As filed with the Securities and Exchange Commission on April 18, 2006
File No. 33-84546
United States
Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-12
Pioneer Variable Contracts Trust
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee Computed on table below per Exchange Act Rules 14a-6(i)(1) and 1-11.
1) Title of each class of securies to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and idendtify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
Pioneer Small Cap Value II VCT Portfolio
(each, "your Portfolio" and together, the "Portfolios")
IMPORTANT INFORMATION
To the owners of variable annuity or life insurance contracts:
I am writing to ask that you vote in favor of an important proposal that
will affect your investment in your Portfolio. Your Portfolio's investment
adviser, Pioneer Investment Management, Inc., manages three mutual funds that
focus on small-capitalization companies: the Portfolios and Pioneer Small Cap
Value VCT Portfolio ("Small Cap Value Portfolio"). The enclosed combined proxy
statement and prospectus contains information about a proposal to reorganize
each Portfolio into Small Cap Value Portfolio. If approved, you would become a
shareowner of Small Cap Value Portfolio and would receive shares of Small Cap
Value Portfolio equal in value to the value of your shares in your Portfolio.
Small Cap Value Portfolio would be the legal, accounting and performance
survivor of each reorganization, with Small Cap Value Portfolio's investment
strategy, policies and overall structure being retained. The result will be
that you become a shareowner of a portfolio the investment goals and focus of
which are similar to your Portfolio, but which will be substantially larger in
size as a result of the reorganizations. Our hope is that a larger asset base
will enable the combined portfolio to invest more efficiently and to have the
potential to realize expense savings in the future.
WHY ARE THE REORGANIZATIONS BEING PROPOSED?
The trustees of your Portfolio believe that reorganizing the Portfolios
into Small Cap Value Portfolio offers you potential benefits, including the
opportunity to be part of a combined portfolio with a larger asset size that
may be better positioned in the market to further increase its asset size and
achieve economies of scale. Each Portfolio's shareowners will realize lower
expenses following the reorganizations due to the increased asset base. Each
Portfolio incurs substantial operating costs for insurance, accounting, legal,
and custodial services. The reorganizations would result in a larger combined
portfolio that would allow Small Cap Value Portfolio to hold larger positions
in individual securities and, consequently, achieve better net prices on
securities trades.
YOUR VOTE MATTERS
After careful consideration, your Portfolio's trustees have unanimously
approved the reorganization of each Portfolio into Small Cap Value Portfolio.
The enclosed combined proxy statement and prospectus contains further
explanation and important details about the reorganizations, which I strongly
encourage you to read before voting. If approved by shareowners, each
reorganization is scheduled to take place at the close of business on May 24,
2006.
Your vote makes a difference, regardless of the size of your investment.
Please review the enclosed proxy materials and submit your vote promptly to
help us avoid the need for additional mailings. Your vote will instruct the
insurance company that issued your contract how to vote the shares of your
Portfolio attributable to your contract at the special meeting of shareowners.
For your convenience, you may vote via mail by returning the enclosed voting
instruction card. If you have any questions or need additional information,
please contact a Pioneer Customer Service Representative at 1-800-622-3265
between 9:00 a.m. and 5:00 p.m. (Boston time). I thank you for your prompt vote
on this matter.
Sincerely,
/s/ Osbert M. Hood
Osbert M. Hood
President and Chief Executive
Officer
Pioneer Investment Management, Inc.
PIONEER VARIABLE CONTRACTS TRUST
Pioneer Small Company VCT Portfolio
Pioneer Small Cap Value II VCT Portfolio
(each, "your Portfolio" and together, the "Portfolios")
60 State Street
Boston, Massachusetts 02109
1-800-622-3265
NOTICE OF SPECIAL MEETING OF SHAREOWNERS
SCHEDULED FOR MAY 23, 2006
To the owners of variable annuity or life insurance contracts:
You are being asked to vote on the proposals listed below on the enclosed
voting instruction card. Your vote will instruct the insurance company that
issued your contract how to vote the shares of your Portfolio attributable to
your contract at the joint special meeting of shareowners of the Portfolios
(the "Meeting").
The Meeting will be held at the offices of Wilmer Cutler Pickering Hale
and Dorr LLP, 60 State Street, 26th Floor, Boston, Massachusetts on May 23,
2006 at 2:00 p.m., Boston time, to consider the following:
1. With respect to each Portfolio, a proposal to approve an Agreement and
Plan of Reorganization. Under the Agreement and Plan of Reorganization,
your Portfolio will transfer all of its assets to Pioneer Small Cap
Value VCT Portfolio ("Small Cap Value Portfolio"), a series of Pioneer
Variable Contracts Trust. Small Cap Value Portfolio is an existing
mutual fund with similar investment objectives and similar investment
policies as your Portfolio. Class I and/or Class II shares of Small Cap
Value Portfolio will be distributed to your Portfolio's shareowners in
proportion to the relative net asset value of their holdings of the
applicable class of shares on the closing date of the reorganization.
Small Cap Value Portfolio also will assume all of your Portfolio's
liabilities. Your Portfolio will then be dissolved. As a result of the
reorganization, you will become shareowners of Small Cap Value
Portfolio. YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE PROPOSAL.
2. Any other business that may properly come before the Meeting.
Shareowners of record as of the close of business on March 28, 2006 are
entitled to vote at the Meeting and any related follow-up meetings.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
ENCLOSED VOTING INSTRUCTION CARD. If shareowners do not return their proxies in
sufficient numbers, your Portfolio may be required to make additional
solicitations.
By order of the Board of Trustees,
/s/ Dorothy E. Bourassa
Dorothy E. Bourassa, Secretary
Boston, Massachusetts
April 18, 2006
PIONEER VARIABLE CONTRACTS TRUST
COMBINED PROXY STATEMENT OF
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
(each, "your Portfolio" and together, the "Portfolios")
PROSPECTUS
FOR CLASS I AND CLASS II SHARES OF
PIONEER SMALL CAP VALUE VCT PORTFOLIO
("Small Cap Value Portfolio")
The address and telephone number of each Portfolio and Small Cap Value
Portfolio is:
60 State Street
Boston, Massachusetts 02109
1-800-622-3265
Shares of Small Cap Value Portfolio have not been approved or disapproved
by the Securities and Exchange Commission (the "SEC"). The SEC has not passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
An investment in Small Cap Value Portfolio is not a bank deposit and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
1
TABLE OF CONTENTS
Page
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INTRODUCTION ........................................................... 3
PROPOSAL 1(a) -- PIONEER SMALL COMPANY VCT PORTFOLIO ................... 5
PROPOSAL 1(b) -- PIONEER SMALL CAP VALUE II VCT PORTFOLIO .............. 15
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION ..................... 24
TAX STATUS OF EACH REORGANIZATION ...................................... 25
VOTING RIGHTS AND REQUIRED VOTE ........................................ 25
ADDITIONAL INFORMATION ABOUT THE PIONEER PORTFOLIOS .................... 26
FINANCIAL HIGHLIGHTS ................................................... 30
INFORMATION CONCERNING THE MEETING ..................................... 32
OWNERSHIP OF SHARES OF THE PORTFOLIOS .................................. 33
EXPERTS ................................................................ 35
AVAILABLE INFORMATION .................................................. 35
EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION .............. A-1
EXHIBIT B -- PORTFOLIO MANAGER'S DISCUSSION OF PERFORMANCE ............. B-1
2
INTRODUCTION
This combined proxy statement and prospectus (the "Proxy
Statement/Prospectus"), dated April 18, 2006, is being furnished to shareowners
of each Portfolio in connection with the solicitation by the board of trustees
(the "Board" or the "Trustees") of Pioneer Variable Contracts Trust of proxies
to be used at a joint special meeting of shareowners of the Portfolios (the
"Meeting"). The Meeting will be held at the offices of Wilmer Cutler Pickering
Hale and Dorr LLP, 60 State Street, 26th Floor, Boston, Massachusetts 02109 on
May 23, 2006 at 2:00 p.m., Boston time. The purpose of the Meeting is to
consider a proposal to approve an Agreement and Plan of Reorganization, a form
of which is attached hereto as Exhibit A, providing for the reorganization of
your Portfolio into Small Cap Value Portfolio (each, a "Reorganization"). Each
Portfolio and Small Cap Value Portfolio is a series of Pioneer Variable
Contracts Trust, an open-end management investment company organized as a
Delaware statutory trust. The Proxy Statement/Prospectus is being mailed to the
shareowners of the Portfolios on or about April 18, 2006.
The Proxy Statement/Prospectus includes information about the proposals,
including a summary comparing each Portfolio to Small Cap Value Portfolio. You
should read the entire Proxy Statement/Prospectus carefully, including Exhibit
A and Exhibit B, because they are a part of this Proxy Statement/Prospectus and
contain details that are not in the summary. A Statement of Additional
Information, dated April 18, 2006, includes additional information regarding
each Portfolio and Small Cap Value Portfolio and is incorporated herein by
reference. You may obtain a copy of the Statement of Additional Information by
calling 1-800-622-3265.
The Proxy Statement/Prospectus sets forth the information about Small Cap
Value Portfolio that a prospective investor ought to know before investing and
should be retained for future reference. Additional information about the
Portfolios and Small Cap Value Portfolio has been filed with the SEC and is
available upon oral or written request and without charge. See below on "Where
to Get More Information."
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Where to Get More Information
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Pioneer Small Company VCT Portfolio's Class I and Class On file with the SEC and available at no charge by calling our
II Shares prospectuses, each dated May 1, 2005. toll-free number: 1-800-622-3265.
Pioneer Small Cap Value II VCT Portfolio's Class I Shares On file with the SEC and available at no charge by calling our
prospectus dated May 1, 2005. toll-free number: 1-800-622-3265.
Each Portfolio's combined statement of additional On file with the SEC and available at no charge by calling our
information ("SAI") dated May 1, 2005, as supplemented. toll-free number: 1-800-622-3265.
Each Portfolio's annual report dated December 31, 2005. On file with the SEC and available at no charge by calling our
toll-free number: 1-800-622-3265.
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Pioneer Small Cap Value VCT Portfolio's Class I and On file with the SEC and available at no charge by calling our
Class II Shares prospectuses, each dated May 1, 2005. toll-free number: 1-800-622-3265.
Pioneer Small Cap Value VCT Portfolio's SAI dated On file with the SEC and available at no charge by calling our
May 1, 2005, as supplemented. toll-free number: 1-800-622-3265.
Pioneer Small Cap Value VCT Portfolio's annual report On file with the SEC and available at no charge by calling our
dated December 31, 2005. toll-free number: 1-800-622-3265.
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The SAI for this Proxy Statement/Prospectus, dated On file with the SEC and available at no charge by calling our
April 18, 2006. It contains additional information toll-free number: 1-800-622-3265. This SAI is incorporated by
about each Portfolio and the Pioneer Small Cap Value reference into this Proxy Statement/Prospectus.
VCT Portfolio.
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To ask questions about this Proxy Statement/Prospectus. Call our toll-free telephone number: 1-800-622-3265.
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The date of this Proxy Statement/Prospectus is April 18, 2006.
3
How Each Reorganization will Work
o Your Portfolio will transfer all of its assets to Small Cap Value
Portfolio. Small Cap Value Portfolio will assume your Portfolio's
liabilities.
o Small Cap Value Portfolio will issue Class I and/or Class II shares to
your Portfolio in amounts equal to the aggregate net asset value of your
Portfolio's Class I and/or Class II shares, as applicable. Shareowners of
your Portfolio will receive Class I and/or Class II shares of Small Cap
Value Portfolio. These shares will be distributed to shareowners of your
Portfolio in proportion to their holdings of the respective class of
share holdings on the closing date of the reorganization ("Closing Date")
and the shareowners will become shareowners of Small Cap Value Portfolio.
On the Closing Date, shareowners will hold the shares of Small Cap Value
Portfolio with the same aggregate net asset value as the shares of your
Portfolio that you held immediately prior to the Reorganization.
o Each Portfolio will be dissolved after the Closing Date.
o The Reorganization of each Portfolio would be conditioned upon the
approval of its shareowners, but either Reorganization could proceed if
the other is not approved.
o Each Reorganization is intended to result in no income, gain or loss
being recognized for federal income tax purposes to Small Cap Value
Portfolio, your Portfolio or the shareowners of your Portfolio.
o There is no guarantee that your variable contract sponsor will make Small
Cap Value Portfolio available to its contract holders even if the
Reorganizations are approved by the shareowners of the Portfolios. If
Small Cap Value Portfolio is not available as an investment option under
your contract on the date of the Reorganization, you will have to
allocate the money in your Portfolio to a different investment option
that is available under your contract.
Why the Trustees are Recommending the Reorganizations
The Trustees of your Portfolio believe that reorganizing your Portfolio
into Small Cap Value Portfolio, a portfolio with similar investment policies,
and having a combined portfolio with greater assets, offers you potential
benefits. These potential benefits and considerations include:
o The opportunity to be part of a combined portfolio with substantially
greater assets that may be better positioned in the market to further
increase asset size and achieve economies of scale. Economies of scale
have potential benefits to the combined portfolio in two ways. First, a
larger portfolio, which trades in larger blocks of stock, will be able to
hold larger positions in individual securities and, consequently, have an
enhanced ability to achieve better net prices on securities trades. In
addition, each Portfolio incurs substantial operating costs for
insurance, accounting, legal, and custodial services. The combined
portfolio resulting from each Reorganization may spread fixed expenses
over a larger asset base, potentially contributing to a lower expense
ratio in the long term than your Portfolio would achieve separately.
o The average annual rate of the combined portfolio's advisory fee will be
the same as your Portfolio's current advisory fee of 0.75%. In addition,
assuming shareholders approve the reorganizations, the expense limitation
with respect to the combined portfolio's total expenses will be lower
than Pioneer Small Company VCT Portfolio's current contractual expense
limit of 1.25% (Class I Shares) and the same as Pioneer Small Cap Value
II VCT Portfolio's current contractual expense limit of 1.01% (Class I
Shares).
o Similar investment objectives and investment policies, as well as
overlapping portfolio compositions.
Therefore, the Trustees of your Portfolio recommend that you vote FOR the
Reorganization of your Portfolio into Small Cap Value Portfolio. For further
information, please see the individual description of the proposal affecting
your Portfolio contained in the Proxy Statement/Prospectus.
Who is Eligible to Vote
If you are the owner of a variable annuity or variable life insurance
contract (a "contract owner"), the insurance company that issued your contract
is the record owner of shares of your Portfolio. By completing and returning
the enclosed voting instruction card, you will instruct the insurance company
how to vote the shares of your Portfolio attributable to your contract.
Shareowners of record on March 28, 2006 are entitled to attend and vote at
the Meeting or any adjournment of the Meeting. Shareowners of your Portfolio
will vote together as a single class with respect to your Portfolio's
Reorganization. Each share is entitled to one vote. Shares represented by
properly executed proxies, unless revoked before or at the Meeting, will be
voted according to shareowners' instructions. If you sign a proxy but do not
fill in a vote, your shares will be voted to approve the Agreement and Plan of
Reorganization relating to your Portfolio. If any other business comes before
the Meeting, your shares will be voted at the discretion of the persons named
as proxies.
4
PIONEER SMALL COMPANY VCT PORTFOLIO AND
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PROPOSAL 1(a)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as Exhibit A, because they
contain details that are not in the summary.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Portfolio and Small Cap Value Portfolio.
Your Portfolio and Small Cap Value Portfolio have the same investment
objective and similar investment policies. Your Portfolio is managed by the
same investment adviser that manages Small Cap Value Portfolio. Your Portfolio
may invest a greater percentage of its assets in non-U.S. securities than Small
Cap Value Portfolio.
Comparison of Pioneer Small Company VCT Portfolio to Pioneer Small Cap Value
VCT Portfolio
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Business A diversified series of Pioneer Variable Contracts Trust, an open-end management investment
company organized as a Delaware statutory trust.
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Net assets as of $13.0 million $42.3 million
December 31, 2005
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Investment adviser Pioneer Investment Management, Inc. ("Pioneer")
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Portfolio managers Until January 2006, day-to-day management of Day-to-day management of Small Cap Value
your Portfolio was the responsibility of co- Portfolio is the responsibility of David M.
managers Diego Franzin and Michael Rega. Adams, Portfolio Manager, and John
Mr. Franzin, Vice President and head of U.S. McPherson, Portfolio Manager. The portfolio
Quantitative Research & Management and lead managers are supported by the small cap
of Global Active Quantitative Equity Research, team. Members of this team manage other
joined Pioneer in 1998 as an active quantitative Pioneer funds investing primarily in small cap
equity research analyst. Mr. Rega, Vice securities. The portfolio managers and the
President and Senior Portfolio Manager, joined team also may draw upon the research and
Pioneer in 2004. Prior to joining Pioneer, investment management expertise of the
Mr. Rega was a Vice President and Portfolio global research team, which provides
Manager at 646 Advisors from 2000 to 2004. fundamental research on companies and
includes members from Pioneer's affiliate,
Since January 2006, the Portfolio Managers of Pioneer Investment Management Limited.
Small Cap Value VCT Portfolio, as indicated Mr. Adams is a Vice President of Pioneer. He
in the next column, have been managing joined Pioneer in 1994 and has been an
your Portfolio. investment professional since 1992.
Mr. McPherson joined Pioneer in September
2002 as an Assistant Portfolio Manger. Prior
to joining Pioneer, he was employed by
Middleton & Company as an analyst on the
team responsible for managing the equity
portion of high net worth client portfolios.
From 1997 to 2001, Mr. McPherson was an
analyst with Evergreen Investment
Management.
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5
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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The Statement of Additional Information provides additional information about the portfolio
managers' compensation, other accounts managed by the portfolio managers, and the portfolio
managers' ownership of shares of your Portfolio and Small Cap Value Portfolio.
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Investment objective Capital growth by investing in a diversified portfolio of securities consisting primarily of
common stocks.
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Primary investment policy Normally, your Portfolio invests at least 80% Normally, Small Cap Value Portfolio invests
of its total assets in equity securities of small at least 80% of its net assets (including
companies. borrowing, if any, for investment purposes)
in equity securities of small companies.
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Small companies are those with market values, at the time of investment, that do not exceed
the greater of the market capitalization of the largest company within the Russell 2000 Index or
the 3-year rolling average of the market capitalization of the largest company within the Russell
2000 Index as measured at the end of the preceding month. The Russell 2000 Index measures
the performance of the 2,000 smallest companies in the Russell 3000 Index. The size of the
companies in the index changes with market conditions and the composition of the index.
Pioneer monitors the portfolio so that, under normal circumstances, the capitalization range of
your Portfolio and Small Cap Value Portfolio are consistent with the inclusion of your Portfolio
and Small Cap Value Portfolio in the Lipper Small-Cap category. For purposes of your Portfolio's
and Small Cap Value Portfolio's investment policies, equity securities include common stocks,
convertible debt and other equity instruments, such as depositary receipts, warrants, rights,
equity interests in real estate investment trusts (REITs) and preferred stocks.
Each of your Portfolio and Small Cap Value Portfolio will provide written notice to its
shareowners at least 60 days prior to any change to the requirement that it invest at least 80%
of its assets as described above.
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Your Portfolio and Small Cap Value Portfolio each may invest up to 25% of its total assets
in REITs.
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Your Portfolio may invest up to 25% of its
total assets in equity and debt securities of
non-U.S. issuers, but will not invest more than
5% of its total assets in securities of emerging
market issuers.
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Investment strategies Pioneer uses a value approach to select your Portfolio's and Small Cap Value Portfolio's
investments. Using this investment style, Pioneer seeks securities selling at substantial
discounts to their underlying values and then holds these securities until the market values
reflect their intrinsic values. Pioneer evaluates a security's potential value, including the
attractiveness of its market valuation, based on the company's assets and prospects for
earnings growth. In making that assessment, Pioneer employs due diligence and fundamental
research, an evaluation of the issuer based on its financial statements and operations,
employing a bottom-up analytic style. Pioneer relies on the knowledge, experience and judgment
of its staff who have access to a wide variety of research. Pioneer focuses on the quality and
price of individual issuers, not on economic sector or market-timing strategies.
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6
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Investment strategies Factors Pioneer looks for in selecting Factors Pioneer looks for in selecting
(continued) investments include: investments include:
o Favorable expected returns relative to o Favorable expected returns relative to
perceived risk perceived risk
o Management with demonstrated ability and o Management with demonstrated ability and
commitment to the company commitment to the company
o Estimated private market value in excess of o Above average potential for earnings and
current stock price. Private market value is revenue growth
the price an independent investor would pay
to own the entire company o Low market valuations relative to earnings
forecast, book value, cash flow and sales
o Turnaround potential for companies that
have been through difficult periods o Turnaround potential for companies that
have been through difficult periods
o Low market valuations relative to earnings
forecast, book value, cash flow and sales o Low debt levels relative to equity
o Issuer's industry has strong fundamentals,
such as increasing or sustainable demand
and barriers to entry
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Other investments Your Portfolio and Small Cap Value Portfolio each may invest up to 20% of its total assets in
debt securities of corporate and government issuers. Generally, your Portfolio and Small Cap
Value Portfolio each acquires debt securities that are investment grade, but each may invest up
to 5% of its net assets in below investment grade convertible debt securities issued by both
U.S. and non-U.S. issuers. Your Portfolio and Small Cap Value Portfolio each invests in debt
securities when Pioneer believes they are consistent with your Portfolio's and Small Cap Value
Portfolio's respective investment objective by offering the potential for capital growth, to
diversify the portfolio or for greater liquidity.
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Small Cap Value Portfolio may invest in
securities of Canadian issuers to the same
extent as securities of U.S. issuers. In
addition, Small Cap Value Portfolio may invest
up to 5% of its total assets in equity and debt
securities of other non-U.S. issuers, including
securities of emerging market issuers.
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Temporary defensive Normally, your Portfolio and Small Cap Value Portfolio each invests substantially all of its assets
strategies to meet its respective investment objective. Your Portfolio and Small Cap Value Portfolio each
may invest the remainder of its assets in securities with remaining maturities of less than one
year, cash equivalents or may hold cash. For temporary defensive purposes, including during
periods of unusual cash flows, your Portfolio and Small Cap Value Portfolio each may depart
from its principal investment strategies and invest part or all of its assets in these securities
or may hold cash. During such periods, your Portfolio and Small Cap Value Portfolio each may
not be able to achieve its respective investment objective. Your Portfolio and Small Cap Value
Portfolio each intends to adopt a defensive strategy when Pioneer believes securities in which
your Portfolio or Small Cap Value Portfolio normally invests have extraordinary risks due to
political or economic factors and in other extraordinary circumstances.
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7
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Short-term trading Your Portfolio and Small Cap Value Portfolio usually do not trade for short-term profits. Your
Portfolio and Small Cap Value Portfolio each will sell an investment, however, even if it has only
been held for a short time, if it no longer meets the Portfolio's investment criteria. If either your
Portfolio or Small Cap Value Portfolio does a lot of trading, it may incur additional operating
expenses, which would reduce performance, and could cause its respective shareowners to
incur a higher level of taxable income or capital gains.
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Derivative instruments Your Portfolio and Small Cap Value Portfolio each may use futures and options on securities,
indices and currencies, forward foreign currency exchange contracts and other derivatives. A
derivative is a security or instrument whose value is determined by reference to the value or the
change in value of one or more securities, currencies, indices or other financial instruments.
Although there is no specific limitation on investing in derivatives, neither your Portfolio nor
Small Cap Value Portfolio use derivatives as a primary investment technique and generally limits
their use to hedging. However, your Portfolio and Small Cap Value Portfolio each may use
derivatives for a variety of non-principal purposes, including:
o As a hedge against adverse changes in stock market prices, interest rates
or currency exchange rates
o As a substitute for purchasing or selling securities
o To increase return as a non-hedging strategy that may be considered speculative
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Buying, Selling and Exchanging Shares
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Sales charges The Class I and/or Class II shares of Small Cap Value Portfolio you receive in the Reorganization
will not be subject to any sales charge.
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Management and other fees Your Portfolio and Small Cap Value Portfolio each pay a monthly management fee equal to
0.75% of average daily net assets. Pioneer has contractually agreed to limit ordinary operating
expenses of each of your Portfolio and Small Cap Value Portfolio's expenses to 1.25% of the
average daily net assets attributable to Class I shares through May 1, 2006. The portion of your
Portfolio's and Small Cap Value Portfolio's expenses attributable to its Class II shares are
reduced only to the extent such expenses are reduced for your Portfolio's and Small Cap Value
Portfolio's Class I shares, respectively. Assuming shareholders approve the reorganization,
Pioneer has contractually agreed to limit ordinary operating expenses to the extent required to
reduce Small Cap Value Portfolio's expenses to 1.01% of the average daily net assets
attributable to Class I shares. The portion of Small Cap Value Portfolio's expenses attributable to
its Class II shares will be reduced only to the extent such expenses are reduced for Small Cap
Value Portfolio's Class I shares. This expense limitation will be in effect through May 1, 2007.
There can be no assurance that Pioneer will extend the expense limitation beyond May 1, 2007.
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Distribution and service Class I shares of your Portfolio and Small Cap Value Portfolio are not subject to a Rule 12b-1
(12b-1) fee fee. Your Portfolio and Small Cap Value Portfolio each have adopted a plan of distribution for
Class II shares in accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Under each plan, your Portfolio and Small Cap Value
Portfolio each pay to Pioneer Funds Distributor, Inc. a distribution fee of 0.25% of the average
daily net assets attributable to Class II shares. Because these fees are an ongoing expense, over
time they increase the cost of an investment and the shares may cost more than shares that are
subject to other types of sales charges.
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8
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Buying, Selling and Exchanging Shares
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Pioneer Small Company VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Buying shares Your Portfolio and Small Cap Value Portfolio each may sell its shares directly to separate
accounts established and maintained by insurance companies for the purpose of funding
variable contracts and to qualified plans. Shares of your Portfolio and Small Cap Value Portfolio
are sold at net asset value. Investments in your Portfolio and Small Cap Value Portfolio are
credited to an insurance company's separate account or qualified plan account, immediately
upon acceptance of the investment by your Portfolio or Small Cap Value Portfolio, respectively.
The offering of shares of your Portfolio or Small Cap Value Portfolio may be suspended for a
period of time, and your Portfolio and Small Cap Value Portfolio each reserves the right to
reject any specific purchase order. Purchase orders may be refused if, in Pioneer's opinion,
they are of a size or frequency that would disrupt the management of your Portfolio or
Small Cap Value Portfolio.
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Selling shares Shares of your Portfolio and Small Cap Value Portfolio each will be sold at net asset value per
share next calculated after your Portfolio and Small Cap Value Portfolio, respectively, receives
the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable
contract, as described in your variable contract's prospectus.
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Comparison of Principal Risks of Investing in your Portfolio and Small Cap
Value Portfolio
Because your Portfolio and Small Cap Value Portfolio have the same
investment objective and similar primary investment policies and strategies,
they are subject to similar principal risks. You could lose money on your
investment or not make as much as if you invested elsewhere if:
o The stock market goes down or performs poorly relative to other
investments (this risk may be greater in the short term)
o Small company or value stocks fall out of favor with investors
o The Portfolio's assets remain undervalued or do not have the potential
value originally expected
Small cap risks. Your Portfolio and Small Cap Value Portfolio also have
risks associated with investing in small companies. Compared to large
companies, small companies, and the market for their equity securities, are
likely to:
o Be more sensitive to changes in the economy, earnings results and
investor expectations
o Have more limited product lines and capital resources
o Experience sharper swings in market values
o Be harder to sell at the times and prices Pioneer thinks appropriate
o Offer greater potential for gain and loss
Risks of REITs. Your Portfolio and Small Cap Value Portfolio each may
invest up to 25% of its total assets in REITs. REITs are companies that invest
primarily in real estate or real estate related loans. Investing in REITs
involves unique risks. They are significantly affected by the market for real
estate and are dependent upon management skills and cash flow. In addition to
its own expenses, your Portfolio and Small Cap Value Portfolio will indirectly
bear its proportionate share of any management and other expenses paid by REITs
in which it invests.
Market segment risks. To the extent your Portfolio or Small Cap Value
Portfolio emphasizes, from time to time, investments in a market segment, it
will be subject to a greater degree to the risks particular to the industries
in that segment, and may experience greater market fluctuation, than a
portfolio without the same focus. For example, industries in the financial
segment, such as banks, insurance companies, broker-dealers and REITs, may be
sensitive to changes in interest rates and general economic activity and are
subject to extensive government regulation. Industries in the technology
segment, such as information technology, communications equipment, computer
hardware and software, and office and scientific equipment, are subject to
risks of rapidly evolving technology, short product lives, rates of corporate
expenditures, falling prices and profits, competition from new market entrants,
and general economic conditions.
9
Non-U.S. securities risks. Your Portfolio is also subject to risks
associated with investments other than U.S. equity securities. Investing in
non-U.S. issuers may involve unique risks compared to investing in securities
of U.S. issuers. Some of these risks do not apply to the larger more developed
non-U.S. markets. These risks may include:
o Less information about non-U.S. issuers or markets may be available due
to less rigorous disclosure or accounting standards or regulatory
practices
o Many non-U.S. markets are smaller, less liquid and more volatile. In a
changing market, Pioneer may not be able to sell portfolio securities at
times, in amounts and at prices it considers reasonable
o Adverse effect of currency exchange rates or controls on the value of the
Portfolio's investments
o The possibility that a counterparty may not complete a currency or
securities transaction
o The economies of non-U.S. countries may grow at slower rates than
expected or may experience a downturn or recession
o Economic, political and social developments may adversely affect the
securities markets
o Withholding and other non-U.S. taxes may decrease the Portfolio's return
Investments in your Portfolio and Small Cap Value Portfolio are not bank
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You could lose money by investing
in either Portfolio.
Comparison of Past Performance
Set forth below is the performance information for your Portfolio and
Small Cap Value Portfolio. The bar charts show the year-by-year performance of
your Portfolio's and Small Cap Value Portfolio's Class I shares since
inception. Class II shares will have different performance. The tables show the
average annual total return of your Portfolio and Small Cap Value Portfolio
over time compared with a broad-based securities market index. Your Portfolio's
and Small Cap Value Portfolio's returns in the bar chart and table are net of
annual operating expenses, but do not reflect any additional charges and
expenses that may be imposed by the variable insurance product or the qualified
retirement plan through which you invest. If such charges and expenses were
included, performance would be lower. Past performance does not indicate future
results.
Pioneer Small Company VCT Portfolio -- Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED DOCUMENT.]
'02 -16.75
'03 25.30
'04 13.37
'05 1.78
* During the period shown in the bar chart, your Portfolio's highest quarterly
return was 16.71% for the quarter ended 06/30/03, and the lowest quarterly
return was -19.91% for the quarter ended 09/30/02.
10
Pioneer Small Cap Value VCT Portfolio -- Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED DOCUMENT.]
'02 -15.08
'03 35.43
'04 20.16
'05 11.39
* During the period shown in the bar chart, Small Cap Value VCT Portfolio's
highest quarterly return was 21.45% for the quarter ended 06/30/03, and the
lowest quarterly return was -21.72% for the quarter ended 09/30/02.
Average Annual Total Returns*
(for periods ended December 31, 2005)
1 Year Since Inception Inception Date
Pioneer Small Company VCT Portfolio
Class I shares 1.78% 5.78% 1/19/01
Class II shares 1.65% 5.55% 7/31/01(3)
Russell 2000 Index(1)
(reflects no deduction for fees or expenses) 4.55% 8.10%(4)
Pioneer Small Cap Value VCT Portfolio
Class I shares 11.39% 13.22% 11/8/01
Class II shares 11.10% 13.01% 5/1/03(3)
Russell 2000 Value Index(2)
(reflects no deduction for fees or expenses) 4.71% 15.87%(4)
* Assumes the reinvestment of dividends and distributions, and sale of shares
at the end of the period.
(1) The Russell 2000 Index is a widely recognized measure of performance of
2,000 issuers with small to moderate market capitalizations.
(2) The Russell 2000 Value Index is a measure of the performance of the
value-oriented stocks in the Russell 2000 Index. Small Cap Value
Portfolio's benchmark index will change from the Russell 2000 Value Index
to the Russell 2000 Index upon consummation of the closing of the
Reorganization.
(3) The performance of Class II shares for the period prior to the commencement
of operations of Class II shares is based on the performance of Class I
shares, reduced to reflect the distribution fee of Class II shares.
(4) Reflects the return of the index since the inception of Class I shares.
The most recent portfolio manager's discussion of your Portfolio and Small
Cap Value Portfolio is attached as Exhibit B.
11
Your Portfolio's and Small Cap Value Portfolio's Fees and Expenses
Shareowners of your Portfolio and Small Cap Value Portfolio pay various
fees and expenses, either directly or indirectly. The tables below show the
fees and expenses that you would pay if you were to buy and hold shares of your
Portfolio and Small Cap Value Portfolio. The expenses in the tables appearing
below are based on the expenses of your Portfolio and Small Cap Value Portfolio
for the period ended December 31, 2005. Future expenses may be greater or less.
Shareowners of Pioneer Small Cap Value II VCT Portfolio are also being asked to
approve the Reorganization of their Portfolio into Pioneer Small Cap Value VCT
Portfolio. The tables also show (1) the pro forma expenses of the combined
portfolio assuming the Reorganization occurred on December 31, 2005 and (2) the
pro forma expenses of the combined portfolio assuming the Reorganization of
Pioneer Small Cap Value II VCT Portfolio also occurred on December 31, 2005.
These fees and expenses do not include any fees or sales charges imposed
by a variable contract for which your Portfolio or Small Cap Value Portfolio
are investment options. If they were included, your costs would be higher. You
should consult your insurance company's separate account prospectus or
disclosure document for more information.
Combined
Pioneer
Small Cap
Pioneer Pioneer Value
Small Small Cap VCT
Company Value Portfolio
VCT VCT (Pro
Portfolio Portfolio Forma)
------------------ ----------------- ------------------
Class I Class I Class I
------------------ ----------------- ------------------
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
Management fee 0.75% 0.75% 0.75%
Distribution and service (12b-1) fee None None None
Other expenses 0.86% 0.40% 0.35%
Total Portfolio operating expenses 1.61% 1.15% 1.10%
- ----------------------------------------------------------------------------------------------
Fee Waiver and Expense Limitation -0.36%(1) 0.00%(1) -0.09%(2)
Net Portfolio operating expenses 1.25%(1) 1.15%(1) 1.01%(2)
Combined Combined
Pioneer Pioneer
Small Cap Small Cap
Value Value
VCT VCT
Portfolio Portfolio
(Including Combined (Including
Pioneer Pioneer Pioneer
Small Cap Small Cap Small Cap
Value II Pioneer Pioneer Value Value II
VCT Small Small Cap VCT VCT
Portfolio) Company Value Portfolio Portfolio)
(Pro VCT VCT (Pro (Pro
Forma) Portfolio Portfolio Forma) Forma)
----------------- ------------------ ----------------- ------------------ -----------------
Class I Class II Class II Class II Class II
----------------- ------------------ ----------------- ------------------ -----------------
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
Management fee 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fee None 0.25% 0.25% 0.25% 0.25%
Other expenses 0.22% 0.83% 0.39% 0.35% 0.22%
Total Portfolio operating expenses 0.97% 1.83% 1.39% 1.35% 1.22%
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Fee Waiver and Expense Limitation 0.00%(2) -0.36%(3) 0.00%(3) -0.09%(3) 0.00%(3)
Net Portfolio operating expenses 0.97%(2) 1.47%(3) 1.39%(3) 1.26%(3) 1.22%(3)
- ----------
(1) The expenses in the table above reflect the contractual expense limitation
in effect through May 1, 2006 under which Pioneer 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 your
Portfolio's and Small Cap Value Portfolio's Class I expenses to 1.25% of
the average daily net assets attributable to your Portfolio's and Small Cap
Value Portfolio's Class I shares, respectively. There can be no assurance
that Pioneer will extend the expense limitation beyond May 1, 2006.
(2) The expenses in the table above reflect the contractual expense limitation
that will be in effect from May 1, 2006 through May 1, 2007 under which
Pioneer 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 further reduce Small Cap Value Portfolio's Class I shares
expenses to 1.01% of the average daily net assets attributable to Small Cap
Value Portfolio's Class I shares. This limitation assumes that shareholders
approve the reorganization. There can be no assurance that Pioneer will
extend the expense limitation beyond May 1, 2007.
(3) The portion of your Portfolio's and Small Cap Value Portfolio's expenses
attributable to its Class II shares are reduced only to the extent such
expenses are reduced for your Portfolio's and Small Cap Value Portfolio's
Class I shares, respectively. Any differences in the fee waiver and expense
limitation among classes result from rounding in the daily calculation of a
Class's net assets and expense limit, which may exceed 0.01% annually.
12
The hypothetical example below helps you compare the cost of investing in
your Portfolio and Small Cap Value Portfolio. It assumes that: (a) you invest
$10,000 in your Portfolio and Small Cap Value Portfolio for the time periods
shown, (b) you reinvest all dividends and distributions, (c) your investment
has a 5% return each year, (d) your Portfolio's and Small Cap Value Portfolio's
gross operating expenses remain the same, and (e) the applicable expense
limitations are in effect for year one. The examples are for comparison
purposes only and are not a representation of either your Portfolio's or Small
Cap Value Portfolio's actual expenses or returns, either past or future.
Combined Pioneer
Small Cap Value
VCT Portfolio
Combined Pioneer (including Pioneer
Pioneer Pioneer Small Cap Value Small Cap Value II
Number of Years Small Company Small Cap Value VCT Portfolio VCT Portfolio)
You Own Your Shares VCT Portfolio VCT Portfolio (Pro Forma) (Pro Forma)
- ------------------- --------------- ----------------- ------------------ -------------------
Class I Shares
Year 1 ............. $ 127 $ 117 $ 103 $ 99
Year 3 ............. $ 473 $ 365 $ 341 $ 309
Year 5 ............. $ 842 $ 633 $ 597 $ 536
Year 10 ............ $1,881 $1,398 $1,332 $1,190
Class II Shares
Year 1 ............. $ 150 $ 142 $ 128 $ 124
Year 3 ............. $ 541 $ 440 $ 419 $ 387
Year 5 ............. $ 957 $ 761 $ 731 $ 670
Year 10 ............ $2,118 $1,669 $1,616 $1,477
CAPITALIZATION
The following table sets forth the capitalization of your Portfolio and
Small Cap Value Portfolio as of December 31, 2005, and the pro forma combined
portfolio as of December 31, 2005. The table also sets forth the pro forma
capitalization of the combined portfolio as of December 31, 2005, assuming the
shareowners of Pioneer Small Cap Value II VCT Portfolio approve the
Reorganization of their Portfolio into Small Cap Value Portfolio.
Combined Pioneer
Small Cap Value
VCT Portfolio
Combined Pioneer (including Pioneer
Pioneer Pioneer Small Cap Value Small Cap Value II
Small Company Small Cap Value VCT Portfolio VCT Portfolio
VCT Portfolio VCT Portfolio (Pro Forma) (Pro Forma)
December 31, 2005 December 31, 2005 December 31, 2005(1) December 31, 2005(1)
------------------- ------------------- ---------------------- ---------------------
Total Net Assets (in millions) ....... $13,016,439 $42,254,207 $55,251,979 $99,846,271
Class I Shares ...................... $ 3,284,702 $20,554,697 $23,832,504 $68,426,796
Class II Shares ..................... $ 9,731,737 $21,699,510 $31,419,475 $31,419,475
Net Asset Value Per Share
Class I Shares ...................... $ 11.85 $ 16.19 $ 16.19 $ 16.19
Class II Shares ..................... $ 11.71 $ 16.07 $ 16.07 $ 16.07
Shares Outstanding
Class I Shares ...................... 277,175 1,269,643 1,472,528 4,227,528
Class II Shares ..................... 831,281 1,350,250 1,955,834 1,955,994
- ----------
(1) The pro forma data reflects adjustments to account for the costs of the
reorganization borne by each Portfolio.
It is impossible to predict how many shares of Small Cap Value Portfolio
will actually be received and distributed by your Portfolio on the Closing Date
of the Reorganization. The table should not be relied upon to determine the
amount of Small Cap Value Portfolio's shares that will actually be received and
distributed.
13
Reasons for the Proposed Reorganization
The Trustees of your Portfolio believe that the proposed Reorganization
will be advantageous to the shareowners of your Portfolio for several reasons.
The Trustees considered the following matters, among others, in approving the
proposal.
First, the Reorganization would eliminate confusion in the marketplace
caused by having similar portfolios and enhancing the potential for the
combined portfolio to achieve growth in assets. The combined portfolio may be
better positioned to attract assets than your Portfolio. After the
Reorganization, the combined portfolio's greater asset size may allow it,
relative to your Portfolio, to (i) obtain better net prices on securities
trades, and (ii) reduce per share expenses as fixed expenses are shared over a
larger asset base.
Second, the investment performance of Small Cap Value Portfolio is better
than your Portfolio's investment performance. For each calendar year since
inception, Small Cap Value Portfolio's Class I shares had higher total returns
than your Portfolio's Class I shares during the same periods. In addition,
Small Cap Value Portfolio's Class I and Class II shares had higher average
annual returns for the one-year period ended December 31, 2005 and since
inception than your Portfolio's Class I and Class II shares during the same
periods.
Third, since the management fee rate and the current expense limitations
are the same for both your Portfolio and Small Cap Value Portfolio, there will
be no increase in management fee (as a percentage of average daily net assets)
or net expenses (assuming total expenses exceed the expense limitation) as a
result of the Reorganization. In addition, effective May 1, 2006, Pioneer has
contractually 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 further reduce Small Cap Value Portfolio's Class I shares expenses to 1.01%
of the average daily net assets attributable to Small Cap Value Portfolio's
Class I shares through May 1, 2007. There can be no assurance that Pioneer will
extend the expense limit beyond May 1, 2007.
Fourth, the total expenses of Small Cap Value Portfolio's Class I and
Class II shares are lower than your Portfolio's Class I and Class II shares
total expenses, respectively, for the most recent calendar year ended December
31, 2005. It is anticipated that the pro forma total expenses and pro forma
expense ratio for both Class I and Class II shares of the combined portfolio
will be lower than either of your Portfolio's or Small Cap Value Portfolio's
total expenses and expense ratio as a result of the Reorganization. In
addition, if the Reorganization of Pioneer Small Cap Value II VCT Portfolio
into Small Cap Value Portfolio is approved by the shareowners of Pioneer Small
Cap Value II VCT Portfolio, the estimated pro forma total expenses and pro
forma expense ratio will be decreased even further.
The Trustees of your Portfolio and Small Cap Value Portfolio considered
that your Portfolio, Small Cap Value II Portfolio and Small Cap Value Portfolio
would each bear equally half of all of the expenses associated with the
preparation, printing and mailing of any shareholder communications, including
this combined Proxy Statement/Prospectus, and any filings with the SEC and
other governmental agencies in connection with the Reorganizations. Pioneer
will bear the balance of these expenses. The Trustees estimate that these
expenses in the aggregate will be approximately $56,000.
The Trustees of your Portfolio and Small Cap Value Portfolio considered
that the investment adviser and principal distributor of your Portfolio and
Small Cap Value Portfolio would benefit from the Reorganization. For example,
Pioneer might achieve cost savings from managing one larger combined portfolio,
which would result in a decrease in the combined portfolio's gross expenses and
a corresponding decrease in fees waived under the current expense limit
agreement. The Trustees believe, however, that these savings will not amount to
a significant economic benefit to Pioneer or the principal distributor. In
addition, Pioneer has agreed to further reduce its fees pursuant to a new lower
contractual expense limit agreement.
The Trustees of both your Portfolio and Small Cap Value Portfolio also
considered that the Reorganization presents an excellent opportunity for the
shareowners of your Portfolio and Small Cap Value Portfolio to become investors
in a combined portfolio that has a larger asset size than either your Portfolio
or Small Cap Value Portfolio alone without the obligation to pay commissions or
other transaction costs that a portfolio normally incurs when purchasing
securities. This opportunity provides an economic benefit to shareowners of
both your Portfolio and Small Cap Value Portfolio.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Portfolio and Small
Cap Value Portfolio. The Trustees, including the Independent Trustees, also
determined that the interests of your Portfolio and Small Cap Value Portfolio's
shareowners would not be diluted as a result of the Reorganization.
The Trustees recommend that the shareowners of your Portfolio vote FOR the
proposal to approve the Agreement and Plan of Reorganization.
14
PIONEER SMALL CAP VALUE II VCT PORTFOLIO AND
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PROPOSAL 1(b)
Approval of Agreement and Plan of Reorganization
SUMMARY
The following is a summary of more complete information appearing later in
this Proxy Statement/Prospectus or incorporated herein. You should read
carefully the entire Proxy Statement/Prospectus, including the form of
Agreement and Plan of Reorganization attached as Exhibit A, because they
contain details that are not in the summary.
In the table below, if a row extends across the entire table, the policy
disclosed applies to both your Portfolio and Small Cap Value Portfolio.
Your Portfolio and Small Cap Value Portfolio have substantially similar
investment objectives and the same investment policies. Your Portfolio is
managed by the same investment adviser and portfolio management team that
manages Small Cap Value Portfolio.
Comparison of Pioneer Small Cap Value II VCT Portfolio to Pioneer Small Cap
Value VCT Portfolio
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Pioneer Small Cap Value II VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Business A diversified series of Pioneer Variable Contracts Trust, an open-end management investment
company organized as a Delaware statutory trust.
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Net assets as of $44.6 million $42.3 million
December 31, 2005
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Investment adviser Pioneer Investment Management, Inc. ("Pioneer")
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Portfolio managers Day-to-day management of your Portfolio and Small Cap Value Portfolio is the responsibility
of David M. Adams, Portfolio Manager, and John McPherson, Portfolio Manager. The portfolio
managers are supported by the small cap team. Members of this team manage other Pioneer
funds investing primarily in small cap securities. The portfolio managers and the team also may
draw upon the research and investment management expertise of the global research team,
which provides fundamental research on companies and includes members from Pioneer's
affiliate, Pioneer Investment Management Limited. Mr. Adams is a Vice President of Pioneer.
He joined Pioneer in 1994 and has been an investment professional since 1992. Mr. McPherson
joined Pioneer in September 2002 as an Assistant Portfolio Manger. Prior to joining Pioneer,
he was employed by Middleton & Company as an analyst on the team responsible for managing
the equity portion of high net worth client portfolios. From 1997 to 2001, Mr. McPherson was
an analyst with Evergreen Investment Management.
The Statement of Additional Information provides additional information about the portfolio
managers' compensation, other accounts managed by the portfolio managers, and the portfolio
managers' ownership of shares of your Portfolio and Small Cap Value Portfolio.
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Investment objective Capital growth. Capital growth by investing in a diversified
portfolio of securities consisting primarily of
common stocks.
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15
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Pioneer Small Cap Value II VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Primary investment policy Normally, your Portfolio and Small Cap Value Portfolio each invests at least 80% of its net assets
(including borrowing, if any, for investment purposes) in equity securities of small companies.
Small companies are those with market values, at the time of investment, that do not exceed the
greater of the market capitalization of the largest company within the Russell 2000 Index or the
3-year rolling average of the market capitalization of the largest company within the Russell 2000
Index as measured at the end of the preceding month. The Russell 2000 Index measures the
performance of the 2,000 smallest companies in the Russell 3000 Index. The size of the
companies in the index changes with market conditions and the composition of the index. Pioneer
monitors the portfolio so that, under normal circumstances, the capitalization range of your
Portfolio and Small Cap Value Portfolio is consistent with the inclusion of your Portfolio and Small
Cap Value Portfolio in the Lipper Small-Cap category. For purposes of your Portfolio's and Small
Cap Value Portfolio's investment policies, equity securities include common stocks, convertible
debt and other equity instruments, such as depositary receipts, warrants, rights, equity interests in
real estate investment trusts (REITs) and preferred stocks.
Each of your Portfolio and Small Cap Value Portfolio will provide written notice to its shareowners
at least 60 days prior to any change to the requirement that it invest at least 80% of its assets as
described above.
-------------------------------------------------------------------------------------------------------
Your Portfolio and Small Cap Value Portfolio each may invest up to 25% of its
total assets in REITs.
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Investment strategies Pioneer uses a value approach to select your Portfolio's and Small Cap Value Portfolio's
investments. Using this investment style, Pioneer seeks securities selling at substantial
discounts to their underlying values and then holds these securities until the market values
reflect their intrinsic values. Pioneer evaluates a security's potential value, including the
attractiveness of its market valuation, based on the company's assets and prospects for
earnings growth. In making that assessment, Pioneer employs due diligence and fundamental
research, an evaluation of the issuer based on its financial statements and operations,
employing a bottom-up analytic style. Pioneer relies on the knowledge, experience and judgment
of its staff who have access to a wide variety of research. Pioneer focuses on the quality and
price of individual issuers, not on economic sector or market-timing strategies.
Factors Pioneer looks for in selecting investments include:
o Favorable expected returns relative to perceived risk
o Management with demonstrated ability and commitment to the company
o Above average potential for earnings and revenue growth
o Low market valuations relative to earnings forecast, book value, cash flow and sales
o Turnaround potential for companies that have been through difficult periods
o Low debt levels relative to equity
o Issuer's industry has strong fundamentals, such as increasing or sustainable demand and
barriers to entry
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16
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Pioneer Small Cap Value II VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Other investments Your Portfolio and Small Cap Value Portfolio each may invest up to 20% of its total assets in
debt securities of corporate and government issuers. Generally, your Portfolio and Small Cap
Value Portfolio each acquires debt securities that are investment grade, but may invest up to 5%
of its net assets in below investment grade convertible debt securities issued by both U.S. and
non-U.S. issuers. Your Portfolio and Small Cap Value Portfolio each invests in debt securities
when Pioneer believes they are consistent with your Portfolio's and Small Cap Value Portfolio's
respective investment objective by offering the potential for capital growth, to diversify the
portfolio or for greater liquidity. Your Portfolio and Small Cap Value Portfolio each may invest in
securities of Canadian issuers to the same extent as securities of U.S. issuers. In addition, your
Portfolio and Small Cap Value Portfolio each may invest up to 5% of its total assets in equity
and debt securities of other non-U.S. issuers, including securities of emerging
market issuers.
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Temporary defensive Normally, your Portfolio and Small Cap Value Portfolio each invests substantially all of its assets
strategies to meet its respective investment objective. Your Portfolio and Small Cap Value Portfolio each
may invest the remainder of its assets in securities with remaining maturities of less than one
year, cash equivalents or may hold cash. For temporary defensive purposes, including during
periods of unusual cash flows, your Portfolio and Small Cap Value Portfolio each may depart
from its principal investment strategies and invest part or all of its assets in these securities or
may hold cash. During such periods, your Portfolio and Small Cap Value Portfolio may not be
able to achieve its respective investment objective. Your Portfolio and Small Cap Value Portfolio
each intends to adopt a defensive strategy when Pioneer believes securities in which your
Portfolio and Small Cap Value Portfolio normally invests have extraordinary risks due to political
or economic factors and in other extraordinary circumstances.
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Short-term trading Your Portfolio and Small Cap Value Portfolio usually do not trade for short-term profits. Your
Portfolio and Small Cap Value Portfolio each will sell an investment, however, even if it has only
been held for a short time, if it no longer meets the Portfolio's investment criteria. If either your
Portfolio or Small Cap Value Portfolio does a lot of trading, it may incur additional operating
expenses, which would reduce performance, and could cause its respective shareowners to
incur a higher level of taxable income or capital gains.
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Derivative instruments Your Portfolio and Small Cap Value Portfolio each may use futures and options on securities,
indices and currencies, forward foreign currency exchange contracts and other derivatives. A
derivative is a security or instrument whose value is determined by reference to the value or the
change in value of one or more securities, currencies, indices or other financial instruments.
Although there is no specific limitation on investing in derivatives, your Portfolio and Small Cap
Value Portfolio each do not use derivatives as a primary investment technique and generally
limits their use to hedging. However, your Portfolio and Small Cap Value Portfolio each may use
derivatives for a variety of non-principal purposes, including:
o As a hedge against adverse changes in stock market prices, interest rates or currency
exchange rates
o As a substitute for purchasing or selling securities
o To increase the Portfolio's return as a non-hedging strategy that may be considered speculative
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17
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Buying, Selling and Exchanging Shares
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Pioneer Small Cap Value II VCT Portfolio Pioneer Small Cap Value VCT Portfolio
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Sales charges The Class I shares of Small Cap Value Portfolio you receive in the Reorganization will not be
subject to any sales charge.
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Management and other fees Your Portfolio and Small Cap Value Portfolio each pay a monthly management fee equal to
0.75% of average daily net assets.
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Pioneer has contractually agreed to limit Pioneer has contractually agreed to limit
ordinary operating expenses to the extent ordinary operating expenses to the extent
required to reduce your Portfolio's expenses required to reduce Small Cap Value Portfolio's
to 1.01% of the average daily net assets expenses to 1.25% of the average daily net
attributable to Class I shares through assets attributable to Class I shares through
December 10, 2006. May 1, 2006.
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Assuming shareholders approve the reorganization, Pioneer has contractually agreed to limit
ordinary operating expenses to the extent required to reduce Small Cap Value Portfolio's
expenses to 1.01% of the average daily net assets attributable to Class I shares through May 1,
2007. There can be no assurance that Pioneer will extend the expense limitation beyond
May 1, 2007.
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Distribution and service Class I shares of your Portfolio and Small Cap Value Portfolio are not subject to a Rule 12b-1 fee.
(12b-1) fee
- ------------------------------------------------------------------------------------------------------------------------------------
Buying shares Your Portfolio and Small Cap Value Portfolio each may sell its shares directly to separate
accounts
established and maintained by insurance companies for the purpose of funding variable contracts
and to qualified plans. Shares of your Portfolio and Small Cap Value Portfolio are sold at net
asset
value. Investments in your Portfolio and Small Cap Value Portfolio are credited to an insurance
company's separate account or qualified plan account, immediately upon acceptance of the
investment by your Portfolio or Small Cap Value Portfolio, respectively. The offering of shares
of your Portfolio or Small Cap Value Portfolio may be suspended for a period of time, and your
Portfolio and Small Cap Value Portfolio each reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in Pioneer's opinion, they are of a size or frequency
that would disrupt the management of your Portfolio or Small Cap Value Portfolio.
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares Shares of your Portfolio and Small Cap Value Portfolio each will be sold at net asset value per
share next calculated after your Portfolio and Small Cap Value Portfolio, respectively, receives
the request in good order.
You may sell your shares by contacting the insurance company sponsoring your variable
contract, as described in your variable contract's prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------
Comparison of Principal Risks of Investing in your Portfolio and Small Cap
Value Portfolio
Because your Portfolio and Small Cap Value Portfolio have a substantially
similar investment objective and the same primary investment policies and
strategies, they are subject to the same principal risks. You could lose money
on your investment or not make as much as if you invested elsewhere if:
o The stock market goes down or performs poorly relative to other
investments (this risk may be greater in the short term)
o Small company or value stocks fall out of favor with investors
o The Portfolio's assets remain undervalued or do not have the potential
value originally expected
Small cap risks. Your Portfolio and Small Cap Value Portfolio also have
risks associated with investing in small companies. Compared to large
companies, small companies, and the market for their equity securities, are
likely to:
o Be more sensitive to changes in the economy, earnings results and
investor expectations
o Have more limited product lines and capital resources
18
o Experience sharper swings in market values
o Be harder to sell at the times and prices Pioneer thinks appropriate
o Offer greater potential for gain and loss
Risks of REITs. Your Portfolio and Small Cap Value Portfolio each may
invest up to 25% of its total assets in REITs. REITs are companies that invest
primarily in real estate or real estate related loans. Investing in REITs
involves unique risks. They are significantly affected by the market for real
estate and are dependent upon management skills and cash flow. In addition to
its own expenses, your Portfolio and Small Cap Value Portfolio each will
indirectly bear its proportionate share of any management and other expenses
paid by REITs in which it invests.
Market segment risks. To the extent either your Portfolio or Small Cap
Value Portfolio emphasizes, from time to time, investments in a market segment,
it will be subject to a greater degree to the risks particular to the
industries in that segment, and may experience greater market fluctuation, than
a portfolio without the same focus. For example, industries in the financial
segment, such as banks, insurance companies, broker-dealers and REITs, may be
sensitive to changes in interest rates and general economic activity and are
subject to extensive government regulation. Industries in the technology
segment, such as information technology, communications equipment, computer
hardware and software, and office and scientific equipment, are subject to
risks of rapidly evolving technology, short product lives, rates of corporate
expenditures, falling prices and profits, competition from new market entrants,
and general economic conditions.
Investments in your Portfolio and Small Cap Value Portfolio are not bank
deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. You could lose money by investing
in either Portfolio.
Comparison of Past Performance
Set forth below is the performance information for your Portfolio and
Small Cap Value Portfolio. The bar charts show the year-by-year performance of
your Portfolio's and Small Cap Value Portfolio's Class I shares since
inception. Small Cap Value Portfolio's Class II shares will have different
returns. Your Portfolio does not offer Class II shares. The tables show the
average annual total return of your Portfolio and Small Cap Value Portfolio
over time compared with a broad-based securities market index. Your Portfolio's
and Small Cap Value Portfolio's returns in the bar chart and table are net of
annual operating expenses, but do not reflect any additional charges and
expenses that may be imposed by the variable insurance product or the qualified
retirement plan through which you invest. If such charges and expenses were
included, performance would be lower. Past performance does not indicate future
results.
Pioneer Small Cap Value II VCT Portfolio -- Class I Shares *
Calendar Year Total Returns**
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED DOCUMENT.]
'98 -19.95
'99 15.4
'00 -6.02
'01 21.15
'02 -4.56
'03 42.78
'04 22.31
'05 14.94
* Pursuant to an agreement and plan of reorganization, your Portfolio acquired
all of the assets and those liabilities reflected in the net asset value of
Safeco Small-Cap Value Portfolio (the predecessor portfolio) on December 10,
2004. As a result of the reorganization, your Portfolio is the accounting
successor of the predecessor portfolio, which commenced operations on April
30, 1997. The performance of Class I shares of your Portfolio prior to the
reorganization includes the performance of the predecessor portfolio.
** During the period shown in the bar chart, your Portfolio's highest quarterly
return was 20.64% for the quarter ended 06/30/03, and the lowest quarterly
return was -16.27% for the quarter ended 09/30/02.
19
Pioneer Small Cap Value VCT Portfolio -- Class I Shares
Calendar Year Total Returns*
[THE FOLLOWING DATA WAS REPRESENTED AS A BAR CHART IN THE PRINTED DOCUMENT.]
'02 -15.08
'03 35.43
'04 20.16
'05 11.39
* During the period shown in the bar chart, Small Cap Value VCT Portfolio's
highest quarterly return was 21.45% for the quarter ended 06/30/03, and the
lowest quarterly return was -21.72% for the quarter ended 09/30/02.
Average Annual Total Returns*
(for periods ended December 31, 2005)
1 Year 5 Years Since Inception Inception Date
Pioneer Small Cap Value II VCT Portfolio
Class I shares 14.94% 18.34% 11.59% 4/30/97(1)
Pioneer Small Cap Value VCT Portfolio
Class I shares 11.39% N/A 13.22% 11/8/01
Russell 2000 Value Index(2)
(reflects no deduction for fees or expenses) 4.71% 13.55% 12.53%(3)
* Assumes the reinvestment of dividends and distributions, and sale of shares
at the end of the period.
(1) The inception date of the Portfolio is December 10, 2004. Pursuant to an
agreement and plan of reorganization, your Portfolio acquired all of the
assets and those liabilities reflected in the net asset value of Safeco
Small-Cap Value Portfolio (the predecessor portfolio) on December 10, 2004.
As a result of the reorganization, your Portfolio is the accounting
successor of the predecessor portfolio, which commenced operations on April
30, 1997. The performance of Class I shares of your Portfolio prior to the
reorganization includes the performance of the predecessor portfolio.
(2) The Russell 2000 Value Index is a measure of the performance of the
value-oriented stocks in the Russell 2000 Index. Small Cap Value
Portfolio's benchmark index will change from the Russell 2000 Value Index
to the Russell 2000 Index upon consummation of the closing of the
Reorganization. The Russell 2000 Index is a widely recognized measure of
performance of 2,000 issuers with small to moderate market capitalizations.
(3) Reflects the return of the index since the inception of your Portfolio's
Class I shares. The return of the index since the inception of Small Cap
Value Portfolio's Class I shares is 15.87%.
The most recent portfolio manager's discussion of your Portfolio and Small
Cap Value Portfolio is attached as Exhibit B.
20
Your Portfolio's and Small Cap Value Portfolio's Fees and Expenses
Shareowners of both your Portfolio and Small Cap Value Portfolio pay
various fees and expenses, either directly or indirectly. The tables below show
the fees and expenses that you would pay if you were to buy and hold shares of
your Portfolio and Small Cap Value Portfolio. The expenses in the tables
appearing below are based on the expenses of your Portfolio and Small Cap Value
Portfolio for the period ended December 31, 2005. Future expenses may be
greater or less. Shareowners of Pioneer Small Company VCT Portfolio are also
being asked to approve the Reorganization of their Portfolio into Small Cap
Value Portfolio. The tables also show (1) the pro forma expenses of the
combined Portfolio assuming the Reorganization occurred on December 31, 2005
and (2) the pro forma expenses of the combined Portfolio assuming the
Reorganization of Pioneer Small Company VCT Portfolio also occurred on December
31, 2005.
These fees and expenses do not include any fees or sales charges imposed
by a variable contract for which your Portfolio or Small Cap Value Portfolio
are investment options. If they were included, your costs would be higher. You
should consult your insurance company's separate account prospectus or
disclosure document for more information.
Combined
Pioneer
Small Cap Value
Combined VCT Portfolio
Pioneer (Including Pioneer
Pioneer Small Pioneer Small Small Cap Value Small Company
Cap Value II Cap Value VCT Portfolio VCT Portfolio)
VCT Portfolio VCT Portfolio (Pro Forma) (Pro Forma)
----------------- ----------------- ----------------- -------------------
Class I Class I Class I Class I
Shares Shares Shares Shares
----------------- ----------------- ----------------- -------------------
Annual Portfolio operating expenses
(deducted from Portfolio assets)
(as a % of average net assets)
Management fee 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fee None None None None
Other expenses 0.22% 0.40% 0.26% 0.22%
Total Portfolio operating expenses 0.97% 1.15% 1.01% 0.97%
- ----------------------------------------------------------------------------------------------------------------
Fee Waiver and Expense Limitation 0.00%(1) 0.00%(2) 0.00%(3) 0.00%(3)
Net Portfolio operating expenses 0.97%(1) 1.15%(2) 1.01%(3) 0.97%(3)
- ----------
(1) The expenses in the table above reflect the contractual expense limitation
in effect through December 10, 2006 under which Pioneer 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 your
Portfolio's Class I expenses to 1.01% of the average daily net assets
attributable to your Portfolio's Class I shares. There can be no assurance
that Pioneer will extend the expense limitation beyond December 10, 2006.
(2) The expenses in the table above reflect the contractual expense limitation
in effect through May 1, 2007 under which Pioneer 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 Small Cap
Value Portfolio's Class I expenses to 1.25% of the average daily net assets
attributable to Small Cap Value Portfolio's Class I shares. There can be no
assurance that Pioneer will extend the expense limitation beyond May 1,
2007.
(3) The expenses in the table above reflect the contractual expense limitation
that will be in effect from May 1, 2006 through May 1, 2007 under which
Pioneer 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 further reduce Small Cap Value Portfolio's Class I shares
expenses to 1.01% of the average daily net assets attributable to Small Cap
Value Portfolio's Class I shares. This limitation assumes that shareholders
approve the reorganization. There can be no assurance that Pioneer will
extend the expense limitation beyond May 1, 2007.
21
The hypothetical example below helps you compare the cost of investing in
your Portfolio and Small Cap Value Portfolio. It assumes that: (a) you invest
$10,000 in each of your Portfolio and Small Cap Value Portfolio for the time
periods shown, (b) you reinvest all dividends and distributions, (c) your
investment has a 5% return each year, (d) each of your Portfolio's and Small
Cap Value Portfolio's gross operating expenses remain the same, and (e) the
applicable expense limitations are in effect for year one. The examples are for
comparison purposes only and are not a representation of either your
Portfolio's or Small Cap Value Portfolio's actual expenses or returns, either
past or future.
Combined Pioneer
Small Cap Value
VCT Portfolio
Combined Pioneer (including Pioneer
Pioneer Pioneer Small Cap Value Small Company
Number of Years Small Cap Value II Small Cap Value VCT Portfolio VCT Portfolio)
You Own Your Shares VCT Portfolio VCT Portfolio (Pro Forma) (Pro Forma)
- ------------------- -------------------- ----------------- ------------------ -------------------
Class I Shares
Year 1 ............. $ 99 $ 117 $ 103 $ 99
Year 3 ............. $ 309 $ 365 $ 322 $ 309
Year 5 ............. $ 536 $ 633 $ 558 $ 536
Year 10 ............ $1,190 $1,398 $1,236 $1,190
CAPITALIZATION
The following table sets forth the capitalization of your Portfolio and
Small Cap Value Portfolio as of December 31, 2005, and the pro forma combined
portfolio as of December 31, 2005. The table also sets forth the pro forma
capitalization of the combined portfolio as of December 31, 2005, assuming the
shareowners of Pioneer Small Company VCT Portfolio approve the Reorganization
of their Portfolio into Small Cap Value Portfolio.
Combined Pioneer
Small Cap Value
VCT Portfolio
Combined Pioneer (including Pioneer
Pioneer Pioneer Small Cap Value Small Company
Small Cap Value II Small Cap Value VCT Portfolio VCT Portfolio)
VCT Portfolio VCT Portfolio (Pro Forma) (Pro Forma)
December 31, 2005 December 31, 2005 December 31, 2005(1) December 31, 2005(1)
-------------------- ------------------- ---------------------- ---------------------
Total Net Assets (in millions) ....... $44,603,625 $42,254,207 $86,839,165 $99,846,271
Class I Shares ...................... $44,603,625 $20,554,697 $65,144,449 $68,426,796
Class II Shares ..................... N/A $21,699,510 $21,694,716 $31,419,475
Net Asset Value Per Share
Class I Shares ...................... $ 23.33 $ 16.19 $ 16.19 $ 16.19
Class II Shares ..................... N/A $ 16.07 $ 16.07 $ 16.07
Shares Outstanding
Class I Shares ...................... 1,911,974 1,269,643 4,024,654 4,227,528
Class II Shares ..................... N/A 1,350,250 1,350,250 1,955,994
- ----------
(1) The pro forma data reflects adjustments to account for the costs of the
reorganization borne by each Portfolio.
It is impossible to predict how many shares of Small Cap Value Portfolio will
actually be received and distributed by your Portfolio on the Reorganization
date. The table should not be relied upon to determine the amount of Small Cap
Value Portfolio's shares that will actually be received and distributed.
Reasons for the Proposed Reorganization
The Trustees of your Portfolio believe that the proposed Reorganization
will be advantageous to the shareowners of your Portfolio for several reasons.
The Trustees considered the following matters, among others, in approving the
proposal.
First, the Reorganization would eliminate confusion in the marketplace
caused by having substantially similar portfolios and enhancing the potential
for the combined portfolio to achieve growth in assets. The combined portfolio
may be better positioned to attract assets
22
than your Portfolio. After the Reorganization, the combined portfolio's greater
asset size may allow it, relative to your Portfolio, to (i) obtain better net
prices on securities trades, and (ii) reduce per share expenses as fixed
expenses are shared over a larger asset base.
Second, Small Cap Value Portfolio offers Class II shares which are not
currently offered by your Portfolio.
Third, since the management fee rate is the same for both your Portfolio
and Small Cap Value Portfolio, there will be no increase in management fee (as
a percentage of average daily net assets) as a result of the Reorganization.
Fourth, although the total and net expenses of your Portfolio's Class I
shares are lower than Pioneer Small Cap Value VCT Portfolio's Class I shares
total and net expenses for the most recent calendar year ended December 31,
2005, Pioneer 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 limit Small Cap Value Portfolio's Class I shares expenses to 1.01%
of the average daily net assets attributable to Small Cap Value Portfolio's
Class I shares through May 1, 2007. This expense limit is the same as your
Portfolio's current Class I shares expense limit. There can be no assurance
that Pioneer will extend the expense limitation beyond May 1, 2007.
Fifth, although the historical investment performance of your Portfolio is
better than Small Cap Value Portfolio's investment performance, Safeco Asset
Management managed your Portfolio for the period prior to December 10, 2004 and
over time, your Portfolio will more closely resemble that of Small Cap Value
Portfolio. The Trustees considered that the positive factors associated with
the Reorganization, such as greater portfolio assets, potential for growth and
potential economies of scale, outweighed this factor.
The Trustees of your Portfolio and Small Cap Value Portfolio considered
that your Portfolio, Small Company Portfolio and Small Cap Value Portfolio
would each bear equally half of all of the expenses associated with the
preparation, printing and mailing of any shareholder communications, including
this combined Proxy Statement/Prospectus, and any filings with the SEC and
other governmental agencies in connection with the Reorganizations. Pioneer
will bear the balance of these expenses. The Trustees estimate that these
expenses in the aggregate will be approximately $56,000.
The Trustees of your Portfolio and Small Cap Value Portfolio considered
that the investment adviser and principal distributor of your Portfolio and
Small Cap Value Portfolio would benefit from the Reorganization. For example,
Pioneer might achieve cost savings from managing one larger combined portfolio,
which would result in a decrease in the combined portfolio's gross expenses and
a corresponding decrease in fees waived under the current expense limit
agreement. The Trustees believe, however, that these savings will not amount to
a significant economic benefit to Pioneer or the principal distributor.
The Trustees of both your Portfolio and Small Cap Value Portfolio also
considered that the Reorganization presents an excellent opportunity for the
shareowners of your Portfolio and Small Cap Value Portfolio to become investors
in a combined portfolio that has a larger asset size than either your Portfolio
or Small Cap Value Portfolio alone without the obligation to pay commissions or
other transaction costs that a portfolio normally incurs when purchasing
securities. This opportunity provides an economic benefit to shareowners of
both your Portfolio and Small Cap Value Portfolio.
Board's Evaluation and Recommendation
For the reasons described above, the Trustees, including the Independent
Trustees, approved the Reorganization. In particular, the Trustees determined
that the Reorganization is in the best interests of your Portfolio and Small
Cap Value Portfolio. The Trustees, including the Independent Trustees, also
determined that the interests of your Portfolio and Small Cap Value Portfolio's
shareowners would not be diluted as a result of the Reorganization.
The Trustees recommend that the shareowners of your Portfolio vote FOR the
proposal to approve the Agreement and Plan of Reorganization.
23
TERMS OF EACH AGREEMENT AND PLAN OF REORGANIZATION
The Reorganizations
o Each Reorganization is scheduled to occur as of the close of business on
May 24, 2006, but may occur on such later date as the parties may agree
in writing. Your Portfolio will transfer all of its assets to Small Cap
Value Portfolio, and Small Cap Value Portfolio will assume all of your
Portfolio's liabilities. This will result in the addition of your
Portfolio's assets to Small Cap Value Portfolio's portfolio. The net
asset value of your Portfolio and Small Cap Value Portfolio will be
computed as of the close of regular trading on the New York Stock
Exchange on the Closing Date of the Reorganization.
o Pioneer Small Company VCT Portfolio. Small Cap Value Portfolio will issue
to your Portfolio Class I and Class II shares with an aggregate net asset
value equal to the net assets attributable to your Portfolio's Class I
and Class II shares. As part of the liquidation of your Portfolio, these
shares will immediately be distributed to Class I and Class II
shareowners of your Portfolio in proportion to their holdings on the
closing date of the Reorganization. As a result, Class I and Class II
shareowners of your Portfolio will become Class I and Class II
shareowners of Small Cap Value Portfolio.
o Pioneer Small Cap Value II VCT Portfolio. Small Cap Value Portfolio will
issue to your Portfolio Class I shares with an aggregate net asset value
equal to the net assets attributable to your Portfolio's Class I shares.
As part of the liquidation of your Portfolio, these shares will
immediately be distributed to Class I shareowners of your Portfolio in
proportion to their holdings on the closing date of the Reorganization.
As a result, Class I shareowners of your Portfolio will become Class I
shareowners of Small Cap Value Portfolio. Your Portfolio does not offer
Class II shares and therefore, Class II shares of Small Cap Value
Portfolio will not be distributed to your Portfolio's shareowners.
o After the shares are issued, each Portfolio will be dissolved.
o Each Reorganization will not result in any income, gain or loss being
recognized for federal income tax purposes and will not take place unless
Pioneer Variable Contracts Trust, on behalf of each Portfolio and Small
Cap Value Portfolio, receives a satisfactory opinion concerning the tax
consequences of the Reorganization from Wilmer Cutler Pickering Hale and
Dorr LLP, counsel to each Portfolio and Small Cap Value Portfolio.
Agreement and Plan of Reorganization
The shareowners of your Portfolio are being asked to approve the Agreement
and Plan of Reorganization, the form of which is attached to this combined
proxy statement/prospectus as Exhibit A and incorporated herein by this
reference. The description of the Agreement and Plan of Reorganization
contained herein, which include all the material provisions of the Agreement
and Plan of Reorganization, is qualified in its entirety by the attached copy.
Conditions to Closing each Reorganization. The obligation of each
Portfolio to consummate each Reorganization is subject to the satisfaction of
certain conditions, including each Portfolio's performance of all of its
obligations under the Agreement and Plan of Reorganization, the receipt of
certain documents and financial statements from your Portfolio and the receipt
of all consents, orders and permits necessary to consummate the Reorganization
(see Sections 7 and 8 of the Agreement and Plan of Reorganization). The
consummation of each Reorganization is not contingent on the consummation of
the other Reorganization.
The obligations of both Portfolios are subject to the approval of the
Agreement and Plan of Reorganization by the necessary vote of the outstanding
shares of your Portfolio, in accordance with the provisions of your Portfolio's
Agreement and Declaration of Trust and By-Laws. Each Portfolio's obligations
are also subject to the receipt of a favorable opinion of Wilmer Cutler
Pickering Hale and Dorr LLP as to the United States federal income tax
consequences of each Reorganization (see Section 7 of the Agreement and Plan of
Reorganization).
Cancellation of Share Certificates. If your shares are represented by one
or more share certificates before the Closing Date of the Reorganization, all
certificates will be canceled on the Closing Date of the Reorganization, will
no longer evidence ownership of your Portfolio's shares and will evidence
ownership of Small Cap Value Portfolio shares. Small Cap Value Portfolio will
not issue share certificates in the Reorganization.
Termination of each Agreement and Plan of Reorganization. The Trustees of
each Portfolio and Small Cap Value Portfolio may terminate the Agreement and
Plan of Reorganization (even if the shareowners of your Portfolio have already
approved it) at any time before the Closing Date, if that Board believes in
good faith that proceeding with the Reorganization would not longer be in the
best interests of shareowners.
Expenses of the Reorganization. The Portfolios and Small Cap Value
Portfolio will bear equally half of all the expenses incurred in connection
with the Reorganization, including the costs of printing, mailing, legal fees,
audit fees and solicitation expenses. Pioneer will bear the balance of these
expenses.
24
TAX STATUS OF EACH REORGANIZATION
Each Reorganization will not result in any income, gain or loss being
recognized for United States federal income tax purposes and will not take
place unless Pioneer Variable Contracts Trust, on behalf of each Portfolio and
Small Cap Value Portfolio, receives a satisfactory opinion from Wilmer Cutler
Pickering Hale and Dorr LLP, counsel to each Portfolio and Small Cap Value
Portfolio, substantially to the effect that each Reorganization will be a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
As a result, for federal income tax purposes:
o No gain or loss will be recognized by your Portfolio upon (1) the
transfer of all of its assets to Small Cap Value Portfolio as described
in this Proxy Statement/Prospectus or (2) the distribution by your
Portfolio of Small Cap Value Portfolio's shares to your Portfolio's
shareowners.
o No gain or loss will be recognized by Small Cap Value Portfolio upon the
receipt of your Portfolio's assets solely in exchange for the issuance of
Small Cap Value Portfolio shares to your Portfolio and the assumption of
your Portfolio's liabilities by Small Cap Value Portfolio.
o The basis of the assets of your Portfolio acquired by Small Cap Value
Portfolio will be the same as the basis of those assets in the hands of
your Portfolio immediately before the transfer;
o The tax holding period of the assets of your Portfolio in the hands of
Small Cap Value Portfolio will include your Portfolio's tax holding
period for those assets;
o Shareowners will not recognize gain or loss upon the exchange of shares
of their Portfolio solely for the shares of Small Cap Value Portfolio as
a part of the Reorganization;
o The basis of Small Cap Value Portfolio's shares received by shareowners
in the Reorganization will be the same as the basis of their shares of
the Portfolio surrendered in the exchange; and
o The tax holding period of Small Cap Value Portfolio shares that
shareowners receive will include the tax holding period of their shares
of the Portfolio surrendered in the exchange, provided that shareowners
held their shares of the Portfolio as capital assets on the date of the
exchange.
In rendering such opinions, counsel shall rely upon, among other things,
reasonable assumptions as well as representations of Pioneer Variable Contracts
Trust, on behalf of each Portfolio and Small Cap Value Portfolio.
No tax ruling has been or will be received from the Internal Revenue
Service ("IRS") in connection with the Reorganization. An opinion of counsel is
not binding on the IRS or a court, and no assurance can be given that the IRS
would not assert, or a court would not sustain, a contrary position.
The foregoing consequences may not apply to certain classes of taxpayers
who are subject to special tax circumstances. You should consult your tax
adviser for the particular tax consequences to you of the Reorganizations,
including the applicability of any state, local or foreign tax laws.
VOTING RIGHTS AND REQUIRED VOTE
Each share of your Portfolio is entitled to one vote, and each fractional
share shall be entitled to a proportionate fractional vote. A quorum is
required to conduct business at the Meeting. With respect to each Portfolio,
the presence in person or by proxy of one-third of the outstanding shares of
your Portfolio entitled to cast votes at the Meeting will constitute a quorum
with respect to that Portfolio; however, since the proposal must be approved
"by a majority of the outstanding voting securities," as defined in the
Investment Company Act, at least 50% of the outstanding shares must be present
in person or by proxy at the Meeting to approve the proposal. A "majority of
the outstanding voting securities" of your Portfolio means the lesser of:
(i) 67% of the shares of the applicable Portfolio represented at the
meeting, if at least 50% of all outstanding shares of the Portfolio
are represented at the meeting, or
(ii) 50% or more of the outstanding shares of the Portfolio entitled to
vote at the meeting.
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Shares Quorum Voting
- ------------------------------------------------------------------------------------------------------------------------------------
In General All shares "present" in person or by proxy are Shares "present" in person will be voted in
counted towards a quorum. person at the Meeting. Shares present by
proxy will be voted in accordance with
instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
Signed Proxy with no Voting Considered "present" at Voted "for" the proposal.
Instruction meeting for purposes of quorum.
(other than
Broker Non-Vote)
- ------------------------------------------------------------------------------------------------------------------------------------
Broker Non-Vote (where the Considered "present" at Broker non-votes do not count as a vote "for"
underlying holder had not meeting for purposes of quorum. the proposal and effectively result in a vote
voted and the broker does not "against" the proposal.
have discretionary authority to
vote the shares)
- ------------------------------------------------------------------------------------------------------------------------------------
Vote to Abstain Considered "present" at Abstentions do not constitute a vote "for" the
meeting for purposes of quorum. proposal and effectively result in a vote
"against" the proposal.
- ------------------------------------------------------------------------------------------------------------------------------------
If the required approval of shareowners is not obtained, the meeting may
be adjourned as more fully described in this Proxy Statement/
Prospectus, and your Portfolio will continue to engage in business as a
separate mutual fund and the Board will consider what further action may be
appropriate.
ADDITIONAL INFORMATION ABOUT THE PIONEER PORTFOLIOS
Investment Adviser
Pioneer serves as the investment adviser to each Pioneer Portfolio.
Pioneer is an indirect, wholly owned subsidiary of UniCredito Italiano S.p.A.,
one of the largest banking groups in Italy. Pioneer is part of the global asset
management group providing investment management and financial services to
mutual funds, institutional and other clients. As of December 31, 2005, assets
under management were approximately $187 billion worldwide, including over $48
billion in assets under management by Pioneer. Pioneer's main office is at 60
State Street, Boston, Massachusetts 02109. Pioneer's U.S. mutual fund
investment history includes creating one of the first mutual funds in 1928.
The Board is responsible for overseeing the performance of each of your
Portfolio's and Small Cap Value Portfolio's investment adviser and determining
whether to approve and renew the investment advisory agreement.
Pioneer has received an order (the "Exemptive Order") from the SEC that
permits Pioneer, subject to the approval of the Pioneer Portfolios' board of
trustees, to hire and terminate a subadviser or to materially modify an
existing subadvisory agreement for a Pioneer Portfolio without shareowner
approval. Pioneer retains the ultimate responsibility to oversee and recommend
the hiring, termination and replacement of any subadviser. To the extent that
the SEC adopts a rule that would supersede the Exemptive Order, Pioneer and the
Pioneer Portfolios intend to rely on such rule to permit Pioneer, subject to
the approval of the Pioneer Portfolios' board of trustees and any other
applicable conditions of the rule, to hire and terminate a subadviser or to
materially modify an existing subadvisory agreement for a Pioneer Portfolio
without shareowner approval.
A discussion regarding the factors considered by the Trustees in approving
each Portfolio's and Small Cap Value Portfolio's investment advisory agreement
is available in the annual report to shareowners dated December 31, 2005.
Disclosure of Portfolio Holdings
The Pioneer Portfolios' policies and procedures with respect to the
disclosure of each Portfolio's and Small Cap Value Portfolio's portfolio
holdings are describe in the Statement of Additional Information and on
Pioneer's website at www.pioneerfunds.com.
26
Buying, Exchanging and Selling Shares of the Pioneer Portfolios
Net Asset Values
Each Pioneer Portfolio's net asset value is the value of its portfolio of
securities plus any other assets minus its operating expenses and any other
liabilities. Each Pioneer Portfolio calculates a net asset value for each class
of shares every day the New York Stock Exchange is open when regular trading
closes (normally 4:00 p.m. Eastern time).
Each Pioneer Portfolio generally values its portfolio securities using
closing market prices or readily available market quotations. When closing
market prices or market quotations are not available or are considered by
Pioneer to be unreliable, the Portfolio uses a security's fair value. All
methods of determining the value of a security used by the Portfolio, including
those discussed below, on the basis other than market value, are forms of fair
value. All valuations of securities on a fair value basis are made pursuant to
procedures adopted by the Board of Trustees. The use of fair value pricing by
the Portfolio may cause the net asset value of its hares to differ from the net
asset value that would be calculated only using market prices. For market
prices and quotations, as well as for some fair value methods, the Portfolio
relies upon securities prices provided by pricing services.
The Portfolio uses a fair value of a security, including a non-U.S.
security, when Pioneer determines that the closing market price on the primary
exchange where the security is traded no longer accurately reflects the value
of the security at the time the portfolio calculates its net asset value. This
may occur for a variety of reasons that affect either the relevant securities
markets generally or the specific issuer. For example, with respect to non-U.S.
securities held by the Portfolio, developments relating to specific events, the
securities markets or the specific issuer may occur between the time the
primary market closes and the time the Portfolio determines its net asset
value. In those circumstances when the Portfolio believes the price of the
security may be affected, the Portfolio uses the fair value of the security.
International securities markets may be open on days when the U.S. markets are
closed. For this reason, the values of any international securities owned by
the portfolio could change on a day you cannot buy or sell shares of the
Portfolio.
Certain types of securities, including those discussed in this paragraph,
are priced using fair value rather than market prices. The portfolio uses a
pricing matrix to determine the value of fixed income securities that do not
trade daily. A pricing matrix is a means of valuing a debt security on the
basis of current market prices for other debt securities and historical trading
patterns in the market for fixed income securities. The Portfolio values cash
equivalent securities with remaining maturities of 60 days or less at amortized
cost. To the extent that the Portfolio invests in the shares of other
registered open-end investment companies that are not traded on an exchange
(mutual funds), such shares are valued at their published net asset values per
share as reported by the funds. The prospectuses of these funds explain the
circumstances under which the funds will use fair value pricing and the effects
of using fair value pricing.
Investments in Shares of the Portfolios
Each Portfolio may sell its shares directly to separate accounts
established and maintained by insurance companies for the purposes of funding
variable annuity and variable life insurance contracts and to qualified pension
and retirement plans. Shares of the Portfolios are sold at net asset value.
Investments in each Portfolio are expressed in terms of the full and fractional
shares of the Portfolio purchased. Investments in a Portfolio are credited to
an insurance company's separate account or qualified pension and retirement
plan account immediately upon acceptance of the investment by the Portfolio.
Investments will be processed at the next net asset value calculated after an
order is received and accepted by a Portfolio. The offering of shares of any
Portfolio may be suspended for a period of time and each Portfolio reserves the
right to reject any specific purchase order. Purchase orders may be refused if,
in Pioneer's opinion, they are of a size or frequency that would disrupt the
management of a Portfolio.
Since you may not directly purchase shares of the Portfolios, you should
read the prospectus for your insurance company's variable annuity and variable
life insurance contract to learn how to purchase a variable annuity or variable
life insurance contract based on the Portfolios.
The interests of variable annuity and variable life insurance contracts
and qualified pension and retirement plans investing in the Portfolios could
conflict due to differences of tax treatment and other considerations. The
Portfolios currently do not foresee any disadvantages to investors arising out
of the fact that each Portfolio may offer its shares to insurance company
separate accounts that serve as the investment mediums for their variable
annuity and variable life insurance contracts or that each Portfolio may offer
its shares to qualified pension and retirement plans. Nevertheless, the
Portfolios' Trustees intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts. If such a conflict were
to occur, one or more insurance companies' separate accounts or qualified
pension or retirement plans might be required to withdraw their investments in
one or more Portfolios and shares of another portfolio may be substituted. This
might force a Portfolio to sell securities at disadvantageous prices. In
addition, the Trustees may refuse to sell shares of any Portfolio to any
separate
27
account or qualified pension or retirement plan or may suspend or terminate the
offering of shares of any Portfolio if such action is required by law or
regulatory authority or is in the best interests of the shareowners of the
Portfolio.
Insurance companies and plan fiduciaries are required to notify a
Portfolio if the tax status of their separate account or qualified pension or
retirement plan is revoked or challenged by the IRS. The Portfolio may redeem
any account of any shareowner whose qualification as a diversified segregated
asset account or a qualified pension or retirement plan satisfying the
requirements of Treasury Regulation ss.1.817-5 is revoked or challenged. The
Portfolio will not treat an investor as a qualified plan for this purpose
unless the investor is among the categories specifically enumerated in Revenue
Ruling 94-62, 1994-2 C.B. 164. An insurance company separate account or
qualified pension or retirement plan whose tax status is revoked or challenged
by the IRS may be liable to the Portfolios or Pioneer for losses incurred by
the Portfolios or Pioneer as a result of such action.
Selling
Shares of a Portfolio may be sold on any business day. Portfolio shares
are sold at net asset value next determined after receipt by the Portfolio of a
redemption request in good order from the insurance company as described in the
prospectus of the insurance company's variable annuity or variable insurance
contract. Sale proceeds will normally be forwarded by bank wire to the selling
insurance company on the next business day after receipt of the sales
instructions by a Portfolio but in no event later than 7 days following receipt
of instructions. Each Portfolio may suspend transactions in shares or postpone
payment dates when trading on the New York Stock Exchange is closed or
restricted, when the SEC determines an emergency or other circumstances exist
that make it impracticable for the Portfolio to sell or value its investments.
You can obtain more free information about the Pioneer Portfolios by
writing to Pioneer Investment Management Shareowner Services, Inc., 60 State
Street, Boston, Massachusetts 02109. You may also call 1-800-622-3265.
Excessive Trading
Frequent trading into and out of the Portfolios can disrupt portfolio
management strategies, harm Portfolio performance by forcing the Portfolio to
hold excess cash or to liquidate certain portfolio securities prematurely and
increase expense for all investors, including long-term investors who do not
generate these costs. An investor may use short-term trading as a strategy, for
example, if the investor believes that the valuation of the Portfolio's
securities for purposes of calculating its net asset value does not fully
reflect the then current fair market value of those holdings. The Portfolios
discourage, and do not take any intentional action to accommodate, excessive
and short-term trading practices, such as market timing. Although there is no
generally applied standard in the marketplace as to what level of trading
activity is excessive, we may consider trading in a Portfolio's shares to be
excessive for a variety of reasons, such as if a variable annuity or variable
life insurance contract owner or plan participant provides instructions to the
insurance company or plan administrator for:
o The sale of shares of a Portfolio within a short period of time after
the shares were purchased;
o Two or more purchases and redemptions within a short period of time; or
o A series of transactions that is indicative of a timing pattern or
strategy.
The Portfolios' Board has adopted policies and procedures with respect to
frequent purchases and redemptions of Portfolio shares by investors. Because
the insurance company aggregates the trading by variable annuity and variable
life insurance contract owners, we are not able to monitor trading at the
variable annuity and variable life insurance contract owner level. If we are
advised by an insurance company that a variable annuity or variable life
insurance contract owner, initiating transactions in the Portfolio through a
separate account that is the owner of record, has engaged in excessive
short-term trading that we believe may be harmful to the Portfolio, we will ask
the insurance company to restrict the variable annuity or variable life
insurance contract owners from placing further purchase orders in the
Portfolio. We make seek limitations on trading activity by qualified plans
investing in a Portfolio in similar circumstances. In determining whether to
take such action, we seek to act in a manner that is consistent with the best
interests of the Portfolio's shareowners. In order to prevent short-term
trading in portfolios that primarily invest in non-U.S. securities, these
portfolios use a fair value pricing services, as discussed under "Net Asset
Value."
While we use efforts that we believe are reasonable under the
circumstances to detect excessive trading activity, there can be no assurance
that our efforts will be successful or that market timers will not employ
tactics described to evade detection. If we are not successful, the return of
an investor in a Portfolio may be adversely affected. However, we are dependent
upon the insurance companies that offer variable annuity and variable life
insurance contracts and the administrators of the qualified plans that invest
in the Portfolios to monitor and restrict such activities. Consequently, an
investment in Portfolio may involve the risk that certain investors will engage
in short-term or excessive trading.
28
The Portfolios may reject any purchase order before its acceptance or an
order prior to issuance of shares, or request that an insurance company or plan
administrator restrict transactions activity by a variable annuity or variable
life insurance contract owners, for any reasons, without prior notice,
including transactions that the Portfolios believes are requested on behalf of
market timers. The Portfolios reserve the right to reject any purchase request
by a qualified plan or insurance company if the Portfolios believe that any
combination of trading activity in the account or related accounts is
potentially disruptive to the Portfolios. A prospective investor whose purchase
order is rejected will not achieve the investment results, whether gain or
loss, that would have been realized if the order were accepted and an
investment made in the Portfolio. The Portfolios and their shareowners do not
incur any gain or loss as a result of a rejected order. The Portfolios may
impose further restrictions on trading activities by market timers in the
future. Each Portfolio's prospectus will be amended or supplemented to reflect
any material additional restrictions on trading activities intended to prevent
excessive trading.
Distribution Plan
The Portfolios and Pioneer Small Cap Value Portfolio have each adopted a
plan of distribution for its Class II shares in accordance with Rule 12b-1
under the Investment Company Act. Under each plan, each Portfolio pays to
Pioneer Funds Distributor, Inc. a distribution fee of 0.25% of the average
daily net assets attributable to its Class II shares. Because these fees are an
ongoing expense, over time they increase the cost of an investment and the
shares may cost more than shares that are subject to other types of sales
charges. Pioneer Small Cap Value II VCT Portfolio does not presently offer its
Class II shares.
Additional Dealer Compensation
The distributor or its affiliates may pay additional compensation, out of
their own assets, to certain brokerage firms and other intermediaries or their
affiliates, based on sales or assets attributable to the firm, or such other
criteria agreed to by the distributor. The firms to which payments may be made
are determined by PFD. These payments may provide an incentive, in addition to
any sales charge, to these firms to actively promote the Portfolios or
cooperate with the distributor's promotional efforts.
Distributions and Taxes
Each Portfolio generally pays any distributions of net short- and
long-term capital gains in June. Each Portfolio generally pays dividends from
any net investment income in December. Each Portfolio may also pay dividends
and capital gain distributions at other times if necessary for the Portfolio to
avoid federal income or excise tax.
Shares of each Portfolio are held by life insurance company separate
accounts that fund variable annuity or life insurance contracts or by certain
qualified plans. Owners of variable annuity and variable life insurance
contracts should read the prospectus for their insurance company's variable
contract for a discussion of the tax status of a variable contract, including
the tax consequences of withdrawals or other payments, and should keep all
statements received from the insurance company or the Pioneer Portfolios to
assist in personal recordkeeping. Participants in a qualified plan should
consult their tax advisers regarding the tax consequences of owning and
receiving distributions or other payments relating to such plans.
Under the Code, a Portfolio's dividends and distributions of net
short-term capital gain in excess of net long-term capital loss to insurance
company separate accounts or qualified plans are generally treated as ordinary
income; distributions to those accounts of net long-term capital gain in excess
of net short-term capital loss are generally treated as long-term capital gain.
Dividends and capital gain distributions are treated as received by the
insurance company or the qualified plan rather than by the owner of the
variable contract or the plan participant. Insurance companies and qualified
plans should consult their own tax advisers regarding the tax treatment of
dividend and capital gain distributions they receive from any Portfolio.
Each Portfolio is treated as a separate entity for U.S. federal income tax
purposes and has elected to be treated, and intends to qualify each year, as a
regulated investment company under Subchapter M of the Code. Each Portfolio
must satisfy certain requirements relating to the sources of its income,
diversification of its assets and distribution of its income to shareowners to
qualify as a regulated investment company. As a regulated investment company,
each Portfolio generally will not be subject to U.S. federal income tax on any
net investment income and net realized capital gains that are distributed to
its shareowners as required under the Code.
In addition to the above, each Portfolio also follows certain
diversification requirements imposed by the Code on separate accounts of
insurance companies relating to the tax-deferred status of variable contracts.
The failure of a qualified plan to be or remain qualified could cause the
insurance company separate account to fail to meet such diversification
requirements. More specific information on these diversification requirements
is contained in the insurance company's separate account prospectus and the
Statement of Additional Information for the Portfolio.
29
FINANCIAL HIGHLIGHTS
The following tables show the financial performance of Pioneer Small Cap
Value VCT Portfolio's investment operations since its inception. Certain
information reflects financial results for a single Pioneer Portfolio share.
"Total return" shows how much an investment in Pioneer Small Cap Value VCT
Portfolio would have increased or decreased during each period, assuming you
had reinvested all dividends and other distributions.
The financial highlights for each fiscal year ended on or after December
31, 2002 have been audited by Ernst & Young LLP, Pioneer Small Cap Value VCT
Portfolio's independent registered public accounting firm, whose report is
included in Pioneer Small Cap Value VCT Portfolio's annual report along with
the financial statements. For the fiscal period ended December 31, 2001, the
financial highlights of Pioneer Small Cap Value VCT Portfolio were audited by
Arthur Anderson LLP. Arthur Andersen ceased operations in 2002. The annual
report is available upon request.
PIONEER SMALL CAP VALUE VCT PORTFOLIO
FINANCIAL HIGHLIGHTS
11/8/01 (a)
Year Ended Year Ended Year Ended Year Ended to
Class I 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
Net asset value, beginning of period $ 15.02 $ 12.50 $ 9.23 $ 10.87 $10.00
------- ------- ------- ------- ------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.05 $ (0.03) $ -- $ (0.01) $ 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.61 2.55 3.27 (1.63) 0.86
------- ------- ------- ------- ------
Net increase (decrease) from investment operations $ 1.66 $ 2.52 $ 3.27 $ (1.64) $ 0.87
Distributions to shareowners:
Net investment income -- -- -- (0.00)(b) --
Net realized gain (0.49) -- -- (0.00)(b) --
------- ------- ------- ------- ------
Net increase (decrease) in net asset value $ 1.17 $ 2.52 $ 3.27 $ (1.65) $ 0.87
------- ------- ------- ------- ------
Net asset value, end of period $ 16.19 $ 15.02 $ 12.50 $ 9.23 $10.87
------- ------- ------- ------- ------
Total return* 11.39% 20.16% 35.43% (15.08)% 8.70%
Ratio of net expenses to average net assets+ 1.15% 1.25% 1.25% 1.25% 1.21%**
Ratio of net investment income (loss) to average net assets+ 0.35% (0.21)% 0.03% (0.05)% 0.86%**
Portfolio turnover rate 38% 36% 74% 50% 0%
Net assets, end of period (in thousands) $20,555 $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 1.15% 1.30% 2.40% 2.76% 77.48**
Net investment income (loss) 0.35% (0.26)% (1.12)% (1.56)% (75.41)%**
Ratios with waiver of management fees and assumption of
expenses by PIM and no reduction for fees paid indirectly:
Net expenses 1.15% 1.25% 1.25% 1.25% 1.21%**
Net investment income (loss) 0.35% (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.
Note: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
30
Year Year 5/1/03(a)
Ended Ended to
Class II 12/31/05 12/31/04 12/31/03
Net asset value, beginning of period $ 14.95 $ 12.47 $ 9.11
------- ------- ------
Increase (decrease) from investment operations:
Net investment income (loss) $ 0.02 $ (0.03) $(0.00)
Net realized and unrealized gain on investments and foreign currency transactions 1.59 2.51 3.37
------- ------- ------
Net increase from investment operations $ 1.61 $ 2.48 $ 3.36
Distributions to shareowners:
Net realized gain (0.49) -- --
------- ------- ------
Net increase in net asset value $ 1.12 $ 2.48 $ 3.36
------- ------- ------
Net asset value, end of period $ 16.07 $ 14.95 $12.47
------- ------- ------
Total return* 11.10% 19.89% 36.88%(b)
Ratio of net expenses to average net assets+ 1.39% 1.54% 1.58%**
Ratio of net investment income (loss) to average net assets+ 0.16% (0.41)% (0.15)%**
Portfolio turnover rate 38% 36% 74%
Net assets, end of period (in thousands) $21,700 $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 1.39% 1.59% 2.65%**
Net investment income (loss) 0.16% (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 1.39% 1.54% 1.58%**
Net investment income (loss) 0.16% (0.41)% (0.15)%**
(a) Class II shares were first publicly offered on May 1, 2003.
(b) Not annualized.
* Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of the
investment at the net asset value at the end of each period.
** Annualized.
+ Ratios with no reduction for fees paid indirectly.
NOTE: The above financial highlights do not reflect the deduction of non-fund
expenses associated with variable insurance products, such as mortality and
expense risk charges, separate account charges, and sales charges.
31
INFORMATION CONCERNING THE MEETING
Voting by Contract Owners
Because the insurance company that issued your variable annuity or
variable life insurance contract is the owner of record of shares of the
Portfolio, your vote will instruct the insurance company how to vote the shares
of the Portfolio attributable to your contract. The insurance company will vote
all of the shares of the Portfolio which it holds that are not attributable to
any contract in the same proportion as the voting instructions received from
its contract owners with respect to the Portfolio. The insurance company will
also vote those shares for which no timely voting instruction was received from
the contract owner in the same proportion as the voting instructions timely
received from its other contract owners with respect to the Portfolio.
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be
solicited by telephone, by fax or in person by the Trustees and officers of
your Portfolio; by personnel of Pioneer or Pioneer Investment Management
Shareholder Services, Inc. ("PIMSS"); or by broker-dealer firms.
Householding
If you have previously given your Portfolio permission to do so, the
Portfolio may send a single proxy statement to your residence for you and any
other member of your household who has an account with the Portfolio. If you
wish to revoke your consent to this practice, you may do so by notifying your
Portfolio, by phone or in writing by using the telephone number and address on
page 1 of the Proxy Statement/Prospectus. Your Portfolio will begin mailing
separate proxy statements, prospectuses and shareholder reports to you within
30 days after receiving your notice.
Revoking Proxies
Each shareowner of your Portfolio by signing and returning a proxy has the
power to revoke it at any time before it is exercised:
o By filing a written notice of revocation with Pioneer Investment
Management Shareholder Services, Inc., 60 State Street, Boston,
Massachusetts 02109, or
o By returning a duly executed proxy with a later date before the time of
the meeting, or
o If a shareowner has executed a proxy but is present at the meeting and
wishes to vote in person, by notifying the secretary of your Portfolio
(without complying with any formalities) at any time before it is voted.
o Being present at the meeting alone does not revoke a previously executed
and returned proxy.
Outstanding Shares and Quorum
Only shareowners of record on March 28, 2006 (the "record date") are
entitled to notice of and to vote at the Meeting. The presence in person or by
proxy by one-third of outstanding shares of your Portfolio entitled to cast
votes at the Meeting will constitute a quorum.
As of the record date, the following number of shares of each Portfolio
were outstanding.
Shares
Portfolio Outstanding
--------- ----------------
Pioneer Small Company VCT Portfolio
Class I Shares ........................ 248,784.553
Class II Shares ....................... 793,684.812
Pioneer Small Cap Value II VCT Portfolio
Class I Shares ........................ 1,947,734.324
Other Business
Your Board knows of no business to be presented for consideration at the
Meeting other than Proposals 1(a) and 1(b). If other business is properly
brought before a Meeting, proxies will be voted according to the best judgment
of the persons named as proxies.
32
Adjournments
In the event that, at the time any session of the shareowner meeting is
called to order, a quorum is not present in person or by proxy, the persons
named as proxies may vote those proxies that have been received to adjourn the
shareowner meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of the proposal have not been received, the persons
named as proxies may propose one or more adjournments of the shareowner meeting
to permit further solicitation of proxies with respect to such proposal. Any
such adjournment will require the affirmative vote of more than one-half of the
shares of your Portfolio present in person or by proxy at the session of the
shareowner meeting to be adjourned. The persons named as proxies will vote
those proxies that they are entitled to vote in favor of the proposal in favor
of such an adjournment and will vote those proxies required to be voted against
the proposal against any such adjournment. A shareowner vote may be taken on
the proposal in the proxy statement prior to such adjournment if sufficient
votes for its approval have been received and it is otherwise appropriate. Such
vote will be considered final regardless of whether the meeting is adjourned to
permit additional solicitation with respect to any other proposal.
Shareowners' Proposals
Your Portfolio is not required, and does not intend, to hold meetings of
shareowners each year. Instead, meetings will be held only when and if
required. Any shareowners desiring to present a proposal for consideration at
the next meeting for shareowners must submit the proposal in writing, so that
it is received by your Portfolio at 60 State Street, Boston, Massachusetts
02109 within a reasonable time before the meeting. The submission by a
shareowner of a proposal for inclusion in a proxy statement does not guarantee
that it will be included. Shareowner proposals are subject to certain
regulations under the federal securities laws.
Appraisal Rights
If the Reorganization of your Portfolio is approved at the Meeting,
shareowners of your Portfolio will not have the right to dissent and obtain
payment of the fair value of their shares because the exercise of appraisal
rights is subject to the forward pricing requirements of Rule 22c-1 under the
Investment Company Act which supersede state law. Shareowners of your
Portfolio, however, have the right to redeem their Portfolio shares at net
asset value until the closing date of the Reorganization. After the
Reorganization, shareowners of your Portfolios will hold shares of the
corresponding Pioneer Small Cap Value VCT Portfolio which may also be redeemed
at net asset value.
OWNERSHIP OF SHARES OF THE PORTFOLIOS
As of March 31, 2006, the Trustees and officers of each Portfolio owned in
the aggregate less than 1% of the outstanding shares of the Portfolios.
To the knowledge of each Portfolio, as of March 31, 2006, the following
persons owned of record or beneficially 5% or more of the outstanding class of
shares of each Portfolio.
- -------------------------------------------------------------------------------------------------------------------
Portfolio/Class Shareowner Name and Address Actual Percentage Owned
- -------------------------------------------------------------------------------------------------------------------
Pioneer Small Company VCT Portfolio
- -------------------------------------------------------------------------------------------------------------------
Class I Shares Allmerica Financial Life Co. 95.96%
440 Lincoln Street
Worcester, MA 01653-0002
- -------------------------------------------------------------------------------------------------------------------
Class II Shares ING USA Annuity & Life Insurance Co. 71.25%
151 Farmington Avenue
Hartford, MA 06156-0001
- -------------------------------------------------------------------------------------------------------------------
Travelers Life & Annuity Company 15.95%
P.O. Box 990027
Hartford, CT 06199-0027
- -------------------------------------------------------------------------------------------------------------------
Travelers Insurance Company 10.83%
P.O. Box 990027
Hartford, CT 06199-0027
- -------------------------------------------------------------------------------------------------------------------
33
- ---------------------------------------------------------------------------------------------------------------
Portfolio/Class Shareowner Name and Address Actual Percentage Owned
- ---------------------------------------------------------------------------------------------------------------
Pioneer Small Cap Value II VCT Portfolio
- ---------------------------------------------------------------------------------------------------------------
Class I Shares Symetra Financial 67.54%
777 108th Avenue, N.E.
Suite 1200
Bellevue, WA 98004-5135
- ---------------------------------------------------------------------------------------------------------------
Great-West Life & Annuity 14.77%
GWLA Variable Annuity 1 Select
8515 East Orchard Road, 2T2
Englewood, CO 80111-5002
- ---------------------------------------------------------------------------------------------------------------
Great-West Life & Annuity 13.67%
GWLA Variable Annuity 1 Signature
8515 East Orchard Road, 2T2
Englewood, CO 80111-5002
- ---------------------------------------------------------------------------------------------------------------
Pioneer Small Cap Value Portfolio
- ---------------------------------------------------------------------------------------------------------------
Class I Shares Allmerica Financial Life Co. 47.20%
Accumulation Account
440 Lincoln Street
Worcester, MA 01653-0002
- ---------------------------------------------------------------------------------------------------------------
Security Life of Denver Ins. Co. 33.04%
ING Variable Annuities
151 Farmington Avenue
Hartford, MA 06156-0001
- ---------------------------------------------------------------------------------------------------------------
Reliastar Life Insurance Co. 18.41%
151 Farmington Avenue
Hartford, CT 06156-0001
- ---------------------------------------------------------------------------------------------------------------
Class II Shares Travelers Life & Annuity Company 40.28%
P.O. Box 990027
Hartford, CT 06199-0027
- ---------------------------------------------------------------------------------------------------------------
Travelers Insurance Company 27.95%
P. O. Box 990027
Hartford, CT 06199-0027
- ---------------------------------------------------------------------------------------------------------------
Symetra Financial 26.45%
777 108th Avenue, N.W.
Suite 1200
Bellevue, WA 98004-5135
- ---------------------------------------------------------------------------------------------------------------
34
EXPERTS
The financial statements and financial highlights of each Pioneer
Portfolio incorporated by reference in the Pioneer Variable Contracts Trust's
Annual Report at and for the year ended December 31, 2005, have been audited by
Ernst & Young LLP, independent registered public accounting firm, as set forth
in their report thereon incorporated by reference into this registration
statement. Such financial statements and financial highlights are incorporated
herein by reference in reliance on such report given on the authority of such
firm as experts in accounting and auditing.
AVAILABLE INFORMATION
You can obtain more free information about the Portfolios by writing to
Pioneer Investment Management Shareholder Services, Inc., 60 State Street,
Boston, Massachusetts 02109. You may also call 1-800-622-3265.
Each Portfolio's Statement of Additional Information and shareowner
reports are available free of charge on the funds' website at
www.pioneerfunds.com.
Shareowner reports. Annual and semiannual reports to shareowners, and
quarterly reports filed with the Securities and Exchange Commission, provide
information about each Portfolio's investments. The annual report discusses
market conditions and investment strategies that significantly affected each
Portfolio's performance during its last fiscal year.
Statement of additional information. The Statement of Additional
Information provides more detailed information about each Portfolio. It is
incorporated by reference into this prospectus.
Each Portfolio is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended and the Investment Company Act, and
files reports, proxy statements and other information with the SEC. These
reports, proxy statements and other information filed by the Portfolios and
their predecessors can be inspected and copied (for a duplication fee) at the
public reference facilities of the SEC at 450 Fifth Street, N.W., Washington,
D.C. Copies of these materials can also be obtained by mail from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed
rates. In addition, copies of these documents may be viewed on-screen or
downloaded from the SEC's Internet site at http://www.sec.gov.
35
EXHIBIT A -- FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [ ] day of May, 2006, by and between Pioneer Variable Contracts Trust, a
Delaware statutory trust on behalf of its series Pioneer Small Cap Value VCT
Portfolio (the "Acquiring Portfolio"), with its principal place of business at
60 State Street, Boston, Massachusetts 02109, and Pioneer Variable Contracts
Trust on behalf of its series [Pioneer Small Company VCT Portfolio] [Pioneer
Small Cap Value II VCT Portfolio], with its principal place of business at 60
State Street, Boston, Massachusetts 02109 (the "Acquired Portfolio").
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of (a) the transfer of all of the assets of the
Acquired Portfolio to the Acquiring Portfolio solely in exchange for (i) the
issuance of shares of beneficial interest of each Class of shares of the
Acquiring Portfolio that corresponds to the Classes of shares of the Acquired
Portfolio equal to the net asset value ("NAV") represented by such shares
(collectively, the "Acquiring Portfolio Shares" and each, an "Acquiring
Portfolio Share") to the Acquired Portfolio, and (ii) the assumption by the
Acquiring Portfolio of all of the liabilities of the Acquired Portfolio (the
"Assumed Liabilities"), on the closing date set forth below (the "Closing
Date"), and (b) the distribution by the Acquired Portfolio, on the Closing
Date, or as soon thereafter as practicable, of the Acquiring Portfolio Shares
to the shareholders of the Acquired Portfolio in liquidation and termination of
the Acquired Portfolio, all upon the terms and conditions hereinafter set forth
in this Agreement.
WHEREAS, Acquiring Portfolio and the Acquired Portfolio are each series of
Pioneer Variable Contracts Trust, a registered investment company classified as
a management company of the open-end type, and the Acquired Portfolio owns
securities that generally are assets of the character in which the Acquiring
Portfolio is permitted to invest;
WHEREAS, the Acquiring Portfolio is authorized to issue shares of
beneficial interest;
WHEREAS, the Board of Trustees of Pioneer Variable Contracts Trust, on
behalf of the Acquiring Portfolio, has determined that the exchange of all of
the assets of the Acquired Portfolio for Acquiring Portfolio Shares and the
assumption of the Assumed Liabilities of the Acquired Portfolio by the
Acquiring Portfolio are in the best interests of the Acquiring Portfolio
shareholders;
WHEREAS, the Board of Trustees of Pioneer Variable Contracts Trust, on
behalf of the Acquired Portfolio, has determined that the exchange of all of
the assets of the Acquired Portfolio for Acquiring Portfolio Shares and the
assumption of the Assumed Liabilities of the Acquired Portfolio by the
Acquiring Portfolio are in the best interests of the Acquired Portfolio
shareholders.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO IN EXCHANGE FOR THE ACQUIRING
PORTFOLIO SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES AND LIQUIDATION
AND TERMINATION OF THE ACQUIRED PORTFOLIO.
1.1 Subject to the terms and conditions set forth in this Agreement and on
the basis of the representations and warranties contained in this Agreement,
the Acquired Portfolio agrees to transfer its assets as set forth in paragraph
1.2 to the Acquiring Portfolio free and clear of all liens and encumbrances
(other than those arising under the Securities Act of 1933, as amended (the
"Securities Act"), liens for taxes not yet due and payable or being contested
in good faith and contractual restrictions on the transfer of the acquired
assets), and the Acquiring Portfolio agrees in exchange therefore: (a) to issue
to the Acquired Portfolio the number of Acquiring Portfolio Shares of each
Class, including fractional Acquiring Portfolio Shares, determined (to at least
two decimal places) by dividing the value of the Acquired Portfolio's net
assets attributable to a Class of shares and transferred to the Acquiring
Portfolio, computed in the manner and as of the time and date set forth in
paragraph 2.1, by the NAV of one Acquiring Portfolio Share of the applicable
Class, computed in the manner and as of the time and date set forth in
paragraph 2.2; and (b) to assume the Assumed Liabilities, as set forth in
paragraph 1.3. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "Closing").
1.2 (a) The assets of the Acquired Portfolio to be acquired by the
Acquiring Portfolio shall consist of all of the Acquired Portfolio's property,
including, without limitation, all portfolio securities and instruments,
dividends and interest receivables, cash, goodwill, contractual rights of the
Acquired Portfolio all other intangible property owned by the Acquired
Portfolio and originals or copies of all books and records of the Acquired
Portfolio.
(b) The Acquired Portfolio has provided the Acquiring Portfolio with a
list of all of the Acquired Portfolio's securities and other assets as of the
date of this Agreement. The Acquired Portfolio reserves the right to sell any
of these securities (except to the extent sales may be limited by
representations of the Acquired Portfolio made in connection with the issuance
of the tax opinion provided for in paragraph 9.5 hereof) but will not, without
the prior approval of the Acquiring Portfolio, acquire any additional
securities other than securities of the
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type in which the Acquiring Portfolio is permitted to invest and shall not
acquire, without the consent of the Acquiring Portfolio, any securities that
are valued at "fair value" under the valuation procedures of either the
Acquired Portfolio or the Acquiring Portfolio.
1.3 The Acquired Portfolio will endeavor to discharge all the Acquired
Portfolio's known liabilities and obligations that are or will become due prior
to the Closing Date. The Acquired Portfolio shall prepare an unaudited
statement of assets and liabilities (the "Closing Statement"), as of the
Valuation Date (as defined in paragraph 2.1), in accordance with GAAP
consistently applied from the prior audited period, including a calculation of
the net assets of the Acquired Portfolio as of the close of business on the
Closing Date. The Acquiring Portfolio shall assume the Assumed Liabilities.
1.4 On the Closing Date or as soon thereafter as is practicable, the
Acquired Portfolio shall liquidate and distribute pro rata to the Acquired
Portfolio's shareholders of record determined as of the close of business on
the Closing Date (the "Acquired Portfolio Shareholders") the Acquiring
Portfolio Shares it receives pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the Acquired Portfolio instructing the
Acquiring Portfolio to transfer the Acquiring Portfolio Shares then credited to
the account of the Acquired Portfolio on the books of the Acquiring Portfolio
to open accounts on the share records of the Acquiring Portfolio in the names
of the Acquired Portfolio Shareholders (as provided to the Acquiring Portfolio
by the Acquired Portfolio) and representing the respective pro rata number of
the Acquiring Portfolio Shares due such shareholders. The Acquired Portfolio
shall promptly provide the Acquiring Portfolio with evidence of such
liquidation and distribution. All issued and outstanding shares of the Acquired
Portfolio will simultaneously be cancelled on the books of the Acquired
Portfolio, although share certificates representing interests in the Acquired
Portfolio will represent a number of Acquiring Portfolio Shares after the
Closing Date as determined in accordance with paragraph 1.1. The Acquiring
Portfolio shall not issue certificates representing the Acquiring Portfolio
Shares in connection with such exchange.
1.5 Ownership of Acquiring Portfolio Shares will be shown on the books of
the Acquiring Portfolio's transfer agent. Acquiring Portfolio Shares will be
issued in the manner described in the Acquiring Portfolio's Registration
Statement on Form N-14 in the form attached to this Agreement as Annex A.
1.6 Any transfer taxes payable upon issuance of the Acquiring Portfolio
Shares in a name other than the registered holder of the Acquired Portfolio
shares on the books of the Acquired Portfolio as of the time of issuance shall,
as a condition of such issuance and transfer, be paid by the person to whom
such Acquiring Portfolio Shares are to be issued and transferred.
1.7 Any reporting responsibility of the Acquired Portfolio with respect to
the Acquired Portfolio is and shall remain the responsibility of the Acquired
Portfolio up to and including the Closing Date and such later date on which the
Acquired Portfolio is terminated.
1.8 The Acquired Portfolio shall, following the Closing Date and the
making of all distributions pursuant to paragraph 1.4, be terminated under the
laws of the State of Delaware and in accordance with the Declaration of Trust
and By-Laws of Pioneer Variable Contracts Trust.
2. VALUATION
2.1 The value of the assets of the Acquired Portfolio to be acquired by
the Acquiring Portfolio hereunder shall be the value of such assets computed as
of the close of regular trading on the New York Stock Exchange, Inc. on the
Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the prospectus or statement
of additional information of the Acquired Portfolio as in effect on the date
hereof.
2.2 The NAV of the Acquiring Portfolio Shares shall be calculated in
accordance with the valuation procedures described in paragraph 2.1.
2.3 All computations of value shall be made by Pioneer Investment
Management, Inc., or its agent, in accordance with its regular practice as
pricing agent for the Acquired Portfolio.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be May 24, 2006, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m.
(Eastern time) at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, Massachusetts, or at such other time and/or place as the
parties may agree.
3.2 Portfolio securities shall be presented by the Acquired Portfolio to
Brown Brothers Harriman & Co. ("BBH") as custodian for the Acquiring Portfolio
for examination no later than three business days preceding the Valuation Date.
The Acquiring Portfolio may, in its sole discretion, reject any securities if
it reasonably believes that the ownership of such securities by the Acquired
Portfolio or the acquisition of such securities by the Acquiring Portfolio
would violate the investment policies and restrictions of the Acquired
Portfolio
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and the Acquiring Portfolio. The portfolio securities, cash and due bills shall
be delivered by the Acquired Portfolio to BBH as custodian for the Acquiring
Portfolio for the account of the Acquiring Portfolio at the Closing duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof in accordance with the custom of brokers. The cash shall be
delivered by wire in federal funds to an account of the Acquiring Portfolio
specified by the Acquiring Portfolio.
3.3 BBH, custodian for the Acquired Portfolio, shall deliver at or as soon
as possible after the Closing a certificate of an authorized officer stating
that: (a) the Acquired Portfolio's assets have been delivered in proper form to
the Acquiring Portfolio on the Closing Date and (b) all necessary transfer
taxes including all applicable federal and state stock transfer stamps, if any,
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities.
3.4 In the event that on the Valuation Date (a) the primary trading market
for portfolio securities of the Acquired Portfolio shall be closed to trading
or trading thereon shall be restricted or (b) trading or the reporting of
trading on such market shall be disrupted so that accurate calculation based
upon available market prices of the value of the net assets of the parties
hereto is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored, provided that unless the parties otherwise
agree, if the transactions contemplated by this Agreement shall not have
occurred on or prior to , 200 , each party's obligations under this
Agreement shall terminate without liability to the other party, except for any
liability that may arise out of a party's breach of its obligations under this
Agreement prior to such termination.
3.5 The Acquired Portfolio shall deliver to the Acquiring Portfolio at the
Closing (or, if not reasonably available at the Closing, as soon as practicable
thereafter) a list of the names, addresses, taxpayer identification numbers and
backup withholding and nonresident alien withholding status of the Acquired
Portfolio Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing,
certified by the President, Executive Vice President or Treasurer of the
Acquired Portfolio as being an accurate record of the information (i) provided
by Acquired Portfolio Shareholders or (ii) derived from the Acquired
Portfolio's records by such officers or one of the Acquired Portfolio's service
providers.
3.6 The Acquiring Portfolio shall issue and deliver a confirmation
evidencing the Acquiring Portfolio Shares to be credited to the Acquired
Portfolio's account on the Closing Date to the Secretary of the Acquired
Portfolio, or provide evidence satisfactory to the Acquired Portfolio that such
Acquiring Portfolio Shares have been credited to the Acquired Portfolio's
account on the books of the Acquiring Portfolio. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. LIQUIDATION AND TERMINATION OF ACQUIRED PORTFOLIO
4.1 As soon as practicable after the Closing, the Acquired Portfolio shall
liquidate the Acquired Portfolio and distribute pro rata to the Acquired
Portfolio Shareholders the Acquiring Portfolio Shares received pursuant to
paragraph 1.1. Such liquidation and distribution will be accomplished by the
transfer of the Acquiring Portfolio Shares credited to the account of the
Acquired Portfolio to open accounts on the share records in the names of
Acquired Portfolio Shareholders as delivered to the Acquiring Portfolio prior
to the Closing Date in accordance with paragraph 3.5 and representing the
respective pro rata entitlement of each Acquired Portfolio Shareholder in the
Acquiring Portfolio Shares of the corresponding Class held by the Acquired
Portfolio Shareholder at the time of the Closing.
4.2 In connection with such liquidating distributions, (a) the Acquiring
Portfolio shall not deliver certificates representing its shares and (b) the
share transfer books of the Acquired Portfolio shall be permanently closed as
of the Closing Date and arrangements satisfactory to the Acquiring Portfolio,
acting reasonably, shall be made to restrict the further transfer of the
Acquired Portfolio's shares.
4.3 As soon as practicable after the liquidation of the Acquired
Portfolio, the Acquired Portfolio shall terminate its existence as a statutory
trust under the laws of the State of Delaware and in accordance with the
Declaration of Trust and By-Laws of the Acquired Portfolio.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Acquired Portfolio represents and warrants to the Acquiring
Portfolio, which representations and warranties will be true and correct on the
date hereof and on the Closing Date as though made on and as of the Closing
Date, as follows:
(a) The Acquired Portfolio is a series of a statutory trust validly
existing and in good standing under the laws of the State of Delaware and
has the power to own all of its properties and assets and, subject to
approval by the Acquired Portfolio Shareholders, to perform its obligations
under this Agreement. The Acquired Portfolio is not required to qualify to
do business in any jurisdiction in which it is not so qualified or where
failure to qualify would not subject it to any material liability or
disability. The Acquired Portfolio has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry
on its business as now being conducted;
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(b) The Acquired Portfolio is a series of a registered investment
company classified as a management company of the open-end type, and its
registration with the Securities and Exchange Commission (the "Commission")
under the Investment Company Act of 1940 (the "Investment Company Act") is
in full force and effect;
(c) The Acquired Portfolio is not, and the execution, delivery and
performance of this Agreement in respect of the Acquired Portfolio will not
result, in a material violation of its Declaration of Trust or By-Laws or
of any material agreement, indenture, instrument, contract, lease or other
undertaking with respect to the Acquired Portfolio to which the Acquired
Portfolio is a party or by which the Acquired Portfolio or its assets are
bound;
(d) Except as specifically disclosed on Schedule 5.1(d) or included in
the calculation of NAV on the Valuation Date, the Acquired Portfolio has no
material contracts or other commitments (other than this Agreement) with
respect to the Acquired Portfolio which will be terminated with liability
to either the Acquired Portfolio or to the Acquired Portfolio on or prior
to the Closing Date;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Portfolio or any of the Acquired
Portfolio's properties or assets, except as previously disclosed in writing
to, and acknowledged in writing by, the Acquiring Portfolio. The Acquired
Portfolio is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects the Acquired Portfolio's business or the Acquired
Portfolio's ability to consummate the transactions herein contemplated;
(f) The statement of assets and liabilities of the Acquired Portfolio
as of December 31, 2005 has been audited by Ernst & Young LLP, independent
registered public accounting firm, has been prepared in accordance with
GAAP consistently applied and fairly reflects the financial condition of
the Acquired Portfolio as of such date; except for the Assumed Liabilities,
the Acquired Portfolio will not have any known or contingent liabilities on
the Closing Date;
(g) Since December 31, 2005, except as disclosed on a schedule to this
Agreement or specifically disclosed in the Acquired Portfolio's prospectus
or statement of additional information as in effect on the date of this
Agreement, there has not been any material adverse change in the Acquired
Portfolio's financial condition, assets, liabilities, business or
prospects, or any incurrence by the Acquired Portfolio of indebtedness,
except for normal contractual obligations incurred in the ordinary course
of business or in connection with the settlement of purchases and sales of
portfolio securities. For the purposes of this subparagraph (g), a decline
in NAV per share of the Acquired Portfolio arising out of its normal
investment operations or a decline in net assets of the Acquired Portfolio
as a result of redemptions shall not constitute a material adverse change;
(h) (A) For each taxable year of its operation, the Acquired Portfolio
has met the requirements of Subchapter M of the Code for qualification and
favorable tax treatment as a regulated investment company and will qualify
as such as of the Closing Date with respect to its taxable year ending on
the Closing Date. The Acquired Portfolio has not taken any action, or
failed to take any action, which has caused or will cause the Acquired
Portfolio to fail to qualify for such favorable tax treatment as a
regulated investment company under the Code. The Acquired Portfolio has not
been notified that any tax return or other filing of the Acquired Portfolio
has been reviewed or audited by any federal, state, local or foreign taxing
authority. To the knowledge of the Acquired Portfolio, (i) the Acquired
Portfolio does not have, and has not ever had, any shareholder that is not
a segregated asset account within the meaning of Treasury Regulation
Section 1.817-5(e) or an entity referred to in (and holding its shares in
compliance with the terms of) Treasury Regulation Section 1.817-5(f)(3)(i),
(ii), or (iii); (ii) no public investor is participating or has ever
participated in the Acquired Portfolio through such a segregated account
other than through purchase of a variable contract within the meaning of
Treasury Regulation Section 1.817-5(f)(2)(i)(B); and (iii) the Acquired
Portfolio satisfies, and at all times during its existence has satisfied,
the diversification requirements contained in Treasury Regulation Section
1.817-5(b)(1), (2), or (3);
(B) The Acquired Portfolio shall have filed all federal, state
and local tax returns required by law to be filed, including all
information returns and payee statements, and all tax returns for
foreign countries, provinces and other governing bodies that have
jurisdiction to levy taxes upon;
(C) The Acquired Portfolio shall have paid all taxes, interest,
penalties, assessments and deficiencies which have become due or which
have been claimed to be due or provision shall have been made for the
payment thereof;
(D) All tax returns filed or to be filed by the Acquired
Portfolio shall constitute complete and accurate reports of the
respective tax liabilities of the Acquired Portfolio or, in the case
of information returns and payee statements, the amounts required to
be reported accurately set forth all material items required to be
included or reflected in such returns;
(E) The Acquired Portfolio has not and will not have waived or
extended any applicable statute of limitations relating to the
assessment of federal, state, local or foreign taxes; and
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(F) The Acquired Portfolio has not been notified that any
examinations of the federal, state, local or foreign tax returns of
the Acquired Portfolio are currently in progress or threatened and no
deficiencies have been asserted or assessed against the Acquired
Portfolio as a result of any audit by the Internal Revenue Service or
any state, local or foreign taxing authority, and no such deficiency
has been proposed or threatened;
(i) All issued and outstanding shares of the Acquired Portfolio are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. To the Acquired Portfolio's knowledge, all
of the issued and outstanding shares of the Acquired Portfolio will, at the
time of Closing, be held of record by the persons and in the amounts set
forth in the records of the transfer agent as provided in paragraph 3.5.
The Acquired Portfolio does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the Acquired
Portfolio, nor is there outstanding any security convertible into any
shares of the Acquired Portfolio;
(j) At the Closing Date, the Acquired Portfolio will have good and
marketable title to the assets to be transferred to the Acquiring Portfolio
pursuant to paragraph 1.1 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Portfolio will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, except such restrictions as might arise under the Securities Act,
other than as disclosed in writing to, and acknowledged in writing by, the
Acquiring Portfolio;
(k) The Acquired Portfolio has the power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action on the part of the Acquired Portfolio's Board of Trustees, and,
subject to the approval of the Acquired Portfolio Shareholders, assuming
due authorization, execution and delivery by the Acquiring Portfolio, this
Agreement will constitute a valid and binding obligation of the Acquired
Portfolio, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(l) Any information furnished by the Acquired Portfolio for use in
registration statements, proxy materials and any information necessary to
compute the total return of the Acquired Portfolio shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto
or the requirements of any form for which its use is intended;
(m) The proxy statement to be included in the Acquiring Portfolio's
Registration Statement on Form N-14 (other than information therein that
relates to Pioneer Investment Management, Inc., the Acquiring Portfolio or
their affiliates) will, on the effective date of that Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(n) Except as set forth on Schedule 5.1 and as will be obtained on or
prior to the Closing Date, no consent, approval, authorization or order of
any court or governmental authority is required for the consummation by the
Acquired Portfolio of the transactions contemplated by this Agreement;
(o) To the Acquired Portfolio's knowledge, all of the issued and
outstanding shares of beneficial interest of the Acquired Portfolio have
been offered for sale and sold in conformity with all applicable federal
and state securities laws;
(p) The Acquired Portfolio currently complies in all material respects
with and since its organization has complied in all material respects with
the requirements of, and the rules and regulations under, the Investment
Company Act, the Securities Act, the Securities Exchange Act of 1934 (the
"Exchange Act"), state "Blue Sky" laws and all other applicable federal and
state laws or regulations. The Acquired Portfolio currently complies in all
material respects with, and since its organization has complied in all
material respects with, all investment objectives, policies, guidelines and
restrictions and any compliance procedures established by the Acquired
Portfolio with respect to the Acquired Portfolio. All advertising and sales
material used by the Acquired Portfolio complies in all material respects
with and has complied in all material respects with the applicable
requirements of the Securities Act, the rules and regulations of the
Commission, and, to the extent applicable, the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD") and any
applicable state regulatory authority. All registration statements,
prospectuses, reports, proxy materials or other filings required to be made
or filed with the Commission, the NASD or any state securities authorities
by the Acquired Portfolio have been duly filed and have been approved or
declared effective, if such approval or declaration of effectiveness is
required by law. Such registration statements, prospectuses, reports, proxy
materials and other filings under the Securities Act, the Exchange Act and
the Investment Company Act (i) are or were in compliance in all material
respects with the requirements of all applicable statutes and the rules and
regulations thereunder and (ii) do not or did not contain any untrue
statement of a material fact or omit to state a material
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fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not false
or misleading;
(q) The Acquired Portfolio has previously provided to the Acquiring
Portfolio (and will at the Closing provide an update through the Closing
Date of such information) with data which supports a calculation of the
Acquired Portfolio's total return and yield for all periods since the
organization of the Acquired Portfolio. Such data has been prepared in
accordance in all material respects with the requirements of the Investment
Company Act and the regulations thereunder and the rules of the NASD; and
(r) The prospectus of the Acquired Portfolio dated May 1, 2005, and
any amendments or supplements thereto, previously furnished to the
Acquiring Portfolio, did not as of their dates or the dates of their
distribution to the public contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
such statements were made, not misleading.
(s) The Acquired Portfolio Tax Representation Certificate to be
delivered by the Acquired Portfolio to the Acquiring Portfolio and Wilmer
Cutler Pickering Hale and Dorr LLP at the Closing pursuant to paragraph 8.4
(the "Acquired Portfolio Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
5.2 The Acquiring Portfolio represents and warrants to the Acquired
Portfolio, which representations and warranties will be true and correct on the
date hereof and on the Closing Date as though made on and as of the Closing
Date, as follows:
(a) The Acquiring Portfolio is a series of a statutory trust, validly
existing and in good standing under the laws of the State of Delaware and
has the power to own all of its properties and assets and to perform its
obligations under this Agreement. The Acquiring Portfolio is not required
to qualify to do business in any jurisdiction in which it is not so
qualified or where failure to qualify would not subject it to any material
liability or disability. The Acquiring Portfolio has all necessary federal,
state and local authorizations to own all of its properties and assets and
to carry on its business as now being conducted;
(b) The Acquiring Portfolio is a series of a registered investment
company classified as a management company of the open-end type, and its
registration with the Commission as an investment company under the
Investment Company Act is in full force and effect;
(c) The prospectus and statement of additional information of the
Acquiring Portfolio included in the Acquiring Portfolio's registration
statement that will be in effect on the Closing Date will conform in all
material respects with the applicable requirements of the Securities Act
and the Investment Company Act and the rules and regulations of the
Commission thereunder and will not as of its date and as of the Closing
Date contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading;
(d) The Acquiring Portfolio is not, and its execution, delivery and
performance of this Agreement will not result, in violation of its
Agreement and Declaration of Trust or By-Laws or in material violation of
any agreement, indenture, instrument, contract, lease or other undertaking
with respect to the Acquiring Portfolio to which it is a party or by which
it is bound;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened
against the Acquiring Portfolio or any of the Acquiring Portfolio's
properties or assets, except as previously disclosed in writing to, and
acknowledged in writing by, the Acquired Portfolio. The Acquiring Portfolio
knows of no facts which might form the basis for the institution of such
proceedings, and the Acquiring Portfolio is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the Acquiring
Portfolio's business or its ability to consummate the transactions
contemplated herein;
(f) The Acquiring Portfolio has the power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action, if any, on the part of the Acquiring Portfolio's Board of Trustees,
and, assuming due authorization, execution and delivery by the Acquired
Portfolio, this Agreement will constitute a valid and binding obligation of
the Acquiring Portfolio, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to general
equity principles;
(g) The Acquiring Portfolio Shares to be issued and delivered to the
Acquired Portfolio, for the account of the Acquired Portfolio Shareholders,
pursuant to the terms of this Agreement, will at the Closing Date have been
duly authorized and, when so issued and delivered, will be duly and validly
issued Acquiring Portfolio Shares and will be fully paid and
non-assessable; the Acquiring Portfolio does not have outstanding any
options, warrants or other rights to subscribe for or purchase any
Acquiring Portfolio Shares, nor is there outstanding any security
convertible into any of the Acquiring Portfolio Shares;
A-6
(h) The information to be furnished by the Acquiring Portfolio for use
in proxy materials and other documents which may be necessary in connection
with the transactions contemplated hereby shall be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto or the
requirements of any form for which its use is intended;
(i) (A) For each taxable year of its operation, the Acquiring
Portfolio has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and has
elected to be treated as such and will qualify as such as of the Closing
Date. The Acquiring Portfolio has not taken any action which has caused or
will cause the Acquiring Portfolio to fail to qualify as a regulated
investment company under the Code. The Acquiring Portfolio has not been
notified that any tax return or other filing of the Acquiring Portfolio has
been reviewed or audited by any federal, state, local or foreign taxing
authority. To the knowledge of the Acquiring Portfolio, (i) the Acquiring
Portfolio does not have, and has not ever had, any shareholder that is not
a segregated asset account within the meaning of Treasury Regulation
Section 1.817-5(e) or an entity referred to in (and holding its shares in
compliance with the terms of) Treasury Regulation Section 1.817-5(f)(3)(i),
(ii), or (iii); (ii) no public investor is participating or has ever
participated in the Acquiring Portfolio through such a segregated asset
account other than through the purchase of a variable contract within the
meaning of Treasury Regulation Section 1.817-5(f)(2)(i)(B); and (iii) the
Acquiring Portfolio satisfies, and at all times during its existence has
satisfied, the diversification requirements contained in Treasury
Regulation Section 1.817-5(b)(1), (2), or (3);
(B) The Acquiring Portfolio shall have filed all federal, state
and local tax returns required to be filed, including all information
returns and payee statements, and all tax returns for foreign
countries, provinces and other governing bodies that have jurisdiction
to levy taxes upon it;
(C) The Acquiring Portfolio shall have paid all taxes, interest,
penalties, assessments and deficiencies which have become due or which
have been claimed to be due or provision shall have been made for the
payment thereof;
(D) All tax returns filed or to be filed by the Acquiring
Portfolio shall constitute complete and accurate reports of the
respective tax liabilities of the Acquiring Portfolio or, in the case
of information returns and payee statements, the amounts required to
be reported accurately set forth all material items required to be
included or reflected in such returns;
(E) The Acquiring Portfolio has not and will not have waived or
extended any applicable statute of limitations relating to the
assessment of federal, state, local or foreign taxes; and
(F) The Acquiring Portfolio has not been notified that any
examinations of the federal, state, local or foreign tax returns of
the Acquiring Portfolio are currently in progress or threatened and no
deficiencies have been asserted or assessed against the Acquiring
Portfolio as a result of any audit by the Internal Revenue Service or
any state, local or foreign taxing authority, and no such deficiency
has been proposed or threatened;
(j) Immediately prior to the Closing, the Acquiring Portfolio will be
in compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Immediately prior to the Closing, the Acquiring Portfolio will be in
compliance in all material respects with the applicable investment policies
and restrictions set forth in its registration statement currently in
effect and will have calculated its NAV in accordance with the Acquiring
Portfolio's registration statement;
(k) The Acquiring Portfolio Shares to be issued pursuant to this
Agreement shall on the Closing Date be duly registered under the Securities
Act by a Registration Statement on Form N-14 of the Acquiring Portfolio
then in effect and qualified for sale under the applicable state securities
laws; and
(l) The Acquiring Portfolio Shares to be issued pursuant to this
Agreement are duly authorized and on the Closing Date will be validly
issued and fully paid and non-assessable and will conform in all material
respects to the description thereof contained in the Acquiring Portfolio's
Registration Statement on Form N-14. On the Closing Date, the Acquiring
Portfolio shall not, except as provided herein, have outstanding any
warrants, options, convertible securities or any other type of right
pursuant to which any person could acquire Acquiring Portfolio Shares.
(m) The Acquiring Portfolio Tax Representation Certificate to be
delivered by the Acquiring Portfolio to the Acquired Portfolio and Wilmer
Cutler Pickering Hale and Dorr LLP at Closing pursuant to paragraph 7.3
(the "Acquiring Portfolio Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
A-7
6. COVENANTS OF EACH OF THE PARTIES
6.1 The Acquired Portfolio will operate its business in the ordinary
course between the date hereof and the Closing Date. It is understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions and any other dividends and distributions
necessary or advisable (except to the extent distributions that are not
customary may be limited by representations made in connection with the
issuance of the tax opinion described in paragraph 9.5 hereof), in each case
payable either in cash or in additional shares.
6.2 The Acquired Portfolio will call a meeting of the Acquired Portfolio
Shareholders to consider and act upon the matters set forth in the proxy
statement. Each of the Acquired Portfolio and the Acquiring Portfolio will use
reasonable efforts to promptly prepare and file with the Commission a
Registration Statement on Form N-14 relating to the transactions contemplated
by this Agreement.
6.3 The Acquired Portfolio covenants that the Acquiring Portfolio Shares
to be issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
6.4 The Acquired Portfolio will assist the Acquiring Portfolio in
obtaining such information as the Acquiring Portfolio reasonably requests
concerning the beneficial ownership of the Acquired Portfolio's shares.
6.5 Subject to the provisions of this Agreement, each of the Acquired
Portfolio and the Acquiring Portfolio will take, or cause to be taken, all
actions, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
6.6 The Acquired Portfolio shall furnish to the Acquiring Portfolio on the
Closing Date the Closing Statement, which statement shall be prepared in
accordance with GAAP consistently applied and shall be certified by the
Acquired Portfolio's Treasurer or Assistant Treasurer. As promptly as
practicable, but in any case within 90 days after the Closing Date, the
Acquired Portfolio shall furnish to the Acquiring Portfolio, in such form as is
reasonably satisfactory to the Acquiring Portfolio, a statement of the earnings
and profits of the Acquired Portfolio for federal income tax purposes, and of
any capital loss carryovers and other items that will be carried over to the
Acquiring Portfolio as a result of Section 381 of the Code, and which statement
will be certified by the Treasurer of the Acquired Portfolio.
6.7 The Acquired Portfolio shall provide the Acquiring Portfolio with
information reasonably necessary for the preparation of a prospectus, which
will include the proxy statement, referred to in paragraph 5.1(m), all to be
included in the Acquiring Portfolio's Registration Statement on Form N-14, in
compliance with the Securities Act, the Exchange Act and the Investment Company
Act in connection with the meeting of the Acquired Portfolio Shareholders to
consider approval of this Agreement and the transactions contemplated herein.
6.8 The Acquired Portfolio shall maintain errors and omissions insurance
covering management of the Acquired Portfolio prior to and including the
Closing Date.
6.9 Neither the Acquired Portfolio not the Acquiring Portfolio shall take
any action that is inconsistent with the representations set forth in, with
respect to the Acquired Portfolio, the Acquired Portfolio Tax Representation
Certificate, and with respect to the Acquiring Portfolio, the Acquiring
Portfolio Tax Representation Certificate, to the extent such action would
prevent the reorganization from qualifying as a "reorganization" under Section
368(a) of the Code.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO
The obligations of the Acquired Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquiring Portfolio of all of the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions, unless waived by the Acquired Portfolio in writing:
7.1 All representations and warranties made in this Agreement by the
Acquiring Portfolio shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Acquiring Portfolio shall have delivered to the Acquired Portfolio
a certificate executed in its name by its President, Executive Vice President,
Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory
to the Acquired Portfolio and dated as of the Closing Date, to the effect that
the representations and warranties made in this Agreement by the Acquiring
Portfolio are true and correct in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement; and
A-8
7.3 The Acquiring Portfolio shall have delivered to the Acquired Portfolio
and Wilmer Cutler Pickering Hale and Dorr LLP an Acquiring Portfolio Tax
Representation Certificate, satisfactory to the Acquired Portfolio and Wilmer
Cutler Pickering Hale and Dorr LLP concerning certain tax-related matters with
respect to the Acquiring Portfolio.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
The obligations of the Acquiring Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Portfolio of all of the its obligations hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
8.1 All representations and warranties made in this Agreement by the
Acquired Portfolio shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
8.2 The Acquired Portfolio shall have delivered to the Acquiring Portfolio
a statement of the Acquired Portfolio's assets and liabilities showing the
federal tax bases and holding periods as of the Closing Date, certified by the
Acquired Portfolio's Treasurer or Assistant Treasurer;
8.3 The Acquired Portfolio shall have delivered to the Acquiring Portfolio
on the Closing Date a certificate executed in its name by its President,
Executive Vice President, Treasurer or Assistant Treasurer, in form and
substance reasonably satisfactory to the Acquiring Portfolio and dated as of
the Closing Date, to the effect that the representations and warranties made in
this Agreement are true and correct in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement; and
8.4 The Acquired Portfolio shall have delivered to the Acquiring Portfolio
and Wilmer Cutler Pickering Hale and Dorr LLP an Acquired Portfolio Tax
Representation Certificate, satisfactory to the Acquiring Portfolio and Wilmer
Cutler Pickering Hale and Dorr LLP concerning certain tax-related matters with
respect to the Acquired Portfolio.
9. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE PARTIES
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
9.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Portfolio in accordance with the provisions of each of the
Acquired Portfolio's Declaration of Trust and By-Laws, and certified copies of
the votes evidencing such approval shall have been delivered to the Acquiring
Portfolio. Notwithstanding anything herein to the contrary, neither party
hereto may waive the conditions set forth in this paragraph 9.1;
9.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
9.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
either party hereto, provided that either party may for itself waive any of
such conditions;
9.4 The Acquiring Portfolio's Registration Statement on Form N-14 shall
have become effective under the Securities Act and no stop orders suspending
the effectiveness thereof shall have been issued and, to the best knowledge of
the parties hereto, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under the Securities
Act;
9.5 The parties shall have received a favorable opinion of Wilmer Cutler
Pickering Hale and Dorr LLP, addressed to Pioneer Variable Contracts Trust on
behalf of each of the Acquiring Portfolio and the Acquired Portfolio and
satisfactory to the Acquiring Portfolio and the Acquired Portfolio,
substantially to the effect that for federal income tax purposes, on the basis
of the facts, representations and assumptions set forth in such opinion, the
acquisition by the Acquiring Portfolio of all of the assets of the Acquired
Portfolio solely in exchange for the issuance of Acquiring Portfolio Shares to
the Acquired Portfolio and the assumption of all of the Assumed Liabilities by
the Acquiring Portfolio, followed by the distribution by the Acquired
Portfolio, in liquidation of the Acquired Portfolio, of Acquiring Portfolio
Shares to the Acquired Portfolio Shareholders in exchange for their Acquired
Portfolio shares of beneficial interest and the termination of the Acquired
A-9
Portfolio, will constitute a reorganization within the meaning of Section
368(a) of the Code. Notwithstanding anything herein to the contrary, neither
Acquiring Portfolio nor Acquired Portfolio may waive the conditions set forth
in this paragraph 9.5; and
9.6 The Acquired Portfolio shall have distributed to its shareholders, in
a distribution or distributions qualifying for the deduction for dividends paid
under Section 561 of the Code, all of its investment company taxable income (as
defined in Section 852(b)(2) of the Code determined without regard to Section
852(b)(2)(D) of the Code) for its taxable year ending on the Closing Date, all
of the excess of (i) its interest income excludable from gross income under
Section 103(a) of the Code over (ii) its deductions disallowed under Sections
265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date,
and all of its net capital gain (as such term is used in Sections 852(b)(3)(A)
and (C) of the Code), after reduction by any available capital loss
carryforward, for its taxable year ending on the Closing Date.
10. BROKERAGE FEES AND EXPENSES
10.1 Each party hereto represents and warrants to the other party hereto
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
10.2 The parties have been informed by Pioneer Investment Management, Inc.
that it will pay 50% of the expenses incurred in connection with the
Reorganization (including, but not limited to, the preparation of the proxy
statement and solicitation expenses, printing costs, legal fees and audit
fees). The Acquired Portfolio, the Acquiring Portfolio and [Pioneer
VCT Portfolio] agree to pay equally the remaining 50% of the expenses incurred
in connection with the Reorganization (including, but not limited to, the
preparation of the proxy statement and solicitation expenses, printing costs,
legal fees and audit fees).
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein or referred to in paragraph 9.6
hereof and that this Agreement constitutes the entire agreement between the
parties.
11.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.
12. TERMINATION
12.1 This Agreement may be terminated at any time prior to the Closing
Date by: (a) the mutual agreement of the Acquired Portfolio and the Acquiring
Portfolio; (b) any party in the event that the other party hereto shall breach
any material representation, warranty or agreement contained herein to be
performed at or prior to the Closing Date and has not cured such breach within
10 days of notice thereof; or (c) a condition herein expressed to be precedent
to the obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.
12.2 In the event of any such termination, there shall be no liability for
damages on the part of any party hereto or their respective Trustees or
officers to the other party, but each shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement in accordance
with paragraph 10.2.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Portfolio and the Acquiring Portfolio; provided, however, that
following the meeting of the Acquired Portfolio Shareholders called by the
Acquired Portfolio pursuant to paragraph 6.2 of this Agreement, no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Portfolio Shares to be issued to the Acquired Portfolio
Shareholders under this Agreement to the detriment of the Acquired Portfolio
Shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Portfolio and
the Acquiring Portfolio at 60 State Street, Boston, Massachusetts 02109.
A-10
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the written consent of the other party hereto. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm, corporation or other entity, other than the parties
hereto and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.
15.5 It is expressly agreed that the obligations of the Acquiring
Portfolio and the Acquired Portfolio shall not be binding upon any of their
respective Trustees, shareholders, nominees, officers, agents or employees
personally, but bind only the property of the Acquiring Portfolio or the
Acquired Portfolio, as the case may be, as provided in the Declaration of Trust
of the Acquiring Portfolio and the Acquired Portfolio, respectively. The
execution and delivery of this Agreement have been authorized by the Acquired
Trustees of each of the Acquiring Portfolio and the Acquired Portfolio and this
Agreement has been executed by authorized officers of the Acquiring Portfolio
and the Acquired Portfolio acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the property of the Acquiring Portfolio
and the Acquired Portfolio, as the case may be, as provided in the Declaration
of Trust of the Acquiring Portfolio and the Acquired Portfolio, respectively.
[Remainder of page left blank intentionally.]
A-11
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its President or Vice President and attested by its Secretary
or Assistant Secretary.
Attested: PIONEER VARIABLE CONTRACTS TRUST
on behalf of its series,
[PIONEER SMALL COMPANY VCT PORTFOLIO]
[PIONEER SMALL CAP VALUE II VCT PORTFOLIO]
By: By:
------------------------------- -----------------------------------
Name: Name:
Title: Title:
Attest: PIONEER VARIABLE CONTRACTS TRUST
on behalf of its series,
PIONEER SMALL CAP VALUE VCT PORTFOLIO
By: By:
------------------------------- -----------------------------------
Name: Name:
Title: Title:
A-12
Exhibit B -- Portfolio Manager's Discussion of Performance
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS I SHARES
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/05 12/31/04
Net Asset Value per Share $11.85 $ 12.97
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/05-12/31/05) Income Capital Gains Capital Gains
$ - $ - $1.2777
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Value
Life-of-Class 5.78%
(1/19/01)
1 Year 1.78%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's 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.
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 LINE CHART IN THE PRINTED DOCUMENT.]
Pioneer Small Company Russell 2000
VCT Portfolio Index
1/01 10,000 10,000
10,498 9,741
8,739 7,746
12/03 10,951 11,406
12,415 13,497
12/05 12,636 14,112
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.
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.
B-1
PIONEER SMALL COMPANY VCT PORTFOLIO
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS I SHARES
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/05 12/31/04
Net Asset Value per Share $11.71 $ 12.85
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/05-12/31/05) Income Capital Gains Capital Gains
$ - $ - $1.2777
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Value
Life-of-Class 5.55%
(1/19/01)
1 Year 1.65%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's 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.
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 LINE CHART IN THE PRINTED DOCUMENT.]
Pioneer Small Company Russell 2000
VCT Portfolio Index
1/01 10,000 10,000
10,479 9,741
8,683 7,746
12/03 10,865 11,406
12,301 13,497
12/05 12,504 14,112
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.
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.
B-2
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
Co-managers Diego Franzin and Michael Rega describe conditions in the
small-company universe for 2005, and the stocks that affected the Portfolio's
performance.
Q. How did Pioneer Small Company VCT Portfolio perform over this period?
A: For the twelve months ended December 31, 2005, Class I shares of the
Portfolio returned 1.78% at net asset value. The result trailed the
Portfolio's benchmark, the Russell 2000 Index, which returned 4.55% over
the same period.
Call 1-800-688-9915 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.
Q. Please describe the background for small-company stocks over this period.
A: Whether - or when - escalating energy prices and higher interest rates
might cause consumers to retrench was a major investor preoccupation in
2005. A fall-off in consumer spending, which represents the bulk of U.S.
economic activity, could signal trouble for the ongoing economic expansion.
In fact, a slide in energy prices following post-hurricane peaks boosted
consumer confidence and spending levels stayed healthy. Through the year,
value and growth stocks vied for small-cap leadership, with value holding
an edge at year's end.
Q. Which stocks or sectors affected Portfolio performance?
A: Energy was the year's top sector. High prices for oil and gas stimulated
drilling activity, boosting earnings for NSS Services, which manufactures
seamless piping used in oil wells. Forest Oil, a North American oil and gas
exploration company, also rose.
In health care, strength in Cubist Pharmaceuticals reflected rising sales
of Cubicin, a drug whose effectiveness is making it the treatment of choice
for hospital-based staph infections. Sales of Cerner's software, which lets
medical professionals view x-rays and lab results on their computers, also
grew. Hospitals are increasingly adopting systems that provide current
patient data at the point of care. We took losses in generic drug maker
Able Laboratories when failure to follow standardized lab procedures led to
inventory recalls and cessation of manufacturing. We are still holding
Seralogicals despite slowing sales of its culture media and other
laboratory products at a time of payroll expansion.
Among consumer discretionary issues, Guess?, makers of jeans and other
casual wear for children, teens and adults, benefited from skilled
management and successful execution of its business plan. But teen retailer
Aeropostale stumbled. Poor product choices led to markdowns that ate into
profit margins, and a new store concept failed to gain traction. We also
took losses in Rewards Network when discount dining programs saw shrinking
membership and investors lost confidence. Elsewhere, we took profits in
Administaff, whose human resources services found growing acceptance among
smaller companies lacking staff to deal with regulatory requirements.
Boston Communications Group, one of our holdings in the telecommunications
services sector, provides a product that allows consumers to purchase
pre-paid wireless service. The company learned in May that the technology
used to provide the service was in violation of a patent held by a
competitor. This news led to a decline in the company's stock price. We
sold the stock after the announcement, and in hindsight this was the right
move as the stock price continued to fall further. Connectics, a specialty
pharmaceutical company declined after receiving a Non-Approvable letter
from the FDA for one of its products in development. We think the market
over-reacted to this news, and we believe that the company's past history
of developing well received products, as well as their aggressive sales
force provide what we see as a solid foundation for growth.
Q. What is your outlook for the months ahead?
A: We think high energy prices will persist and that the Federal Reserve Board
will hike rates a bit more. With little clear consensus on the economy's
direction, however, stock selections may be more important than sector
weightings in the period ahead. Our goal is to maintain a well-diversified
portfolio that limits exposure to any one security, basing our selections
on a combination of quantitative and fundamental analysis. Using that
process, we believe prospects for many health care companies are better
than current valuations might imply. In the volatile technology sector, we
favor companies whose products can bolster business efficiency. An eventual
end to rate hikes could revitalize housing stocks for a time, but we cut
exposure to that sector in 2005 and remain wary of it for now.
B-3
A Word About Risk:
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. The Portfolio invests in REIT securities, the value of
which can fall for a variety of reasons, such as declines in rental income,
fluctuating interest rates, poor property management, environmental
liabilities, uninsured damage, increased competition, or changes in real estate
tax laws. Investing in foreign and/or emerging markets securities involves
risks relating to interest rates, currency exchange rates, economic, and
political conditions. At times, the Portfolio's investments may represent
industries or industry sectors that are interrelated or have common risks,
making it more susceptible to any economic, political, or regulatory
developments or other risks affecting those industries and sectors.
Call 800-688-9915 or visit www.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.
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.
B-4
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS I SHARES
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/05 12/31/04
Net Asset Value per Share $23.33 $ 20.44
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/05-12/31/05) Income Capital Gains Capital Gains
$0.1300 $ - $0.0178
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Value
Life-of-Class 11.59%
(4/30/97)
5 Years 18.34%
1 Year 14.94%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's 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.
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.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED DOCUMENT.]
Pioneer Small Cap Value II Russell 2000 Value
VCT Portfolio Index
4/97 10,000 10,000
12,840 13,020
10,278 12,180
12/99 11,861 11,999
11,147 14,737
12/01 13,504 16,804
12,888 14,884
12/03 18,402 21,735
22,507 26,570
12/05 25,870 27,821
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.
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.
B-5
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
David Adams, portfolio manager, and Jack McPherson, assistant portfolio
manager, have managed Pioneer Small Cap Value II VCT Portfolio since Pioneer
became the investment manager of the former SAFECO Funds.
Q. How did the Portfolio perform over this period?
A: For the twelve months ended December 31, 2005, Pioneer's Small Cap Value II
VCT Portfolio returned 14.94% at net asset value. The results far
outdistanced the 4.71% return on the Russell 2000 Value Index, the
Portfolio's benchmark, for the same period.
Call 1-800-688-9915 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.
Q. Please describe the investment environment for small-cap value stocks
during the first half of 2005.
A: Uncertainty about the possible impacts of high energy prices, rising
interest rates and the strengthening U.S. dollar kept equity markets
confined to a narrow range. Large companies led the market for a short
time, but solid earnings growth soon drew market participants to
smaller-cap issues.
The Portfolio's results support our basic view that, interest rates and
energy costs aside, an expanding economy creates opportunities for
well-managed small companies to increase profits substantially.
Q. What stocks or sectors contributed to performance?
A: The boom in homebuilding fed strong results at Building Materials Holding,
which provides materials and construction services to contractors. We took
some profits in this position when valuations surpassed our targets. The
hot building market also boosted Beazer Homes, whose designs target new
buyers and other demographic segments in some of the country's busiest
housing markets.
In the industrial sector, an upturn in orders for new aircraft benefited
Precision Castparts, a low-cost provider of castings to the commercial
aerospace market. Increased spending on infrastructure boosted demand for
Astec Industries' road-building equipment, adding to revenues and earnings.
And United Defense Systems was acquired by BAE Systems, Europe's largest
defense contractor.
Lone Star Technologies moved higher as rising energy prices stimulated
drilling activity, and bolstered demand for its welded pipes and casings.
World Fuel, which serves airline clients through airport-based jet
refueling facilities around the world, also saw earnings rise.
Q. What were some of the period's disappointments?
A: Sluggish trends among orthopedic and prosthetic care centers caused shares
of Hanger Orthopedic Group to decline. Amerigroup, a managed health care
company, also disappointed. Cash America, which makes high-risk,
high-interest payday loans, was the period's worst performer. The Texas
legislature's failure to enact legislation that would have provided greater
operating flexibility was the key factor.
In technology, Plantronics, makers of headsets for telecommunications
devices, declined after a long upward run. Sensient Technologies, suppliers
of flavors and fragrances for food and beverages, as well as inks and
chemicals for computer peripherals, experienced a sub-par year. We
eliminated Impac Mortgage, a real estate investment trust, when weakness in
the housing market pressured shares.
Q. What is your outlook for the economy and how have you positioned the
Portfolio?
A: We think that good stocks bought at prices that appear reasonable should do
well in the moderate-growth environment that we foresee. Compelling ideas
continue to emerge in the technology arena, where we have increased the
Portfolio's exposure. We are also adding some financial stocks, while
scaling back others. On the other hand, we are not finding good value among
consumer-discretionary issues, a sector that could feel pressure if
households reduce spending in the face of big energy bills and rising
interest rates. Persistent demand and high prices make us comfortable with
our current large exposure to energy stocks; we would view any sharp
decline in this sector as an opportunity. Finally, we will continue to
employ our proven discipline in an effort to ferret out superior
opportunities, and take profits as valuations approach our targets.
B-6
A Word About Risk:
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies.
The Portfolio invests in REIT securities, the value of which can fall for a
variety of reasons, such as declines in rental income, fluctuating interest
rates, poor property management, environmental liabilities, uninsured damage,
increased competition, or changes in real estate tax laws. At times, the
Portfolio's investments may represent industries or industry sectors that are
interrelated or have common risks, making it more susceptible to any economic,
political, or regulatory developments or other risks affecting those industries
and sectors.
Call 800-688-9915 or visit www.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.
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.
B-7
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS I SHARES
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/05 12/31/04
Net Asset Value per Share $16.19 $ 15.02
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/05-12/31/05) Income Capital Gains Capital Gains
$ - $ - $0.4861
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Value
Life-of-Class 13.22%
(11/8/01)
1 Year 11.39%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's 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.
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 LINE CHART IN THE PRINTED DOCUMENT.]
Pioneer Small Cap Value Russell 2000 Value
VCT Portfolio Index
11/01 10,000 10,000
10,574 10,612
8,979 9,400
12/03 12,160 13,726
14,611 16,780
12/05 16,275 17,570
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.
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.
B-8
PIONEER SMALL CAP VALUE VCT PORTFOLIO
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE 12/31/05 CLASS II SHARES
- --------------------------------------------------------------------------------
Prices and Distributions
12/31/05 12/31/04
Net Asset Value per Share $16.07 $ 14.95
Net
Distributions per Share Investment Short-Term Long-Term
(1/1/05-12/31/05) Income Capital Gains Capital Gains
$ - $ - $0.4861
Average Annual Total Returns
(As of December 31, 2005)
Net Asset Value
Life-of-Class 13.01%
(11/8/01)
1 Year 11.10%
All total returns shown assume reinvestment of distributions at net asset
value.
Please refer to the variable product's 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.
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 LINE CHART IN THE PRINTED DOCUMENT.]
Pioneer Small Cap Value Russell 2000 Value
VCT Portfolio Index
11/01 10,000 10,000
10,572 10,612
8,980 9,400
12/03 12,132 13,726
14,545 16,780
12/05 16,159 17,570
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.
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.
B-9
PORTFOLIO MANAGEMENT DISCUSSION 12/31/05
Continued adherence to established disciplines enabled Pioneer Small Cap Value
VCT Portfolio to outperform its benchmark index over this period. In the
following discussion, portfolio manager David Adams and assistant portfolio
manager John McPherson review the economic background and describe some of the
decisions that aided performance.
Q. How did the Portfolio perform over this period?
A: For the twelve months ended December 31, 2005, Class I shares of the
Portfolio returned 11.39% at net asset value. The results comfortably
outdistanced the 4.71% return on the Russell 2000 Value Index, the
benchmark over the same period.
Call 1-800-688-9915 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.
Q. Please describe the investment background over the past year and how it
affected small-cap stocks.
A: It was a year in which small-caps outpaced large, value and growth were
essentially in line, and stocks of better-quality companies trumped
lower-quality issues. Rising energy prices and shifting views on the
economy, the dollar, and interest rates kept equity markets in a narrow
range.
Solid earnings growth gave smaller-company stocks renewed impetus after
large caps briefly outperformed early in the year. The Portfolio's positive
results validated our longstanding investment thesis that, despite higher
interest rates and record energy prices, the healthy economy would enable
well-managed small companies to boost operating results.
Q. Which of your investment decisions had the most favorable impact on
results?
A: Our bottom-up stock selection process led us to overweight energy stocks
for some time. The resulting overweight stance compared with the benchmark
was an important contributor to the period's strong results, as prices for
oil and natural gas reached record levels. We were also overweight and
outperformed the benchmark in health care. Successful stock selection
allowed the Portfolio to better the index's results among financial issues
despite our underweight position. Results were also favorable in the
information technology sector, where the Portfolio's exposure was about
equal to the benchmark's.
Southwestern Energy, an independent oil and gas producer operating in
Arkansas and Oklahoma, was one of the period's top performers, thanks to
continued strong financial performance and the possibility that a new gas
field may yield massive reserves. We have been taking profits in this
long-term holding, bearing out our patient approach.
In energy services, TODCO, which operates drilling rigs in the Gulf of
Mexico, benefited when competitors sought better conditions elsewhere. That
shrank the number of available rigs just prior to a surge in demand for
natural gas that allowed TODCO to hike its billing rates. Similarly, the
demand for Gulfmark Offshore's supply boats rose as worldwide energy demand
stimulated North Sea drilling activity.
In health care, shares of Kendle International rose due to healthy demand
for laboratory services tied to the search for new drug compounds.
We took partial profits in shares of NASDAQ Stock Market, the period's
biggest financial sector gainer. NASDAQ has successfully leveraged its core
trading business by offering a series of new products and services to its
customers as the investment business continues to become more
electronically based. Apollo Investment, which provides financing for
mid-sized businesses, recorded a gain thanks to its solid underwriting
capabilities, savvy management and strong network of funding sources. And
our patience was rewarded when municipal bond insurer Assured Guaranty saw
its credit rating strengthen, providing better entree to business
opportunities.
B-10
A Word About Risk:
Investments in small companies may offer the potential for higher returns, but
are also subject to greater short-term price fluctuations than larger, more
established companies. The Portfolio invests in REIT securities, the value of
which can fall for a variety of reasons, such as declines in rental income,
fluctuating interest rates, poor property management, environmental
liabilities, uninsured damage, increased competition, or changes in real estate
tax laws. At times, the Portfolio's investments may represent industries or
industry sectors that are interrelated or have common risks, making it more
susceptible to any economic, political, or regulatory developments or other
risks affecting those industries and sectors.
Call 800-688-9915 or visit www.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.
B-11
19038-00-0406
PIONEER SMALL CAP VALUE VCT PORTFOLIO
60 State Street
Boston, Massachusetts 02109
(a series of Pioneer Variable Contracts Trust)
STATEMENT OF ADDITIONAL INFORMATION
April 18, 2006
This Statement of Additional Information is not a Prospectus. It should
be read in conjunction with the related combined Proxy Statement and Prospectus
dated April 18, 2006 (the "Proxy Statement and Prospectus"), which covers Class
I and Class II shares of Pioneer Small Cap Value VCT Portfolio, a series of
Pioneer Variable Contracts Trust (the "Trust"), a Delaware statutory trust, to
be issued in exchange for Class I and Class II shares of Pioneer Small Company
VCT Portfolio and Class I shares of Pioneer Small Cap Value II VCT Portfolio,
each a series of the Trust. Please retain this Statement of Additional
Information for further reference.
The Prospectus is available to you free of charge (please call
1-800-622-3265).
INTRODUCTION...........................................................2
EXHIBITS...............................................................2
ADDITIONAL INFORMATION ABOUT THE PORTFOLIO.............................3
PORTFOLIO HISTORY.............................................3
DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENT RISKS.........3
MANAGEMENT OF THE PORTFOLIO...................................3
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........3
INVESTMENT ADVISORY AND OTHER SERVICES........................3
PORTFOLIO MANAGERS............................................3
BROKERAGE ALLOCATION AND OTHER PRACTICES......................3
CAPITAL STOCK AND OTHER SECURITIES............................3
PURCHASE, REDEMPTION AND PRICING OF SHARES....................3
TAXATION OF EACH PORTFOLIO....................................3
UNDERWRITERS..................................................4
CALCULATION OF PERFORMANCE DATA...............................4
FINANCIAL STATEMENTS..........................................4
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in a combined Proxy Statement and Prospectus dated April
18, 2006 relating to the following proposed reorganizations:
1. Pioneer Small Company VCT Portfolio (Class I and Class II
shares) into Pioneer Small Cap Value VCT Portfolio
2. Pioneer Small Cap Value II VCT Portfolio (Class I shares only)
into Pioneer Small Cap Value VCT Portfolio
The Statement of Additional Information is also intended to be used in
connection with the solicitation by the management of the Trust of proxies to be
voted at a joint Special Meeting of Shareholders of Pioneer Small Company VCT
Portfolio and Pioneer Small Cap Value II VCT Portfolio to be held on May 23,
2006.
EXHIBITS AND DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference, unless
otherwise indicated. Shareholders will receive a copy of each document that is
incorporated by reference upon any request to receive a copy of this Statement
of Additional Information.
1. Pioneer Variable Contracts Trust's Statement of Additional Information,
dated May 1, 2005, relating to Pioneer Small Company VCT Portfolio,
Pioneer Small Cap Value II VCT Portfolio and Small Cap Value VCT
Portfolio ("SAI") (File Nos. 33-84546; 811-08786), as filed with the
Securities and Exchange Commission on May 5, 2005 (Accession No.
0001016964-05-000207) is incorporated herein by reference.
2. Pioneer Variable Contracts Trust's Annual Report relating to Pioneer
Small Company VCT Portfolio, Pioneer Small Cap Value II VCT Portfolio
and Small Cap Value VCT Portfolio for the fiscal year ended December
31, 2005 (File No. 811-08786), as filed with the Securities and
Exchange Commission on March 6, 2006 (Accession No.
0000930709-06-000017) is incorporated herein by reference.
3. Pro forma financial statements for the fiscal year ending December 31,
2005 for the following:
Pioneer Small Company VCT Portfolio into Pioneer Small Cap
Value VCT Portfolio
Pioneer Small Cap Value II VCT Portfolio into Pioneer Small
Cap Value VCT Portfolio
Pioneer Small Company VCT Portfolio and Pioneer Small Cap
Value II VCT Portfolio into Pioneer Small Cap Value VCT
Portfolio
ADDITIONAL INFORMATION ABOUT
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PORTFOLIO HISTORY
For additional information about Pioneer Variable Contracts Trust
generally and Pioneer Small Cap Value VCT Portfolio and its history, see "Fund
History" in the SAI.
DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENT RISKS
For additional information about Pioneer Small Cap Value VCT
Portfolio's investment objective, policies, risks and restrictions, see
"Investment Policies, Risks and Restrictions" in the SAI.
MANAGEMENT OF THE PORTFOLIO
For additional information about Pioneer Variable Contracts Trust's
Board of Trustees and officers, see "Trustees and Officers" in the SAI.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
For addition information on share ownership of Pioneer Small Cap Value
VCT Portfolio, see "Annual Fee, Expense and Other Information."
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information on Pioneer Small Cap Value VCT Portfolio,
see "Investment Adviser," "Custodian" and "Independent Auditors" in Pioneer
Variable Contracts Trust's SAI.
PORTFOLIO MANAGERS
For additional information, see "Portfolio Management" and "Appendix
C-Portfolio Management-Additional Information About the Portfolio Managers" in
Pioneer Variable Contracts Trust's SAI.
BROKERAGE ALLOCATION AND OTHER PRACTICES
For additional information about Pioneer Variable Contracts Trust and
Pioneer Small Cap Value VCT Portfolio's brokerage allocation practices, see
"Portfolio Transactions" in the SAI.
CAPITAL STOCK AND OTHER SECURITIES
For additional information about the voting rights and other
characteristics of shares of beneficial interest of Pioneer Small Cap Value VCT
Portfolio and Pioneer Variable Contracts Trust, see "Description of Shares" in
the SAI.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about purchase, redemption and pricing of
shares of Pioneer Small Cap Value VCT Portfolio, see "Pricing of Shares" in the
SAI.
TAXATION OF THE PORTFOLIO
For additional information about tax matters related to an investment
in Pioneer Small Cap Value VCT Portfolio, see "Tax Status" in the SAI.
UNDERWRITERS
For additional information about the Pioneer Variable Contracts Trust's
principal underwriter, see "Principal Underwriter" in the SAI.
CALCULATION OF PERFORMANCE DATA
For additional information about the investment performance of Pioneer
Small Cap Value VCT Portfolio, see "Investment Results" in the SAI.
FINANCIAL STATEMENTS
For additional financial information on Pioneer Small Cap Value VCT
Portfolio, see "Financial Statements" in Pioneer Variable Contracts Trust's SAI.
PIONEER SMALL CAP VALUE VCT PORTFOLIO
Pro Forma Statement of Assets & Liabilities
December 31, 2005
(unaudited)
Pioneer Pioneer Pioneer
Small Cap Value Small Cap Value II Small Company
VCT Portfolio VCT Portfolio VCT Portfolio
---------------------------------------------------------
ASSETS:
Investment in securities, at value
(cost $39,267,953, $32,670,206 and $13,015,198, respectively) $ 45,430,594 $ 47,836,880 $ 13,955,743
Cash 854,630 518,951 545,788
Receivables -
Investment securities sold 105,024 132,825 9,459
Fund shares sold 40,895 97,396 1,621
Dividends, interest and foreign taxes withheld 66,521 93,773 21,524
Other 324 14 -
------------ ------------- -------------
Total assets $ 46,497,988 $ 48,679,839 $ 14,534,135
------------ ------------- -------------
LIABILITIES:
Payables -
Investment securities purchased $ 207,694 $ 247,116 $
Fund shares repurchased 100,575 183,986 41,334
Upon return of securities loaned 3,838,966 3,604,067 1,399,038
Variation margin 3,800
Due to affiliates 8,104 3,527 9,766
Accrued expenses 84,642 37,518 67,558
------------ ------------- -------------
Total liabilities $ 4,243,781 $ 4,076,214 $ 1,517,696
------------ ------------- -------------
NET ASSETS:
Paid-in capital $ 33,361,929 $ 19,638,536 $ 11,957,445
Undistributed net investment income 94,683 308,394 1,307
Accumulated undistributed net realized gain 2,652,682 9,490,021 117,142
Net unrealized gain on:
Investments 6,162,641 15,166,674 940,545
Futures contracts (17,728) - -
------------ ------------- -------------
Total net assets $ 42,254,207 $ 44,603,625 $ 13,016,439
------------ ------------- -------------
NET ASSET VALUE PER SHARE:
OUTSTANDING SHARES:
(No par value, unlimited number of shares authorized)
Net assets Class I $ 20,554,697 $ 44,603,625 $ 3,284,702
============ ============= =============
Net assets Class II $ 21,699,510 $ _ $ 9,731,737
============ ============= =============
Class I 1,269,643 1,911,974 277,175
============ ============= =============
Class II 1,350,250 - 831,281
============ ============= =============
NET ASSET VALUE PER SHARE:
Class I 16.19 23.33 11.85
============ ============= =============
Class II 16.07 11.71
============ ============= =============
Pioneer Pioneer
Small Cap Value Small Cap Value
VCT Portfolio VCT Portfolio
Pro Forma Pro Forma
Adjustments Combined
-------------------------------------------------
ASSETS:
Investment in securities, at value
(cost $39,267,953, $32,670,206 and $13,015,198, respectively) $ 107,223,217
Cash 1,919,369
Receivables -
Investment securities sold 247,308
Fund shares sold 139,912
Dividends, interest and foreign taxes withheld 181,818
Other 338
--------------
Total assets $ 109,711,962
--------------
LIABILITIES:
Payables -
Investment securities purchased $ 454,810
Fund shares repurchased 325,895
Upon return of securities loaned 8,842,071
Variation margin 3,800
Due to affiliates 21,397
Accrued expenses 28,000 (b) 217,718
--------------
Total liabilities 9,865,691
--------------
NET ASSETS:
Paid-in capital $ 64,957,910
Undistributed net investment income (28,000) (b) 376,384
Accumulated undistributed net realized gain 12,259,845
Net unrealized gain on:
Investments 22,269,860
Futures contracts (17,728)
--------------
Total net assets $ 99,846,271
--------------
NET ASSET VALUE PER SHARE:
OUTSTANDING SHARES:
(No par value, unlimited number of shares authorized)
Net assets Class I (16,228) (b) $ 68,426,796
==============
Net assets Class II (11,772) (b) $ 31,419,475
==============
Class I 768,736 (a) 4,227,528
==============
(225,537)(a) 1,955,994
==============
NET ASSET VALUE PER SHARE:
Class I 16.19
==============
Class II 16.07
==============
(a) Class I shares of Pioneer Small Cap Value II VCT Portfolio and
Class I and Class II shares of Pioneer Small Company VCT
Portfolio are exchanged for Class I and Class II shares of
Pioneer Small Cap Value VCT Portfolio, respectively.
(b) Reflects costs of the reorganization.
The accompanying notes are an integral part of these financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO
Pro Forma Statement of Operations
For the Year Ended December 31, 2005
(unaudited)
Pioneer Pioneer Pioneer
Small Cap Value Small Cap Value II Small Company
VCT Portfolio VCT Portfolio VCT Portfolio
--------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $884
$0 and $74, respectively) $ 418,320 $ 724,396 $ 163,632
Interest 102,972 10,766 15,206
Income on securities loaned, net 11,006 6,391 8,882
------------ ----------- -----------
Total investment income $ 532,298 $ 741,553 $ 187,720
------------ ----------- -----------
EXPENSES:
Management fees $ 262,583 $ 342,746 $ 99,091
Transfer agent fees 3,000 1,501 7,715
Distribution fees (Class II) 39,927 - 24,684
18,512 18,512 18,512
Custodian fees 33,950 17,676 26,871
Professional fees 45,919 43,300 33,845
Printing 28,855 16,189 17,234
Fees and expenses of nonaffiliated trustees 4,025 3,756 3,901
Miscellaneous 3,277 1,175 2,955
------------ ----------- -----------
Total expenses $ 440,048 444,855 234,808
Less management fees waived and expenses
assumed by Pioneer Investment
Management, Inc. (47,244)
Less fees paid indirectly - - (139)
------------ ----------- -----------
Net expenses $ 440,048 $ 444,855 $ 187,425
------------ ----------- -----------
Net investment income (loss) $ 92,250 $ 296,698 $ 295
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain from:
Investments $ 2,937,296 $ 9,585,443 $ 167,549
Futures contracts 87,722
------------ ----------- -----------
$ 3,025,018 $ 9,585,443 $ 167,549
------------ ----------- -----------
Change in net unrealized gain or loss from:
Investments $ 1,061,614 $(4,376,717) $ 39,771
Futures contracts (50,893) - -
------------ ----------- -----------
$ 1,010,721 $(4,376,717) $ 39,771
------------ ----------- -----------
Net gain on investments and futures contracts $ 4,035,739 $ 5,208,726 $ 207,320
------------ ----------- -----------
Net increase in net assets resulting
from operations $ 4,127,989 $ 5,505,424 $ 207,615
============ =========== ===========
Pioneer Pioneer
Small Cap Value Small Cap Value
VCT Portfolio VCT Portfolio
Pro Forma Pro Forma
Adjustments Combined
------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $884
$0 and $74, respectively) $ $ 1,306,348
Interest 128,944
Income on securities loaned, net 26,279
------------
Total investment income $ - $ 1,461,571
------------
EXPENSES:
Management fees $ $ 704,420
Transfer agent fees (6,001)(b) 6,215
Distribution fees (Class II) 64,611
Administrative reimbursements (35,661)(a) 19,875
Custodian fees (12,741)(a) 65,756
Professional fees (62,753)(a) 60,311
Printing (16,627)(a) 45,651
Fees and expenses of nonaffiliated trustees (5,682)(a) 6,000
Miscellaneous 28,000(c) 35,407
------------ ------------
Total expenses (111,465) 1,008,246
Less management fees waived and expenses
assumed by Pioneer Investment
Management, Inc. 47,244(b) -
Less fees paid indirectly 139(b) -
------------ ------------
Net expenses $ (64,082) $ 1,008,246
------------ ------------
Net investment income (loss) $ 64,082 $ 453,325
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain from:
Investments $ 12,690,288
------------
Futures contracts 87,722
------------
$ 12,778,010
------------
Change in net unrealized gain or loss from:
Investments $ (3,275,332)
Futures contracts (50,893)
------------
$ (3,326,225)
------------
Net gain on investments and futures contracts $ 9,451,785
------------ ------------
Net increase in net assets resulting
from operations $ 64,082 $ 9,905,110
============ ============
(a) Reflects reduction in expenses due to elimination of duplicate
services.
(b) Expense limitations conformed to the Pioneer Small Cap Value II and
Small Company Portfolio's management contract.
(c) Reflects costs of the reorganization.
See accompanying notes to pro forma financial statements.
PIONEER SMALL CAP VALUE VCT PORTFOLIO
PRO FORMA
Schedule of Investments (a)
December 31, 2005
(Unaudited)
Pioneer Small
Cap Value VCT
Pioneer Small Pioneer Small Pioneer Small Pro Forma
Cap Value VCT Cap Value II VCT Company VCT Combined
Shares Shares Shares Shares
------ ------ ------ ------
COMMON STOCKS
Energy
Coal & Consumable Fuels
8,100 8,100 Alpha Natural Resources, Inc. *
12,164 12,164 Massey Energy Co.
Integrated Oil & Gas
10,700 11,900 22,600 CNX Gas Corp. (144A) *
Oil & Gas Drilling
7,500 8,500 16,000 Bronco Drilling Company, Inc. *
11,775 11,775 Todco
7,019 7,019 Unit Corp. *
Oil & Gas Equipment & Services
15,325 4,400 19,725 Gulfmark Offshore, Inc. *
32,661 57,900 90,561 Key Energy Services, Inc. *
21,050 2,900 23,950 Lone Star Technologies, Inc. *
6,440 3,500 9,940 Maverick Tube Corp. *
3,200 3,200 NS Group, Inc.*
3,100 3,100 Offshore Logistics, Inc. *
Oil & Gas Exploration & Production
5,075 2,800 2,425 10,300 Forest Oil Corp. *
2,000 2,000 Houston Exploration Co. *
7,200 7,200 Penn Virginia Corp.
17,500 19,000 36,500 Riata Energy, Inc. (144A) *
16,900 16,900 Rosetta Resources, Inc. (144A) *
26,346 26,346 Southwestern Energy Co. *
2,100 2,100 Stone Energy Corp. *
2,145 2,900 5,045 Swift Energy Co. *
Oil & Gas Storage & Transporation
3,050 3,050 Arlington Tankers, Ltd.
1,300 1,300 Overseas Shipholding Group, Inc.
Total Energy
Materials
Aluminum
4,500 4,500 Century Aluminum
Construction Materials
2,950 2,950 Mega Bloks, Inc. (144A)*
13,112 13,112 Florida Rock Industries, Inc.
1,200 1,200 Texas Industries, Inc.
Diversified Chemical
2,100 2,100 FMC Corp.
Gold
34,450 34,450 Cambior, Inc. *
8,950 8,950 Glamis Gold, Ltd. *
29,700 29,700 IAMGOLD Corp.
Diversified Metals & Mining
4,900 4,900 Brush Engineered Materials, Inc.*
Paper Products
27,793 27,793 Domtar, Inc.
Specialty Chemicals
9,281 9,281 Chemtura Corp.
2,800 2,800 H.B Fuller Co.
9,700 9,700 PolyOne Corp. *
30,950 30,950 Sensient Technologies Corp.
Steel
4,350 1,600 5,950 Carpenter Technology
9,571 9,571 NN, Inc.
10,125 10,125 Schnitzer Steel Industries, Inc.
Total Materials
Capital Goods
Aerospace & Defense
5,600 5,600 Hexcel Corp. *
6,633 7,337 13,970 NCI, Inc. *
7,300 7,300 Orbital Sciences Corp. *
18,225 18,225 Precision Castparts Corp,
Construction & Engineering
24,600 24,600 URS Corp. *
19,900 19,900 Insituform Technologies, Inc. *
Construction, Farm Machinery & Heavy Trucks
4,500 4,500 AGCO CORP. *
34,250 34,250 Astec Industries, Inc. *
13,400 6,700 20,100 Commercial Vehicle Group, Inc. *
12,720 5,100 17,820 Federal Signal Corp.
8,670 8,670 Joy Global, Inc.
2,344 800 3,144 Nacco Industries, Inc.
2,000 2,000 Terex Corp. *
2,400 2,400 The Toro Co.
17,725 4,400 22,125 Wabtec Corp.
Electrical Component & Equipment
13,700 15,200 28,900 C&D Technologies, Inc.
56,468 56,468 Graftech International, Ltd. *
56,979 18,500 23,700 99,179 Power-One, Inc. *
Industrial Machinery
3,200 3,200 Albany International Corp.
10,775 3,100 13,875 Flowserve Corp. *
2,175 2,175 Kennametal, Inc.
Trading Companies & Distributors
5,879 5,879 Applied Industrial Technologies, Inc.
Total Capital Goods
Commercial Services & Supplies
Commercial Printing
1,800 1,800 Consolidated Graphics, Inc. *
2,575 2,575 John H. Harland Co.
Diversified Commercial Services
25,385 25,385 Cornell Companies, Inc. *
4,700 4,700 Corrections Corporation of America *
35 35 Profit Recovery Group International *
7,823 7,823 School Specialty, Inc. *
2,301 2,301 The Brinks Co.
Human Resource & Employment Services
3,200 3,200 Administaff, Inc.
9,345 5,000 4,400 18,745 Korn/Ferry International *
51,175 51,175 On Assignment, Inc. *
11,700 11,700 Watson Wyatt Worldwide Inc.
Total Commercial Services & Supplies
Transportation
Air Freight & Couriers
5,175 5,175 Forward Air Corp.
5,500 40,075 2,100 47,675 Pacer International, Inc.
Marine
5,800 5,800 Dryships, Inc.
6,400 7,100 13,500 Eagle Bulk Shipping, Inc.
11,050 11,050 Excel Maritime Carriers, Ltd. *
5,450 4,800 10,250 Genco Shipping & Trading, Ltd.
18,900 19,200 38,100 Quintana Maritime, Ltd.
Railroads
11,918 3,400 15,318 Genesee & Wyoming, Inc. *
6,900 6,900 RailAmerica, Inc. *
Trucking
14,675 2,300 16,975 Arkansas Best Corp.
4,793 4,793 Dollar Thrifty Automotive Group *
25,325 25,325 Landstar System, Inc.
9,100 9,100 Swift Transportation Co., Inc. *
10,750 10,750 Universal Truckload Services, Inc. *
Total Transportation
Automobiles & Components
Auto Parts & Equipment
5,400 5,400 Aftermarket Technology Corp. *
Tires & Rubber
10,900 9,000 19,900 Cooper Tire & Rubber *
Total Automobiles & Components
Consumer Durables & Apparel
Footwear
10,800 10,800 Skechers U.S.A.*
5,450 5,450 Wolverine World Wide, Inc.
Home Furnishings
7,925 7,925 Furniture Brands International, Inc.
Homebuilding
12,850 12,850 Beazer Homes USA, Inc.
56,050 56,050 Champion Enterprise, Inc. *
Housewares & Specialties
3,000 3,000 American Greetings Corp.
8,505 9,500 18,005 Jarden Corp. *
3,375 3,375 Yankee Candle Co.
Leisure Products
625 625 Mega Blocks*
Total Consumer Durables & Apparel
Consumer Services
Casinos & Gaming
47,000 47,000 Ameristar Casinos, Inc.
12,375 12,375 Alliance Gaming Corp. *
3,900 3,900 Scientific Games Corp. *
Restaurants
13,125 13,125 Jack In The Box, Inc. *
11,719 5,000 16,719 O'Charley's, Inc. *
3,400 3,400 Rare Hospitality International, Inc. *
Specialized Consumer Services
15,275 15,275 Regis Corp.
Total Consumer Services
Media
Advertising
1,800 1,800 R.H. Donnelley Corp. *
Total Media
Retailing
Apparel Retail
7,100 7,100 Charming Shoppers, Inc. *
39,625 39,625 Foot Locker, Inc.
2,300 2,300 Guess?, Inc. *
6,280 5,850 12,130 Stage Stores, Inc.
Catalog Retail
35,425 51,950 87,375 Insight Enterprises, Inc. *
Computer & Electronics Retail
21,650 21,650 Tweeter Home Entertainment Group, Inc. *
Distributors
12,425 12,425 Building Materials Holding Corp.
General Merchandise Stores
15,525 15,525 Fred's, Inc.
Specialty Stores
28,582 28,582 Hancock Fabrics, Inc.
41,355 41,355 Rent-Way, Inc. *
Total Retailing
Food, Beverage & Tobacco
Agricultural Products
11,258 11,258 Fresh Del Monte Produce, Inc.
Packaged Foods & Meats
18,175 18,175 B & G Foods, Inc.
2,400 2,400 Lancaster Colony Corp.
2,139 2,139 The J.M. Smucker Co.
Tobacco
11,650 11,650 Universal Corp.
Total Food, Beverage & Tobacco
Household & Personal Products
Household Products
2,300 2,300 Central Garden & Pet Co.*
Personal Products
4,400 4,800 9,200 Herbalife, Ltd. *
5,875 5,875 NBTY, Inc. *
29,629 33,000 5,050 67,679 Nu Skin Enterprises, Inc.
Total Household & Personal Products
Health Care Equipment & Services
Health Care Equipment
9,100 9,100 Analogic Corp.
4,300 4,300 Steris Corp.
Health Care Facilities
29,175 29,175 Hanger Orthopedic Group, Inc. *
2,500 2,500 Kindred Healthcare, Inc. *
2,500 2,500 Lifepoint Hospitals, Inc. *
3,804 3,804 Sunrise Senior Living, Inc. *
3,358 3,358 Triad Hospitals, Inc. *
2,100 2,100 Universal Health Services, Inc. (Class B)
Health Care Services
2,000 2,000 Cerner Corp. *
7,106 1,200 8,306 Chemed Corp.
24,225 24,225 Cross Country Healthcares, Inc. *
9,000 9,000 eResearch Technology, Inc. *
3,900 3,900 Lifeline Systems, Inc. *
3,527 1,325 4,852 Pediatrix Medical Group, Inc. *
12,350 12,350 Providence Service Corp. *
Health Care Supplies
1,975 1,975 Haemonetics Corp. *
13,700 15,300 5,800 34,800 Merit Medical Systems, Inc. *
Managed Health Care
14,420 5,500 3,500 23,420 AMERIGROUP Corp. *
1,356 1,356 Coventry Health Care, Inc. *
Total Health Care Equipment & Services
Pharmaceuticals & Biotechnology
Biotechnology
7,425 7,425 Cubist Pharmaceuticals, Inc. *
7,300 7,300 InterMune, Inc. *
2,455 2,455 Kendle International, Inc. *
7,100 7,100 Serologicals Corp. *
Pharmaceuticals
5,100 5,100 Connetics Corp.
Total Pharmaceuticals & Biotechnology
Banks
Regional Banks
7,875 7,875 Alliance Bankshares Corp. *
33,550 33,550 Cardinal Financial Corp.
29,550 29,550 Central Pacific Financial Corp.
4,700 4,700 City National Corp.
4,700 4,700 Community Bank System, Inc.
21,400 21,400 Greater Bay Bancorp.
38,945 38,945 Hanmi Financial Corp.
6,968 3,200 10,168 Provident Bankshares Corp.
5,650 5,650 Signature Bank *
3,100 3,300 6,400 Southwest Bancorp, Inc. *
40,100 40,100 Sterling Bancshares, Inc.
4,400 4,400 Susquehanna Bancshares, Inc.
17,225 17,225 Texas Capital Bancshares, Inc. *
Thrifts & Mortgage Finance
16,505 4,300 20,805 BankAtlantic Bancorp, Inc.
5,150 16,575 3,100 24,825 BankUnited Financial Corp.
4,500 4,500 Charter Municipal Mortgage Acceptance Co.
5,000 5,000 Commercial Capital Bankcorp, Inc.
11,550 6,800 18,350 First Niagara Financial Group, Inc.
23,885 23,885 PFF Bancorp, Inc.
13,550 4,800 18,350 Provident Financial Services, Inc.
2,125 2,125 Webster Financial Corp.
Total Banks
Diversified Financials
Asset Management & Custody Banks
28,385 49,638 6,078 84,101 Apollo Investment Corp.
Consumer Finance
8,575 4,078 12,653 Advanta Corp.
9,203 9,203 Advanta Corp. (Class B)
39,725 39,725 AmeriCredit Corp. *
10,025 44,100 54,125 Cash America International, Inc.
7,900 8,500 16,400 The First Marblehead Corp.
Investment Banking & Brokerage
7,550 7,550 A.G. Edwards, Inc.
12,600 12,600 OptionsXpress Holdings, Inc.
9,175 9,175 Piper Jaffray Co's. *
40,975 40,975 SWS Group, Inc.
Specialized Finance
7,143 7,143 Financial Federal Corp.
5,075 5,075 Nasdaq Stock Market, Inc. *
Total Diversified Financials
Insurance
Life & Health Insurance
6,600 7,200 3,000 16,800 American Equity Investment Life Holding *
18,000 18,000 Stancorp Financial Group, Inc.
Multi-Line Insurance
66,775 58,200 124,975 Quanta Capital Holdings (144A) *
10,200 11,000 21,200 Quanta Capital Holdings *
Property & Casualty Insurance
21,575 5,000 5,600 32,175 Assured Guaranty, Ltd.
12,200 12,200 First American Corp.
2,900 2,900 Infinity Property & Casualty Corp.
4,525 4,525 National Interstate Corp.
35,000 35,000 Ohio Casualty Corp.
18,000 18,000 RLI Corp
3,075 3,075 Selective Insurance Group, Inc.
Reinsurance
18,126 12,000 4,800 34,926 IPC Holdings, Ltd.
11,700 13,100 3,400 28,200 Max Re Capital, Ltd.
8,500 8,500 Odyssey Re Holdings Corp.
6,125 6,900 13,025 Platinum Underwriter Holdings, Ltd.
Total Insurance
Real Estate
Real Estate Management & Development
32,300 34,700 7,000 74,000 Deerfield Triarc Capital Corp.
Real Estate Investment Trusts
12,275 12,275 Alexandria Real Estate Equities, Inc.
8,500 8,500 Anworth Mortgage Asset Corp.
15,913 4,577 20,490 BioMed Property Trust, Inc.
11,875 11,875 Camden Property Trust
13,000 2,550 15,550 Capital Trust, Inc.
26,350 26,350 Feldman Mall Properties, Inc.
25,125 25,125 First Potomac Realty Trust
35,400 35,400 Hanover Capital Mortgage Holdings, Inc.
2,800 2,800 Heritage Property Investment Trust
10,000 10,000 MFA Mortgage investments, Inc.
2,800 2,800 Newcastle Investment Corp.
1,600 1,600 Redwood Trust, Inc.
5,900 5,900 Saxon Capital, Inc.
Total Real Estate
Software & Services
Application Software
57,000 56,700 113,700 Aspen Technology, Inc. *
16,570 17,490 34,060 Bottomline Technologies, Inc. *
2,300 2,300 Net 1 UEPS Technologies, Inc. *
16,600 16,600 Parametic Technology Co. *
11,500 12,500 8,500 32,500 Sonic Solutions *
14,054 5,000 19,054 SPSS, Inc. *
34,200 38,000 10,400 82,600 TIBCO Software, Inc. *
Data Processing & Outsourced Services
5,700 5,700 The BISYS Group, Inc. *
5,925 5,925 Intrado, Inc. *
19,742 19,742 Pegusus Systems, Inc. *
Internet Software & Services
7,000 7,000 Earthlink, Inc. *
12,300 12,300 Skillsoft PLC *
IT Consulting & Other Services
12,275 9,900 22,175 Gartner Group, Inc. *
Systems Software
56,450 15,500 71,950 Borland Software Corp. *
12,725 3,500 16,225 Internet Security Systems, Inc. *
8,575 8,575 Sybase, Inc. *
Total Software & Services
Technology Hardware & Equipment
Communications Equipment
6,300 6,300 AudioCodes, Ltd. *
10,425 15,425 2,800 28,650 Black Box Corp.
4,800 4,800 CommScope, Inc. *
13,250 13,000 26,250 Dycom Industries, Inc. *
7,700 7,700 Packeteer, Inc. *
12,800 12,800 Plantronics, Inc.
1 1 Powerwave Technologies, Inc. *
46,500 51,300 97,800 Symmetricom, Inc. *
Computer Hardware
13,300 14,700 28,000 Avid Technology, Inc. *
Computer Storage & Peripherals
6,160 6,160 Electronics for Imaging, Inc. *
27,125 27,125 Hypercom Corp. *
20,175 20,175 Imation Corp.
Electronic Equipment & Instruments
7,575 7,575 Aerofelx, Inc.
17,600 17,600 Electro Scientific Industrials *
6,400 6,400 Landauer, Inc.
16,900 16,900 Planar Systems, Inc. *
18,175 5,400 23,575 Technitrol, Inc.
Electronic Manufacturing Services
24,925 24,925 Benchmark Electronics, Inc.
10,300 11,400 21,700 Mercury Computer Systems, Inc. *
Technology Distributors
4,400 4,400 Agilysys, Inc.
21,625 21,625 Anixter International, Inc.
Total Technology Hardware & Equipment
Semiconductors
Semiconductor Equipment
2,500 2,500 ADE Corp. *
11,000 11,000 Brooks Automation, Inc. *
Semiconductors
41,350 91,725 22,000 155,075 Lattice Semiconductor Corp. *
500 500 PortalPlayer, Inc. *
3,300 3,300 Semtech Corp. *
Total Semiconductors
Telecommunication Services
Integrated Telecommunication Services
40,200 44,700 9,400 94,300 Alaska Communications Systems Group, Inc.
Total Telecommunication Services
Utilities
Electric Utilities
21,075 3,100 24,175 IDACORP, Inc.
Gas Utilities
7,975 7,975 AGL Resources, Inc.
4,600 4,600 Atmos Energy Corp.
5,750 5,750 Energen Corp.
8,005 1,500 9,505 People's Energy Corp.
2,100 2,100 Multi-Utilities
CH Energy Group, Inc.
Total Utilities
TOTAL COMMON STOCKS
EXCHANGE TRADED FUNDS
4,500 4,500 Russell 2000 Exchange Traded Fund
4,500 4,500 Russell 2000 Growth Exchange Traded Fund
3,875 3,875 Russell 2000 Value Exchange Traded Fund
TOTAL EXCHANGE TRADED FUNDS
Principal Principal
Amount Amount
------------------ ---------------
TEMPORARY CASH INVESTMENTS
Repurchase Agreement
$ 3,200,000 $ 3,200,000 UBS Warburg, Inc., 3.25%, dated 12/30/05,
repurchase price of $3,200,000 plus accrued
interest on 1/3/06 collateralized by $3,336,000
U.S. Treasury Bill, 4.36%, 6/29/06
Shares Shares
------------------ ---------------
Security Lending Collateral
3,838,966 3,604,067 1,399,038 8,842,071 Securities Lending Investment Fund, 4.24%
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $12,042,071)
TOTAL INVESTMENT IN SECURITIES
(Cost $84,953,357)
OTHER ASSETS AND LIABILITIES
TOTAL NET ASSETS
Total Investments at Cost
Pioneer Pioneer Pioneer Pioneer
Small Cap Value Small Cap Value II Small Company Small Cap Value
% of VCT Portfolio VCT Portfolio VCT Portfolio VCT Portfolio
Pro Forma Pro Forma Combined
Combined Market Market Market Market
Net Assets Value Value Value Value
---------- ------ ------ ------ -----
COMMON STOCKS 94.5%
Energy 9.2%
Coal & Consumable Fuels 0.6%
Alpha Natural Resources, Inc. * $ 155,601 $ $ $ 155,601
Massey Energy Co. 460,651 460,651
--------------------------------------------------------------------------
$ 616,252 $ $ $ 616,252
--------------------------------------------------------------------------
Integrated Oil & Gas 0.5%
CNX Gas Corp. (144A) * $ 222,025 $ 246,925 $ $ 468,950
--------------------------------------------------------------------------
Oil & Gas Drilling 1.2%
Bronco Drilling Company, Inc. * $ 172,575 $ 195,585 $ $ 368,160
Todco 448,157 448,157
Unit Corp. * 386,256 386,256
--------------------------------------------------------------------------
$ 1,006,988 $ 195,585 $ $ 1,202,573
--------------------------------------------------------------------------
Oil & Gas Equipment & Services 3.7%
Gulfmark Offshore, Inc. * $ 453,927 $ $ 130,328 $ 584,255
Key Energy Services, Inc. * 439,944 779,913 1,219,857
Lone Star Technologies, Inc. * 1,087,443 149,814 1,237,257
Maverick Tube Corp. * 256,698 139,510 396,208
NS Group, Inc.* 133,792 133,792
Offshore Logistics, Inc. * 90,520 90,520
--------------------------------------------------------------------------
$ 1,150,569 $ 1,867,356 $ 643,964 $ 3,661,889
--------------------------------------------------------------------------
Oil & Gas Exploration & Production 3.1%
Forest Oil Corp. * $ 231,268 $ 127,596 $ 110,507 $ 469,371
Houston Exploration Co. * 105,600 105,600
Penn Virginia Corp. 413,280 413,280
Riata Energy, Inc. (144A) * 266,875 289,750 556,625
Rosetta Resources, Inc. (144A) * 304,200 304,200
Southwestern Energy Co. * 946,875 946,875
Stone Energy Corp. * 95,613 95,613
Swift Energy Co. * 96,675 130,703 227,378
--------------------------------------------------------------------------
$ 2,259,173 $ 417,346 $ 442,423 $ 3,118,942
--------------------------------------------------------------------------
Oil & Gas Storage & Transporation 0.1%
Arlington Tankers, Ltd. $ 66,338 $ $ $ 66,338
Overseas Shipholding Group, Inc. 65,507 65,507
--------------------------------------------------------------------------
$ 66,338 $ $ 65,507 $ 131,845
--------------------------------------------------------------------------
Total Energy $ 5,321,345 $ 2,727,212 $ 1,151,894 $ 9,200,451
--------------------------------------------------------------------------
Materials 3.5%
Aluminum 0.1%
Century Aluminum $ $ $ 117,945 $ 117,945
--------------------------------------------------------------------------
Construction Materials 0.8%
Mega Bloks, Inc. (144A)* $ $ $ 70,068 $ 70,068
Florida Rock Industries, Inc. 643,275 643,275
Texas Industries, Inc. 59,808 59,808
--------------------------------------------------------------------------
$ $ 643,275 $ 129,876 $ 773,151
--------------------------------------------------------------------------
Diversified Chemical 0.1%
FMC Corp. $ $ $ 111,657 $ 111,657
--------------------------------------------------------------------------
Gold 0.6%
Cambior, Inc. * $ 96,460 $ $ $ 96,460
Glamis Gold, Ltd. * 245,946 245,946
IAMGOLD Corp. 232,254 232,254
--------------------------------------------------------------------------
$ 574,660 $ $ $ 574,660
--------------------------------------------------------------------------
Diversified Metals & Mining 0.1%
Brush Engineered Materials, Inc.* $ $ $ 77,910 $ 77,910
--------------------------------------------------------------------------
Paper Products 0.2%
Domtar, Inc. $ 160,644 $ $ $ 160,644
--------------------------------------------------------------------------
Specialty Chemicals 0.8%
Chemtura Corp. $ 117,869 $ $ $ 117,869
H.B Fuller Co. 89,796 89,796
PolyOne Corp. * 62,371 62,371
Sensient Technologies Corp. $ 554,005 554,005
--------------------------------------------------------------------------
$ 117,869 $ 554,005 $ 152,167 $ 824,041
--------------------------------------------------------------------------
Steel 0.8%
Carpenter Technology $ 306,545 $ $ 112,752 $ 419,297
NN, Inc. 101,453 101,453
Schnitzer Steel Industries, Inc. 309,724 309,724
--------------------------------------------------------------------------
$ 407,998 $ 309,724 $ 112,752 $ 830,474
--------------------------------------------------------------------------
Total Materials $ 1,261,171 $ 1,507,004 $ 702,307 $ 3,470,482
--------------------------------------------------------------------------
Capital Goods 8.2%
Aerospace & Defense 1.3%
Hexcel Corp. * $ $ $ 101,080 $ 101,080
NCI, Inc. * 91,071 100,737 191,808
Orbital Sciences Corp. * 93,732 93,732
Precision Castparts Corp, 944,237 944,237
--------------------------------------------------------------------------
$ 91,071 $ 1,044,974 $ 194,812 $ 1,330,857
--------------------------------------------------------------------------
Construction & Engineering 1.3%
URS Corp. * $ $ 925,206 $ $ 925,206
Insituform Technologies, Inc. * $ 385,463 $ $ $ 385,463
--------------------------------------------------------------------------
$ 385,463 $ 925,206 $ $ 1,310,669
--------------------------------------------------------------------------
Construction, Farm Machinery & Heavy Trucks 3.4%
AGCO CORP. * $ $ $ 74,565 $ 74,565
Astec Industries, Inc. * 1,118,605 1,118,605
Commercial Vehicle Group, Inc. * 251,652 125,826 377,478
Federal Signal Corp. 190,927 76,551 267,478
Joy Global, Inc. 346,800 346,800
Nacco Industries, Inc. 274,600 93,720 368,320
Terex Corp. * 118,800 118,800
The Toro Co. 105,048 105,048
Wabtec Corp. 476,803 118,360 595,163
--------------------------------------------------------------------------
$ 1,540,782 $ 1,118,605 $ 712,870 $ 3,372,257
--------------------------------------------------------------------------
Electrical Component & Equipment 1.2%
C&D Technologies, Inc. $ 104,394 $ 115,824 $ $ 220,218
Graftech International, Ltd. * 351,231 351,231
Power-One, Inc. * 343,014 111,370 142,674 597,058
--------------------------------------------------------------------------
$ 798,639 $ 227,194 $ 142,674 $ 1,168,507
--------------------------------------------------------------------------
Industrial Machinery 0.8%
Albany International Corp. $ $ $ 115,712 $ 115,712
Flowserve Corp. * 426,259 122,636 548,895
Kennametal, Inc. 111,012 111,012
--------------------------------------------------------------------------
426,259 349,360 775,619
--------------------------------------------------------------------------
Trading Companies & Distributors 0.2%
Applied Industrial Technologies, Inc. $ 198,064 $ $ $ 198,064
--------------------------------------------------------------------------
Total Capital Goods $ 3,440,278 $ 3,315,979 $ 1,399,716 $ 8,155,973
--------------------------------------------------------------------------
Commercial Services & Supplies 2.5%
Commercial Printing 0.2%
Consolidated Graphics, Inc. * $ $ $ 85,212 $ 85,212
John H. Harland Co. 96,820 96,820
--------------------------------------------------------------------------
$ $ $ 182,032 $ 182,032
--------------------------------------------------------------------------
Diversified Commercial Services 1.0%
Cornell Companies, Inc. * $ 350,821 $ $ $ 350,821
Corrections Corporation of America * 211,359 211,359
Profit Recovery Group International * 21 21
School Specialty, Inc. * 285,070 285,070
The Brinks Co. 110,241 110,241
--------------------------------------------------------------------------
$ 847,271 $ $ 110,241 $ 957,512
--------------------------------------------------------------------------
Human Resource & Employment Services 1.4%
Administaff, Inc. $ $ $ 134560 $ 134,560
Korn/Ferry International * 174,658 93,450 82,236 350,344
On Assignment, Inc. * 558,319 558,319
Watson Wyatt Worldwide Inc. 326,430 326,430
--------------------------------------------------------------------------
$ 1,059,407 $ 93,450 $ 216,796 $ 1,369,653
--------------------------------------------------------------------------
Total Commercial Services & Supplies $ 1,906,678 $ 93,450 $ 509,069 $ 2,509,197
--------------------------------------------------------------------------
Transportation 5.5%
Air Freight & Couriers 1.4%
Forward Air Corp. $ 189,664 $ $ $ 189,664
Pacer International, Inc. 143,330 1,044,354 54,726 1,242,410
--------------------------------------------------------------------------
$ 332,994 $ 1,044,354 $ 54,726 $ 1,432,074
--------------------------------------------------------------------------
Marine 1.0%
Dryships, Inc. $ 70,875 $ $ $ 70,875
Eagle Bulk Shipping, Inc. 101,888 113,032 214,920
Excel Maritime Carriers, Ltd. * 126,523 126,523
Genco Shipping & Trading, Ltd. 95,048 83,712 178,760
Quintana Maritime, Ltd. 192,402 195,456 387,858
--------------------------------------------------------------------------
$ 586,736 $ 392,200 $ $ 978,936
--------------------------------------------------------------------------
Railroads 0.7%
Genesee & Wyoming, Inc. * 446,925 $ $ 127,500 $ 574,425
RailAmerica, Inc. * 75,831 75,831
--------------------------------------------------------------------------
$ 446,925 $ $ 203,331 $ 650,256
--------------------------------------------------------------------------
Trucking 2.4%
Arkansas Best Corp. $ $ 641,004 $ 100,464 $ 741,468
Dollar Thrifty Automotive Group * 172,882 172,882
Landstar System, Inc. 1,057,066 1,057,066
Swift Transportation Co., Inc. * 184,730 184,730
Universal Truckload Services, Inc. * 247,250 247,250
--------------------------------------------------------------------------
$ 420,132 $ 1,698,070 $ 285,194 $ 2,403,396
--------------------------------------------------------------------------
Total Transportation $ 1,786,787 $ 3,134,624 $ 543,251 $ 5,464,662
--------------------------------------------------------------------------
Automobiles & Components 0.4%
Auto Parts & Equipment 0.1%
Aftermarket Technology Corp. * $ $ $ 104,976 $ 104,976
--------------------------------------------------------------------------
Tires & Rubber 0.3%
Cooper Tire & Rubber * $ 166,988 $ 137,880 $ $ 304,868
--------------------------------------------------------------------------
Total Automobiles & Components $ 166,988 $ 137,880 $ 104,976 $ 409,844
--------------------------------------------------------------------------
Consumer Durables & Apparel 2.9%
Footwear 0.3%
Skechers U.S.A.* $ $ $ 165,456 $ 165,456
Wolverine World Wide, Inc. 122,407 122,407
--------------------------------------------------------------------------
$ $ $ 287,863 $ 287,863
--------------------------------------------------------------------------
Home Furnishings 0.2%
Furniture Brands International, Inc. $ $ 176,965 $ $ 176,965
--------------------------------------------------------------------------
Homebuilding 1.7%
Beazer Homes USA, Inc. $ $ 935,994 $ $ 935,994
Champion Enterprise, Inc. * 763,401 763,401
--------------------------------------------------------------------------
$ $ 1,699,395 $ $ 1,699,395
--------------------------------------------------------------------------
Housewares & Specialties 0.7%
American Greetings Corp. $ $ $ 65,910 $ 65,910
Jarden Corp. * 256,426 286,425 542,851
Yankee Candle Co. $ $ $ 86,400 $ 86,400
--------------------------------------------------------------------------
$ 256,426 $ 286,425 $ 152,310 $ 695,161
--------------------------------------------------------------------------
Leisure Products 0.0%
Mega Blocks* $ $ $ 14,845 $ 14,845
--------------------------------------------------------------------------
Total Consumer Durables & Apparel $ 256,426 $ 2,162,785 $ 455,018 $ 2,874,229
--------------------------------------------------------------------------
Consumer Services 2.7%
Casinos & Gaming 1.3%
Ameristar Casinos, Inc. $ $ 1,066,900 $ $ 1,066,900
Alliance Gaming Corp. * 161,123 161,123
Scientific Games Corp. * 106,392 106,392
--------------------------------------------------------------------------
$ 161,123 $ 1,066,900 $ 106,392 $ 1,334,415
--------------------------------------------------------------------------
Restaurants 0.8%
Jack In The Box, Inc. * $ $ 458,456 $ $ 458,456
O'Charley's, Inc. * 181,762 77,550 259,312
Rare Hospitality International, Inc. * 103,326 $ 103,326
--------------------------------------------------------------------------
$ 181,762 $ 458,456 $ 180,876 $ 821,094
--------------------------------------------------------------------------
Specialized Consumer Services 0.6%
Regis Corp. $ $ 589,157 $ $ 589,157
--------------------------------------------------------------------------
Total Consumer Services $ 342,885 $ 2,114,513 $ 287,268 $ 2,744,666
--------------------------------------------------------------------------
Media 0.1%
Advertising 0.1%
R.H. Donnelley Corp. * $ $ $ 110,916 $ 110,916
--------------------------------------------------------------------------
Total Media $ $ $ 110,916 $ 110,916
--------------------------------------------------------------------------
Retailing 4.8%
Apparel Retail 1.5%
Charming Shoppers, Inc. * $ $ $ 93,720 $ 93,720
Foot Locker, Inc. 934,754 934,754
Guess?, Inc. * 81,880 81,880
Stage Stores, Inc. $ 187,018 $ $ 174,213 $ 361,231
--------------------------------------------------------------------------
$ 187,018 $ 934,754 $ 349,813 $ 1,471,585
--------------------------------------------------------------------------
Catalog Retail 1.7%
Insight Enterprises, Inc. * $ 694,684 $ 1,018,740 $ $ 1,713,424
--------------------------------------------------------------------------
Computer & Electronics Retail 0.1%
Tweeter Home Entertainment Group, Inc. * $ 123,838 $ $ $ 123,838
--------------------------------------------------------------------------
Distributors 0.8%
Building Materials Holding Corp. $ $ 847,509 $ $ 847,509
--------------------------------------------------------------------------
General Merchandise Stores 0.3%
Fred's, Inc. $ 252,592 $ $ $ 252,592
--------------------------------------------------------------------------
Specialty Stores 0.4%
Hancock Fabrics, Inc. $ 116,329 $ $ $ 116,329
Rent-Way, Inc. * 264,258 264,258
--------------------------------------------------------------------------
$ 380,587 $ $ $ 380,587
--------------------------------------------------------------------------
Total Retailing $ 1,638,719 $ 2,801,003 $ 349,813 $ 4,789,535
--------------------------------------------------------------------------
Food, Beverage & Tobacco 1.2%
Agricultural Products 0.3%
Fresh Del Monte Produce, Inc. $ 256,345 $ $ $ 256,345
--------------------------------------------------------------------------
Packaged Foods & Meats 0.4%
B & G Foods, Inc. $ 263,901 $ $ $ 263,901
Lancaster Colony Corp. 88,920 88,920
The J.M. Smucker Co. $ $ $ 94,116 $ 94,116
--------------------------------------------------------------------------
$ 263,901 $ 0 $ 183,036 $ 446,937
--------------------------------------------------------------------------
Tobacco 0.5%
Universal Corp. 505,144 $ 505,144
--------------------------------------------------------------------------
Total Food, Beverage & Tobacco $ 520,246 $ 505,144 $ 183,036 $ 1,208,426
--------------------------------------------------------------------------
Household & Personal Products 1.7%
Household Products 0.1%
Central Garden & Pet Co.* $ $ $ 105,662 $ 105,662
--------------------------------------------------------------------------
Personal Products 1.6%
Herbalife, Ltd. * $ 143,088 $ 156,096 $ $ 299,184
NBTY, Inc. * 95,469 95,469
Nu Skin Enterprises, Inc. 520,876 580,140 88,779 1,189,795
--------------------------------------------------------------------------
$ 759,433 $ 736,236 $ 88,779 $ 1,584,448
--------------------------------------------------------------------------
Total Household & Personal Products $ 759,433 $ 736,236 $ 194,441 $ 1,690,110
--------------------------------------------------------------------------
Health Care Equipment & Services 4.4%
Health Care Equipment 0.5%
Analogic Corp. $ 435,435 $ $ $ 435,435
Steris Corp. 107,586 107,586
--------------------------------------------------------------------------
$ 435,435 $ $ 107,586 $ 543,021
--------------------------------------------------------------------------
Health Care Facilities 0.7%
Hanger Orthopedic Group, Inc. * $ $ 166,589 $ $ 166,589
Kindred Healthcare, Inc. * 64,400 64,400
Lifepoint Hospitals, Inc. * 93,750 93,750
Sunrise Senior Living, Inc. * 128,233 128,233
Triad Hospitals, Inc. * 131,734 131,734
Universal Health Services, Inc. (Class B) 98,154 98,154
--------------------------------------------------------------------------
$ 131,734 $ 166,589 $ 384,537 $ 682,860
--------------------------------------------------------------------------
Health Care Services 2.1%
Cerner Corp. * $ $ $ 181,820 $ 181,820
Chemed Corp. 353,026 59,616 412,642
Cross Country Healthcares, Inc. * 430,721 430,721
eResearch Technology, Inc. * 135,900 135,900
Lifeline Systems, Inc. * 142,584 142,584
Pediatrix Medical Group, Inc. * 312,386 117,355 429,741
Providence Service Corp. * 355,557 355,557
--------------------------------------------------------------------------
$ 1,451,690 $ $ 637,275 $ 2,088,965
--------------------------------------------------------------------------
Health Care Supplies 0.5%
Haemonetics Corp. * $ $ $ 96,499 $ 96,499
Merit Medical Systems, Inc. * 166,318 185,741 70,412 422,471
--------------------------------------------------------------------------
$ 166,318 $ 185,741 $ 166,911 $ 518,970
--------------------------------------------------------------------------
Managed Health Care 0.5%
AMERIGROUP Corp. * $ 280,613 $ 107,030 $ 68,110 $ 455,753
Coventry Health Care, Inc. * 77,238 77,238
--------------------------------------------------------------------------
$ 280,613 $ 107,030 $ 145,348 $ 532,991
--------------------------------------------------------------------------
Total Health Care Equipment & Services $ 2,465,790 $ 459,360 $ 1,441,657 $ 4,366,807
--------------------------------------------------------------------------
Pharmaceuticals & Biotechnology 0.6%
Biotechnology 0.5%
Cubist Pharmaceuticals, Inc. * 157,781 $ 157,781
InterMune, Inc. * 122,640 122,640
Kendle International, Inc. * 63,192 63,192
Serologicals Corp. * $ $ $ 140,154 $ 140,154
--------------------------------------------------------------------------
$ 63,192 $ $ 420,575 $ 483,767
--------------------------------------------------------------------------
Pharmaceuticals 0.1%
Connetics Corp. $ $ $ 73,695 $ 73,695
--------------------------------------------------------------------------
Total Pharmaceuticals & Biotechnology $ 63,192 $ $ 494,270 $ 557,462
--------------------------------------------------------------------------
Banks 7.6%
Regional Banks 5.0%
Alliance Bankshares Corp. * $ 126,079 $ $ $ 126,079
Cardinal Financial Corp. 369,050 369,050
Central Pacific Financial Corp. 1,061,436 1,061,436
City National Corp. 340,468 340,468
Community Bank System, Inc. 105,985 105,985
Greater Bay Bancorp. 548,268 548,268
Hanmi Financial Corp. 695,558 695,558
Provident Bankshares Corp. 235,309 108,064 343,373
Signature Bank * 158,596 158,596
Southwest Bancorp, Inc. * 62,000 66,000 128,000
Sterling Bancshares, Inc. 619,144 619,144
Susquehanna Bancshares, Inc. 104,192 104,192
Texas Capital Bancshares, Inc. * 386,012 386,012
--------------------------------------------------------------------------
$ 2,061,349 $ 2,606,571 $ 318,241 $ 4,986,161
--------------------------------------------------------------------------
Thrifts & Mortgage Finance 2.6%
BankAtlantic Bancorp, Inc. $ 231,070 $ $ 60,200 $ 291,270
BankUnited Financial Corp. 136,833 440,398 82,367 659,598
Charter Municipal Mortgage Acceptance Co. 95,310 95,310
Commercial Capital Bankcorp, Inc. 85,600 85,600
First Niagara Financial Group, Inc. 167,129 98,396 265,525
PFF Bancorp, Inc. 728,970 728,970
Provident Financial Services, Inc. 250,811 88,848 339,659
Webster Financial Corp. 99,663 99,663
--------------------------------------------------------------------------
$ 785,843 $ 1,169,368 $ 610,384 $ 2,565,595
--------------------------------------------------------------------------
Total Banks $ 2,847,192 $ 3,775,939 $ 928,625 $ 7,551,756
--------------------------------------------------------------------------
Diversified Financials 7.4%
Asset Management & Custody Banks 1.5%
Apollo Investment Corp. $ 508,943 $ 890,009 $ 108,979 $ 1,507,931
--------------------------------------------------------------------------
Consumer Finance 3.5%
Advanta Corp. $ 258,365 $ $ 132,290 $ 390,655
Advanta Corp. (Class B) 298,545 298,545
AmeriCredit Corp. * 1,018,152 1,018,152
Cash America International, Inc. 232,480 1,022,679 1,255,159
The First Marblehead Corp. 259,594 279,310 538,904
--------------------------------------------------------------------------
$ 1,048,984 $ 2,320,141 $ 132,290 $ 3,501,415
--------------------------------------------------------------------------
Investment Banking & Brokerage 1.9%
A.G. Edwards, Inc. $ 353,793 $ $ $ 353,793
OptionsXpress Holdings, Inc. 309,330 309,330
Piper Jaffray Co's. * 370,670 370,670
SWS Group, Inc. 858,017 858,017
--------------------------------------------------------------------------
$ 1,033,793 $ 858,017 $ $ 1,891,810
--------------------------------------------------------------------------
Specialized Finance 0.5%
Financial Federal Corp. $ 317,506 $ $ $ 317,506
Nasdaq Stock Market, Inc. * 178,539 178,539
--------------------------------------------------------------------------
$ 496,045 $ $ $ 496,045
--------------------------------------------------------------------------
Total Diversified Financials $ 3,087,765 $ 4,068,167 $ 241,269 $ 7,397,201
--------------------------------------------------------------------------
Insurance 8.2%
Life & Health Insurance 1.1%
American Equity Investment Life Holding * $ 86,130 $ 93,960 $ 39,150 $ 219,240
Stancorp Financial Group, Inc. $ $ 899,100 $ $ 899,100
--------------------------------------------------------------------------
$ 86,130 $ 993,060 $ 39,150 $ 1,118,340
--------------------------------------------------------------------------
Multi-Line Insurance 1.2%
Quanta Capital Holdings (144A) * $ 340,553 $ 296,820 $ $ 637,373
Quanta Capital Holdings * 260,100 280,500 540,600
--------------------------------------------------------------------------
$ 600,653 $ 577,320 $ 0 $ 1,177,973
--------------------------------------------------------------------------
Property & Casualty Insurance 3.6%
Assured Guaranty, Ltd. $ 547,789 $ 126,950 $ 142,184 $ 816,923
First American Corp. 552,660 552,660
Infinity Property & Casualty Corp. 107,909 107,909
National Interstate Corp. 86,292 86,292
Ohio Casualty Corp. 991,200 991,200
RLI Corp 897,660 897,660
Selective Insurance Group, Inc. 163,283 163,283
--------------------------------------------------------------------------
$ 797,364 $ 2,568,470 $ 250,093 $ 3,615,927
--------------------------------------------------------------------------
Reinsurance 2.3%
IPC Holdings, Ltd. $ 496,290 $ 328,560 $ 131,424 $ 956,274
Max Re Capital, Ltd. 303,846 340,207 88,298 732,351
Odyssey Re Holdings Corp. 213,180 213,180
Platinum Underwriter Holdings, Ltd. 190,304 214,383 404,687
--------------------------------------------------------------------------
$ 1,203,620 $ 883,150 $ 219,722 $ 2,306,492
--------------------------------------------------------------------------
Total Insurance $ 2,687,767 $ 5,022,000 $ 508,965 $ 8,218,732
--------------------------------------------------------------------------
Real Estate 5.3%
Real Estate Management & Development 1.0%
Deerfield Triarc Capital Corp. $ 442,510 $ 475,390 $ 95,900 $ 1,013,800
--------------------------------------------------------------------------
Real Estate Investment Trusts 4.3%
Alexandria Real Estate Equities, Inc. $ $ 988,138 $ $ 988,138
Anworth Mortgage Asset Corp. 62,050 62,050
BioMed Property Trust, Inc. 388,277 111,679 499,956
Camden Property Trust 687,800 687,800
Capital Trust, Inc. 380,640 74,664 455,304
Feldman Mall Properties, Inc. 316,464 316,464
First Potomac Realty Trust 668,325 668,325
Hanover Capital Mortgage Holdings, Inc. 236,472 236,472
Heritage Property Investment Trust 93,520 93,520
MFA Mortgage investments, Inc. 57,000 57,000
Newcastle Investment Corp. 69,580 69,580
Redwood Trust, Inc. 66,016 66,016
Saxon Capital, Inc. 66,847 66,847
--------------------------------------------------------------------------
$ 1,085,381 $ 2,580,735 $ 601,356 $ 4,267,472
--------------------------------------------------------------------------
Total Real Estate $ 1,527,891 $ 3,056,125 $ 697,256 $ 5,281,272
--------------------------------------------------------------------------
Software & Services 4.9%
Application Software 3.1%
Aspen Technology, Inc. * $ 447,450 $ 445,095 $ $ 892,545
Bottomline Technologies, Inc. * 182,601 192,740 375,341
Net 1 UEPS Technologies, Inc. * 66,355 66,355
Parametic Technology Co. * 101,260 101,260
Sonic Solutions * 173,765 188,874 128,435 491,074
SPSS, Inc. * 434,690 154,650 589,340
TIBCO Software, Inc. * 255,474 283,860 77,688 617,022
--------------------------------------------------------------------------
$ 1,493,980 $ 1,110,569 $ 528,388 $ 3,132,937
--------------------------------------------------------------------------
Data Processing & Outsourced Services 0.4%
The BISYS Group, Inc. * $ $ $ 79,857 $ 79,857
Intrado, Inc. * 136,394 136,394
Pegusus Systems, Inc. * 177,086 177,086
--------------------------------------------------------------------------
$ 313,480 $ $ 79,857 $ 393,337
--------------------------------------------------------------------------
Internet Software & Services 0.1%
Earthlink, Inc. * $ $ $ 77,770 $ 77,770
Skillsoft PLC * 67,650 67,650
--------------------------------------------------------------------------
$ $ $ 145,420 $ 145,420
--------------------------------------------------------------------------
IT Consulting & Other Services 0.3%
Gartner Group, Inc. * $ 158,348 $ $ 127,710 $ 286,058
--------------------------------------------------------------------------
Systems Software 1.0%
Borland Software Corp. * $ 368,619 $ 101,215 $ $ 469,834
Internet Security Systems, Inc. * 266,589 73,325 339,914
Sybase, Inc. * 187,450 187,450
--------------------------------------------------------------------------
$ 822,658 $ 101,215 $ 73,325 $ 997,198
--------------------------------------------------------------------------
Total Software & Services $ 2,788,466 $ 1,211,784 $ 954,700 $ 4,954,950
--------------------------------------------------------------------------
Technology Hardware & Equipment 9.7%
Communications Equipment 3.4%
AudioCodes, Ltd. * $ $ $ 69,930 $ 69,930
Black Box Corp. 493,937 730,837 132,664 1,357,438
CommScope, Inc. * 96,624 96,624
Dycom Industries, Inc. * 291,500 286,000 577,500
Packeteer, Inc. * 59,829 59,829
Plantronics, Inc. 362,240 362,240
Powerwave Technologies, Inc. * 13 13
Symmetricom, Inc. * 393,853 434,511 828,364
--------------------------------------------------------------------------
$ 1,179,303 $ 1,813,588 $ 359,047 $ 3,351,938
--------------------------------------------------------------------------
Computer Hardware 1.5%
Avid Technology, Inc. * $ 728,308 $ 804,972 $ $ 1,533,280
--------------------------------------------------------------------------
Computer Storage & Peripherals 1.3%
Electronics for Imaging, Inc. * $ 163,918 $ $ $ 163,918
Hypercom Corp. * 173,329 173,329
Imation Corp. $ $ 929,462 $ $ 929,462
--------------------------------------------------------------------------
$ 163,918 $ 1,102,791 $ 0 $ 1,266,709
--------------------------------------------------------------------------
Electronic Equipment & Instruments 1.3%
Aerofelx, Inc. $ $ $ 81,431 $ 81,431
Electro Scientific Industrials * 425,040 425,040
Landauer, Inc. 294,976 294,976
Planar Systems, Inc. * 141,453 141,453
Technitrol, Inc. 310,793 92,340 403,133
--------------------------------------------------------------------------
$ 877,286 $ 294,976 $ 173,771 $ 1,346,033
--------------------------------------------------------------------------
Electronic Manufacturing Services 1.3%
Benchmark Electronics, Inc. $ $ 838,228 $ $ 838,228
Mercury Computer Systems, Inc. * 212,489 235,182 447,671
--------------------------------------------------------------------------
$ 212,489 $ 1,073,410 $ 0 $ 1,285,899
--------------------------------------------------------------------------
Technology Distributors 0.9%
Agilysys, Inc. $ $ $ 80,168 $ 80,168
Anixter International, Inc. 845,970 845,970
--------------------------------------------------------------------------
$ $ 845,970 $ 80,168 $ 926,138
--------------------------------------------------------------------------
Total Technology Hardware & Equipment $ 3,161,304 $ 5,935,707 $ 612,986 $ 9,709,997
--------------------------------------------------------------------------
Semiconductors 0.9%
Semiconductor Equipment 0.2%
ADE Corp. * $ $ $ 60,150 $ 60,150
Brooks Automation, Inc. * 137,830 137,830
--------------------------------------------------------------------------
$ 137,830 $ $ 60,150 $ 197,980
--------------------------------------------------------------------------
Semiconductors 0.7%
Lattice Semiconductor Corp. * $ 178,632 $ 396,251 $ 95,040 $ 669,923
PortalPlayer, Inc. * 14,160 14,160
Semtech Corp. * 60,258 60,258
--------------------------------------------------------------------------
$ 178,632 $ 396,251 $ 169,458 $ 744,341
--------------------------------------------------------------------------
Total Semiconductors $ 316,462 $ 396,251 $ 229,608 $ 942,321
--------------------------------------------------------------------------
Telecommunication Services 1.0%
Integrated Telecommunication Services 1.0%
Alaska Communications Systems Group, Inc. $ 408,432 $ 454,152 $ 95,504 $ 958,088
--------------------------------------------------------------------------
Total Telecommunication Services $ 408,432 $ 454,152 $ 95,504 $ 958,088
--------------------------------------------------------------------------
Utilities 1.7%
Electric Utilities 0.7%
IDACORP, Inc. $ $ 617,498 $ 90,830 $ 708,328
--------------------------------------------------------------------------
Gas Utilities 0.9%
AGL Resources, Inc. $ 277,607 $ $ $ 277,607
Atmos Energy Corp. 120,336
120,336
Energen Corp. 208,840
208,840
People's Energy Corp. 333,340
280,735 52,605
--------------------------------------------------------------------------
$ 767,182 $ $ 172,941 $ 940,123
--------------------------------------------------------------------------
Multi-Utilities 0.1%
CH Energy Group, Inc. 96,389 96,389
--------------------------------------------------------------------------
Total Utilities $ 767,182 $ 617,498 $ 360,160 $ 1,744,840
--------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 37,522,399 $44,232,813 $ 12,556,705 $ 94,311,917
--------------------------------------------------------------------------
EXCHANGE TRADED FUNDS 0.9%
Russell 2000 Exchange Traded Fund $ 300,105 $ $ $ 300,105
Russell 2000 Growth Exchange Traded Fund 313,335 313,335
Russell 2000 Value Exchange Traded Fund 255,789 255,789
--------------------------------------------------------------------------
$ $ $ $ 869,229
869,229
--------------------------------------------------------------------------
TOTAL EXCHANGE TRADED FUNDS $ 869,229 $ $ $ 869,229
--------------------------------------------------------------------------
Value
TEMPORARY CASH INVESTMENTS 12.1%
Repurchase Agreement 3.2%
UBS Warburg, Inc., 3.25%, dated 12/30/05,
repurchase price of $3,200,000 plus
accrued interest on 1/3/06 collateralized by
$3,336,000 U.S. Treasury Bill, 4.36%, 6/29/06 $ 3,200,000 $ $ $ 3,200,000
--------------------------------------------------------------------------
Security Lending Collateral 8.9%
Securities Lending Investment Fund, 4.24% $ 3,838,966 $ 3,604,067 $ 1,399,038 $ 8,842,071
--------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $12,042,071) $ 7,038,966 $ 3,604,067 $ 1,399,038 $ 12,042,071
--------------------------------------------------------------------------
TOTAL INVESTMENT IN SECURITIES 107.4%
(Cost $84,953,357) $ 45,430,594 $47,836,880 $ 13,955,743 $107,223,217
--------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -7.4% $ (3,176,387) $(3,233,255) $ (939,304) $ (7,376,946)
--------------------------------------------------------------------------
TOTAL NET ASSETS 100.0% $ 42,254,207 $44,603,625 $ 13,016,439 $ 99,846,271(b)
==========================================================================
Total Investments at Cost $ 39,267,953 $32,670,206 $ 13,015,198 $ 84,953,357
==========================================================================
* 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.
(a) No adjustments are shown to the unaudited pro forma combined schedule of
investments due to the fact that upon consumation of the merger no
securities would need to be sold in order for Pioneer Small Cap Value VCT
Fund to comply with its prospectus restrictions. The foregoing sentence
shall not restrict in any way the ability of the investment adviser of the
funds from buying or selling securities in the normal course of such
fund's business and operations.
(b) Includes costs of the reorganization.
The accompanying notes are an integral part of these financial statements.
Pioneer Small Cap Value VCT Portfolio
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
12/31/05
(Unaudited)
1. Description of the Portfolio
The Small Cap Value VCT Portfolio (Small Cap Value Portfolio) is a Portfolio of
Pioneer Variable Contracts Trust (the Trust). The Trust is a Delaware business
trust registered under the Investment Company Act of 1940 as an open-end
management investment company. The Trust consists of twenty nine 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 AmPac Growth VCT Portfolio (Papp AmPac Growth Portfolio)
(Class II shares only)
Pioneer Small and Mid Cap Growth VCT Portfolio (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)
Pioneer Cullen Value VCT Portfolio (Cullen Value Portfolio)
(Class II shares only)
Pioneer Equity Opportunity VCT Portfolio (Equity Opportunity Portfolio)
(Class II shares only)
Pioneer Global High Yield VCT Portfolio (Global High Yield Portfolio)
(Class II shares only)
Pioneer Ibboston Aggressive Allocation VCT Portfolio
(Ibboston Aggressive Allocation Portfolio) (Class II share only)
Pioneer Ibboston Moderate Allocation VCT Portfolio (Ibboston Moderate
Allocation Portfolio) (Class II shares only)
Pioneer Ibboston Growth Allocation VCT Portfolio
(Ibboston Growth Allocation Portfolio) (Class II shares only)
Pioneer Core Bond VCT Portfolio (Core Bond Portfolio)
(Class II shares only)
Portfolio shares may be purchased only 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 Small Cap Value Portfolio is to seek capital
appreciation.
2. Basis of Combination
The accompanying pro forma combining financial statements, and related notes,
are presented to show the effect of the proposed acquisition (the "acquisition")
of the Small Cap Value II Portfolio and Small Company Portfolio by Small Cap
Value Portfolio, as if such acquisition had taken place as of January 1, 2005.
Under the terms of an Agreement and Plan of Reorganization (the
"Reorganization") among these three Portfolios, the combination of the Small Cap
Value Portfolio, Small Cap Value II Portfolio and Small Company Portfolio will
be treated as a tax-free business combination and accordingly will be accounted
for by a method of accounting for tax-free mergers of investment companies. The
acquisition will be accomplished by an acquisition of the net assets of the
Small Cap Value II Portfolio and Small Company Portfolio in exchange for shares
of the Small Cap Value Portfolio at their net asset values. The accompanying pro
forma schedules of investments, statements of assets and liabilities and the
related statements of operations of the Small Cap Value Portfolio, Small Cap
Value II Portfolio and Small Company Portfolio have been prepared as of and for
their most recent fiscal year ended December 31, 2005. Following the
acquisition, Small Cap Value Portfolio will be the accounting survivor. The
Advisor has agreed to pay 50% of the expenses associated with the
reorganizations, and each of the Small Cap Value II VCT Portfolio, Small Company
VCT Portfolio and Small Cap Value VCT Portfolio will equally bear the remaining
costs of the reorganization. These costs are reflected in the proforma financial
statements.
These pro forma financial statements and related notes should be read in
conjunction with the financial statements of the Small Cap Value Portfolio,
Small Cap Value II Portfolio and Small Company Portfolio in their respective
annual reports to shareowners dated December 31, 2005. Adjustments have been
made to expenses for Pioneer affiliated service providers and duplicate services
that would not have been incurred if the merger had taken place on January 1,
2005.
3. Security Valuation
Security transactions are recorded as of trade date. The net asset value of the
Portfolio is computed once daily, on each day the New York Stock Exchange (NYSE)
is open, as of the close of regular trading on the NYSE. In computing the net
asset value, securities are valued at the last sale price on the principal
exchange where they are traded. 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, 2005, 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. Dividend and interest
income from foreign securities are reported net of unrecoverable foreign taxes
withheld at the applicable country rates.
Small capitalization stocks, such as those in the Small Cap Value Portfolio,
while offering the potential for higher returns, may be subject to greater
short-term price fluctuations than securities of larger companies.
4. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of the
Small Cap Value Portfolio that would have been issued at December 31, 2005, in
connection with the proposed acquisition. The number of shares assumed to be
issued is equal to the net asset value of shares of the Small Cap Value II
Portfolio or Small Company Portfolio, as of December 31, 2005, divided by the
net asset value per share of the Portfolio's shares as of December 31, 2005. The
pro forma number of shares outstanding, by class, for the combined Small Cap
Value Portfolio consists of the following at December 31, 2005:
- ---------------------------- ------------------------ ---------------------------- --------------------------
Shares of
Small Cap Value Additional Shares
Portfolio Assumed Issued Total Outstanding Shares
Class of Shares Pre-Combination In Reorganization Post-Combination
- ---------------------------- ------------------------ ---------------------------- --------------------------
Class I 1,269,643 2,957,885 4,227,528
- ---------------------------- ------------------------ ---------------------------- --------------------------
Class II 1,350,250 605,744 1,955,994
- ---------------------------- ------------------------ ---------------------------- --------------------------
5. Federal Income Taxes
The Small Cap Value Portfolio has elected to be taxed as a "regulated
investment company" under the Internal Revenue Code. After the acquisition,
it will continue to be the Small Cap Value Portfolio's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and net
realized capital gains, if any, to its shareowners. Therefore, no federal
income tax provision is required.
The identified cost of investments for these portfolios is substantially the
same for both financial and federal income tax purposes. The cost of
investments will remain unchanged for the combined Small Cap Value
Portfolio.
PIONEER SMALL COMPANY VCT PORTFOLIO
PIONEER SMALL CAP VALUE II VCT PORTFOLIO
JOINT SPECIAL MEETING OF SHAREHOLDERS
May 23, 2006
This proxy is solicited on behalf of the Board of Trustees of Pioneer
Variable Contracts Trust (the "Trust"), on behalf of its series, Pioneer Small
Company VCT Portfolio and Small Cap Value II VCT Portfolio (each, a
"Portfolio"). The undersigned hereby appoints John F. Cogan, Jr., Dorothy E.
Bourassa and David C. Phelan, each of them (with full powers of substitution) to
vote for the undersigned all shares of beneficial interest of the undersigned in
the above-referenced Portfolios at the Joint Special Meeting of Shareholders of
the Portfolios to be held at 2:00 p.m., Eastern time, on May 23, 2006, at the
offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, 26th
Floor, Boston, Massachusetts, and any adjournment thereof ("Meeting"), with all
the power the undersigned would have if personally present.
The shares represented by this proxy will be voted as instructed on the
reverse side. Unless instructions to the contrary are given on the reverse or if
this proxy is executed but no instruction is given, this proxy shall be deemed
to grant authority to vote "FOR" the proposal, with discretionary power to vote
upon such other business as may properly come before the Meeting or any
adjournment. The proxies intend to vote with management on any such other
business properly brought before the Meeting. The undersigned hereby
acknowledges receipt of the accompanying Notice of the Meeting and combined
Proxy Statement and Prospectus.
Date: April 18, 2006
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD
PROMPTLY.
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Signature(s) of Shareholder(s) (Sign in the Box)
NOTE: Please sign exactly as you name or names
appear. When signing as attorney, executor,
administrator, trustee or guardian, please give
your full title as such. If a corporation or
partnership, please sign in full corporate or
partnership name by an authorized officer.
NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
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YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE
BELOW.
Your Board of Trustees recommends that you vote "FOR" Proposal 1.
(1) To approve an Agreement and Plan of Reorganization. Under an Agreement and
Plan of Reorganization, your Portfolio will transfer all of its assets to
Pioneer Small Cap Value VCT Portfolio (the "Acquiring Portfolio"), a series of
the Trust managed by Pioneer Investment Management, Inc., in exchange for shares
of the Acquiring Portfolio.
Refer to the combined Proxy Statement and Prospectus to review relevant
information regarding the Acquiring Portfolio.
FOR |_| AGAINST |_| ABSTAIN |_|
(2) To transact such other business as may properly come before the meeting.
WE NEED YOUR VOTE BEFORE MAY 23, 2006.
PLEASE SIGN AND DATE THE REVERSE SIDE.