGIC 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 CLASS II SHAREOWNERS OF PIONEER STRATEGIC INCOME VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Strategic Income VCT Portfolio, one of
the portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of
December 31, 2004, 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 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. An audit
includes 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, 2004, 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 Strategic Income VCT Portfolio of the Pioneer Variable Contracts Trust
at December 31, 2004, 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 the periods indicated therein, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
24
PIONEER STRATEGIC INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the
affairs of the Trust. The officers of the Trust are responsible for the
CUSTODIAN Trust's operations. The Trust's 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 Portfolio within the meaning
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM of the Investment Company Act of 1940 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 serves as a
PRINCIPAL UNDERWRITER trustee of each of the 73 U.S. registered investment portfolios for
Pioneer Funds Distributor, Inc. which Pioneer Investment Management, Inc. ("Pioneer") serves as
investment adviser (the "Pioneer Funds"). The address for all Interested
LEGAL COUNSEL Trustees and all officers of the Portfolio is 60 State Street, Boston,
Wilmer Cutler Pickering Hale and Dorr LLP Massachusetts 02109.
SHAREOWNER SERVICES AND TRANSFER The Trust's statement of additional information provides more detailed
Pioneer Investment Management Shareholder Services, Inc. information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
Proxy Voting Policies and Procedures of the Trust are available without
charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
John F. Cogan, Chairman of the Serves until Trustee and President Serves until Director of Harbor Global
Jr. (78)* Board, Trustee successor trustee is retirement or removal; Deputy Chairman Company, Ltd.
and President elected or earlier and a Director of Pioneer Global Asset
retirement or removal 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; Director of Pioneer Alternative
Investment Management Limited (Dublin);
President and a Director of Pioneer
Alternative Investment Management
(Bermuda) Limited and affiliated funds;
President and Director of Pioneer Funds
Distributor, Inc. ("PFD"); President of
all of the Pioneer Funds; and Of Counsel
(since 2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and Dorr LLP
(counsel to PIM-USA and the Pioneer
Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood Trustee and Serves until President and Chief Executive Officer, None
(52)** Executive Vice successor trustee is PIM-USA since May 2003 (Director since
President elected or earlier January 2001); President and Director of
retirement or removal Pioneer since May 2003; Chairman and
Director of Pioneer Investment Management
Shareholder Services, Inc. ("PIMSS")
since May 2003; Executive Vice President
of all of the Pioneer Funds since June
2003; Executive Vice President and Chief
Operating Officer of PIM-USA, November
2000 to May 2003; Executive Vice
President, Chief Financial Officer and
Treasurer, John Hancock Advisers, L.L.C.,
Boston, MA, November 1999 to November
2000; Senior Vice President and Chief
Financial Officer, John Hancock Advisers,
L.L.C., April 1997 to November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
25
PIONEER STRATEGIC INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS TRUSTEE
David R. Bock Trustee since Serves until a Senior Vice President and Chief Financial Director of The Enterprise
**(61)3050 K. 2005. successor trustee Officer, I-trax, Inc. (publicly traded Social Investment Company
Street NW, is elected or earlier health care services company) (privately-held affordable
Washington, retirement or (2001-present); Managing Partner, Federal housing finance company);
DC 20007 removal. City Capital Advisors (boutique merchant Director of New York Mortgage
bank)(1995 -2000; 2002 to 2004); Trust (publicly traded
Executive Vice President and Chief mortgage REIT)
Financial Officer, Pedestal Inc.
(internet-based mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush Trustee since Serves until President, Bush International Director of Brady Corporation
(56)3509 2000. successor trustee (international financial advisory firm) (industrial identification
Woodbine is elected or and specialty coated material
Street,Chevy earlier retirement products manufacturer),
Chase, MD or removal Millennium Chemicals, Inc.
20815 (commodity chemicals),
Mortgage Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco Holdings,
Inc. (tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Trustee since Serves until Founding Director, The Winthrop Group, None
Graham(57) 2000. successor trustee Inc. (consulting firm); Professor of
1001 is elected or Management, Faculty of Management, McGill
Sherbrooke earlier retirement University
Street West, or removal
Montreal,
Quebec,
Canada H3A 1G5
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Trustee since Serves until President and Chief Executive Officer, Director of New America High
Piret(56) One 1995. successor trustee Newbury, Piret & Company, Inc. Income Fund, Inc. (closed-end
Boston Place, is elected or (investment banking firm) investment company)
28th Floor, earlier retirement
Boston, MA or removal
02108
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Trustee since Serves until Senior Counsel, Sullivan & Cromwell (law Director, The Swiss Helvetia
West(76) 125 1995. successor trustee firm) Fund, Inc. (closed-end
Broad Street, is elected or investment company) and
New York, NY earlier retirement AMVESCAP PLC (investment
10004 or removal managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop Trustee since Serves until President, John Winthrop & Co., Inc. None
(68)One North September, successor trustee (private investment firm)
Adgers Wharf, 2000. is elected or
Charleston, SC earlier retirement
29401 or removal
- ------------------------------------------------------------------------------------------------------------------------------------
26
PIONEER STRATEGIC INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
NAME AND AGE POSITIONS HELD TERM OF OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
WITH THE TRUST YEARS THIS TRUSTEE
Dorothy E. Secretary Serves at the Secretary of PIM-USA; Senior Vice None
Bourassa (57) discretion of the President - Legal of Pioneer; and
Board Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000;
Secretary of all of the Pioneer Funds
since September 2003 (Assistant Secretary
from November 2000 to September 2003);
and Senior Counsel, Assistant Vice
President and Director of Compliance of
PIM-USA from April 1998 through October
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Assistant Serves at the Assistant Vice President and Senior None
Kelley (40) Secretary discretion of the Counsel of Pioneer since July 2002; Vice
Board President and Senior Counsel of BISYS
Fund Services, Inc. (April 2001 to June
2002); Senior Vice President and Deputy
General Counsel of Funds Distributor,
Inc. (July 2000 to April 2001; Vice
President and Associate General Counsel
from July 1996 to July 2000); Assistant
Secretary of all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Assistant Serves at the Partner, Wilmer Cutler Pickering Hale and None
Phelan (47) Secretary discretion of the Dorr LLP; Assistant Secretary of all
Board Pioneer Funds since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave Treasurer Serves at the Vice President - Fund Accounting, None
(59) discretion of the Administration and Custody Services of
Board Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Assistant Serves at the Deputy Treasurer of Pioneer since 2004; None
Bradley (45) Treasurer discretion of the Treasurer and Senior Vice President, CDC
Board IXIS Asset Management Services from 2002
to 2003; Assistant Treasurer and Vice
President, MFS Investment Management from
1997 to 2002; and Assistant Treasurer of
all of the Pioneer Funds since November
2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Assistant Serves at the Assistant Vice President - Fund None
Presutti(39) Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since November 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan Assistant Serves at the Fund Accounting Manager - Fund None
(46) Treasurer discretion of the Accounting, Administration and Custody
Board Services of Pioneer; and Assistant
Treasurer of all of the Pioneer Funds
since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
27
PIONEER STRATEGIC INCOME VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST FIVE OTHER DIRECTORSHIPS HELD BY
NAME AND AGE WITH THE TRUST TERM OF OFFICE YEARS THIS OFFICER
Katharine Kim Assistant Serves at the Fund Administration Manager - Fund None
Sullivan (31) Treasurer discretion of the Accounting, Administration and Custody
Board Services since June 2003; Vice President
- Mutual Fund Operations Assistant of
State Street Corporation from June2002 to
June 2003 (formerly Deutsche Bank Asset
Management); Pioneer Fund Accounting,
Administration and Custody Services (Fund
Accounting Manager from August 1999 to
May 2002, Fund Accounting Services
Supervisor from 1997 to July 1999);
Assistant Treasurer of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Chief Serves at the Chief Compliance Officer of Pioneer None
Wolin (37) Compliance discretion of the (Director of Compliance and Senior
Officer Board Counsel from November 2000 to September
2004); Vice President and Associate
General Counsel of UAM Fund Services,
Inc. (mutual fund administration company)
from February 1998 to November 2000; and
Chief Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
28
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
29
[LOGO] PIONEER
INVESTMENTS(R)
[PIONEER INVESTEMNTS(R) LOGO]
PIONEER VARIABLE CONTRACTS TRUST
PIONEER VALUE VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
PIONEER VARIABLE CONTRACTS TRUST
TABLE OF CONTENTS
Pioneer Value VCT Portfolio
Portfolio and Performance Update 2
Comparing Ongoing Portfolio Expenses 3
Portfolio Management Discussion 4
Schedule of Investments 5
Financial Statements 8
Notes to Financial Statements 12
Report of Independent Registered Public Accounting Firm 16
Trustees, Officers and Service Providers 17
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
WWW.PIONEERFUNDS.COM.
THE TRUST FILES A COMPLETE STATEMENT 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 VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO UPDATE 12/31/04
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[PIE CHART]
U.S. Common Stocks 91.9%
International Common Stocks 1.8%
Depositary Receipts for International Stocks 6.3%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[PIE CHART]
Financials 34.0%
Energy 11.7%
Consumer Discretionary 11.6%
Industrials 10.9%
Information Technology 6.9%
Consumer Staples 6.6%
Telecommunication Services 5.9%
Health Care 5.7%
Materials 5.5%
Utilities 1.2%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Citigroup, Inc. 4.79%
2. Bank of America Corp. 3.99
3. Merrill Lynch & Co., Inc. 3.18
4. Freddie Mac 2.92
5. Time Warner, Inc. 2.57
The Portfolio is actively managed, and current holdings may be different.
PERFORMANCE UPDATE 12/31/04
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 13.40 $ 12.04
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 12/31/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.0065 $ 0.0051 $ -
PERFORMANCE OF A $10,000 INVESTMENT
The following chart shows the change in value of an investment made in PIONEER
VALUE 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.
[LINE GRAPH]
PIONEER VALUE RUSSELL 1000
VCT PORTFOLIO VALUE INDEX
------------- ------------
5/03 10,000 $ 10,000
12/03 12,040 $ 12,562
12/04 13,413 $ 14,634
The Russell 1000 Value Index measures the performance of the value-oriented
stocks in the Russell 1000 Index. Index returns are calculated monthly, assume
reinvestment of dividends and, unlike Portfolio returns, do not reflect any
fees, expenses or sales charges. You cannot invest directly in any Index.
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
NET ASSET VALUE
Life-of-Class 19.22%
(5/1/03)
1 Year 11.40
All total returns shown assume reinvestment of distributions at net asset value.
Please refer to the variable product's annual report for performance that
reflects the deduction of the variable product's fees and charge. 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.pioneerfunds.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 fund 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 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 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 VALUE VCT PORTFOLIO
Based on actual returns from July 1, 2004 through December 31, 2004.
SHARE CLASS II
- ----------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,079.77
Expenses Paid During Period* $ 7.78
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% 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 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). 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 VALUE VCT PORTFOLIO
Based on a hypothetical 5% return per year before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS II
- ----------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,017.60
Expenses Paid During Period* $ 7.55
* Expenses are equal to the Portfolio's annualized expense ratio of 1.49% 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 VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
Portfolio Manager J. Rodman Wright describes the economic background and
investment strategies that affected results for Pioneer Value VCT Portfolio
through 2004's market swings.
Q. WHAT WAS THE INVESTMENT BACKGROUND, AND HOW DID THE PORTFOLIO PERFORM
DURING THE PERIOD?
A. Stocks made little progress for much of last year, until uncertainties
about the presidential election faded and oil prices backed down from
their record highs. A late year rally then drove major stock indices into
the black for the second straight year. For the twelve months ended
December 31, 2004, the Portfolio returned 11.40% at net asset value. This
result trailed the Portfolio's benchmark, the Russell 1000 Value Index,
which returned 16.49% over the same period.
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.
Q. WHICH SECTORS OR STOCKS HAD THE GREATEST IMPACT ON RESULTS?
A. In technology, stock selection was productive despite weakness in the
sector; Symantec's takeover of Veritas Software was key. Similarly, the
acquisition of AT&T Wireless by Cingular aided results in
telecommunications, but Bell South was down slightly. Our largest decliner
was insurer Marsh & McLennan, which came under intense scrutiny from
regulators over commission payment practices and other issues.
In energy, our modestly overweight position and good stock selection both
added to results. High oil prices fed gains at Transocean, a deepwater
driller that works under contract to major oil companies. Fees for
drilling platforms have tracked the rising cost of oil. Expensive oil also
favored Suncor Energy, a Canadian producer, whose costly process for
extracting oil from sand and shale deposits benefits disproportionately
from rising prices.
Avoiding the struggling automobile sector was beneficial, but performance
suffered in other consumer areas. Electronics conglomerate Philips NV fell
as slack demand pushed down prices of semiconductors. Media stocks,
including Viacom and Clear Channel also lagged. Supermarkets, including
Kroger, declined under pressure from labor issues and from Walmart's
expansion of its grocery initiatives. And discount retailer Kohl's sought
to overcome difficult times by revamping its stores and merchandise lines.
We were overweighted in the underperforming health care sector. Recall of
an important arthritis treatment drove Pfizer down. We had more success
with Merck, however, investing while pessimism was greatest following the
withdrawal of Vioxx. Merck's price recovered some lost ground later in the
period.
Industrial conglomerate Tyco Industries boosted returns as it continued
its transition from troubled turnaround candidate to successful operating
company. Can-maker Ball benefited as beverage consumption increased during
Europe's unusually warm summer. Ball also bought back some of its shares,
a step that investors welcomed.
Mortgage originator Countrywide Financial was a solid contributor as fears
that higher mortgage rates would choke off demand never materialized.
Regulatory problems drove down shares of the Federal Home Loan Mortgage
Corporation, known as Freddie Mac. We acquired shares when valuations
sank; Freddie Mac's price recovered later in the year and helped the
Portfolio's performance. Providian, which issues credit cards to consumers
with questionable credit, tightened financial controls and grew its volume
of receivables.
Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. We are fairly optimistic about the economy, and prospects for large-cap
stocks also appear positive. Last year's gains trailed the growth in
corporate earnings, resulting in a more rationally priced equity market
than was the case a year ago. Interest rates remain low in absolute terms.
Energy prices may slip in 2005, as supplies seem adequate and there is
unused capacity in oil-producing nations. After the market's focus on
speculative issues in 2003 and on profitable smaller companies in 2004, we
think bigger, stronger companies may draw attention next year. We are
optimistic that large-cap stocks may perform well in the year ahead.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
Call 800-688-9915 or visit www.pioneerfunds.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 VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04
SHARES VALUE
COMMON STOCKS - 98.0%
ENERGY - 11.5%
INTEGRATED OIL & GAS - 6.5%
2,088 BP Amoco Plc. (A.D.R.) $ 121,939
2,768 ConocoPhillips 240,345
3,324 ChevronTexaco Corp. 174,543
2,821 Occidental Petroleum Corp. 164,634
----------
$ 701,461
----------
OIL & GAS DRILLING - 1.6%
2,010 ENSCO International, Inc. $ 63,797
1,002 Nabors Industries, Inc.* 51,393
1,385 Transocean Offshore, Inc.* 58,710
----------
$ 173,900
----------
OIL & GAS EXPLORATION & PRODUCTION - 3.4%
1,250 Apache Corp. $ 63,213
1,047 Anadarko Petroleum Corp. 67,856
4,522 Devon Energy Corp. 175,996
1,921 Suncor Energy, Inc. 68,003
----------
$ 375,068
----------
TOTAL ENERGY $1,250,429
----------
MATERIALS - 5.4%
COMMODITY CHEMICALS - 1.1%
2,764 Praxair, Inc. $ 122,031
----------
DIVERSIFIED CHEMICAL - 1.0%
1,550 PPG Industries, Inc. $ 105,648
----------
DIVERSIFIED METALS & MINING - 1.2%
1,847 Freeport-McMoRan Copper & Gold, Inc.
(Class B) $ 70,611
600 Phelps Dodge Corp. 59,352
----------
$ 129,963
----------
METAL & GLASS CONTAINERS - 0.8%
1,950 Ball Corp. $ 85,761
----------
PAPER PRODUCTS - 1.3%
2,110 Weyerhaeuser Co. $ 141,834
----------
TOTAL MATERIALS $ 585,237
----------
CAPITAL GOODS - 7.7%
AEROSPACE & DEFENSE - 1.0%
2,070 Northrop Grumman Corp. $ 112,525
----------
ELECTRICAL COMPONENT & EQUIPMENT - 1.9%
5,480 General Electric Co. $ 200,020
----------
INDUSTRIAL CONGLOMERATES - 3.5%
662 Donaldson Co., Inc. $ 21,568
5,853 Tyco International, Ltd. 209,186
1,420 United Technologies Corp. 146,757
----------
$ 377,511
----------
INDUSTRIAL MACHINERY - 1.3%
1,940 Deere & Co. $ 144,336
----------
TOTAL CAPITAL GOODS $ 834,392
----------
COMMERCIAL SERVICES & SUPPLIES - 1.5%
ENVIRONMENTAL SERVICES - 1.5%
5,471 Waste Management, Inc. $ 163,802
----------
TOTAL COMMERCIAL SERVICES & SUPPLIES $ 163,802
----------
TRANSPORTATION - 1.5%
AIRLINES - 0.8%
5,429 Southwest Airlines Co. $ 88,384
----------
RAILROADS - 0.3%
530 Canadian National Railway Co. $ 32,463
----------
TRUCKING - 0.4%
549 United Parcel Service $ 46,918
----------
TOTAL TRANSPORTATION $ 167,765
----------
HOTELS, RESTAURANTS & LEISURE - 0.4%
RESTAURANTS - 0.4%
1,523 McDonald's Corp. $ 48,827
----------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 48,827
----------
MEDIA - 9.8%
ADVERTISING - 1.3%
1,660 Omnicom Group $ 139,971
----------
BROADCASTING & CABLE TELEVISION - 3.6%
5,770 Clear Channel Communications, Inc. $ 193,237
6,044 Comcast Corp.* 201,144
----------
$ 394,381
----------
MOVIES & ENTERTAINMENT - 4.3%
14,113 Time Warner, Inc.* $ 274,357
5,217 Viacom, Inc. (Class B) 189,847
----------
$ 464,204
----------
PUBLISHING - 0.6%
762 Gannett Co. $ 62,255
----------
TOTAL MEDIA $1,060,811
----------
RETAILING - 1.1%
SPECIALTY STORES - 1.1%
4,570 Foot Locker, Inc. $ 123,070
----------
TOTAL RETAILING $ 123,070
----------
FOOD & DRUG RETAILING - 3.8%
FOOD DISTRIBUTORS - 1.5%
2,880 Cardinal Health, Inc. $ 167,472
----------
The accompanying notes are an integral part of these financial statements.
5
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SCHEDULE OF INVESTMENTS 12/31/04 (continued)
SHARES VALUE
FOOD RETAIL - 2.3%
7,333 Kroger Co.* $ 128,621
452 Nestle SA (Registered Shares) 118,049
----------
$ 246,670
----------
TOTAL FOOD & DRUG RETAILING $ 414,142
----------
FOOD, BEVERAGE & TOBACCO - 1.7%
SOFT DRINKS - 1.7%
3,453 PepsiCo, Inc. $ 180,247
----------
TOTAL FOOD, BEVERAGE & TOBACCO $ 180,247
----------
HOUSEHOLD & PERSONAL PRODUCTS - 1.0%
PERSONAL PRODUCTS - 1.0%
1,678 Kimberly-Clark Corp. $ 110,429
----------
TOTAL HOUSEHOLD & PERSONAL
PRODUCTS $ 110,429
----------
HEALTH CARE EQUIPMENT & SERVICES - 3.5%
HEALTH CARE DISTRIBUTORS - 1.0%
2,500 Wyeth $ 106,475
----------
HEALTH CARE EQUIPMENT - 0.6%
2,010 AstraZeneca Plc (A.D.R.) $ 73,144
----------
HEALTH CARE FACILITIES - 1.9%
4,912 HCA, Inc. $ 196,284
761 Tenet Healthcare Corp.* 8,356
----------
$ 204,640
----------
TOTAL HEALTH CARE EQUIPMENT &
SERVICES $ 384,259
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 2.0%
PHARMACEUTICALS - 2.0%
4,320 IVAX Corp.* $ 68,342
2,035 Merck & Co., Inc. 65,405
3,306 Pfizer, Inc. 88,898
----------
$ 222,645
----------
TOTAL PHARMACEUTICALS &
BIOTECHNOLOGY $ 222,645
----------
BANKS - 9.8%
DIVERSIFIED BANKS - 5.3%
9,044 Bank of America Corp. $ 424,978
2,432 Wells Fargo & Co. 151,149
----------
$ 576,127
----------
REGIONAL BANKS - 1.5%
3,400 Fifth Third Bancorp $ 160,752
----------
THRIFTS & MORTGAGE FINANCE - 3.0%
530 Countrywide Financial Corp. $ 19,615
4,217 Freddie Mac 310,793
----------
$ 330,408
----------
TOTAL BANKS $1,067,287
----------
DIVERSIFIED FINANCIALS - 14.7%
ASSET MANAGEMENT & CUSTODY BANKS - 1.9%
6,263 The Bank of New York Co., Inc. $ 209,309
----------
CONSUMER FINANCE - 2.0%
12,936 Providian Financial Corp.* $ 213,056
----------
INVESTMENT BANKING & BROKERAGE - 6.1%
1,435 Goldman Sachs Group, Inc. $ 149,297
2,004 Lehman Brothers Holdings, Inc. 175,310
5,680 Merrill Lynch & Co., Inc. 339,494
----------
$ 664,101
----------
DIVERSIFIED FINANCIAL SERVICES - 4.7%
10,594 Citigroup, Inc. $ 510,419
----------
TOTAL DIVERSIFIED FINANCIALS $1,596,885
----------
INSURANCE - 6.8%
LIFE & HEALTH INSURANCE - 1.1%
6,525 UNUM Corp. $ 117,059
----------
MULTI-LINE INSURANCE - 1.6%
2,718 American International Group, Inc. $ 178,491
----------
PROPERTY & CASUALTY INSURANCE - 4.1%
550 ACE, Ltd. $ 23,513
2,589 Allstate Corp. 133,903
1,014 Ambac Financial Group, Inc. 83,280
68 Berkshire Hathaway, Inc. (Class B)* 199,648
----------
$ 440,344
----------
TOTAL INSURANCE $ 735,894
----------
SOFTWARE & SERVICES - 3.9%
APPLICATION SOFTWARE - 1.9%
7,190 Veritas Software Corp.* $ 205,275
----------
DATA PROCESSING & OUTSOURCED SERVICES - 2.0%
5,216 First Data Corp. $ 221,889
----------
TOTAL SOFTWARE & SERVICES $ 427,164
----------
TECHNOLOGY HARDWARE & EQUIPMENT - 4.1%
COMMUNICATIONS EQUIPMENT - 1.9%
4,053 Motorola, Inc. $ 69,712
8,288 Nokia Corp. (A.D.R.) 129,873
----------
$ 199,585
----------
COMPUTER HARDWARE - 1.8%
9,360 Hewlett-Packard Co. $ 196,279
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4%
1,707 Koninklijke Philips Electronics $ 45,235
----------
TOTAL TECHNOLOGY HARDWARE &
EQUIPMENT $ 441,099
----------
The accompanying notes are an integral part of these financial statements.
6
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
SHARES VALUE
SEMICONDUCTORS - 0.8%
3,855 Intel Corp. $ 90,168
-----------
TOTAL SEMICONDUCTORS $ 90,168
-----------
TELECOMMUNICATION SERVICES - 5.7%
INTEGRATED TELECOMMUNICATION SERVICES - 2.2%
1,538 Alltel Corp. $ 90,372
5,629 BellSouth Corp. 156,430
-----------
$ 246,802
-----------
WIRELESS TELECOMMUNICATION SERVICES - 3.5%
4,060 Nextel Communications, Inc.* $ 121,800
6,615 Vodafone Group Plc (A.D.R.) 181,119
27,881 Vodafone Group Plc 75,549
-----------
$ 378,468
-----------
TOTAL TELECOMMUNICATION SERVICES $ 625,270
-----------
UTILITIES - 1.2%
ELECTRIC UTILITIES - 1.2%
367 Dominion Resources, Inc. $ 24,861
2,410 Exelon Corp. 106,208
-----------
$ 131,069
-----------
TOTAL UTILITIES $ 131,069
-----------
TOTAL COMMON STOCKS
(Cost $9,714,978) $10,660,891
-----------
TOTAL INVESTMENTS
IN SECURITIES - 98.0%
(Cost $9,714,978) $10,660,891
-----------
OTHER ASSETS AND
LIABILITIES - 2.0% $ 218,094
-----------
TOTAL NET ASSETS - 100.0% $10,878,985
===========
* Non-Income producing security
(A.D.R.) American Depositary Receipt
The accompanying notes are an integral part of these financial statements.
7
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
FINANCIAL HIGHLIGHTS
5/1/03
YEAR ENDED TO
CLASS II 12/31/04 12/31/03 (a)
Net asset value, beginning of period $ 12.04 $ 10.00
------- -------
Increase from investment operations:
Net investment income $ 0.02 $ 0.01
Net realized and unrealized gain on investments and foreign currency transactions 1.36 2.03
------- -------
Net increase from investment operations $ 1.38 $ 2.04
Distributions to shareowners:
Net income $ (0.01) $ --
Net realized gain (0.01) --
------- -------
Net increase in net asset value $ 1.36 $ 2.04
------- -------
Net asset value, end of period $ 13.40 $ 12.04
======= =======
Total return* 11.40% 20.40%
Ratio of net expenses to average net assets+ 1.50% 1.50%**
Ratio of net investment income to average net assets+ 0.27% 0.27%**
Portfolio turnover rate 52% 24%
Net assets, end of period (in thousands) $10,879 $ 1,695
Ratios with no waiver of management fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses 3.61% 10.93%**
Net investment loss (1.85)% (9.16)%**
Ratios with waiver of management fees and assumption of expenses
by PIM and reduction for fees paid indirectly:
Net expenses 1.50% 1.50%**
Net investment income 0.27% 0.27%**
(a) Class II shares were first publicly offered on May 1, 2003.
* 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.
+ Ratios with no reduction for fees paid indirectly.
The accompanying notes are an integral part of these financial statements.
8
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
ASSETS:
Investment in securities, at value (Cost $9,714,978)) $ 10,660,891
Cash 509,918
Receivables --
Fund shares sold 11,278
Dividends, interest and foreign taxes withheld 14,872
Due from Pioneer Investment Management, Inc. 3,204
Other 1,073
------------
Total assets $ 11,201,236
------------
LIABILITIES:
Payables --
Investment securities purchased $ 266,861
Fund shares repurchased 2,510
Due to affiliates 3,950
Accrued expenses 48,930
------------
Total liabilities $ 322,251
------------
NET ASSETS:
Paid-in capital $ 9,867,799
Undistributed net investment income (loss) 12,435
Accumulated undistributed net realized gain (loss) 52,791
Net unrealized gain (loss) on:
Investments 945,913
Forward foreign currency contracts and other assets
and liabilities denominated in foreign currencies 47
------------
Total net assets $ 10,878,985
------------
NET ASSET VALUE PER SHARE:
CLASS II:
(No par value, unlimited number of shares authorized)
Net assets $ 10,878,985
Shares outstanding 812,061
------------
Net asset value per share $ 13.40
The accompanying notes are an integral part of these financial statements.
9
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENT OF OPERATIONS
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $570) $ 95,075
Interest 2,051
----------
Total investment income $ 97,126
----------
EXPENSES:
Management fees $ 41,263
Transfer agent fees 1,384
Distribution fees 13,755
Administrative fees 18,500
Custodian fees 48,091
Professional fees 50,449
Printing 23,086
Miscellaneous 2,125
----------
Total expenses $ 198,653
Less management fees waived and expenses assumed by
Pioneer Investment Management, Inc. (116,128)
----------
Less fees paid indirectly
Net expenses $ 82,525
----------
Net investment income (loss) $ 14,601
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 56,702
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (634)
----------
$ 56,068
----------
Change in net unrealized gain or loss from:
Investments $ 807,113
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies 45
----------
$ 807,158
----------
Net gain (loss) on investments and foreign currency transactions $ 863,226
==========
Net increase (decrease) in net assets resulting
from operations $ 877,827
==========
The accompanying notes are an integral part of these financial statements.
10
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
5/1/03
(COMMENCEMENT
YEAR ENDED OF OPERATIONS
12/31/04 TO 12/31/03
FROM OPERATIONS:
Net investment income $ 14,601 $ 1,095
Net realized gain (loss) on investments 56,068 (2,039)
Change in net unrealized gain or loss on
investments, futures contracts and
foreign currency transactions 807,158 138,802
----------- ----------
Net increase (decrease) in net assets
resulting from operations $ 877,827 $ 137,858
----------- ----------
DISTRIBUTIONS TO SHAREOWNERS
Net investment income:
Class II $ (2,607) $ --
Net realized gain
Class II (2,047) --
----------- ----------
Total distributions to shareowners $ (4,654) $ --
----------- ----------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 8,460,112 $1,646,040
Reinvestment of distributions 4,364 --
Cost of shares repurchased (154,122) (88,440)
----------- ----------
Net increase in net assets
resulting from Fund share transactions $ 8,310,354 $1,557,600
----------- ----------
Net increase in net assets $ 9,183,527 $1,695,458
NET ASSETS:
Beginning of year 1,695,458 --
----------- ----------
End of year $10,878,985 $1,695,458
=========== ==========
Undistributed net investment income (loss), end of year $ 12,435 $ 1,075
=========== ==========
The accompanying notes are an integral part of these financial statements.
11
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Value VCT Portfolio (the Portfolio), a Portfolio of Pioneer Variable
Contracts Trust (the Trust), which is a Delaware statutory trust registered
under the Investment Company Act of 1940 as an open-end management investment
diversified company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap Value Portfolio)
Pioneer Small Company VCT Portfolio (Small Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic Income Portfolio)
Pioneer America Income VCT Portfolio (America Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market Portfolio) (Class I shares
only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp America-Pacific Rim
Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio (Papp Small and Mid Cap
Growth Portfolio) (Class II shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio (Oak Ridge Large Cap
Growth Portfolio) (Class II shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth Opportunities Portfolio)
(Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap Value II Portfolio)
(Class I shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I shares only)
The Value VCT Portfolio commenced operations on May 1, 2003.
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Value Portfolio is to seek capital appreciation.
The financial statements and financial highlights of all other portfolios are
presented in separate books.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust, 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded.
Securities that have not traded on the date of valuation, or securities
for which sale prices are not generally reported, are valued at the mean
between the last bid and asked prices. The Portfolio also may 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 exchange. At December 31, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
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
12
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
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. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount
of income accrued and the U.S. dollar actually received. Further, the
effects of changes in foreign currency exchange rates on investments are
not segregated in the statement of operations from the effects of changes
in market price of those securities but are included with the net realized
and unrealized gain or loss on investments.
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. At December 31, 2004, there were no open
forward foreign currency contracts.
D. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and net realized capital gains, if
any, to its shareowners. Therefore, no federal income tax provision is
required.
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, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of
the portfolio and are designed to present the portfolio's capital accounts
on a tax basis.
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED GAIN PAID-IN
PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL
- --------- -------------- ------------- -------
Pioneer Value VCT Portfolio $ (634) $634 $ (0)
------ ---- ----
13
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
NOTES TO FINANCIAL STATEMENTS 12/31/04 (continued)
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004, and the distributions paid
during the year ended December 31, 2004 and the period ended December 31,
2003 on a tax basis.
2004 2003
---------- --------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 4,654 $ --
Long-Term capital gain -- --
Return of Capital -- --
---------- --------
Total distributions $ 4,654 $ --
========== ========
DISTRIBUTABLE EARNINGS
(ACCUMULATED LOSSES):
Undistributed ordinary income $ 20,095
Undistributed long-term gain/
(capital loss carryforward) 87,163
Unrealized appreciation
(depreciation) 903,928
----------
Total $1,011,186
==========
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
E. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. Distribution fees for Class II shares are calculated
based on the average daily net asset values attributable to Class II
shares of the Portfolio.
F. SECURITIES LENDING
The Portfolio lends securities in its portfolio to certain broker-dealers
or other institutional investors, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain
or loss in the fair value of the securities loaned that may occur during
the term of the loan, will be for account of the Trust. The loans are
secured by collateral of at least 102%, at all times, of the fair value of
the securities loaned. The fair value of the collateral will be adjusted
daily to reflect any price fluctuation in the value of the loaned
securities. The Trust has the right under the lending agreement to recover
the securities on loan from the borrower on demand. The Trust invests cash
collateral in the Securities Lending Investment Fund which is managed by
Brown Brothers Harriman & Co., the Trust's custodian.
G. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued
interest received from counterparties, is required to be at least equal to
or in excess of the value of the repurchase agreement at the time of
purchase. The collateral for all repurchase agreements is held in
safekeeping in the customer-only account of the Portfolio's custodian, or
subcustodian. The Trust's investment adviser, Pioneer Investment
Management, Inc. (PIM), is responsible for determining that the value of
the collateral remains at least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following annual rate of
0.75% of the Portfolio's average daily net assets.
In addition, under the management and administration agreements, certain other
services and costs, including accounting, regulatory reporting and insurance
premiums, are paid by the Portfolio. At December 31, 2004, $1,542 was payable to
PIM related to management fees, administrative fees and certain other services,
and is included in due to affiliates.
Through December 31, 2004, 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 1.50% of the average daily
net assets attributable to class II shares. As of December 31, 2004, there were
no Class I shares outstanding.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $135 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$2,274 payable to PFD at December 31, 2004.
14
PIONEER VALUE VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------- ------------ ------------ ---------------
Value Portfolio $9,757,010 $987,539 $ (83,658) $903,881
---------- -------- --------- --------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $10,917,619 and $2,766,134, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
VALUE PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- --------------- ---------- ---------- ---------- ----------
CLASS II:
Shares sold 683,440 $8,460,112 148,910 $ 1,646,041
Reinvestment of distributions 353 4,364 -- --
Shares repurchased (12,576) (154,122) (8,066) (88,440)
------- ---------- ------- -----------
Net increase 671,217 $8,310,354 140,844 $ 1,557,601
======= ========== ======= ===========
15
PIONEER VALUE 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 CLASS II SHAREOWNERS OF PIONEER VALUE VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Value VCT Portfolio, one of the
portfolios constituting Pioneer Variable Contracts Trust (the "Trust") as of
December 31, 2004, and the related statement of operations for the year then
ended and the statements of changes in net assets, 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. An audit
includes 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, 2004, 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 Value VCT Portfolio of the Pioneer Variable Contracts Trust at December
31, 2004, the results of its operations for the year then ended, and the changes
in its net assets, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
16
PIONEER 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
Wilmer Cutler Pickering Hale and Dorr LLP
SHAREOWNER SERVICES AND TRANSFER
Pioneer Investment Management Shareholder Services, Inc.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The officers of the Trust are responsible for the Trust's operations. The
Trust's Trustees and officers are listed below, together with their principal
occupations during the past five years. Trustees who are interested persons of
the Portfolio within the meaning of the Investment Company Act of 1940 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 73 U.S. registered investment portfolios for which
Pioneer Investment Management, Inc. ("Pioneer") serves as investment adviser
(the "Trust"). The address for all Interested Trustees and all officers of the
Portfolio is 60 State Street, Boston, Massachusetts 02109.
The Trust's statement of additional information provides more detailed
informations regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-255-62927
Proxy Voting Policies and Procedures of the Trust are available without charge,
upon Agent request, by calling our toll free number (1-800-225-6292). This
information is also available online at pioneerfunds.com.
INTERESTED TRUSTEES
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor trustee
Board, Trustee and is elected or earlier retirement
President or removal
Osbert M. Hood (52)** Trustee and Executive Serves until successor trustee
Vice President is elected or earlier retirement
or removal
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Trustee and President Serves until retirement or removal; Director of Harbor Global Company, Ltd.
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; Director
of Pioneer Alternative Investment Management Limited
(Dublin); President and a Director of Pioneer Alternative
Investment Management (Bermuda) Limited and affiliated
funds; President and Director of Pioneer Funds Distributor,
Inc. ("PFD"); President of all of the Pioneer Funds; and
Of Counsel (since 2000, partner prior to 2000), Wilmer Cutler
Pickering Hale and Dorr LLP (counsel to PIM-USA and the
Pioneer Funds).
Osbert M. Hood (52)** President and Chief Executive Officer, PIM-USA since May None
2003 (Director since January 2001); President and Director
of Pioneer since May 2003; Chairman and Director of
Pioneer Investment Management Shareholder Services, Inc.
("PIMSS") since May 2003; Executive Vice President of all of
the Pioneer Funds since June 2003; Executive Vice President
and Chief Operating Officer of PIM-USA, November 2000 to
May 2003; Executive Vice President, Chief Financial Officer
and Treasurer, John Hancock Advisers, L.L.C., Boston, MA,
November 1999 to November 2000; Senior Vice President
and Chief Financial Officer, John Hancock Advisers, L.L.C.,
April 1997 to November 1999.
* Mr. Cogan is an Interested Trustee because he is an officer or director of
Pioneer and certain of its affiliates.
** Mr. Hood is an Interested Trustee because he is an officer or director of
Pioneer and certain of its affiliates.
17
PIONEER VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
INDEPENDENT TRUSTEES
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE
David R. Bock** (61) Trustee since 2005. Serves until a successor
3050 K. Street NW, trustee is elected or earlier
Washington, DC 20007 retirement or removal.
Mary K. Bush (56) Trustee since 2000. Serves until successor trustee
3509 Woodbine Street, is elected or earlier retirement
Chevy Chase, MD 20815 or removal
Margaret B.W. Graham (57) Trustee since 2000. Serves until successor trustee
1001 Sherbrooke Street is elected or earlier retirement
West, Montreal, Quebec, or removal
Canada H3A 1G5
Marguerite A. Piret (56) Trustee since 1995. Serves until successor trustee
One Boston Place, is elected or earlier retirement
28th Floor, or removal
Boston, MA 02108
Stephen K. West (76) Trustee since 1995. Serves until successor trustee
125 Broad Street, is elected or earlier retirement
New York, NY 10004 or removal
John Winthrop (68) Trustee since Serves until successor trustee
One North Adgers Wharf, September, 2000. is elected or earlier retirement
Charleston, SC 29401 or removal
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
David R. Bock** (61) Senior Vice President and Chief Financial Officer, I-trax,
3050 K. Street NW, Inc. (publicly traded health care services company)
Washington, DC 20007 (2001-present); Managing Partner, Federal City Capital
Advisors (boutique merchant bank) (1995-2000; 2002 to 2004);
Executive Vice President and Chief Financial Officer,
Pedestal Inc. (internet-based mortgage trading company)
(2000-2002)
Mary K. Bush (56) President, Bush International (international financial
3509 Woodbine Street, advisory firm)
Chevy Chase, MD 20815
Margaret B.W. Graham (57) Founding Director, The Winthrop Group, Inc.
1001 Sherbrooke Street (consulting firm); Professor of Management, Faculty of
West, Montreal, Quebec, Management, McGill University
Canada H3A 1G5
Marguerite A. Piret (56) President and Chief Executive Officer, Newbury, Piret
One Boston Place, & Company, Inc. (investment banking firm)
28th Floor,
Boston, MA 02108
Stephen K. West (76) Senior Counsel, Sullivan & Cromwell (law firm)
125 Broad Street,
New York, NY 10004
John Winthrop (68) President, John Winthrop & Co., Inc. (private
One North Adgers Wharf, investment firm)
Charleston, SC 29401
NAME AND AGE OTHER DIRECTORSHIPS HELD BY THIS TRUSTEE
David R. Bock** (61) Director of The Enterprise Social Investment Company
3050 K. Street NW, (privately-held affordable housing finance company); Director
Washington, DC 20007 of New York Mortgage Trust (publicly traded mortgage REIT)
Mary K. Bush (56) Director of Brady Corporation (industrial identification and
3509 Woodbine Street, specialty coated material products manufacturer), Millennium
Chevy Chase, MD 20815 Chemicals, Inc. (commodity chemicals), Mortgage Guaranty
Insurance Corporation, and R.J. Reynolds Tobacco Holdings,
Inc. (tobacco)
Margaret B.W. Graham (57) None
1001 Sherbrooke Street
West, Montreal, Quebec,
Canada H3A 1G5
Marguerite A. Piret (56) Director of New America High Income Fund, Inc.
One Boston Place, (closed-end investment company)
28th Floor,
Boston, MA 02108
Stephen K. West (76) Director, The Swiss Helvetia Fund, Inc.
125 Broad Street, (closed-end investment company) and AMVESCAP PLC (investment
New York, NY 10004 managers)
John Winthrop (68) None
One North Adgers Wharf,
Charleston, SC 29401
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
18
PIONEER VALUE VCT PORTFOLIO
TRUST OFFICERS
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE
Dorothy E. Bourassa (57) Secretary Serves at the discretion
of the Board
Christopher J. Kelley (40) Assistant Secretary Serves at the discretion
of the Board
David C. Phelan (47) Assistant Secretary Serves at the discretion
of the Board
Vincent Nave (59) Treasurer Serves at the discretion
of the Board
Mark E. Bradley (45) Assistant Treasurer Serves at the discretion
of the Board
Luis I. Presutti (39) Assistant Treasurer Serves at the discretion
of the Board
Gary Sullivan (46) Assistant Treasurer Serves at the discretion
of the Board
OTHER DIRECTORSHIPS HELD
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary of PIM-USA; Senior Vice President - Legal of None
Pioneer; and Secretary/Clerk of most of PIM-USA's
subsidiaries since October 2000; Secretary of all of the
Pioneer Funds since September 2003 (Assistant Secretary
from November 2000 to September 2003); and Senior
Counsel, Assistant Vice President and Director of Compliance
of PIM-USA from April 1998 through October 2000
Christopher J. Kelley (40) Assistant Vice President and Senior Counsel of Pioneer since None
July 2002; Vice President and Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to June 2002); Senior Vice
President and Deputy General Counsel of Funds Distributor,
Inc. (July 2000 to April 2001; Vice President and Associate
General Counsel from July 1996 to July 2000); Assistant
Secretary of all Pioneer Funds since September 2003
David C. Phelan (47) Partner, Wilmer Cutler Pickering Hale and Dorr LLP; Assistant None
Secretary of all Pioneer Funds since September 2003
Vincent Nave (59) Vice President - Fund Accounting, Administration and None
Custody Services of Pioneer; and Treasurer of all of the
Pioneer Funds (Assistant Treasurer from June 1999 to
November 2000)
Mark E. Bradley (45) Deputy Treasurer of Pioneer since 2004; Treasurer and Senior None
Vice President, CDC IXIS Asset Management Services from
2002 to 2003; Assistant Treasurer and Vice President, MFS
Investment Management from 1997 to 2002; and Assistant
Treasurer of all of the Pioneer Funds since November 2004
Luis I. Presutti (39) Assistant Vice President - Fund Accounting, Administration None
and Custody Services of Pioneer; and Assistant Treasurer of
all of the Pioneer Funds since November 2000
Gary Sullivan (46) Fund Accounting Manager - Fund Accounting, Administration None
and Custody Services of Pioneer; and Assistant Treasurer of
all of the Pioneer Funds since May 2002
19
PIONEER VALUE VCT PORTFOLIO
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (continued)
TRUST OFFICERS
POSITIONS HELD
NAME AND AGE WITH THE TRUST TERM OF OFFICE
Katharine Kim Sullivan (31) Assistant Treasurer Serves at the discretion
of the Board
Martin J. Wolin (37) Chief Compliance Serves at the discretion
Officer of the Board
OTHER DIRECTORSHIPS HELD
NAME AND AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS BY THIS OFFICER
Katharine Kim Sullivan (31) Fund Administration Manager - Fund Accounting, None
Administration and Custody Services since June 2003;
Assistant Vice President - Mutual Fund Operations of
State Street Corporation from June 2002 to June 2003
(formerly Deutsche Bank Asset Management); Pioneer
Fund Accounting, Administration and Custody Services
(Fund Accounting Manager from August 1999 to May 2002,
Fund Accounting Services Supervisor from 1997 to July
1999); Assistant Treasurer of all Pioneer Funds since
September 2003
Martin J. Wolin (37) Chief Compliance Officer of Pioneer (Director of Compliance None
and Senior Counsel from November 2000 to September
2004); Vice President and Associate General Counsel of
UAM Fund Services, Inc. (mutual fund administration
company) from February 1998 to November 2000; and
Chief Compliance Officer of all of the Pioneer Funds.
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
20
THIS PAGE FOR YOUR NOTES.
21
[PIONEER INVESTMENTS(R) LOGO]
[LOGO] PIONEER
INVESTMENTS(R)
PIONEER VARIABLE CONTRACTS TRUST
PIONEER REAL ESTATE SHARES VCT PORTFOLIO -- CLASS II SHARES
ANNUAL REPORT
DECEMBER 31, 2004
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 5
Financial Statements 6
Notes to Financial Statements 10
Report of Independent Registered Public Accounting Firm 15
Trustees, Officers and Service Providers 16
PLEASE CONSIDER A PORTFOLIO'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION
ABOUT A PORTFOLIO AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
TO OBTAIN A PROSPECTUS AND FOR OTHER INFORMATION ON ANY PIONEER PORTFOLIO,
CONTACT YOUR ADVISER, CALL 1-800-225-6292 OR VISIT OUR WEBSITE AT
www.pioneerfunds.com.
THE TRUST FILES A COMPLETE STATEMENT 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 12/31/04
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION
(As a percentage of total investment portfolio)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Common Stocks 92.1%
Temporary Cash Investment 7.9%
SECTOR DISTRIBUTION
(As a percentage of equity holdings)
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Office 20.3%
Apartment 18.6%
Regional Mall 13.4%
Industrials 13.1%
Shopping Center 12.0%
Hotel 10.1%
Diversified 7.7%
Self Storage 4.0%
Manufactured Homes 0.4%
Health Care 0.4%
FIVE LARGEST HOLDINGS
(As a percentage of equity holdings)
1. Simon DeBartolo Group, Inc. 6.58%
2. Boston Properties, Inc. 5.08%
3. AvalonBay Communities, Inc. 4.82%
4. Equity Residential Property
Trust 4.37%
5. Catellus Development Corp. 4.19%
The Portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/04
- --------------------------------------------------------------------------------
PRICES AND DISTRIBUTIONS
12/31/04 12/31/03
Net Asset Value per Share $ 24.26 $ 18.55
DISTRIBUTIONS PER SHARE SHORT-TERM LONG-TERM
(1/1/04 - 6/30/04) DIVIDENDS CAPITAL GAINS CAPITAL GAINS
$ 0.4032 $ 0.2128 $ 0.1166
- --------------------------------------------------------------------------------
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
Wilshire Real Estate Securities Index. Portfolio returns are based on net asset
value and do not reflect applicable insurance fees and surrender charges.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Wilshire Real Estate Securities Index Pioneer Real Estate Shares VCT Portfolio
Mar-95 10000 10000
11322 11674
Dec-96 15497 15680
18565 18919
Dec-98 15330 15258
14841 14460
Dec-00 19403 18904
21431 20326
2-Dec 21983 20788
30133 27951
4-Dec 40622 37844
Index comparison begins on 2/28/95. The Wilshire Real Estate Securities Index is
a market-capitalization weighted measure of the performance of real estate
investment trusts (equity and hybrid) and real estate operating companies. Index
returns are calculated monthly, assume reinvestment of dividends and, unlike
Portfolio returns, do not reflect any fees, expenses or sales charges. You
cannot invest directly in the Index.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(As of December 31, 2004)
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
Life of Class 14.48%
(3/1/95)
5 Years 21.22%
1 Year 35.39%
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.pioneerfunds.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. Please refer to variable product's annual report for
performance that reflects the deduction of the variable products fees and
charges.
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, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,263.87 $ 1,262.50
Expenses Paid During Period* $ 5.77 $ 7.18
* Expenses are equal to the Portfolio's annualized expense ratio 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 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). 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 before expenses, reflecting the
period from July 1, 2004 through December 31, 2004.
SHARE CLASS I II
--------------------------------- ---------- ----------
Beginning Account Value on 7/1/04 $ 1,000.00 $ 1,000.00
Ending Account Value on 12/31/04 $ 1,020.21 $ 1,018.95
Expenses Paid During Period* $ 5.15 $ 6.41
* Expenses are equal to the Portfolio's annualized expense ratio 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 REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT DISCUSSION 12/31/04
- --------------------------------------------------------------------------------
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, POOR PROPERTY MANAGEMENT,
ENVIRONMENTAL LIABILITIES, UNINSURED DAMAGE, INCREASED COMPETITION, OR CHANGES
IN REAL ESTATE TAX LAWS.
CALL 800-688-9915 OR VISIT www.pioneer funds.com FOR THE MOST RECENT MONTH-END
PERFORMANCE RESULTS. CURRENT PER FORMANCE MAY BE LOWER OR HIGHER THAN THE PER
FORMANCE 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 PER FORMANCE 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.
For the fifth year in a row, real estate stocks achieved positive returns and
outperformed the broader market indices. As Matthew Troxell of AEW Capital
Management, L.P. explains in the following interview, it will fall to astute
stock selection to identify the real estate investments most likely to continue
this momentum into the New Year after such a rewarding multi-year rally.
Q: HOW DID THE PORTFOLIO PERFORM DURING FISCAL 2004?
A: Performance by property type was universally strong. For the 12 months
ended December 31, 2004, Class II shares generated a return of 35.39% at
net asset value. This performance slightly outperformed the 34.81% return
for the Wilshire Real Estate Securities Index for the same period.
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.
Q: WHAT INVESTMENTS CONTRIBUTED TO PERFORMANCE?
A: Strong operating fundamentals at the property level and solid consumer
spending patterns boosted returns of regional mall real estate investment
trusts (REITs). One of the Portfolio's largest holdings, Simon Property
Group, performed strongly in the last quarter of the fiscal year. This REIT
announced the acquisition of Chelsea Property Group (also held by the
Portfolio) during the first half of the fiscal year. Initially, investors
reacted negatively. But we viewed the proposed merger very positively,
because Chelsea Property Group, which owns factory outlet shopping centers
in Japan as well as in the United States, would add international diversity
and a new retail avenue of growth to Simon's current portfolio. Each
company's board of directors and Chelsea's shareholders unanimously
approved the definitive merger agreement, and the company's stock rallied
nicely.
While the outlook for the office sector is improving as a result of
positive job growth, it takes longer for the improvements to manifest
themselves at the property owner level. (Tenants must first use their
existing empty space before seeking new office space.) Boston Properties,
Inc., which holds a portfolio of high-quality buildings in markets with
high barriers to entry, exemplifies the kind of resilient, well-managed
company that has weathered the office downturn better than many of its
counterparts. This office REIT returned 42.5% for 2004.
A sector of the real estate market that recovered well in 2004 was
apartments. AvalonBay Communities, Inc. was one of the Portfolio's best
performing stocks for the reporting period. Like the office sector,
multi-family housing is benefiting from positive job growth, which helps
increase demand for apartments. In addition, we're seeing tremendous demand
for the conversion of apartments to condominiums in a number of markets,
including southeast Florida and southern California, where the price of
owning a home is prohibitive for many people. This increased demand is
improving fundamentals while condo conversion demand provides support for
asset prices -- a scenario that creates a natural price support.
In the lodging sector, our selection of hotels did well, but it was the
presence of Starwood Hotels and Resorts that dramatically impacted
performance with its 64.7% return for 2004. This hotel, like many in its
universe, saw great improvement in occupancy rates -- resulting in a
greater number of rooms being rented in 2004 than 2003. Much of the
improvement was due to the ability of management to increase room rates,
which is a more powerful driver of profitability than occupancy rates.
Q: ANY STOCKS PROVE TO BE DISAPPOINTING?
A: Despite the positive performance of industrial stocks, the sector detracted
from performance relatively speaking, since the group underperformed the
index. The Portfolio's investments in Liberty Property Trust, an office and
industrial REIT, lagged the market due to investor concerns about
management's decision to delay construction of a new office building in
downtown Philadelphia until an anchor tenant was found. When Comcast signed
on as a tenant, the stock recovered. We remain confident that management at
Liberty has a good understanding of their business and holds strong assets.
Q: WHAT IS YOUR OUTLOOK?
A: With the underlying fundamentals improving, real estate stocks appear
poised to continue strengthening. However, after such impressive
performance during the past five years, we would not be surprised to see a
moderating of performance returns in 2005. As the proverbial tide lifts all
boats, we expect to take a more cautious approach, knowing that astute
stock picking will be challenging but all the more important in the
upcoming months.
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. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
4
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS 12/31/04
- --------------------------------------------------------------------------------
SHARES VALUE
COMMON STOCKS - 97.7%
HOTELS, RESTAURANTS & LEISURE - 5.4%
HOTELS, RESORTS & CRUISE LINES - 5.4%
93,500 Hilton Hotels Corp. $ 2,126,190
54,000 Starwood Hotels & Resorts 3,153,600
-------------
$ 5,279,790
-------------
TOTAL HOTELS, RESTAURANTS & LEISURE $ 5,279,790
-------------
DIVERSIFIED FINANCIALS - 3.3%
DIVERSIFIED FINANCIAL SERVICES - 3.3%
86,000 Brookfield Properties Corp. (a) $ 3,216,400
-------------
TOTAL DIVERSIFIED FINANCIALS $ 3,216,400
-------------
REAL ESTATE - 89.1%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 4.5%
131,500 Catellus Development Corp. $ 4,023,900
27,500 Kite Realty Group Trust 420,200
-------------
$ 4,444,100
-------------
REAL ESTATE INVESTMENT TRUSTS - 84.6%
38,000 Apartment Investment & Management Co. $ 1,464,520
46,200 AMB Property Corp. 1,866,018
40,000 Arden Realty Group, Inc. 1,508,800
102,000 Archstone Communities Trust 3,906,600
61,500 AvalonBay Communities, Inc. 4,630,950
20,500 BioMed Property Trust, Inc. 455,305
75,500 Boston Properties, Inc. 4,882,585
6,200 Capital Automotive 220,255
44,600 Camden Property Trust 2,274,600
19,000 Carramerica Realty Corp. 627,000
21,000 Corporate Office Properties 616,350
74,000 Developers Diversifies Realty Corp. 3,283,380
53,000 Duke Realty Investments, Inc. 1,809,420
11,300 Equity Lifestyle Properties, Inc. 403,975
86,000 Equity Office Properties Trust 2,504,320
116,000 Equity Residential Property Trust (a) 4,196,880
12,100 First Potomac Realty Trust 275,880
38,000 Federal Realty Investment Trust 1,962,700
74,500 General Growth Properties, Inc. 2,693,920
51,000 Highwoods Properties, Inc. 1,412,700
196,800 Host Marriott Corp. 3,404,640
14,500 Hospitality Properties Trust 667,000
9,000 Healthcare Realty Trust, Inc. 366,300
24,500 iStar Financial, Inc. 1,108,870
16,500 Kimco Realty Corp. 956,835
12,000 Kilroy Realty Corp. $ 513,000
82,000 Liberty Property Trust 3,542,400
30,900 The Macerich Co. 1,940,520
90,900 ProLogis Trust 3,938,697
30,800 Pan Pacific Retail Properties, Inc. 1,931,160
41,000 Prentiss Properties Trust 1,566,200
44,000 Public Storage, Inc. 2,453,000
25,000 PS Business Parks, Inc. 1,127,500
53,600 Regency Centers Corp. 2,969,440
10,800 Spirit Finance Corp.* (a) 136,620
30,500 Shurgard Storage Centers, Inc. 1,342,305
24,700 Strategic Hotel Capital, Inc. 407,550
97,800 Simon DeBartolo Group, Inc. 6,324,726
63,400 Taubman Centers, Inc. 1,898,830
70,400 Trizec Properties Inc. 1,331,968
57,000 United Dominion Realty Trust 1,413,600
36,500 Vornado Realty Trust (a) 2,778,745
-------------
$ 83,116,064
-------------
TOTAL REAL ESTATE $ 87,560,164
-------------
TOTAL COMMON STOCKS
(Cost $63,722,198) $ 96,056,354
-------------
TEMPORARY CASH INVESTMENT - 8.4%
SECURITY LENDING COLLATERAL - 8.4%
8,225,580 Securities Lending
Investment Fund, 2.18% $ 8,225,580
-------------
TOTAL TEMPORARY CASH
INVESTMENT
(Cost $8,225,580) $ 8,225,580
-------------
TOTAL INVESTMENTS IN
SECURITIES - 106.1%
(Cost $71,947,778) $ 104,281,934
-------------
OTHER ASSETS
AND LIABILITIES - (6.1)% $ (6,035,766)
-------------
TOTAL NET ASSETS - 100.0% $ 98,246,168
=============
* Non-income producing security
(a) At December 31, 2004, the following securities were out on loan:
SHARES SECURITY MARKET VALUE
81,700 Brookfield Properties Corp. $ 3,055,580
58,700 Equity Residential Property Trust 2,123,766
10,260 Spirit Finance Corp.* 129,789
34,675 Vornado Realty Trust 2,639,808
-----------
TOTAL $ 7,948,943
===========
The accompanying notes are an integral part of these financial statements. 5
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
CLASS II (a) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
Net asset value, beginning of period $ 18.55 $ 14.45 $ 14.75 $ 14.40 $ 14.55
-------- -------- -------- -------- -------
Increase from investment operations:
Net investment income $ 0.44 $ 0.68 $ 0.55 $ 0.41 $ 0.32
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 6.00 4.18 (0.20) 0.63 (0.28)
-------- -------- -------- -------- -------
Net increase from investment operations $ 6.44 $ 4.86 $ 0.35 $ 1.04 $ 0.04
Distributions to shareowners:
Net investment income (0.40) (0.56) (0.65) (0.52) (0.09)
Net realized gain (0.33) -- -- -- --
Net tax return of capital -- (0.20) -- (0.17) (0.10)
-------- -------- -------- -------- -------
Net increase (decrease) in net asset value $ 5.71 $ 4.10 $ (0.30) $ 0.35 $ (0.15)
-------- -------- -------- -------- -------
Net asset value, end of period $ 24.26 $ 18.55 $ 14.45 $ 14.75 $ 14.40
======== ======== ======== ======== =======
Total return* 35.39% 34.45% 2.28% 7.52% 1.32%
Ratio of net expenses to average net assets+ 1.23% 1.28% 1.32% 1.52% 1.63%**
Ratio of net investment income to average net assets+ 2.20% 4.26% 4.21% 4.36% 7.54%**
Portfolio turnover rate 35% 20% 29% 34% 31%**
Net assets, end of period (in thousands) $ 61,799 $ 39,892 $ 31,985 $ 11,972 $ 1,770
Ratios with no waiver of management fees and assumption of expenses
by PIM and no reduction for fees paid indirectly:
Net expenses 1.23% 1.28% 1.32% 1.52% 1.63%**
Net investment income 2.20% 4.26% 4.21% 4.36% 7.54%**
(a) Class 2 shares were first publicly offered on August 1, 2000.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at net asset value at the end of each period.)
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
6 The accompanying notes are an integral part of these financial statements.
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 12/31/04
- --------------------------------------------------------------------------------
ASSETS:
Investment in securities, at value (including securities loaned of $7,948,943) (Cost $71,947,778) $ 104,281,934
Cash 2,220,578
Receivables -
Fund shares sold 15,950
Dividends, interest and foreign taxes withheld 561,625
Other 3,635
-------------
Total assets $ 107,083,722
-------------
LIABILITIES:
Payables -
Investment securities purchased $ 404,407
Fund shares repurchased 60,248
Upon return for securities loaned 8,225,580
Due to affiliates 82,031
Accrued expenses 65,288
-------------
Total liabilities $ 8,837,554
-------------
NET ASSETS:
Paid-in capital $ 62,351,060
Undistributed net investment income (loss) 286,854
Accumulated undistributed net realized gain (loss) 3,274,098
Net unrealized gain (loss) on:
Investments 32,334,156
-------------
Total net assets $ 98,246,168
-------------
NET ASSET VALUE PER SHARE:
CLASS I:
No par value (unlimited number of shares authorized)
Net assets $ 36,447,028
Shares outstanding 1,499,747
-------------
Net asset value per share $ 24.30
CLASS II:
No par value (unlimited number of shares authorized)
Net assets $ 61,799,140
Shares outstanding 2,547,790
-------------
Net asset value per share $ 24.26
The accompanying notes are an integral part of these financial statements. 7
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED
12/31/04
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $3,560) $ 2,668,265
Interest 28,012
Income on securities loaned, net 1,856
------------
Total investment income $ 2,698,133
------------
EXPENSES:
Management fees $ 632,167
Transfer agent fees and expenses 3,007
Distribution fees (Class II) 117,814
Administrative reimbursements 18,500
Custodian fees 34,727
Professional fees 46,225
Printing expense 37,031
Miscellaneous 2,572
------------
Total expenses $ 892,043
------------
Net expenses $ 892,043
------------
Net investment income (loss) $ 1,806,090
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments $ 7,508,438
------------
$ 7,508,438
------------
Change in net unrealized gain or loss from:
Investments $ 15,633,552
------------
$ 15,633,552
------------
Net gain (loss) on investments, futures contracts
and foreign currency transactions $ 23,141,990
============
Net increase (decrease) in net assets resulting
from operations $ 24,948,080
============
8 The accompanying notes are an integral part of these financial statements.
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
12/31/04 12/31/03
FROM OPERATIONS:
Net investment income (loss) $ 1,806,090 $ 2,666,503
Net realized gain (loss) on investments 7,508,438 (441,521)
Change in net unrealized gain or loss on investments, futures contracts and
foreign currency transactions 15,633,552 15,916,594
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 24,948,080 $ 18,141,576
------------- -------------
DISTRIBUTIONS TO SHAREOWNERS:
Net investment income
Class I $ (707,216) $ (1,049,939)
Class II (916,414) (1,121,546)
Net Realized Gains
Class I (493,376) --
Class II (803,210) --
------------- -------------
Tax return of capital
Class I -- (372,973)
Class II -- (398,048)
Total distributions to shareowners $ (2,920,216) $ (2,942,506)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares $ 20,027,996 $ 9,753,610
Reinvestment of distributions 2,920,216 2,942,506
Cost of shares repurchased (18,513,875) (17,969,003)
------------- -------------
Net increase (decrease) in net assets resulting from Fund share transactions $ 4,434,337 $ (5,272,887)
------------- -------------
Net increase (decrease) in net assets $ 26,462,201 $ 9,926,183
------------- -------------
NET ASSETS:
Beginning of year $ 71,783,967 $ 61,857,784
------------- -------------
End of year $ 98,246,168 $ 71,783,967
============= =============
Undistributed net investment income (loss),
end of year $ 286,854 $ 153,315
============= =============
The accompanying notes are an integral part of these financial statements. 9
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Pioneer Real Estate Shares VCT Portfolio (the Portfolio) a Portfolio of
Pioneer Variable Contracts Trust (the Trust) which is a Delaware business trust
registered under the Investment Company Act of 1940 as an open-end management
investment company. The Trust consists of twenty two separate portfolios,
fourteen of which issue both Class I and Class II shares (collectively, the
Portfolios, individually the Portfolio) as follows:
PORTFOLIOS:
Pioneer Emerging Markets VCT Portfolio (Emerging
Markets Portfolio)
Pioneer Europe VCT Portfolio (Europe Portfolio)
Pioneer International Value VCT Portfolio (International
Value Portfolio)
Pioneer Small Cap Value VCT Portfolio (Small Cap
Value Portfolio)
Pioneer Small Company VCT Portfolio (Small
Company Portfolio)
Pioneer Mid Cap Value VCT Portfolio (Mid-Cap
Value Portfolio)
Pioneer Growth Shares VCT Portfolio (Growth
Shares Portfolio)
Pioneer Real Estate Shares VCT Portfolio (Real Estate
Shares Portfolio)
Pioneer Fund VCT Portfolio (Fund Portfolio)
Pioneer Equity Income VCT Portfolio (Equity-
Income Portfolio)
Pioneer Balanced VCT Portfolio (Balanced Portfolio)
Pioneer High Yield VCT Portfolio (High Yield Portfolio)
Pioneer Strategic Income VCT Portfolio (Strategic
Income Portfolio)
Pioneer America Income VCT Portfolio (America
Income Portfolio)
Pioneer Money Market VCT Portfolio (Money Market
Portfolio) (Class I shares only)
Pioneer Value VCT Portfolio (Value Portfolio) (Class II
shares only)
Pioneer Papp America-Pacific Rim VCT Portfolio (Papp
America-Pacific Rim Portfolio) (Class II shares only)
Pioneer Papp Small and Mid Cap Growth VCT Portfolio
(Papp Small and Mid Cap Growth Portfolio) (Class II
shares only)
Pioneer Oak Ridge Large Cap Growth VCT Portfolio
(Oak Ridge Large Cap Growth Portfolio) (Class II
shares only)
Pioneer Growth Opportunities VCT Portfolio (Growth
Opportunities Portfolio) (Class I shares only)
Pioneer Small Cap Value II VCT Portfolio (Small Cap
Value I Portfolio) (Class II shares only)
Pioneer Bond VCT Portfolio (Bond Portfolio) (Class I
shares only)
Portfolio shares may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts, and may also be
purchased by qualified pension and retirement plans.
The investment objective of Real Estate Shares Portfolio pursues long-term
capital growth, with current income as a secondary objective.
The financial highlights for the Portfolio's Class I shares are presented in a
separate book.
The Trust's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America that
require the management of the Trust to, among other things, make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income, expenses, gains and losses
during the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust 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
Exchange. In computing the net asset values, securities are valued at the
last sale price on the principal exchange where they are traded. Securities
that have not traded on the date of valuation, or securities for which sale
prices are not generally reported, are valued at the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available are valued at their fair values as determined by, or
under the direction of, the Board of Trustees. The Portfolio also may 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, 2004, there were no fair valued securities.
Temporary cash investments are valued at amortized cost.
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
10
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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.
Because Real Estate Shares 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.
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, 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
realize a gain or loss equal to the difference between the opening and
closing value of the contract. The use of futures contracts involves, to
varying degrees, elements of market risk which may exceed the amounts
recognized by the 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, 2004, Real Estate Shares had no open contracts.
C. FOREIGN CURRENCY TRANSLATION
The books and records of the Portfolio are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars
using current exchange rates.
Net realized gains and losses on foreign currency transactions represent,
the net realized gains and losses on foreign currency contracts,
disposition of foreign currencies, and the difference between the amount of
income accrued and the U.S. dollar actually received. Further, the effects
of changes in foreign currency exchange rates on investments are not
segregated in the statement of operations from the effects of changes in
market price of those securities but are included with the net realized and
unrealized gain or loss on investments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolio enters into forward foreign currency contracts (contracts)
for the purchase or sale of a specific foreign currency at a fixed price on
a future date as a hedge or cross-hedge against either specific investment
transactions (settlement hedges) or portfolio positions (portfolio hedges).
All contracts are marked to market daily at the applicable exchange rates,
and any resulting unrealized gains or losses are recorded in the
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.
E. TAXES
It is the Trust's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income and net realized capital gains, if any, to its
shareowners. Therefore, no federal income tax provision is required.
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.
A portion of the dividend income recorded by Real Estate Shares Portfolio
is from distributions by
11
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
publicly traded REITs, and such distributions for tax purposes may also
consist of capital gains and return of capital. The actual return of
capital and capital gains portions of such distributions will be determined
by formal notifications from the REITs subsequent to the calendar year-end.
Distributions received from the REITs that are determined to be a return of
capital are recorded by the Trust as a reduction of the cost basis of the
securities held and those determined to be capital gain are reflected as
such on the statement of operations.
Capital loss carryforwards are available to offset future realized capital
gains.
At December 31, 2004, the portfolio made reclassifications as described
below. These reclassifications have no impact on the net asset value of the
portfolio and are designed to present the portfolio's capital accounts on a
tax basis.
UNDISTRIBUTED NET ACCUMULATED
INVESTMENT REALIZED GAIN PAID-IN
PORTFOLIO INCOME (LOSS) (LOSS) CAPITAL
- ---------------------------------------- ----------------- ------------- --------
Pioneer Real Estate Shares VCT Portfolio $ (48,921) $ 19,456 $ 29,465
========== ======== ========
The following chart shows the components of distributable earnings
(accumulated losses) as of December 31, 2004 and the distributions paid
during the years ended December 31, 2004 and 2003 on a tax basis.
2004 2003*
------------ -----------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 2,449,917 $ 2,171,485
Long-Term capital gain 470,299 --
------------ -----------
2,920,216 2,171,485
Return of Capital -- 771,021
------------ -----------
Total distributions $ 2,920,216 $ 2,942,506
============ ===========
DISTRIBUTABLE EARNINGS (ACCUMULATED LOSSES):
Undistributed long-term gain/(capital loss carryforward) $ 3,564,562
REIT Dividend Payable 286,584
Unrealized appreciation (depreciation) 32,043,692
------------
Total $ 35,895,108
============
The difference between book-basis and tax-basis unrealized appreciation is
primarily attributable to the tax deferral of losses on wash sales.
* Included in the Portfolio's distributions from 2003 ordinary income is
$192,564 in excess of investment company taxable income, which, in
accordance with U.S. tax law, is taxable to shareowners as ordinary
income distributions.
The difference between book-basis and tax-basis unrealized appreciation
(depreciation) is primarily attributable to the tax deferral of losses on
wash sales, returns of capital on REITs, and the recognition of unrealized
gains or losses on certain futures contracts, and the tax treatment of
premium amortization.
F. PORTFOLIO SHARES
The Portfolio records sales and repurchases of its portfolio shares as of
trade date. Certain insurance companies paid Pioneer Funds Distributor,
Inc. (PFD), the principal underwriter for the Trust and a wholly owned
indirect subsidiary of UniCredito Italiano S.p.A. (Unicredito Italiano),
$1,231,475 in commissions on the sale of Trust shares for the year ended
December 31, 2004. 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),
12
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
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, with the Portfolio's custodian acting as
the lending agent. When entering into a loan, the Portfolio receives
collateral which is maintained by the custodian and earns income in the
form of negotiated lenders' fees. The Portfolio also continues to receive
payments in lieu of interest or dividends on the securities loaned. Gain or
loss in the fair value of the securities loaned that may occur during the
term of the loan, will be for account of the Trust. The loans are secured
by collateral of at least 102%, at all times, of the fair value of the
securities loaned. The fair value of the collateral will be adjusted daily
to reflect any price fluctuation in the value of the loaned securities. The
Trust has the right under the lending agreement to recover the securities
on loan from the borrower on demand. The Trust invests cash collateral in
the Securities Lending Investment Fund which is managed by Brown Brothers
Harriman & Co., the Trust's custodian.
H. REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, the
value of the underlying securities (collateral), including accrued interest
received from counterparties, is required to be at least equal to or in
excess of the value of the repurchase agreement at the time of purchase.
The collateral for all repurchase agreements is held in safekeeping in the
customer-only account of the Portfolio's custodian, or subcustodian. The
Trust's investment adviser, Pioneer Investment Management, Inc. (PIM), is
responsible for determining that the value of the collateral remains at
least equal to the repurchase price.
2. MANAGEMENT AGREEMENT
PIM, a wholly owned indirect subsidiary of UniCredito Italiano manages the
portfolio. Management fees are calculated daily at the following 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. At December 31, 2004, $68,694 was payable to PIM related to
management fees, administrative fees and certain other services, and is included
in due to affiliates.
3. TRANSFER AGENT
PIMSS, a wholly owned indirect subsidiary of UniCredito Italiano provides
substantially all transfer agent and shareowner services to the Trust at
negotiated rates. Included in due to affiliates is $270 in transfer agent fees
payable to PIMSS at December 31, 2004.
4. DISTRIBUTION PLANS
The Portfolio has adopted a plan of distribution for Class II shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940. Under the
plan, the Portfolio pays PFD a distribution fee of 0.25% of the average daily
net assets attributable to Class II shares. Included in due to affiliates is
$13,097 payable to PFD at December 31, 2004.
5. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
At December 31, 2004, the Portfolios' aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes was as follows:
NET
GROSS GROSS APPRECIATION/
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Real Estate Shares Portfolio $ 72,238,242 $ 32,121,655 $ (77,963) $ 32,043,692
============ ============ ========= ============
13
PIONEER REAL ESTATE SHARES VCT PORTFOLIO PIONEER VARIABLE CONTRACTS TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 12/31/04 (CONTINUED)
- --------------------------------------------------------------------------------
6. PORTFOLIO TRANSACTIONS
The cost of purchases and the proceeds from sales of investments other than U.S.
Government obligations and temporary cash investments for the year ended
December 31, 2004, were $33,759,977 and $26,732,885, respectively.
7. CAPITAL SHARES
At December 31, 2004, there were an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
REAL ESTATE SHARES PORTFOLIO '04 SHARES '04 AMOUNT '03 SHARES '03 AMOUNT
- ----------------------------- ---------- ------------- ---------- ------------
CLASS I:
Shares sold 151,466 $ 3,192,487 153,884 $ 2,545,266
Reinvestment of distributions 56,986 1,200,592 87,137 1,422,912
Shares repurchased (425,846) (8,497,885) (588,199) (9,201,017)
-------- ------------- -------- ------------
Net increase (217,394) $ (4,104,806) (347,178) $ (5,232,839)
======== ============= ======== ============
CLASS II:
Shares sold 820,863 $ 16,835,509 424,038 $ 7,208,344
Reinvestment of distributions 81,377 1,719,624 92,474 1,519,594
Shares repurchased (505,041) (10,015,990) (578,790) (8,767,986)
======== ============= ======== ============
Net increase 397,199 $ 8,539,143 (62,278) $ (40,048)
======== ============= ======== ============
14
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 CLASS II SHAREOWNERS OF PIONEER REAL ESTATE SHARES VCT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Pioneer Real Estate Shares VCT Portfolio, one of
the portfolios constituting Pioneer Variable Contracts Trust (the "Trust"), as
of December 31, 2004, 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 three 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. The financial highlights for each of the two years in the period ended
December 31, 2001 were audited by other auditors who have ceased operations and
whose report, dated February 8, 2002, expressed an unqualified opinion on those
financial highlights.
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. An audit
includes 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, 2004, 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 of the Pioneer Variable Contracts Trust
at December 31, 2004, 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 three years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
15
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER TRUSTEES AND OFFICERS
Pioneer Investment Management, Inc. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust. The officers of the Trust are responsible for the Trust's
CUSTODIAN operations. The Trust's Trustees and officers are listed below, together
Brown Brothers Harriman & Co. with their principal occupations during the past five years. Trustees
who are interested persons of the Portfolio within the meaning of the
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Investment Company Act of 1940 are referred to as Interested Trustees.
Ernst & Young LLP 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
PRINCIPAL UNDERWRITER of the 73 U.S. registered investment portfolios for which Pioneer
Pioneer Funds Distributor, Inc. Investment Management, Inc. ("Pioneer") serves as investment adviser (the
"Pioneer Funds"). The address for all Interested Trustees and all
officers of the Portfolio is 60 State Street, Boston, Massachusetts
02109.
LEGAL COUNSEL The Trust's statement of additional information provides more detailed
Wilmer Cutler Pickering Hale and Dorr LLP information regarding the Trust's Trustees and is available upon request,
without charge, by calling 1-800-225-6292.
SHAREOWNER SERVICES AND TRANSFER Proxy Voting Policies and Procedures of the Trust are available without
Pioneer Investment Management Shareholder Services, Inc. charge, upon Agent request, by calling our toll free number
(1-800-225-6292). This information is also available online at
pioneerfunds.com.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
John F. Cogan, Jr. (78)* Chairman of the Serves until successor Trustee and President Serves Director of Harbor
Board, Trustee and trustee is elected or until retirement or removal; Global Company, Ltd.
President earlier retirement Deputy Chairman and a Director
or removal 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; Director of Pioneer
Alternative Investment
Management Limited (Dublin);
President and a Director of
Pioneer Alternative Investment
Management (Bermuda) Limited and
affiliated funds; President and
Director of Pioneer Funds
Distributor, Inc. ("PFD");
President of all of the Pioneer
Funds; and Of Counsel (since
2000, partner prior to 2000),
Wilmer Cutler Pickering Hale and
Dorr LLP (counsel to PIM-USA and
the Pioneer Funds).
*Mr. Cogan is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Osbert M. Hood (52)** Trustee and Serves until successor President and Chief Executive None
Executive Vice trustee is elected or Officer, PIM-USA since May 2003
President earlier retirement or (Director since January 2001);
removal President and Director of
Pioneer since May 2003; Chairman
and Director of Pioneer
Investment Management
Shareholder Services, Inc.
("PIMSS") since May 2003;
Executive Vice President of all
of the Pioneer Funds since June
2003; Executive Vice President
and Chief Operating Officer of
PIM-USA, November 2000 to May
2003; Executive Vice President,
Chief Financial Officer and
Treasurer, John Hancock
Advisers, L.L.C., Boston, MA,
November 1999 to November 2000;
Senior Vice President and Chief
Financial Officer, John Hancock
Advisers, L.L.C., April 1997 to
November 1999.
**Mr. Hood is an Interested Trustee because he is an officer or director of Pioneer and certain of its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
16
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS TRUSTEE
David R. Bock **(61) Trustee since Serves until a Senior Vice President and Chief Director of The
3050 K. Street NW, 2005. successor trustee is Financial Officer, I-trax, Inc. Enterprise Social
Washington, DC 20007 elected or earlier (publicly traded health care Investment Company
retirement or removal. services company) (privately-held
(2001-present); Managing affordable housing
Partner, Federal City Capital finance company);
Advisors (boutique merchant Director of New York
bank) (1995-2000; 2002 to 2004); Mortgage Trust
Executive Vice President and (publicly traded
Chief Financial Officer, mortgage REIT)
Pedestal Inc. (internet-based
mortgage trading company)
(2000-2002)
** Mr. Bock became a Trustee of the Trust on January 1, 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary K. Bush (56) Trustee since Serves until successor President, Bush International Director of Brady
3509 Woodbine Street, 2000. trustee is elected or (international financial Corporation
Chevy Chase, MD 20815 earlier retirement or advisory firm) (industrial
removal identification and
specialty coated
material products
manufacturer),
Millennium Chemicals,
Inc. (commodity
chemicals), Mortgage
Guaranty Insurance
Corporation, and R.J.
Reynolds Tobacco
Holdings, Inc.
(tobacco)
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret B.W. Graham (57) Trustee since Serves until successor Founding Director, The Winthrop None
1001 Sherbrooke Street 2000. trustee is elected or Group, Inc. (consulting firm);
West, Montreal, Quebec, earlier retirement or Professor of Management, Faculty
Canada H3A 1G5 removal of Management, McGill University
- ------------------------------------------------------------------------------------------------------------------------------------
Marguerite A. Piret (56) Trustee since Serves until successor President and Chief Executive Director of New
One Boston Place, 1995. trustee is elected or Officer, Newbury, Piret & America High Income
28th Floor, earlier retirement or Company, Inc. (investment Fund, Inc.
Boston, MA 02108 removal banking firm) (closed-end
investment company)
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West (76) Trustee since Serves until successor Senior Counsel, Sullivan & Director, The Swiss
125 Broad Street, 1995. trustee is elected or Cromwell (law firm) Helvetia Fund, Inc.
New York, NY 10004 earlier retirement or (closed-end
removal investment company)
and AMVESCAP PLC
(investment managers)
- ------------------------------------------------------------------------------------------------------------------------------------
John Winthrop (68) Trustee since Serves until successor President, John Winthrop & Co., None
One North Adgers Wharf, September, 2000. trustee is elected or Inc. (private investment firm)
Charleston, SC 29401 earlier retirement or
removal
- ------------------------------------------------------------------------------------------------------------------------------------
17
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER
Dorothy E. Bourassa (57) Secretary Serves at the Secretary of PIM-USA; Senior None
discretion of the Vice President - Legal of
Board Pioneer; and Secretary/Clerk of
most of PIM-USA's subsidiaries
since October 2000; Secretary of
all of the Pioneer Funds since
September 2003 (Assistant
Secretary from November 2000 to
September 2003); and Senior
Counsel, Assistant Vice
President and Director of
Compliance of PIM-USA from April
1998 through October 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (40) Assistant Serves at the Assistant Vice President and None
Secretary discretion of the Senior Counsel of Pioneer since
Board July 2002; Vice President and
Senior Counsel of BISYS Fund
Services, Inc. (April 2001 to
June 2002); Senior Vice
President and Deputy General
Counsel of Funds Distributor,
Inc. (July 2000 to April 2001;
Vice President and Associate
General Counsel from July 1996
to July 2000); Assistant
Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Phelan (47) Assistant Serves at the Partner, Wilmer Cutler Pickering None
Secretary discretion of the Hale and Dorr LLP; Assistant
Board Secretary of all Pioneer Funds
since September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent Nave (59) Treasurer Serves at the Vice President - Fund None
discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Treasurer of all of the Pioneer
Funds (Assistant Treasurer from
June 1999 to November 2000)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Bradley (45) Assistant Serves at the Deputy Treasurer of Pioneer None
Treasurer discretion of the since 2004; Treasurer and Senior
Board Vice President, CDC IXIS Asset
Management Services from 2002 to
2003; Assistant Treasurer and
Vice President, MFS Investment
Management from 1997 to 2002;
and Assistant Treasurer of all
of the Pioneer Funds since
November 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Luis I. Presutti (39) Assistant Serves at the Assistant Vice President - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since November
2000
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Sullivan (46) Assistant Serves at the Fund Accounting Manager - Fund None
Treasurer discretion of the Accounting, Administration and
Board Custody Services of Pioneer; and
Assistant Treasurer of all of
the Pioneer Funds since May 2002
- ------------------------------------------------------------------------------------------------------------------------------------
18
PIONEER REAL ESTATE SHARES VCT PORTFOLIO
- --------------------------------------------------------------------------------
TRUSTEES, OFFICERS AND SERVICE PROVIDERS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUST OFFICERS
- --------------------------------------------------------------------------------
POSITIONS HELD PRINCIPAL OCCUPATION DURING PAST OTHER DIRECTORSHIPS
NAME AND AGE WITH THE TRUST TERM OF OFFICE FIVE YEARS HELD BY THIS OFFICER
Katharine Kim Sullivan (31) Assistant Serves at the Fund Administration Manager - None
Treasurer discretion of the Fund Accounting, Administration
Board and Custody Services since June
2003; Assistant Vice President -
Mutual Fund Operations of State
Street Corporation from June
2002 to June 2003 (formerly
Deutsche Bank Asset Management);
Pioneer Fund Accounting,
Administration and Custody
Services (Fund Accounting
Manager from August 1999 to May
2002, Fund Accounting Services
Supervisor from 1997 to July
1999); Assistant Treasurer of
all Pioneer Funds since
September 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin (37) Chief Compliance Serves at the Chief Compliance Officer of None
Officer discretion of the Pioneer (Director of Compliance
Board and Senior Counsel from November
2000 to September 2004); Vice
President and Associate General
Counsel of UAM Fund Services,
Inc. (mutual fund administration
company) from February 1998 to
November 2000; and Chief
Compliance Officer of all of the
Pioneer Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
The outstanding capital stock of PFD, PIM and PIMSS is indirectly wholly owned
by UniCredito Italiano S.p.A. ("UniCredito Italiano"), one of the largest
banking groups in Italy. PIM, the Trust's investment adviser, provides
investment management and financial services to mutual funds, institutional and
other clients.
19
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
20
- --------------------------------------------------------------------------------
THIS PAGE FOR YOUR NOTES.
21
[LOGO] PIONEER
INVESTMENTS(R)
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, including fees associated
with routine and non routine filings of its Form N-1A, totaled approximately
$521,000 in 2004 and $525,600 in 2003 for the Trusts 22 portfolios and
19 of the 22 portfolios at that time, respectively. Included in the 2003
fees is an additional billing related to that audit, which was billed after
the Trusts filing of its N-CSR for the year ended December 31, 2003.
(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 Fees
There were no other audit related services provided to the Trust during the
fiscal year ended December 31, 2004. Fees for the Trusts audit-related
services, which were for reviews of the semi annual financial statements
for some of the Trusts 16 portfolios, totaled approximately $50,000
in 2003.
(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 returns, totaled $161,525
in 2004 and $81,050 in 2003.
(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.
Other Fees
There were no other services provided to the Trust during the fiscal years
ended December 31, 2004 and 2003.
(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 recognizes 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 recognizes 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.
N/A
(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 Fund's independent auditor, Ernst & Young
LLP ("E&Y"), recently has advised the Securities
and Exchange Commission, the Public Company
Accounting Oversight Board, and the Audit
Committee of the Fund's Board of Trustees that
certain non-audit work performed by E&Y's China
affiliate has raised questions regarding E&Y's
independence with respect to its performance of
audit services for the Fund. In July 2004, E&Y
became aware that member firms in China ("E&Y
China") provided certain tax services to offices of
UniCredito Italiano, S.p.A. ("UCI"), a member of
the Fund's Investment Company Complex. The
services included receipt and disbursement of
monies transferred to E&Y China by UCI in
payment of individual expatriate income taxes due
on returns prepared by E&Y China for certain UCI
employees located in China from October 1998 to
May 2003. E&Y became auditors of the Fund in
May 2002. These expatriate tax services were
discontinued in May 2003. The fees received by
E&Y China for all such services totaled $3,685.
The Fund's Audit Committee and E&Y have
discussed the matter, including the nature of the
services provided, the personnel involved in
providing the services and the fees received by
E&Y for performing the services. The Committee
continues to review the facts and circumstances
surrounding the matter, including the issue of
whether the monies transferred for employees' taxes
were de facto monies due the employees for tax
payments rather than monies belonging to UCI.
E&Y has informed the Audit Committee that based
on its internal reviews and the de minimis nature of
the services provided and fees received, it does not
believe its independence with respect to the Fund
has been impaired.
Aggregate Non-Audit Fees
The aggregate non-audit fees for the Trust and affiliates, as
previously defined, totaled $139,525 in 2004 and $154,350 in 2003.
The Trust'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.
(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.
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
Trusts 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, 2004 and 2003, there were no services provided to
an affiliate that required the Trusts audit committee pre-approval.
ITEMS 5-6. [RESERVED]
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. [RESERVED]
ITEM 9. 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 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.
ITEM 10. 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 March 9, 2005
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 March 9, 2005
By (Signature and Title)* /s/ Vincent Nave
Vincent Nave, Treasurer
Date March 9, 2005
* Print the name and title of each signing officer under his or her signature.